<PAGE>
As filed with the Securities and Exchange Commission on January 26, 1998
REGISTRATION NO. 333-12995
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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FOX KIDS WORLDWIDE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7812 95-4596247
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
10960 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
(310) 235-5100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S
PRINCIPAL EXECUTIVE OFFICE)
-------------
MEL WOODS
PRESIDENT, CHIEF OPERATING OFFICER AND CHIEF FINANCIAL OFFICER
FOX KIDS WORLDWIDE, INC.
10960 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
(310) 235-5100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
-------------
WITH COPIES TO:
<TABLE>
<S> <C> <C>
ARTHUR M. SISKIND, ESQ. JEFFREY W. RUBIN, ESQ. RICHARD E. TROOP, ESQ.
THE NEWS CORPORATION LIMITED SQUADRON, ELLENOFF, PLESENT & TROOP MEISINGER STEUBER & PASICH,
1211 AVENUE OF THE AMERICAS SHEINFELD, LLP LLP
NEW YORK, NEW YORK 10036 551 FIFTH AVENUE 10940 WILSHIRE BOULEVARD
(212) 852-7000 NEW YORK, NEW YORK 10176 LOS ANGELES, CALIFORNIA 90024
(212) 661-6500 (310) 824-7000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
-------------
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
NOTES TO BE REGISTERED BE REGISTERED PER UNIT (1) PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 1/4% Senior Notes Due
2007 ................. $475,000,000 100% $475,000,000 $140,125
- --------------------------------------------------------------------------------------------
10 1/4% Senior Discount
Notes
Due 2007 ............. $618,670,000 60.614% $375,000,634 $110,625
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Total.................. $1,093,670,000 -- $850,000,634 $250,750(2)
</TABLE>
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(1) Estimated pursuant to Rule 457(f) under the Securities Act of 1933, as
amended, solely for the purposes of calculating the registration fee.
(2) Registrant paid $51,724 with respect to the filing of the Registration
Statement on September 27, 1996. Accordingly, $199,027 is being paid with
this filing.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE NOTES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE NOTES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+NOTES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JANUARY 26, 1998
PROSPECTUS
FOX KIDS WORLDWIDE, INC.
OFFER FOR ANY AND ALL OUTSTANDING
9 1/4% SENIOR NOTES DUE 2007 AND
10 1/4% SENIOR DISCOUNT NOTES DUE 2007
IN EXCHANGE FOR, RESPECTIVELY,
9 1/4% SENIOR NOTES DUE 2007 AND
10 1/4% SENIOR DISCOUNT NOTES DUE 2007
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1998, UNLESS EXTENDED .
Fox Kids Worldwide, Inc., a Delaware corporation (the "Company"), hereby
offers (the "Exchange Offer"), upon the terms and subject to the conditions set
forth herein and in the related Letter of Transmittal, to exchange up to
$475,000,000 aggregate principal amount of 9 1/4% Senior Notes Due 2007 (the
"Senior Notes") of the Company for a like amount of the privately placed 9 1/4%
Senior Notes Due 2007 (the "Old Senior Notes") of the Company issued on October
28, 1997, from the holders thereof (together with the holders of Senior Notes,
"Senior Noteholders") and to exchange up to $618,670,000 aggregate principal
amount at maturity of 10 1/4% Senior Discount Notes Due 2007 (the "Senior
Discount Notes") of the Company for a like amount of the privately placed 10
1/4% Senior Discount Notes Due 2007 (the "Old Senior Discount Notes") of the
Company issued on October 28, 1997, from the holders thereof (together with the
holders of Senior Discount Notes, "Discount Noteholders"). The Senior Notes and
the Senior Discount Notes are registered under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to a Registration Statement of which
this Prospectus is a part. The Old Senior Notes and the Old Senior Discount
Notes are referred to collectively herein as the "Old Notes" and the Senior
Notes and the Senior Discount Notes are referred to collectively herein as the
"Notes."
The Notes are being offered hereunder in order to satisfy the obligations of
the Company under two separate and substantially identical Registration Rights
Agreements with respect to the Senior Notes and the Senior Discount Notes,
respectively, each dated October 28, 1997 (together, the "Registration Rights
Agreement"), and each by and among the Company, Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Citicorp Securities, Inc.,
(cover continued on following page)
-----------
SEE "RISK FACTORS" BEGINNING ON PAGE 13 HEREIN FOR A DISCUSSION OF CERTAIN
RISKS THAT HOLDERS OF OLD NOTES SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE
OFFER AND AN INVESTMENT IN THE NOTES OFFERED HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE>
[INSIDE FRONT COVER]
Fox Kids Worldwide logo along with artwork of characters from various of the
Company's programs. The artwork includes characters from Power Rangers, Silver
Surfer, X-Men, Fantastic Four, Spider-Man, Teenage Mutant Ninja Turtles, Sweet
Valley High and Life With Louie.
<PAGE>
(cover continued from previous page)
Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette Securities Corporation,
and Morgan Stanley & Co. Incorporated (together the "Initial Purchasers").
Upon consummation of the Exchange Offer, certain rights under the Registration
Rights Agreement, including registration rights and the right to receive the
contingent increases in interest rates, will terminate, except under certain
circumstances. The Exchange Offer is designed to provide to Senior Noteholders
and Discount Noteholders (collectively, "Holders" or "Noteholders") an
opportunity to acquire the Notes which, unlike the Old Notes, are expected to
be freely transferable at all times, subject to state "blue sky" law
restrictions and provided that the Holder is not an "affiliate" of the Company
within the meaning of the Securities Act, and represents that the Notes are
being acquired in the ordinary course of such Holder's business and the Holder
is not engaged in, and does not intend to engage in, a distribution of the
Notes. With the exception of the freely transferable nature of the Notes, the
Notes are substantially identical to the Old Notes. See "The Exchange Offer--
Purpose of the Exchange Offer."
The Company will accept for exchange any and all validly tendered Old Notes
on or prior to 5:00 p.m., New York City time, on , 1998,
unless extended by the Company in its sole discretion (the "Expiration Date").
Tenders of the Old Notes made pursuant to the Exchange Offer may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date
unless previously accepted for exchange by the Company. The Exchange Offer is
not conditioned upon any minimum principal amount of the Old Notes being
tendered for exchange. However, the Exchange Offer is subject to certain
conditions which may be waived by the Company and to the terms and provisions
of the Registration Rights Agreement. In the event the Company terminates the
Exchange Offer and does not accept any Old Notes with respect to the Exchange
Offer, the Company will promptly return such Old Notes to the Holders thereof.
The Old Notes may be tendered for exchange only in integral multiples of
$1,000 principal amount at maturity. See "The Exchange Offer."
Any waiver, extension or termination of the Exchange Offer will be publicly
announced by the Company through a release to the Dow Jones News Service and
as otherwise required by applicable law or regulations.
The Notes will be senior unsecured obligations of the Company and will rank
pari passu in right of payment to all future subordinated indebtedness of the
Company. The Notes will not be guaranteed by any of the Company's subsidiaries
or any third parties (including affiliates of the Company). The Notes will be
effectively subordinated to all secured indebtedness of the Company and to all
existing and future indebtedness of the Company's subsidiaries. As of December
31, 1997, the Company and its subsidiaries had an aggregate of approximately
$1.7 billion of indebtedness outstanding, including the Notes, of which
approximately $641 million of indebtedness would have been effectively senior
to the Notes and the balance of which (other than the Notes) would have been
subordinated in right of payment to the Notes. See "Description of Other
Indebtedness" and "Description of the Notes."
Cash interest on the Senior Notes will accrue at a rate of 9 1/4% per annum
and will be payable semiannually in arrears on each May 1 and November 1,
commencing May 1, 1998. The Old Senior Discount Notes were issued at a
substantial discount from their principal amount. Accordingly, cash interest
will not accrue or be payable on the Senior Discount Notes prior to November
1, 2002. Thereafter, cash interest on the Senior Discount Notes will accrue at
a rate of 10 1/4% per annum and will be payable semiannually in arrears on
each May 1 and November 1, commencing May 1, 2003; provided, however, that at
any time on or prior to November 1, 2002, the Company may make a Cash Interest
Election (as defined herein), in which case the outstanding principal amount
at maturity of each Senior Discount Note will on such interest payment date be
reduced to the Accreted Value (as defined herein) of such Senior Discount Note
as of such interest payment date, and cash interest (accruing at a rate of 10
1/4% per annum from the Cash Interest Election Date) will be payable with
respect to such Senior Discount Note on each interest payment date thereafter.
The Old Notes were sold by the Company on October 28, 1997 to the Initial
Purchasers in a transaction not registered under the Securities Act in
reliance upon an exemption from the registration requirements of the
Securities Act (the "Offering"). The Initial Purchasers subsequently placed
the Old Notes with qualified institutional buyers in reliance upon Rule 144A
promulgated under the Securities Act and with a limited number
i
<PAGE>
(cover continued from previous page)
of accredited investors that agreed to comply with certain transfer
restrictions and other conditions. Accordingly, the Old Notes may not be
reoffered, resold or otherwise transferred in the United States unless
registered under the Securities Act or unless an applicable exemption from the
registration requirements of the Securities Act is available.
The Notes are redeemable at the option of the Company, in whole or in part,
at any time on or after November 1, 2002, at the redemption prices set forth
herein, plus accrued and unpaid interest thereon to the date of redemption. In
addition, on or prior to November 1, 2000, the Company may redeem up to 35% of
the originally issued aggregate principal amount of the Senior Notes at a
redemption price of 109.25% of the principal amount thereof, plus accrued and
unpaid interest thereon to the date of redemption, and may redeem up to 35% of
the originally issued principal amount at maturity of the Senior Discount
Notes at a redemption price equal to 110.25% of the Accreted Value at the
redemption date of the Senior Discount Notes so redeemed (or, if a Cash
Interest Election has been made, 110.25% of the principal amount at maturity
of the Senior Discount Notes so redeemed, plus accrued and unpaid interest to
the redemption date), in each case with the net cash proceeds of one or more
Public Equity Offerings (as defined herein) or sales of Qualified Equity
Interests (as defined herein) to Strategic Equity Investors (as defined
herein); provided, however, that not less than 65% of the originally issued
principal amount of Senior Notes and 65% of the originally issued principal
amount at maturity of the Senior Discount Notes is outstanding immediately
after giving effect to such redemption.
Following the occurrence of a Change of Control (as defined herein), each
Holder will have the right to require the Company to purchase all or a portion
of such Holder's Notes at a purchase price equal to 101% of the aggregate
principal amount of the Senior Notes, plus accrued and unpaid interest thereon
to the date of purchase, and at a purchase price equal to 101% of the Accreted
Value of the Senior Discount Notes at the date of purchase (unless the date of
purchase is on or after the earlier to occur of November 1, 2002 or the Cash
Election Date in which case such purchase price shall be equal to 101% of the
aggregate principal amount at maturity thereof, plus accrued and unpaid
interest thereon to the date of purchase). See "Description of the Notes."
The Notes will be senior unsecured obligations of the Company entitled to
the benefits of the Indentures (as defined herein). The form and terms of the
Notes will be identical in all material respects to the form and terms of the
Old Notes except that the Notes will be registered under the Securities Act.
Any Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding and will be entitled to all the rights and preferences, and will
be subject to all the limitations applicable thereto, under the Indentures
(except for those rights which terminate upon consummation of the Exchange
Offer). Following consummation of the Exchange Offer, any Holders of the Old
Notes will continue to be subject to the existing restrictions upon transfers
thereof, and the Company will have no further obligation to such Holders
(other than under certain limited circumstances) to provide for the
registration under the Securities Act of the Old Notes held by them. Following
completion of the Exchange Offer, none of the Notes will be entitled to the
contingent increase in interest rate provided pursuant to the Indentures, the
Registration Rights Agreement and the Old Notes. See "The Exchange Offer."
The Company is making the Exchange Offer in reliance on the position of the
staff of the Securities and Exchange Commission (the "Commission") as set
forth in no-action letters issued to third parties in other transactions.
However, the Company has not sought its own no-action letter and there can be
no assurance that the staff of the Commission would make a similar
determination with respect to the Exchange Offer as in such other
circumstances. Based on those interpretations by the staff of the Commission,
the Company believes that the Notes issued pursuant to the Exchange Offer in
exchange for the Old Notes may be offered for resale, resold and otherwise
transferred by any Holder thereof (other than broker-dealers, as set forth
below, and any such Holder that is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such Notes are acquired in the ordinary course of such Holder's
business and that such Holder is not participating,
ii
<PAGE>
(cover continued from previous page)
does not intend to participate and has no arrangement or understanding with
any person to participate, in the distribution of such Notes. Any Holder who
participates in the Exchange Offer with the intention to participate, or for
the purpose of participating, in a distribution of the Notes may not rely upon
the position of the staff ofthe Commission as set forth in these no-action
letters and, in the absence of an exemption therefrom, must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction, and any such secondary
resale transaction must be covered by an effective registration statement
containing the selling securityholder information required by Item 507 of
Regulation S-K promulgated under the Securities Act. Holders of Old Notes
wishing to accept the Exchange Offer must represent to the Company in the
Letter of Transmittal that such conditions have been met.
Each broker-dealer (other than an affiliate of the Company) that receives
the Notes for its own account pursuant to the Exchange Offer must acknowledge
that it acquired the Old Notes as the result of market-making activities or
other trading activities and will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Notes received in exchange for Old
Notes where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 90 days after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution." Any broker-dealer who is an affiliate of
the Company may not participate in the Exchange Offer and may not rely on the
no-action letters referred to above and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction. See "The Exchange Offer."
The Notes constitute new issues of securities with no established trading
market. Although the Old Notes have been approved for trading in The Private
Offerings, Resale and Trading through Automatic Linkages ("PORTAL") market of
The Nasdaq Stock Market, Inc., there has been no public market for the Old
Notes and it is not currently anticipated that an active public market for the
Notes will develop. The Company does not intend to apply for the listing of
the Notes on any securities exchange or to seek approval for quotation through
any automated quotation system. The Initial Purchasers have advised the
Company that each of the Initial Purchasers currently intends to make a market
in the Notes; however, none are obligated to do so and any market-making may
be discontinued by any Initial Purchasers at any time without notice.
Accordingly, no assurance can be given as to the liquidity or the trading
market for the Notes. The Notes will settle through the book-entry facilities
of The Depository Trust Company. See "Description of the Notes."
This Prospectus, together with the Letter of Transmittal, is being sent to
all registered holders of the Old Notes as of , 1998. As of such date,
there was one registered Holder of the Old Senior Notes and one registered
Holder of the Old Senior Discount Notes.
The Company will not receive any proceeds from the Exchange Offer. No
dealer-manager is being used in connection with the Exchange Offer. See "Use
of Proceeds" and "Plan of Distribution."
iii
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(cover continued from previous page)
FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS CONTAINS STATEMENTS WHICH CONSTITUTE FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995. THESE STATEMENTS APPEAR IN A NUMBER OF PLACES IN THIS PROSPECTUS AND
INCLUDE STATEMENTS REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE
COMPANY WITH RESPECT TO (I) THE COMPANY'S REPROGRAMMING OF THE FAMILY CHANNEL,
(II) TRENDS AFFECTING THE COMPANY'S FINANCIAL CONDITION OR RESULTS OF
OPERATIONS, (III) THE IMPACT OF COMPETITION AND (IV) THE EXPANSION OF THE
COMPANY'S INTERNATIONAL CHANNELS AND CERTAIN OTHER OPERATIONS.
PROSPECTIVE INVESTORS ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS
ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES,
AND THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE IN THE FORWARD-
LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. THE ACCOMPANYING
INFORMATION CONTAINED IN THIS PROSPECTUS, INCLUDING, WITHOUT LIMITATION, THE
INFORMATION UNDER "RISK FACTORS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS," AND "BUSINESS" IDENTIFIES
IMPORTANT FACTORS THAT COULD CAUSE SUCH DIFFERENCES.
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement on Form
S-1 relating to the Notes offered hereby (together with all amendments,
exhibits, schedules and supplements thereto, the "Registration Statement")
under the Securities Act. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information with
respect to the Company, the Exchange Offer and the Notes, reference is hereby
made to the Registration Statement. Statements contained in this Prospectus as
to the contents of any contract, agreement or other document referred to
accurately describe all material terms so referred to, but are not necessarily
a complete description of the contents of any such contract, agreement or
other document. The Registration Statement and the exhibits and schedules
thereto and any periodic reports or other information filed by the Company
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), may be inspected without charge and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices at Seven
World Trade Center, Suite 1300, New York, New York 10048 and at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials can be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, Washington, D.C. 20549, at prescribed
rates. The Commission maintains a website at http://www.sec.gov that contains
reports, proxy and information statements and other information filed
electronically with the Commission.
Upon effectiveness of the Registration Statement, the Company will be
subject to the reporting requirements of the Exchange Act, and in accordance
therewith, the Company must file periodic reports and other information with
the Commission. In the event the Company ceases to be subject to the
informational requirements of the Exchange Act, the Company will be required
under the Indentures to continue to file with the Commission the annual and
quarterly reports, information, documents or other reports, including, without
limitation, reports on
iv
<PAGE>
Forms 10-K, 10-Q and 8-K, which would be required pursuant to the
informational requirements of the Exchange Act. The Company will also furnish
such other reports as may be required by law. In addition, for so long as any
of the Notes are restricted securities within the meaning of Rule 144(a)(3)
under the Securities Act, the Company has agreed to make available to any
prospective purchaser of the Notes or beneficial owner of the Notes, in
connection with any sale thereof, the information required by Rule 144(d)(4)
under the Securities Act.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS OF OLD NOTES FOR EXCHANGE FROM, HOLDERS IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE
HAS BEEN FILED UNDER CHAPTER 421-B WITH THE NEW HAMPSHIRE REVISED STATUTES
WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY
REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A
FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED
UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT
NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A
TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE
MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON,
SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY
PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT, ANY REPRESENTATION INCONSISTENT
WITH THE PROVISIONS OF THIS PARAGRAPH.
----------------
Mighty Morphin Power Rangers, Power Rangers and Saban are registered
trademarks of Saban Entertainment, Inc. and Saban International N.V. Big Bad
BeetleBorgs, BeetleBorgs Metallix, Breaker High, Jim Knopf, Power Rangers In
Space, Power Rangers Zeo, Power Rangers Turbo, Princess Sissi, Saban's
Adventures of Oliver Twist, Space Goofs, The Why Why Family, Walter Melon and
Wunschpunsch are trademarks of Saban Entertainment, Inc. and Saban
International N.V. Bobby's World, The Tick, Life With Louie, Eek! Stravaganza
and Eek! The Cat are trademarks of Fox Children's Network, Inc. The Family
Channel and International Family Entertainment are registered U.S. service
marks of International Family Entertainment, Inc. All other trademarks and
trade names referred to in this Prospectus are the property of their
respective owners.
v
<PAGE>
SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial data, including
the financial statements and notes thereto, included elsewhere in this
Prospectus. Unless otherwise indicated herein, the term the "Company" refers
collectively to Fox Kids Worldwide, Inc. and its subsidiaries. All references
in this Prospectus to ratings refer to ratings compiled and published by
Nielsen Media Research ("Nielsen").
THE COMPANY
The Company is an integrated global children's and family entertainment
company which develops, acquires, produces, broadcasts and distributes quality
television programming. The Company's principal operations comprise (i) Saban
Entertainment, Inc. ("Saban"), whose library of over 5,400 half-hours of
completed and in-production children's programming is among the largest in the
world, (ii) International Family Entertainment, Inc. ("IFE"), which operates
The Family Channel, a leading basic cable television network that provides
family-oriented entertainment programming in the United States, reaching
approximately 95% of all cable and satellite television households, (iii) the
Fox Kids Network--the top-rated children's (ages 2-11) oriented broadcast
television network in the United States and (iv) a growing portfolio of Fox
Kids branded cable and direct-to-home ("DTH") satellite channels operating in
approximately 25 countries worldwide. By combining one of the world's largest
children's programming libraries with a widely distributed cable platform, a
top-rated broadcast network and the Fox Kids branded international channels,
the Company has the ability to manage children's properties and brands from
their creation through production, distribution and the merchandising of
related consumer products.
The Company is the result of the joint venture launched in 1995 by Fox
Broadcasting Company ("Fox Broadcasting") and Saban to match the complementary
programming and broadcasting strengths of the Fox Kids Network and the
international reach of Fox Broadcasting's parent company, The News Corporation
Limited ("News Corp."), with the development, production, distribution and
merchandising strengths of Saban. In September 1997, the Company finalized the
acquisition of IFE (the "IFE Acquisition"), whose principal business is The
Family Channel. The IFE Acquisition provides the Company with several strategic
advantages, including (i) a widely distributed cable platform, which reaches
approximately 71 million homes, providing an effective means for more vigorous
competition with other children's- and family-oriented cable services, (ii) an
additional outlet for the Company's existing children's programming library,
(iii) increased awareness in the Company's primary target market (children ages
2-11) through expanded hours, increased brand exposure and additional licensing
and merchandising opportunities and (iv) cross-promotional opportunities with
the Fox Kids Network.
The Company creates, produces and acquires quality animated and live-action
children's television programming with brand-name characters and elements which
are either widely known to children, such as the Mighty Morphin Power Rangers
("Power Rangers"), Casper, Spider-Man, X-Men, Goosebumps and Bobby's World, or
which are or have been developed or purchased due to their likelihood of
maturing into popular brands. The Company produced, financed or co-financed 14
shows for each of the 1996-1997 and the 1997-1998 broadcast seasons, including
Power Rangers, which since shortly after its launch in 1993 has been the
highest rated children's weekday broadcast television program in the United
States among boys ages 2-11. The Company generally retains worldwide rights to
its brands, and currently has over 500 licensees worldwide, including toy
companies Bandai, Mattel, Hasbro and Toy Biz. One of the most attractive
attributes of the Company's children's programming is its "portability," in
that it generally can be modified at modest cost and resold for exhibition in
other countries through editing and dubbing into other languages. The Company
currently distributes its programming over terrestrial broadcast services in
most major television markets throughout the world.
1
<PAGE>
While maintaining the family image and general entertainment format of the
channel, the Company intends to reprogram The Family Channel with a new
schedule, look, marketing campaign and logo in August 1998 as the Fox Family
Channel. From 6 a.m. to 6 p.m., the Fox Family Channel will carry a total of
76.5 hours of weekly programming targeted principally to children. From 6 p.m.
to 11 p.m., the Fox Family Channel will broadcast programming that appeals to
the entire family and will carry advertising to be sold on adult demographics.
Programming will be selected from the Company's existing library, new original
productions produced or co-produced by the Company and original and library
product licensed from independent suppliers.
The Company also owns and operates the Fox Kids Network, the leading U.S.
children's broadcast television network, which broadcasts 19 hours of
children's programming each week to 97% of U.S. television households, the
broadest reach of any network targeting children. The Fox Kids Network was
formed by Fox Broadcasting and most of Fox Broadcasting's affiliates to provide
children's programming weekdays and Saturday mornings. The Fox Kids Network has
had the highest broadcast television viewership among children in its time
period during 20 consecutive quarterly "sweeps" periods through November 1997.
According to Nielsen, during the 1996-1997 broadcast season, approximately 19
million children--50% of all children (ages 2-11) in the United States--watched
the Fox Kids Network at least once each month. The Fox Kids Network affords
advertisers the opportunity to reach children in a cost-effective manner, in
part by ensuring consistent nationwide placement of their advertisements by
generally broadcasting its programming at the same local time and on the same
day ("day-and-date") in each television market. The Fox Kids Network's
advertising customers include virtually every major advertiser to children.
To capitalize on the Company's extensive library of children's programming,
the Company has launched Fox Kids branded DTH satellite and cable channels in
approximately 25 countries throughout Europe and Latin America since 1996. The
Company intends to leverage its relationship with News Corp., which has
significant equity interests in cable and satellite services in most major
international markets, to further its international presence. For example,
since October 1996, the Company has operated a Fox Kids branded channel as part
of News Corp.'s 40%-owned BSkyB's Sky Multi-Channels package, which through DTH
currently reaches 3.5 million viewers in the United Kingdom and the Republic of
Ireland.
The Company intends to continue to increase its presence in the children's
and family television entertainment business, with the goal of becoming the
leading worldwide producer, broadcaster and distributor of children's and
family television programming.
The Company intends to focus on the following strategies to achieve its
objective:
. Capitalize on U.S. Cable Platform. While maintaining the family image and
general entertainment format of the channel, the Company plans to
reprogram The Family Channel as the Fox Family Channel in August 1998
with a new schedule, image and promotional campaign intended to enhance
ratings among the approximately 71 million subscribers of The Family
Channel. The Fox Family Channel will feature children's programming seven
days per week during the daytime hours and family-oriented programming
during prime time. The Company also has plans to add original series to
The Family Channel's prime time schedule and to double the number of
original prime time movies premiering annually on the Fox Family Channel
from the current level of approximately 12 to 24 or more original
features. The Company believes that the availability of original and
exclusive features will enhance ratings, improve demographics and build
audience loyalty to the Fox Family Channel.
. Continue to Strengthen U.S. Broadcasting Operations. The Company strives
to maintain and improve the ratings, reach and penetration of its U.S.
broadcasting network, the Fox Kids Network. The Fox Kids Network is the
top-rated children's-oriented broadcast television network, currently
reaching approximately 97% of the television households in the United
States. The Company plans to improve its ratings for the Fox Kids Network
by continuing to develop, acquire or license quality programming which is
attractive to children. The Company, which has created such "hit"
programs as the Power Rangers
2
<PAGE>
and Bobby's World, currently owns most of the underlying rights to seven
of the 14 different programs broadcast on the Fox Kids Network and will
strive to increase the number of its owned programs broadcast.
. Develop Strong Branded Characters and Properties. The Company intends to
continue to create and develop new entertainment properties with
potential franchise value and to build on its existing and widely
recognized institutional and programming brands in order to increase
viewership on its networks and maximize revenue from the licensing and
merchandising of its branded characters and properties. Some of the
Company's programming, such as the Power Rangers, have already achieved
franchise status, and their high consumer awareness should provide
opportunities to generate revenues from multiple sources on a long-term
basis. The Company intends to capitalize on the relationships it has
built with major retailers, toy companies and more than 500 licensees
worldwide to exploit the merchandising and other ancillary revenue
potential of its entertainment properties.
. Continue to Develop and Produce Cost-Effective Programming. The Company
intends to continue its practice of obtaining contractual upfront
commitments from networks, independent television stations, international
broadcasters and merchandisers prior to commencing production. The
Company also intends to continue to produce programming in a cost-
effective manner while maintaining control over critical parts of the
production process to ensure continued high quality.
. Launch Additional International Channels. The Company believes that
significant expansion opportunities exist in the international television
markets, where the children's market has been relatively underserved.
With its library of over 5,400 half-hour episodes of completed and in-
production children's programming, many of which meet the local content
requirement of various European countries, the Company intends to focus
significant resources on the expansion of its international operations.
The Company has an important strategic advantage through its relationship
with News Corp., whose equity interests in international television
distribution platforms and reputation throughout the world have been
helpful in securing carriage agreements on those platforms. The Company
intends to expand the Fox Kids Network globally by launching additional
Fox Kids branded cable and DTH satellite channels targeting children in
many major international territories. The Company's objective is to
create synergies across the base of these channels and thereby reduce
programming costs while marketing and localizing the channels to
distinguish Fox Kids from its competitors.
The principal executive offices of the Company are located at 10960 Wilshire
Boulevard, Los Angeles, California 90024. The Company's telephone number at
such address is (310) 235-5100.
FINANCING PLAN
The purpose of the Offering was to repay $615 million of the $1.25 billion
borrowed under the Credit Agreement dated September 4, 1997, by and among the
Company and Citicorp USA, Inc. ("Citibank"), among others (the "Old Credit
Facility"), and to repay $215 million of the $345.5 million principal amount of
the subordinated note issued to News America Holdings Incorporated ("NAHI") on
September 4, 1997 (the "NAHI Bridge Note"). All of the foregoing indebtedness
was incurred in connection with the IFE Acquisition. Upon consummation of the
Offering and the application of the net proceeds therefrom, there was
approximately $635 million of indebtedness under the Amended Credit Facility
(as defined) and approximately $74.8 million remaining under the NAHI Bridge
Note, which also reflects the reduction of $55.7 million from the receipt of
net proceeds on the sale of the Company's equity stake in Flextech plc (the
"Flextech Transaction"). In connection with the Offering, the Old Credit
Facility was amended to allow, among other things, the repayment of a portion
of the NAHI Bridge Note. The Amended Credit Facility consists of a $710 million
facility, comprised of a seven-year amortizing term loan and a seven-year
reducing revolving credit facility (the "Amended Credit Facility"). See
"Description of Other Indebtedness," and "Business--Acquisition of
International Family Entertainment, Inc."
3
<PAGE>
THE OFFERING
On October 28, 1997, the Company consummated the Offering. The Old Notes were
sold to the Initial Purchasers in reliance upon an exemption from the
registration requirements of the Securities Act. The net proceeds to the
Company from the Offering were used to repay $615 million of the $1.25 billion
borrowed under the Old Credit Facility and to repay $215 million of the $345.5
million principal amount of the NAHI Bridge Note.
THE EXCHANGE OFFER
The Notes Offered........... $475,000,000 aggregate principal amount of 9 1/4%
Senior Notes due 2007.
$618,670,000 aggregate principal amount at
maturity of 10 1/4% Senior Discount Notes due
2007. The yield to maturity on the Senior
Discount Notes is 10 1/4% (computed on a semi-
annual bond equivalent basis), calculated from
October 28, 1997. See "Certain United States
Federal Income Tax Considerations."
Maturity.................... November 1, 2007.
The Exchange Offer.......... Pursuant to the Exchange Offer, the Notes are
being offered in exchange for a like principal
amount of the Old Notes. The Old Notes may be
exchanged only in integral multiples of $1,000
principal amount at maturity. The issuance of the
Notes is intended to satisfy obligations of the
Company contained in the Registration Rights
Agreement. Upon consummation of the Exchange
Offer, certain rights under the Registration
Rights Agreement, including registration rights
and the right to receive the contingent increases
in interest rates, will terminate, except under
certain limited circumstances. As of ,
1998, there was one registered Holder of the Old
Senior Notes and one registered Holder of the Old
Senior Discount Notes. On such date, $475,000,000
aggregate principal amount of Old Senior Notes
were outstanding and $618,670,000 aggregate
principal amount at maturity of Old Senior
Discount Notes were outstanding. See "The
Exchange Offer."
The Holders of the Old Notes whose Old Notes are
not tendered and accepted in the Exchange Offer
will continue to hold such Old Notes and will be
entitled to all the rights and preferences
(except for those rights which terminate upon
consummation of the Exchange Offer) and will be
subject to all the limitations applicable thereto
under the Indentures governing the Old Notes and
the Notes, each dated as of October 28, 1997, and
each between the Company and The Bank of New
York, as trustee (together the "Indentures").
Following consummation of the Exchange Offer, the
holders of Old Notes will continue to be subject
to the existing restrictions upon transfer
thereof, and the Company will have no further
obligation to such holders (other than under
certain limited circumstances) to provide for the
registration under the Securities Act of the Old
Notes held by them. The Notes will not be
entitled to certain contingent increases in
interest rates which were available under the Old
Notes in the event the Company failed to timely
file this Registration Statement.
4
<PAGE>
Resale...................... Based on interpretations by the staff of the
Commission set forth in no-action letters issued
to third parties, the Company believes the Notes
issued pursuant to the Exchange Offer in exchange
for the Old Notes may be offered for resale,
resold and otherwise transferred by any Holder
thereof (other than broker-dealers, as set forth
below, and any such Holder that is an "affiliate"
of the Company within the meaning of Rule 405
promulgated under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act,
provided that such Notes are acquired in the
ordinary course of such Holder's business and
that such Holder is not participating, does not
intend to participate, and has no arrangement or
understanding with any person to participate, in
the distribution of such Notes. Any Holder of Old
Notes who tenders in the Exchange Offer with the
intention to participate, or for the purpose of
participating, in a distribution of the Notes may
not rely upon such interpretations by the staff
of the Commission and, in the absence of an
exemption therefrom, must comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with any
secondary resale transaction, and any such
secondary resale transaction must be covered by
an effective registration statement containing
the selling security holder information required
by Item 507 of Regulation S-K promulgated under
the Securities Act. Failure to comply with such
requirements in such instance may result in such
Holder incurring liabilities under the Securities
Act for which the Holder is not indemnified by
the Company. Each broker-dealer (other than an
affiliate of the Company) that receives Notes for
its own account pursuant to the Exchange Offer
must acknowledge that it will deliver a
prospectus in connection with any resale of such
Notes. The Letter of Transmittal states that by
so acknowledging and by delivering a prospectus,
a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the
Securities Act. The Company has agreed that, for
a period of 90 days after the Expiration Date, it
will make this Prospectus available to any
broker-dealer for use in connection with any such
resale. See "Plan of Distribution." Any broker-
dealer who is an affiliate of the Company may not
participate in the Exchange Offer and may not
rely on the no-action letters referred to above
and must comply with the registration and
prospectus delivery requirements of the
Securities Act in connection with a secondary
resale transaction. See "The Exchange Offer."
Expiration Date............. The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1998 (20 business
days after notice is mailed to the Holders),
unless extended by the Company in its sole
discretion, in which case the term "Expiration
Date" shall mean the latest date and time to
which the Exchange Offer is extended. Any
extension, if made, will be publicly announced
through a release to the Dow Jones News Service
and as otherwise required by applicable law or
regulations.
5
<PAGE>
Conditions to the Exchange
Offer....................... The Exchange Offer is subject to certain
conditions, any of which may be waived by the
Company. See "The Exchange Offer--Conditions of
the Exchange Offer." The Exchange Offer is not
conditioned upon any minimum principal amount of
the Old Notes being tendered for exchange.
Procedures for Tendering
the Old Notes.............. Brokers, dealers, commercial banks, trust
companies and other nominees who hold the Old
Notes through The Depository Trust Company
("DTC") may effect tenders by book-entry transfer
in accordance with DTC's Automated Tender Offer
Program ("ATOP"). The Holders of such Old Notes
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
are urged to contact such person promptly if they
wish to tender the Old Notes. In order for the
Old Notes to be tendered by a means other than by
book-entry transfer, each Holder of the Old Notes
wishing to participate in the Exchange Offer must
complete, sign and date the Letter of
Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or a facsimile thereof,
together with such Old Notes and any other
documents required by such Letter of Transmittal
to The Bank of New York, the Exchange Agent, at
the address set forth herein and therein. By
executing a Letter of Transmittal, a Holder will
represent to the Company that, among other
things, the Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary
course of business of the person receiving such
Notes, whether or not such person is the Holder,
that neither the Holder nor any such other person
has an arrangement or understanding with any
person to participate in the distribution of such
Notes, if the Holder is not a broker-dealer, or
is a broker-dealer but will not receive the Notes
for its own account in exchange for the Old
Notes, neither the Holder nor any such other
person is engaged in or intends to participate in
the distribution of such Notes and that neither
the Holder nor any such other person is an
"affiliate" of the Company within the meaning of
Rule 405 promulgated under the Securities Act.
See "The Exchange Offer--Terms of the Exchange
Offer--Procedures for Tendering Old Notes" and
"The Exchange Offer--Terms of the Exchange
Offer--Guaranteed Delivery Procedures."
Guaranteed Delivery
Procedures................. The Holders of the Old Notes who wish to tender
their Old Notes and whose Old Notes are not
immediately available or who cannot deliver their
Old Notes, the Letter of Transmittal or any other
documents required by such Letter of Transmittal
to the Exchange Agent prior to the Expiration
Date, must tender their Old Notes according to
the guaranteed delivery procedures set forth in
"The Exchange Offer--Terms of the Exchange
Offer--Guaranteed Delivery Procedures."
6
<PAGE>
Acceptance of the Old Notes
and Delivery of the
Notes...................... Subject to certain conditions (as described more
fully in "The Exchange Offer--Conditions of the
Exchange Offer"), the Company will accept for
exchange any and all Old Notes which are properly
tendered in the Exchange Offer and not withdrawn,
prior to 5:00 p.m., New York City time, on the
Expiration Date. The Notes issued pursuant to the
Exchange Offer will be delivered as promptly as
practicable following the Expiration Date.
Withdrawal Rights........... Except as otherwise provided herein, tenders of
the Old Notes may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the
Expiration Date. See "The Exchange Offer--Terms
of the Exchange Offer."
Taxation.................... There will be no United States federal income tax
consequences to a U.S. Holder exchanging an Old
Note for a Note. Each Note will be treated as
having been issued at the time the Old Note
exchanged therefor was originally issued, and
therefore a U.S. Holder will have the same
adjusted basis and holding period in the Note as
it had in the Old Note immediately before the
exchange. See "Certain United States Federal
Income Tax Considerations."
Exchange Agent.............. The Bank of New York is the Exchange Agent. The
address, telephone number and facsimile number of
the Exchange Agent are set forth in "The Exchange
Offer--Exchange Agent."
SUMMARY OF TERMS OF THE NOTES
Interest Payment Dates:
The Senior Notes............ May 1 and November 1 of each year, commencing May
1, 1998.
The Senior Discount Notes... Cash interest will not accrue or be payable on
the Senior Discount Notes prior to November 1,
2002. Thereafter, cash interest on the Senior
Discount Notes will accrue at a rate of 10 1/4%
per annum and will be payable semi-annually in
arrears on each May 1 and November 1, commencing
May 1, 2003; provided, however, that at any time
on or prior to November 1, 2002, the Company may
make a Cash Interest Election on any interest
payment date to commence the accrual of cash
interest from and after the Cash Interest
Election Date, in which case the outstanding
principal amount at maturity of each Senior
Discount Note will on such interest payment date
be reduced to the Accreted Value of such Senior
Discount Note as of such interest payment date,
and cash interest (accruing at a rate of 10 1/4%
per annum from the Cash Interest Election Date)
shall be payable with respect to such Senior
Discount Note on each interest payment date
thereafter.
Optional Redemption......... The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or
after November 1, 2002, at the redemption prices
set forth herein, plus accrued and unpaid
interest thereon to the date of redemption. See
"Description of the Notes--Optional Redemption."
7
<PAGE>
In addition, on or prior to November 1, 2000, the
Company may redeem up to 35% of the originally
issued aggregate principal amount of the Senior
Notes at a redemption price of 109.25% of the
principal amount thereof, plus accrued and unpaid
interest thereon to the date of redemption, and
may redeem up to 35% of the originally issued
principal amount at maturity of the Senior
Discount Notes at a redemption price equal to
110.25% of the Accreted Value at the redemption
date of the Senior Discount Notes so redeemed
(or, if a Cash Interest Election has been made,
110.25% of the principal amount at maturity of
the Senior Discount Notes so redeemed, plus
accrued and unpaid interest to the redemption
date), in each case with the net cash proceeds of
one or more Public Equity Offerings or sales of
Qualified Equity Interests to Strategic Equity
Investors; provided, however, that not less than
65% of the originally issued aggregate principal
amount of the Senior Notes and not less than 65%
of the originally issued principal amount at
maturity of the Senior Discount Notes is
outstanding immediately after giving effect to
such redemption. See "Description of the Notes--
Optional Redemption."
Ranking..................... The Notes will be senior unsecured obligations of
the Company and will rank pari passu in right of
payment with all existing and future unsecured
and unsubordinated indebtedness of the Company
and senior in right of payment to all future
subordinated indebtedness of the Company. The
Notes will be effectively subordinated to all
secured indebtedness of the Company to the extent
of the assets securing such indebtedness and all
existing and future indebtedness of the
subsidiaries of the Company, including
indebtedness under the Amended Credit Facility.
As of December 31, 1997, the Company and its
subsidiaries had approximately $1.7 billion in
indebtedness outstanding, including the Notes, of
which approximately $641 million would have been
effectively senior to the Notes and the balance
(other than the Notes) would have been
subordinated in right of payment to the Notes.
See "Description of Other Indebtedness."
Change of Control........... Following the occurrence of a Change of Control,
each Holder will have the right to require the
Company to purchase all or a portion of such
Holder's Notes at a purchase price equal to (i)
with respect to the Senior Notes, 101% of the
aggregate principal amount thereof, plus accrued
and unpaid interest thereon to the date of
purchase, and (ii) with respect to the Senior
Discount Notes, 101% of the Accreted Value on the
date of purchase (unless the date of purchase is
on or after the earlier to occur of November 1,
2002 or the Cash Interest Election Date, in which
case such purchase price shall be equal to 101%
of the aggregate principal amount at maturity
thereof, plus accrued and unpaid interest to the
date of purchase). See "Description of the
Notes--Change of Control."
8
<PAGE>
Certain Covenants........... The Indentures pursuant to which the Old Notes
were issued and the Notes will be issued contain
certain covenants, including (i) limitations on
indebtedness, (ii) limitations on restricted
payments, (iii) limitations on liens, (iv)
limitations on dividends and other payment
restrictions affecting Restricted Subsidiaries
(as defined under "Description of the Notes--
Certain Definitions"), (v) limitations on
preferred stock of Restricted Subsidiaries,
(vi) limitations on transactions with affiliates,
(vii) limitations on sale leaseback transactions,
(viii) limitations on the disposition of proceeds
of asset sales and (ix) limitations on
designations of Unrestricted Subsidiaries (as
defined under "Description of the Notes--Certain
Definitions"). In addition, the Indentures limit
the ability of the Company to consolidate, merge
or sell all or substantially all of its assets.
These covenants are subject to important
exceptions and qualifications. See "Description
of the Notes--Certain Covenants."
Absence of Public Market
for Notes................... The Notes will constitute new issues of
securities for which there is no established
public trading market. Although the Old Notes
have been designated for trading in the PORTAL
market, there has been no public market for the
Old Notes and it is not currently anticipated
that an active public market for the Notes will
develop. The Company does not intend to apply for
the listing of the Notes on any securities
exchange or to seek approval for quotation
through any automated quotation system. Although
the Initial Purchasers have informed the Company
that they currently intend to make a market in
the Notes, they are not obligated to do so and
any such market making may be discontinued at any
time without notice. Accordingly, there can be no
assurance as to the development or liquidity of
any market for the Notes. See "Risk Factors--
Absence of Public Market for the Notes" and "Plan
of Distribution."
For additional information regarding the Notes, see "Description of the
Notes" and "Certain United States Federal Income Tax Considerations."
USE OF PROCEEDS
The Company will not receive any proceeds from the issuance of the Notes
pursuant to this Prospectus. See "Use of Proceeds."
RISK FACTORS
An investment in the Notes involves a high degree of risk. Prospective
investors should carefully consider the matters set forth under "Risk Factors"
beginning on page 13.
9
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA
CONSOLIDATED FINANCIAL DATA
Fox Kids Worldwide, Inc. was incorporated to effect the Reorganization of Fox
Kids Worldwide, L.L.C. (the "LLC"), a joint venture between Saban and FCN
Holding, Inc. ("FCN Holding"). As a result of the Reorganization, Fox Kids
Worldwide, Inc. became the owner of (i) all of the outstanding capital stock of
FCN Holding, which was an indirect subsidiary of Fox Broadcasting, (ii) all of
the outstanding capital stock of Saban and (iii) Fox Broadcasting's direct and
indirect member's interests in the LLC and, consequently, Saban, FCN Holding
and the LLC became wholly owned subsidiaries of Fox Kids Worldwide, Inc. Prior
to the Reorganization, the Company did not engage in any business activities.
The Reorganization was consummated on August 1, 1997. From November 1, 1995
(the "Effective Date") until August 1, 1997, each of Saban and FCN Holding had
been operated by its respective management subject to the overall supervision
of a governing committee of the LLC comprised of an equal number of
representatives of each of Saban and FCN Holding. As a result of the formation
of the joint venture and the common management of the joint venture business,
the respective assets, liabilities and operations of Saban, FCN Holding and the
LLC have been combined at historical cost from and after the Effective Date.
See "Formation of the Company."
The following tables set forth, for the periods and on the dates indicated,
summary historical and pro forma consolidated financial data of the Company
derived from the financial statements included elsewhere in this Prospectus.
The unaudited pro forma financial data for the Company give effect to the IFE
Acquisition and related financing and the Reorganization as though they had
occurred at the beginning of each period presented (with respect to the
statements of operations data and other data). The unaudited pro forma as
adjusted information gives effect to the IFE Acquisition and related financing
and the Reorganization, as adjusted for the Offering, the Exchange Offer and
the reduction of the NAHI Bridge Note from the Flextech Transaction. The
information presented below should be read together with the historical
financial statements and pro forma financial information included elsewhere
herein. The pro forma information, as well as the Company financial
information, are not necessarily indicative of actual results of operations and
the financial position that would have been achieved had the transactions been
consummated on that date, and are not necessarily indicative of future results
of operations or financial position.
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
DATA:
THREE MONTHS THREE MONTHS
EIGHT MONTHS ENDED YEAR ENDED ENDED ENDED
JUNE 30, 1996 JUNE 30, 1997 SEPTEMBER 30, 1996 SEPTEMBER 30, 1997
------------------ ---------------- --------------------- ---------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net revenues............ $191,621 $307,820 $ 63,801 $122,946
Operating income before
amortization of
intangible assets...... 60,759 58,779 16,727 27,261
Operating income........ 60,759 58,779 16,727 20,292
Interest expense........ 885 2,226 648 18,814
Net income (loss)....... 31,600 40,440 11,444 (1,175)
Net income (loss)
attributable to common
shares................. 31,600 40,440 11,444 (6,364)
Net income (loss) per
common share........... $ 1.98 $ 2.53 $ .72 $ (.40)
Weighted average shares
outstanding............ 16,000 16,000 16,000 16,000
<CAPTION>
PRO FORMA PRO FORMA
AS ADJUSTED PRO FORMA AS ADJUSTED
PRO FORMA FOR THE YEAR FOR THREE MONTHS FOR THREE MONTHS
FOR THE YEAR ENDED ENDED ENDED ENDED
JUNE 30, 1997(1) JUNE 30, 1997(3) SEPTEMBER 30, 1997(1) SEPTEMBER 30, 1997(3)
------------------ ---------------- --------------------- ---------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net revenues............ $614,618 $614,618 $147,431 $147,431
Operating income before
amortization of
intangible assets...... 160,367 160,367 34,537 34,537
Operating income........ 118,548 118,548 24,083 24,083
Interest expense........ 148,966 157,083 38,306 40,976
Net loss................ (29,884) (34,754) (11,990) (13,592)
Net loss attributable to
common shares.......... (60,934) (65,804) (19,753) (21,355)
Net loss per common
share.................. $ (3.81) $ (4.11) $ (1.23) $ (1.33)
Weighted average shares
outstanding............ 16,000 16,000 16,000 16,000
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
OTHER DATA:
EIGHT MONTHS THREE MONTHS THREE MONTHS
ENDED YEAR ENDED ENDED ENDED
JUNE 30, 1996 JUNE 30, 1997 SEPTEMBER 30, 1996 SEPTEMBER 30, 1997
------------------ ---------------- ---------------------- ---------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
EBITDA (2).............. $ 61,269 $ 58,436 $16,976 $27,930
Amortization of
intangible assets...... -- -- -- 6,969
Capital expenditures.... 3,053 3,435 961 1,156
Amortization of
programming costs...... 83,485 144,713 34,170 57,633
Investment in
programming ........... 113,506 198,861 58,133 69,022
Ratio of earnings to
fixed charges.......... 22:1 11:1 --
Deficiency of earnings
available to cover
fixed charges.......... -- -- (540)
<CAPTION>
PRO FORMA PRO FORMA
AS ADJUSTED PRO FORMA AS ADJUSTED
PRO FORMA FOR THE YEAR FOR THREE MONTHS FOR THREE MONTHS
FOR THE YEAR ENDED ENDED ENDED ENDED
JUNE 30, 1997 (1) JUNE 30, 1997(3) SEPTEMBER 30, 1997 (1) SEPTEMBER 30, 1997(3)
------------------ ---------------- ---------------------- ---------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
EBITDA (2).............. $172,018 $172,018 $36,265 $36,265
Amortization of
intangible assets...... 41,819 41,819 10,454 10,454
Capital expenditures.... 12,510 12,510 1,379 1,379
Amortization of
programming costs...... 249,620 249,620 66,334 66,334
Investment in
programming ........... 312,088 312,088 78,367 78,367
Deficiency of earnings
available to cover
fixed charges.......... (32,442) (40,559) (15,895) (18,565)
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA:
AS OF SEPTEMBER 30, 1997
---------------------------------
ACTUAL ACTUAL AS ADJUSTED (4)
---------- ----------------------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................... $ 100,267 $ 44,588
Programming costs, less accumulated
amortization............................... 384,550 384,550
Total assets................................ 2,502,633 2,466,954
Long-term obligations (including current
maturities)................................ 1,728,745 1,693,066
Series A preferred stock.................... 345,000 345,000
Stockholders' equity........................ 77,842 77,842
</TABLE>
- -------
(1) The pro forma information gives effect to the IFE Acquisition and related
financing and the Reorganization as if they had occurred at the beginning
of each period presented (with respect to the Statements of Operations Data
and Other Data).
(2) EBITDA represents income from operations before interest, taxes,
depreciation and amortization (excluding capitalized depreciation and
amortization of programming costs). Capitalized depreciation was $1,075,000
for the eight months ended June 30, 1996, $2,023,000 for the year ended
June 30, 1997 and $484,000 and $540,000 for the three months ended
September 30, 1996 and 1997, respectively. EBITDA is presented because the
Company believes it is a standard financial statistic commonly reported and
widely used by analysts and other interested parties in the television
industry. The Company believes that EBITDA, while providing useful
information, should not be considered in isolation or as a substitute
measure for net income or loss, as an indicator of operating performance or
as an alternative to cash flow as a measure of liquidity as determined
under GAAP. EBITDA also does not represent funds available for dividends,
reinvestment or other discretionary uses.
(3) The pro forma as adjusted information gives effect to the IFE Acquisition
and related financing and the Reorganization described in footnote (1), as
adjusted for the Offering, the Exchange Offer and the reduction of the NAHI
Bridge Note from the Flextech Transaction.
(4) The as adjusted information gives effect to the Offering, the Exchange
Offer and the reduction of the NAHI Bridge Note from the Flextech
Transaction.
11
<PAGE>
FORMATION OF THE COMPANY
In June 1995, FCN Holding and Saban formed the LLC, a strategic alliance
limited liability company, to match the complementary programming and
broadcasting strengths of the Fox Kids Network and the international reach of
Fox Broadcasting's parent company, News Corp., with the development,
production, distribution and merchandising strengths of Saban. Between
November 1, 1995 and August 1, 1997, each of Saban and FCN Holding was
operated by its respective management subject to the overall supervision of a
governing committee of the LLC comprised of an equal number of representatives
of each of FCN Holding and Saban.
The Company was incorporated in August 1996 under Delaware law as a holding
company of FCN Holding, Saban and the LLC. Between August 1996 and August
1997, the Company conducted no business or operations. On August 1, 1997, in
connection with the Company's acquisition of a controlling interest in IFE,
(i) Fox Broadcasting Sub, Inc., a wholly owned indirect subsidiary of Fox
Broadcasting ("Fox Broadcasting Sub"), exchanged its capital stock in FCN
Holding, which indirectly owns the Fox Children's Network, Inc. ("FCN"), for
7,920,000 shares of Class B Common Stock of the Company, (ii) the other
stockholder of FCN Holding exchanged its capital stock in FCN Holding for an
aggregate of 160,000 shares of Class A Common Stock of the Company, (iii) Haim
Saban and the other stockholders of Saban (together, the "Saban Stockholders")
(none of whom is affiliated with News Corp.) exchanged their capital stock of
Saban for an aggregate of 7,920,000 shares of Class B Common Stock of the
Company, and (iv) all outstanding management options to purchase Saban capital
stock became options to purchase an aggregate of 646,548 shares of Class A
Common Stock of the Company. In addition, Fox Broadcasting exchanged its
preferred, non-voting interest in the LLC and its $50 million contingent note
receivable from the LLC for a new subordinated pay-in-kind note from the
Company ("Fox Subordinated Note"), which currently has an outstanding
principal amount of approximately $108.6 million. See "Description of
Indebtedness--Fox Subordinated Note" and "Certain Transactions--Formation of
the LLC and the Reorganization." As a result of these transactions, which are
referred to in this Prospectus as the "Reorganization," FCN Holding, FCN,
Saban and the LLC became direct or indirect wholly owned subsidiaries of the
Company.
12
<PAGE>
RISK FACTORS
Prospective investors should consider carefully the following factors, in
addition to the other information contained in this Prospectus, in evaluating
the Company and its business before investing in the Notes offered hereby.
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE INDEBTEDNESS
As of December 31, 1997, the Company's total amount of consolidated debt
outstanding was approximately $1.7 billion, or 80% of total capitalization.
The Company's deficiency of earnings available to cover fixed charges would
have been approximately $14.3 million for the three months ended September 30,
1997 after giving pro forma effect to the Offering, the IFE Acquisition and
the related financing, the Reorganization (as defined) and the Flextech
Transaction (collectively, the "Transactions"). The Indentures will permit the
Company and its subsidiaries to incur additional debt, subject to certain
limitations. See "Capitalization," "Selected Historical Consolidated Financial
Data" and "Description of the Notes--Certain Covenants--Limitation on
Indebtedness." The Company is a holding company and its ability to obtain
funds from its subsidiaries and affiliates could be limited. See "--Risks
Associated with Holding Company Structure."
The degree to which the Company is leveraged following the Exchange Offer
could have important consequences to the Holders, including, but not limited
to, the following: (i) the Company's ability to obtain financing in the future
for working capital, capital expenditures or general corporate purposes may be
impaired; (ii) a substantial portion of cash flows from the operation of the
Company's subsidiaries will be dedicated to the payment of the principal of
and interest on its debt and will not be available for other purposes; and
(iii) certain of the Company's borrowings are at variable rates of interest,
which could result in higher interest expense in the event of increases in
interest rates. Further, the Indentures and the Amended Credit Facility
contain certain restrictive financial and operating covenants which will
affect, and in many respects significantly limit or prohibit, among other
things, the ability of the Company to incur indebtedness, make prepayments of
certain indebtedness, pay dividends, make investments, engage in transactions
with affiliates, create liens, sell assets and engage in mergers and
consolidations. These covenants may significantly limit the operating and
financial flexibility of the Company and may limit its ability to respond to
changes in its business or competitive activities. The failure by the Company
to comply with such covenants could result in an event of default under the
applicable instrument, which could permit acceleration of the debt under such
instrument and in some cases acceleration of debt under other instruments that
contain cross-default or cross-acceleration provisions. See "Description of
the Notes--Certain Covenants--Limitation on Indebtedness" and "--Events of
Default."
The Company's ability to make scheduled payments of principal of, or to pay
interest on or to refinance its debt (including the Notes), depends on its
future financial performance, which, to a certain extent, is subject to
general economic, financial, competitive, legislative, regulatory and other
factors beyond its control. Although management believes that cash from
operations, together with available borrowings pursuant to the Amended Credit
Facility, will be adequate to meet the Company's anticipated future
requirements for working capital, capital expenditures and scheduled payments
of interest on its debt (including the Notes) for the foreseeable future,
there can be no assurance, however, that the Company's business will generate
sufficient cash flow from operations or that future working capital borrowings
will be available in an amount sufficient to enable the Company to service its
debt (including the Notes) or to make necessary capital expenditures or other
expenditures. Furthermore, there can be no assurance that the Company will be
able to raise additional capital for any required refinancing in the future.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources."
The Notes will not be guaranteed by any of the Company's subsidiaries or any
third parties (including any affiliates of the Company). Therefore, there
should be no expectation that any person other than the Company will in the
future make payments of principal, interest or premium (if any) with respect
to the Notes. See "Description of the Notes."
RISKS ASSOCIATED WITH HOLDING COMPANY STRUCTURE
The Company is a holding company and its assets consist solely of
investments in its subsidiaries. As a holding company, the Company's ability
to meet its financial obligations, including its obligations under the
13
<PAGE>
Notes and the Amended Credit Facility and its funding and other commitments to
its subsidiaries, is dependent upon the earnings of such subsidiaries and the
distribution or other payment of such earnings to the Company in the form of
dividend distributions, loans or other advances, payment or reimbursement for
management fees and expenses and repayment of loans and advances from the
Company. Accordingly, the Company's ability to pay interest on the Notes and
otherwise to meet its liquidity requirements may be limited as a result of its
dependence upon the distribution of earnings and advances of funds by its
subsidiaries. The payment of dividends or the making of loans or advances to
the Company by its subsidiaries may be subject to statutory, regulatory or
contractual restrictions, are contingent upon the earnings of those
subsidiaries and are subject to various business considerations. Certain of
the Company's subsidiaries may in the future be subject to loan or other
agreements that prohibit or limit the transfer of funds to the Company in the
form of dividends, loans or advances and/or require that any indebtedness of
such subsidiaries or affiliates to the Company be subordinate to the
indebtedness under such agreements.
In addition, because the Company is a holding company, the Notes will be
effectively subordinated to all existing and future liabilities, including the
Amended Credit Facility, and trade payables of the Company's subsidiaries,
except to the extent that the Company may itself be a creditor with recognized
claims against such subsidiary. Any right of the Company as an equity holder
to participate in the distribution of the assets of any subsidiary upon such
subsidiary's liquidation or reorganization will be subject to the prior claims
of the creditors (including trade creditors) of such subsidiary. As of
December 31, 1997, the Company and its subsidiaries had an aggregate of
approximately $1.7 billion of indebtedness outstanding, including the Notes,
of which approximately $641 million would have been effectively senior to the
Notes and the balance of which (other than the Notes) would have been
subordinated in right of payment to the Notes.
ACQUISITION OF IFE
The IFE Acquisition expanded the Company's operations into the cable
television business, a business in which it had never before operated. The
Company intends to change the programming of The Family Channel and there is
no guarantee that the reprogrammed channel will retain its existing viewers or
attract new viewers. If the ratings of The Family Channel when reprogrammed as
the Fox Family Channel were to fail to meet the Company's expectations, the
Company could be materially adversely affected. The Company acquired IFE with
the expectation that the acquisition will result in synergies for the combined
business. These include the potential to realize a greater return on its
children's programming library through distribution on the Fox Family Channel
and operational synergies through the sale of "packaged advertising," cross-
promotional opportunities with the Fox Kids Network, consolidation of
duplicative functions and the elimination of excess overhead. Achieving these
anticipated business benefits will depend in part on whether the operations of
IFE can be integrated with the operations of the Company in an efficient,
effective and timely manner and the success of the programming changes at The
Family Channel currently anticipated to be introduced in August 1998. In
addition, the integration of operations of IFE into the Company will require
the dedication of management resources, which may affect management's
attention regarding the day-to-day business of the Company. The inability of
management to integrate successfully the operations of the companies could
have a material adverse effect on the business, results of operations and
financial condition of the Company. See "Business--Acquisition of
International Family Entertainment, Inc."
INTERNATIONAL CHANNELS
The Company is spending considerable resources on the development of
international DTH and cable children's channels. The launch of channels
throughout the world is particularly capital intensive. In many markets a
number of the Company's competitors already have well established children's
channels. Not only does the Company have to negotiate to obtain channel
capacity which is limited in many markets, but the Company must also acquire
additional programming or adapt existing programming so that it appeals to
local viewers. See "Business--Distribution--International Channels."
14
<PAGE>
POSSIBLE DECLINE IN POPULARITY OF CURRENT PROGRAMS AND UNCERTAINTY OF
ACCEPTANCE OF NEW PROGRAMS
A significant portion of the Company's revenues are derived from the
creation, development, production, acquisition, international distribution,
merchandising and other exploitation of children's television properties. For
the fiscal year ended June 30, 1997 and the three months ended September 30,
1997, revenues from these sources represented approximately 91% and 52% of the
Company's consolidated revenues, respectively, and, giving effect to the IFE
Acquisition as if it had occurred on July 1, 1996, 45% and 43% of pro forma
consolidated revenues for the fiscal year ended June 30, 1997 and the three
months ended September 30, 1997, respectively. Since its introduction in the
United States in 1993, the Power Rangers series has been materially important
to the success and growth of the Company and accounted for a significant
portion of the Company's revenues and operating profits for the fiscal year
ended June 30, 1997, as well as a substantial portion of the historical
revenues and operating profits of Saban and FCN. For the fiscal year ended
June 30, 1997 and the three months ended September 30, 1997, revenues derived
from the Company's production, distribution and worldwide exploitation of
Power Rangers accounted for approximately 23% and 3% of the Company's
consolidated revenues and, giving effect to the IFE Acquisition as if it had
occurred on July 1, 1996, 12% and 3% of pro forma consolidated revenues for
the fiscal year ended June 30, 1997 and the three months ended September 30,
1997, respectively. The success of any series depends upon unpredictable and
volatile factors beyond the Company's control, such as children's preferences,
competing programming and the availability of other entertainment activities
for children. A shift in children's interests could cause the Company's
current television programming to decline in popularity, which could
materially and adversely affect the Company's results of operations and
financial condition. The ability of the Company to continue successfully to
exploit the merchandising opportunities afforded by its programs will also be
dependent on the favorable ratings of the programs and the ability of the
Company's characters to continue to provide attractive merchandising
opportunities for its licensees. The Company also intends to continue to
produce or acquire new properties, the success of which depends entirely upon
market acceptance. There can be no assurance as to the continuing commercial
success of any of the Company's currently distributed properties, or that the
Company will be successful in generating sufficient demand and market
acceptance for its new properties. While the Company is committed to the
ongoing development and acquisition of children's television programming, the
inability of the Company to develop or acquire new programs that are capable
of achieving commercial success could materially and adversely affect the
Company's results of operations and financial condition. See "Business--
Competition."
DECLINE IN RATINGS OF FOX KIDS NETWORK
Ratings for the Fox Kids Network among children ages 2-11 decreased 12% from
the 1995-1996 broadcast season to the 1996-1997 broadcast season and, based on
figures available to date for the 1997-1998 season, it is possible that
ratings may decrease from the 1996-1997 season to the 1997-1998 season. As a
result, the Company ordered nine new series in addition to the returning shows
for the 1997-1998 season. No assurance can be given that the new series will
perform better than the cancelled series. Although the Fox Kids Network still
leads in ratings among the children's broadcast television networks, certain
children's oriented cable channels have seen ratings increase. The Company
believes that part of the decline is due to the fact that children have many
entertainment options, including more hours of children's programming on
cable, new video games, computers and home videos. Material declines in the
ratings of the Fox Kids Network could materially and adversely affect the
Company's results of operations and financial condition.
POSSIBILITY OF NON-RENEWAL OF AFFILIATION AGREEMENTS BY FOX TELEVISION MEMBER
STATIONS
Over 93% of the affiliation agreements with Fox Broadcasting's member
stations ("FOX Television Member Stations") require the affiliates also to
carry the Fox Kids Network. Fox Broadcasting currently expects to continue to
be able to renew its affiliation agreements with the FOX Television Member
Stations as they mature. A FOX Television Member Station may choose not to
renew its affiliation agreement with Fox Broadcasting and at the same time
discontinue carriage of the Fox Kids Network. If a FOX Television Member
Station decides not to renew its status as such, it is less likely that it
would continue to carry Fox Kids Network programming. If the Company fails to
renew its affiliation agreements, there could be a material and adverse effect
on the results of operations and financial condition of the Company. See
"Business--Distribution--Fox Kids Network" and "Business--The Strategic
Alliance with Fox/News Corp."
15
<PAGE>
POSSIBLE REDUCTION IN DISTRIBUTION OR NON-RENEWAL OF THE FAMILY CHANNEL BY
CABLE OPERATORS
The Company distributes The Family Channel to cable operators pursuant to
affiliation agreements whereby the cable operator agrees to provide carriage
for a specified per subscriber fee. At December 31, 1997, The Family Channel
had affiliation agreements with approximately 850 affiliated cable operators
that terminate on various dates from 1998 to 2006. Pursuant to these
agreements, The Family Channel currently has 71 million cable and satellite
subscribers out of a potential audience reach of 74 million households at
December 31, 1997. Under these agreements, cable operators and other
distributors may discontinue carriage of The Family Channel or move The Family
Channel to a more narrowly distributed level of service or tier. Such
discontinuance or movement would greatly limit The Family Channel's ability to
generate national advertising revenues, as these depend on broad distribution,
particularly by cable operators. The Company currently expects to continue to
be able to renew its affiliation agreements as they mature or to maintain its
carriage on "expanded basic," the most widely distributed level of service.
However, there can be no assurance that such affiliation agreements will be
renewed or that they will be renewed on the same or more favorable terms. See
"--Acquisition of IFE" and "Business--Acquisition of International Family
Entertainment, Inc."
DEPENDENCE UPON KEY PERSONNEL
The Company's success depends to a significant extent upon the expertise and
services of certain key executives, including Haim Saban, the Company's
Chairman and Chief Executive Officer and the founder of Saban. The Company has
entered into employment agreements with Mr. Saban and certain of its other key
executives. The Company does not maintain "key person" life insurance policies
on any of its executives. The loss of the services of Mr. Saban or any of the
key personnel could have a material adverse effect on the results of
operations and financial condition of the Company. See "Management."
COMPETITION
The businesses in which the Company engages are highly competitive. Each of
the Company's primary business operations is subject to competition from
companies which, in some instances, have greater production, distribution and
capital resources than the Company.
The Company competes on the basis of relationships and pricing for access to
a limited supply of facilities and creative personnel to produce its programs.
The Company competes with major motion picture studios, such as Warner Bros.
Television Distribution, Inc. ("Warner Bros.") and The Walt Disney Company,
and animation production companies, including Hanna Barbera and Film Roman,
for the services of writers, producers, animators, actors and other creative
personnel and specialized production facilities.
In the United States, the Company currently competes through its Fox Kids
Network and The Family Channel, and will compete through its Fox Kids Network
and the Fox Family Channel, with the other broadcast television networks,
public television and cable television channels, such as Nickelodeon, USA
Cable Network and The Cartoon Network, for market acceptance of its
programming, viewership ratings and related advertising revenues. Further, the
Company vies for audiences with independent television stations, suppliers of
cable television programs, radio and other forms of media. As a result of
heightened competition for the children ages 2-11 category, the broadcast
networks suffered a decline in ratings of their children's programming during
the last two television seasons, and there can be no assurance that the
decline will not continue. In addition, increased competition for viewers in
the cable industry may result from technological advances, such as digital
compression technology, which allow cable systems to expand channel capacity;
the further deployment of fiber optic cable, which has the capacity to carry a
much greater number of channels than coaxial cable; and "multiplexing," in
which programming services offer more than one feed of their programming. The
increased number of choices available to the Fox Family Channel's family
viewing audience as a result of such technological advances may lead to a
reduction in the Company's market share.
16
<PAGE>
The Company will compete for advertising revenue with the television
programming services described above, as well as with other national and
international television programming services, superstations, broadcast
television networks, local over-the-air television stations, radio, print
media, in addition to alternative delivery services that now exist or are
expected to develop in the future. More generally, the Company competes with
various other leisure-time activities such as home videos, movie theaters,
personal computers and other alternative sources of entertainment and
information.
Internationally, the Company contends with a large number of U.S.-based and
international distributors of children's programming, including The Walt
Disney Company, Warner Bros. and Nickelodeon, with whom the Company must also
compete in the development or acquisition of programming expected to appeal to
international audiences. Such programming often must comply with foreign
broadcast rules and regulations which may stipulate certain local content
requirements. See "--Potential Adverse Impact of Regulation" and "Business--
Competition."
KEY CONTRACTS
The Company has master toy license agreements with Bandai America
Incorporated ("Bandai") pursuant to which the Company has granted to Bandai
worldwide toy manufacturing and distribution rights to three existing series,
including Power Rangers, and to as many as two new series each year through
the end of the year 2002. For the fiscal year ended June 30, 1997, 12% of the
Company's consolidated revenues and, giving effect to the IFE Acquisition as
if it had occurred on July 1, 1996, 6% of the Company's pro forma consolidated
revenues, for the fiscal year ended June 30, 1997 were derived from its
license agreements with Bandai. No revenues were derived from Bandai license
agreements for the three months ended September 30, 1997. Should the Company's
agreements with Bandai terminate, there can be no assurance that the Company
would be able to enter into license agreements with other toy manufacturers on
the same or more favorable terms. See "Business--Merchandising and Licensing."
In addition, two of the Company's 16 series for the 1997-98 broadcast season
are based on programs originally developed by Toei Company, Ltd. ("Toei"),
which is currently one of Japan's largest film companies. The Company has been
granted rights in perpetuity to each of these series, including Power Rangers.
Toei is obligated to provide the Company with an exclusive option to acquire
additional children's programming through at least 2006. While the Company
believes that its ability to successfully develop future programming is not
materially dependent on its relationship with Toei, the possibility
nonetheless exists that any change in the Company's relationship with Toei, or
the failure of Toei to perform its obligations under its agreements with the
Company, could have a material adverse effect on the business, results of
operations and financial condition of the Company.
OVERESTIMATION OF REVENUES OR UNDERESTIMATION OF COSTS
The Company follows Financial Accounting Standards Board Statement No. 53,
"Financial Reporting by Producers and Distributors of Motion Picture Films,"
regarding revenue recognition and amortization of production costs, in which
the Company owns or controls all applicable rights. All costs incurred in
connection with an individual program or film, including acquisition,
development, production and allocable production overhead costs and interest,
are capitalized as television and film costs. These costs are stated at the
lower of unamortized cost or estimated net realizable value. Estimated total
production costs for an individual program or film are amortized in the
proportion that revenue realized relates to management's estimate of the total
revenues expected to be received from such program or film. For programs in
which the Company acquires only network broadcast rights, the Company
amortizes such program costs over the estimated number of broadcasts in
accordance with Financial Accounting Standards Board Statement No. 63,
"Financial Reporting by Broadcasters." If revenue or cost estimates change
with respect to a program or film, the Company may be required to write down
all or a portion of the unamortized costs for such program or film. No
assurance can be given that such write-downs, if they occur, will not have a
material adverse effect on the Company's results of operations or financial
condition. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Significant Accounting Factors--Use of Estimates."
17
<PAGE>
SEASONALITY
All of the Company's television programming revenues are recognized either
when the program is available for broadcast or when advertising spots are
broadcast during a program. For this reason, significant fluctuations in the
Company's total revenues and net income can occur from period to period
depending upon availability dates of programs and advertising revenues. In the
United States, revenues from advertising targeted at children are concentrated
in the fourth calendar quarter of each year. In the international television
market, a significant portion of revenues are recognized in connection with
sales at the international sales trade shows (principally MIP in April and
MIP-COM in October). As a result, the second and fourth quarters of each
calendar year have generally contributed a substantial portion of the
Company's total revenues. Due, in part, to these seasonality factors, the
results of any one quarter are not necessarily indicative of results for
future periods, and cash flows may not correlate with revenue recognition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Significant Accounting Factors--Revenue Recognition and
Seasonality."
DEPENDENCE UPON SATELLITE TRANSPONDERS
Distribution of The Family Channel depends upon the operation of satellites
by third parties. The Company currently owns three full-time transponders on
three different satellites for use by The Family Channel. The Company
transmits The Family Channel programming using two separate "feeds" which are
uplinked to two of its satellites. All of the Company-owned transponders have
"protected" status. "Protected" status means that should the transponder fail,
service will be transferred, subject to availability, to a spare transponder,
and, if one is not available, then to a transponder with "preemptable status"
on the same satellite and/or another satellite owned by the same seller or
lessor, subject to certain limitations. "Preemptable" status means that the
transponder can be preempted in the event of a failure of a "protected"
transponder.
Satellites are subject to significant risks that may prevent or impair
proper commercial operations, including satellite defects, launch failure,
destruction and damage and incorrect orbital placement. At present, there are
a limited number of domestic communications satellites available for the
transmission of cable television programming to cable system operators. If
satellite transmission is interrupted or terminated due to the failure or
unavailability of a transponder, the termination or interruption could have a
material adverse effect on the Company. The availability of additional
transponders in the future is dependent on a number of factors over which the
Company has no control. These factors include the future authorization of
additional domestic satellites, future competition among prospective users for
available transponder space, the uncertain status of the United States' Space
Shuttle Program (including priority allocations of future shuttle cargo space
to military rather than commercial payloads) and the uncertain availability of
satellites launching by private entities in the United States and by private
or governmental entities in other countries. See "Business--Distribution--The
Family Channel/Fox Family Channel--Transmission Facilities."
INTERNATIONAL SUBCONTRACTING OF ANIMATION
As with other producers of animated programming, the Company subcontracts
some of the more labor-intensive components of its animation production
process to animation studios located in countries with relatively low-cost
labor, primarily in the Far East. With an increasing number of animated
feature films and animated television programs being produced in recent years,
the demand for the services of overseas studios has increased substantially.
This increased demand may lead overseas studios to increase their fees, which
could result in increased animated programming production costs incurred by
the Company or the inability of the Company to contract with its preferred
overseas studios. No assurance can be given that future subcontracting
arrangements will be obtainable on terms which are as favorable to the Company
as its current arrangements.
INTERNATIONAL SALES
For the fiscal year ended June 30, 1997 and for the three months ended
September 30, 1997, the Company derived approximately 35% and 30% of its
consolidated revenues, respectively, and, giving effect to the IFE Acquisition
as if it had occurred on July 1, 1996, 19% and 26%, respectively, of its pro
forma consolidated
18
<PAGE>
revenues from international operations. As part of its business strategy, the
Company intends to expand its international program production and
distribution activities, as well as its worldwide merchandising, licensing and
ancillary activities, including the launch of children's channels on DTH
satellite and cable platforms throughout the world. See "Business--Business
Strategies." The Company is subject to the special risks inherent in
international business activities, including (i) general economic, social and
political conditions in each country, (ii) currency fluctuations, (iii) double
taxation, (iv) unexpected changes in applicable regulatory requirements and
(v) compliance with a variety of international laws and regulations. The
operations of the Company's international entities are measured in part in
local currencies. For reporting purposes, assets and liabilities are
translated into U.S. dollars using exchange rates in effect at the end of each
reporting period. Revenues and expenses are translated into U.S. dollars at
the average exchange rates prevailing during the period. As a result, the
Company can expect to record foreign exchange losses and gains in the future.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Results of Operations."
POTENTIAL ADVERSE IMPACT OF REGULATION
The United States Congress and the Federal Communications Commission (the
"FCC") currently have under consideration, and may in the future consider and
adopt, new laws, regulations and policies regarding a wide variety of matters
that may affect, directly or indirectly, the operation, ownership and
profitability of the Company's business. These proposed changes include, for
example, expansion of program access requirements and potential must-carry
rights for digital television broadcast stations (which could limit the
capacity of multichannel video programming distributors available for the
Company's programming). It is impossible to predict the outcome of federal
legislation currently under consideration or the potential effect thereof on
the Company's business. In addition, certain aspects of the Company's cable
operations are subject, directly or indirectly, to regulation at the state
and/or local level. State and/or local authorities could adopt laws or
regulations in this area that could further restrict the operations of the
Company. See "Business--Government Regulation."
POTENTIAL FOR DEADLOCKS
The holders of the Class B Common Stock of the Company have agreed, so long
as neither Fox Broadcasting nor the former Saban Stockholders as a group have
disposed of more than one-third of their respective initial Class B Common
Stock beneficial holdings, to vote their shares together on all matters
presented to the stockholders, and if they cannot agree as to how to vote on a
matter, to abstain from voting with respect thereto. There is no mechanism for
breaking a deadlock among the holders of Class B Common Stock. With respect to
the election of directors, the holders of the Class B Common Stock have agreed
to vote their shares for three directors selected by Haim Saban and three
directors selected by Fox Broadcasting. Because the charter documents provide
that no Board action may be taken without a vote of at least three-quarters of
the directors, the possibility exists that, as a result of differences which
may in the future arise between Fox Broadcasting and Mr. Saban, the Company
may experience difficulties in defining and meeting its business objectives,
or in effecting a transaction which would be in the best interests of the
Company, which could materially adversely affect the results of operations and
financial condition of the Company.
STRATEGIC RELATIONSHIPS WITH NEWS CORP. AND FOX
The Company has had, and continues to have, a close strategic relationship
with News Corp. and its affiliated entities, including Fox Broadcasting, and
believes that this relationship is materially important to its business and
business strategies. However, except as may be provided in the agreements
between them which are discussed elsewhere in this Prospectus, neither News
Corp. or its affiliated companies nor the Company are obligated to engage in
any business transactions or jointly participate in any opportunities with the
other, and the possibility exists that the current strategic relationships
between the parties could materially change in the future. See "Business--The
Strategic Alliance with Fox/News Corp."
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TRANSACTIONS WITH STOCKHOLDERS AND THEIR AFFILIATES
The Company has in the past entered into transactions and agreements, some
of which are ongoing, with Haim Saban and with Fox Broadcasting and News Corp.
and their affiliated companies. In addition, the Company may in the future
enter into additional agreements and other transactions with certain of these
affiliates. Although the Company has adopted a policy that future transactions
between the Company and any of these affiliates or family members must be
approved by a majority of the Board of Directors of the Company, including a
majority of the Disinterested Members (as defined herein) of the Board of
Directors of the Company, there can be no assurance that any such future
transactions will prove to be favorable to the Company. See "Certain
Transactions."
ORIGINAL ISSUE DISCOUNT CONSEQUENCES
The Senior Discount Notes will be issued at a discount from their principal
amount at maturity. Although cash interest is not expected to accrue on the
Senior Discount Notes prior to November 1, 2002, and there are not expected to
be any periodic payments of interest on the Senior Discount Notes prior to May
1, 2003 (unless a Cash Interest Election shall have been made), original issue
discount (the difference between the "stated redemption price at maturity" and
the "issue price," as such terms are defined in the Internal Revenue Code of
1986, as amended (the "Code"), and Treasury Regulations thereunder) ("OID") of
the Senior Discount Notes will accrete from the issue date of such Notes up to
the maturity date. Consequently, Holders of the Senior Discount Notes
generally will be required to include amounts in gross income for United
States federal income tax purposes in advance of their receipt of the cash
payments to which the income is attributable. Such amounts in the aggregate
will be equal to the difference between the "stated redemption price at
maturity" (inclusive of stated interest on the Senior Discount Notes) and the
"issue price" of the Senior Discount Notes. See "Certain United States Federal
Income Tax Considerations" for a more detailed discussion of the federal
income tax consequences of the purchase, ownership and disposition of the
Senior Discount Notes.
In the event a bankruptcy case is commenced by or against the Company under
the United States Bankruptcy Code (the "Bankruptcy Code"), the claim of a
Holder of the Senior Discount Notes may be limited to an amount equal to the
sum of (i) the initial offering price and (ii) that portion of the OID which
is not deemed to constitute "unmatured interest" for purposes of the
Bankruptcy Code. Any OID that was not amortized as of the date of any such
bankruptcy filing would constitute "unmatured interest." To the extent that
the Bankruptcy Code differs from the Code in determining the method of
amortization of OID, a Holder of the Senior Discount Notes may realize taxable
gain or loss on payment of such holder's claim in bankruptcy.
ABSENCE OF PUBLIC MARKET FOR THE NOTES
The Notes will constitute new issues of securities for which there is no
established public trading market. Although the Old Notes are eligible for
trading on PORTAL, the Company does not intend to apply for listing of the
Notes on a national securities exchange or quotation of the Notes on any
automated quotation system. The Initial Purchasers have advised the Company
that they currently intend to make a market in the Notes, although the Initial
Purchasers are not obligated to do so, and any such market making with respect
to the Notes may be discontinued at any time without notice. Accordingly,
there can be no assurance as to the development or liquidity of any market
that may develop for the Notes, the ability of the holders of the Notes to
sell their Notes or the price at which such holders would be able to sell
their Notes. If a market were to exist, the Notes could trade at prices that
may be lower than the initial offering price thereof, depending on many
factors, including prevailing interest rates and the markets for similar
securities, general economic conditions and the financial condition and
performance of, and prospects for, the Company. See "Plan of Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE
The Notes will be issued in exchange for the Old Notes only after timely
receipt by the Exchange Agent of such Old Notes or a book-entry confirmation
of a book-entry transfer of the Old Notes into the Exchange Agent's
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account at DTC, including an Agent's Message (as defined herein) if the
tendering Holder does not deliver a properly completed and duly executed
Letter of Transmittal, or, in the case of book-entry transfer, an Agent's
Message in lieu of the Letter of Transmittal, including all other documents
required by such Letter of Transmittal. Therefore, the Holders of the Old
Notes desiring to tender such Old Notes in exchange for the Notes should allow
sufficient time to ensure timely delivery. Neither the Exchange Agent nor the
Company is under any duty to give notification of defects or irregularities
with respect to tenders of the Old Notes for exchange. The Old Notes that are
not tendered or are tendered but not accepted will, following consummation of
the Exchange Offer, continue to be subject to the existing restrictions upon
transfer thereon (as set forth in the legend thereon). Subject to the
obligation of the Company to file a shelf registration statement covering
resales of the Old Notes in certain limited circumstances, the Company does
not intend to register the Old Notes under the Securities Act and, after
consummation of the Exchange Offer, will not be obligated to do so. Upon
consummation of the Exchange Offer, certain rights under the Registration
Rights Agreement, including registration rights and the right to receive the
contingent increases in interest rates, will terminate, except under limited
circumstances. In addition, any holder of the Old Notes who tenders in the
Exchange Offer for the purpose of participating in a distribution of the Notes
will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer who holds the Old Notes acquired for its own account as a
result of market-making or other trading activities and who receives the Notes
for its own account in exchange for such Old Notes pursuant to the Exchange
Offer, must acknowledge that it will deliver a prospectus in connection with
any resale of such Notes. To the extent that the Old Notes are tendered and
accepted in the Exchange Offer, the trading market for untendered and tendered
but unaccepted Old Notes could be adversely affected due to the limited
amount, or "float," of the Old Notes that are expected to remain outstanding
following the Exchange Offer. Generally, a lower "float" of a security could
result in less demand to purchase such security and could, therefore, result
in lower prices for such security. For the same reason, to the extent that a
large amount of the Old Notes are not tendered or are tendered and not
accepted in the Exchange Offer, the trading market for the Notes could be
adversely affected. See "The Exchange Offer."
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement. In connection with the
original issue and sale of the Old Notes, the Company in the Registration
Rights Agreement, agreed to file with the Commission a registration statement
covering the exchange by the Company of the Notes for the Old Notes. The
Registration Rights Agreement provides, among other things, that (i) the
Company will file the Registration Statement with the Commission on or prior
to January 26, 1998, (ii) the Company will use its best efforts to cause the
Registration Statement to become effective under the Securities Act on or
prior to March 27, 1998 and to effect the Exchange Offer before April 26,
1998, (iii) if the Exchange Offer is not effected before April 26, 1998, or if
certain holders of the Old Notes notify the Company they are not permitted to
participate in, or would not receive freely tradeable Notes pursuant to the
Exchange Offer, the Company will use its best efforts to cause to become
effective a registration statement (the "Shelf Registration Statement") with
respect to the resale of the Old Notes and to keep the Shelf Registration
Statement effective until up to two years after the effective date thereof, or
such shorter period as the Old Notes may become eligible for sale to the
public without volume or manner of sale restrictions under Rule 144(k)
promulgated under the Securities Act.
If (i) the Company fails to file any of the registration statements required
by the Registration Rights Agreement on or before the date specified for such
filing, (ii) any of such registration statements is not declared effective by
the Commission on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date"), (iii) the Exchange Offer is required to be
consummated under the Registration Rights Agreement and the Company fails to
issue the Notes in exchange for all Old Notes properly tendered and not
withdrawn in the Exchange Offer within 45 days of the Effectiveness Target
Date with respect to the Registration Statement, or (iv) the Shelf
Registration Statement or the Registration Statement is declared effective but
thereafter ceases to be effective or usable in connection with the Exchange
Offer or resales of Transfer Restricted Notes, as the case may be, during the
periods specified in the Registration Rights Agreement (each such event
referred to in clauses (i) through (iv) above, a "Registration Default"), then
the Company shall pay as liquidated damages additional interest ("Additional
Interest") on the Notes as to which the Registration Default exists as set
forth herein. If a Registration Default exists with respect to the Senior
Notes (or with respect to the Senior Discount Notes if it occurs after the
Cash Interest Election Date), the interest rate on such Transfer Restricted
Notes will increase, with respect to the first 90-day period (or portion
thereof) while a Registration Default is continuing immediately following the
occurrence of such Registration Default, .25% per annum, such interest rate
increasing by an additional .25% per annum at the beginning of each subsequent
90-day period (or portion thereof) while a Registration Default is continuing
until all Registration Defaults have been cured, up to a maximum rate of
Additional Interest of 1.00% per annum. If a Registration Default exists with
respect to the Senior Discount Notes prior to the Cash Interest Election Date,
the Company will make cash payments of Additional Interest on each interest
payment date on the Senior Discount Notes which are Transfer Restricted Notes
at the rates set forth in the preceding sentence multiplied by the Accreted
Value of the Senior Discount Notes as of the interest payment date on which
such payment is made. Upon (w) the filing of the applicable registration
statement (in the case of clause (i) of this paragraph), (x) the effectiveness
of the applicable registration statement (in the case of clause (ii) of this
paragraph), (y) the issuance of Notes in exchange for all Old Notes properly
tendered and not withdrawn in the Exchange Offer (in the case of clause (iii)
of this paragraph) or (z) the effectiveness of the Registration Statement or
the Shelf Registration Statement, as the case may be, which had ceased to be
effective (in the case of clause (iv) of this paragraph), Additional Interest
as a result of the Registration Default described shall cease to accrue (but
any accrued amount shall be payable) and the interest rate on the Notes will
revert to the original rate if no other Registration Default has occurred and
is continuing. Except under certain limited circumstances, registration rights
and the right to receive additional interest will terminate upon consummation
of the Exchange Offer.
For purposes of the foregoing, "Transfer Restricted Notes" means each Old
Note until (i) the date on which such Old Note has been exchanged by a person
other than a broker-dealer referred to in clause (ii) below for a Note in the
Exchange Offer, (ii) following the exchange by a broker-dealer in the Exchange
Offer of an Old
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Note for a Note, the date on which such Note is sold to a purchaser who
receives from such broker-dealer on or prior to the date of such sale a copy
of the prospectus contained in the Exchange Offer Registration Statement, as
amended or supplemented, (iii) the date on which such Old Note has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement, (iv) the date on which such Old Note is
eligible for distribution to the public pursuant to Rule 144(k) promulgated
under the Securities Act (or any similar provision then in force, but not Rule
144A promulgated under the Securities Act), (v) the date on which such Old
Note shall have been otherwise transferred by the holder thereof and a Note
not bearing a legend restricting further transfer shall have been delivered by
the Company and subsequent disposition of such Note shall not require
registration or qualification under the Securities Act or any similar state
law then in force or (vi) such Note ceases to be outstanding.
The outstanding Old Senior Notes in the aggregate principal amount at
maturity of $475,000,000 and the Old Senior Discount Notes in the aggregate
principal amount at maturity of $618,670,000 were originally issued and sold
on October 28, 1997 (the "Issue Date"). The original sale to the Initial
Purchasers was not registered under the Securities Act in reliance upon the
exemption provided by Section 4(2) of the Securities Act and the concurrent
resale of the Old Notes to investors was not registered under the Securities
Act in reliance upon the exemption provided by Rule 144A promulgated under the
Securities Act. The Old Notes may not be reoffered, resold or transferred
other than pursuant to a registration statement filed pursuant to the
Securities Act or unless an exemption from the registration requirements of
the Securities Act is available. Pursuant to Rule 144 promulgated under the
Securities Act, the Old Notes may generally be resold (a) commencing one year
after the Issue Date, in an amount up to, for any three-month period, the
greater of 1% of the Old Notes then outstanding or the average weekly trading
volume of the Old Notes during the four calendar weeks immediately preceding
the filing of the required notice of sale with the Commission and (b)
commencing two years after the Issue Date, in any amount and otherwise without
restriction by a Holder who is not, and has not been for the preceding 90
days, an affiliate of the Company. The Old Notes are eligible for trading in
the PORTAL market, and may be resold to certain Qualified Institutional Buyers
pursuant to Rule 144A promulgated under the Securities Act. Certain other
exemptions may also be available under other provisions of the federal
securities laws for the resale of the Old Notes.
Under existing interpretations by the Staff of the Commission as set forth
in no-action letters issued to third parties in other transactions, the Notes
will, in general, be freely transferable after the Exchange Offer without
further registration under the Securities Act, subject to any restrictions on
transfer imposed by state "blue sky" laws and provided that the Holder is not
an affiliate of the Company and that, in the case of broker-dealers
participating in the Exchange Offer, a prospectus meeting the requirements of
the Securities Act must be delivered by such broker-dealers in connection with
resales of the Notes. The Company has agreed, for a period of 90 days after
consummation of the Exchange Offer, to make available a prospectus meeting the
requirements of the Securities Act to any such broker-dealer for use in
connection with any resale of any Notes acquired in the Exchange Offer. A
broker-dealer which delivers such a prospectus to purchasers in connection
with such resales will be subject to certain of the civil liability provisions
under the Securities Act and will be bound by the provisions of the
Registration Rights Agreement (including certain indemnification rights and
obligations). Any broker-dealer who is an affiliate of the Company may not
participate in the Exchange Offer and may not rely on the no-action letters
referred to above and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. Subject to the minimum denomination requirements
of the Notes, the Notes are being offered in exchange for a like principal
amount of Old Notes. Old Notes may be exchanged only in integral multiples of
$1,000 principal amount at maturity.
The form and terms of the Notes will be identical in all material respects
to the form and terms of the Old Notes except that the Notes will be
registered under the Securities Act and, therefore, will not bear legends
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restricting the transfer thereof. The Notes will evidence the same debt as the
the Old Notes and will be entitled to the benefits of the Indentures. The
Notes will be treated as a single class under the Indentures with any Old
Notes that remain outstanding. The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Old Notes being tendered for exchange.
As of December 31, 1997, $475,000,000 aggregate principal amount of Old
Senior Notes were outstanding and $618,670,000 aggregate principal amount at
maturity of Old Senior Discount Notes were outstanding. This Prospectus, the
Letter of Transmittal and Notice of Guaranteed Delivery are being sent to all
registered Holders of the Old Notes as of that date. Tendering Holders will
not be required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to the
exchange of the Old Notes pursuant to the Exchange Offer. The Company will pay
all charges and expenses, other than certain transfer taxes which may be
imposed, in connection with the Exchange Offer. See "--Payment of Expenses."
Holders of Old Notes do not have any appraisal or dissenters' rights under
the Delaware General Corporation Law in connection with the Exchange Offer.
EXPIRATION DATE; EXTENSIONS; TERMINATION
The Exchange Offer will expire at 5:00 P.M., New York City time, on ,
1998 (20 business days following the date notice of the Exchange Offer was
mailed to the Holders). The Company reserves the right to extend the Exchange
Offer at its discretion, in which event the term "Expiration Date" shall mean
the time and date on which the Exchange Offer as so extended shall expire. The
Company shall notify the Exchange Agent of any extension by written notice and
shall mail to the registered Holders of the Old Notes an announcement thereof,
each prior to 9:00 A.M., New York City time, on the next business day after
the previously scheduled Expiration Date.
The Company reserves the right to extend or terminate the Exchange Offer and
not accept for exchange any Old Notes if any of the events set forth below
under the caption "Conditions to the Exchange Offer" occur and are not waived
by the Company, by giving written notice of such delay or termination to the
Exchange Agent. See "--Conditions to the Exchange Offer." The rights reserved
by the Company in this paragraph are in addition to the Company's rights set
forth below under the caption "--Conditions to the Exchange Offer."
PROCEDURES FOR TENDERING
The tender to the Company of the Old Notes by a Holder thereof pursuant to
one of the procedures set forth below and the acceptance thereof by the
Company will constitute an agreement between such Holder and the Company in
accordance with the terms and subject to the conditions set forth herein and
in the Letter of Transmittal.
Except as set forth below, a Holder who wishes to tender the Old Notes for
exchange pursuant to the Exchange Offer must transmit an Agent's Message (as
defined below) or a properly completed and duly executed Letter of
Transmittal, including all other documents required by such Letter of
Transmittal, to the Exchange Agent at the address set forth below under
"Exchange Agent" on or prior to the Expiration Date. In addition, either (i)
certificates for such Old Notes must be received by the Exchange Agent along
with the Letter of Transmittal, (ii) a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Old Notes, if such procedure is
available, into the Exchange Agent's account at DTC pursuant to the procedure
of book-entry transfer described below, must be received by the Exchange Agent
prior to the Expiration Date, or (iii) the Holder must comply with the
guaranteed delivery procedures described below. LETTERS OF TRANSMITTAL AND THE
OLD NOTES SHOULD NOT BE SENT TO THE COMPANY.
The term "Agent's Message" means a message, transmitted by DTC to and
received by the Exchange Agent and forming a part of a Book-Entry
Confirmation, which states that DTC has received an express acknowledgement
from the tendering participant, which acknowledgment states that such
participant has received and agrees to be bound by the Letter of Transmittal
and that the Company may enforce such Letter of Transmittal against such
participant.
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Signatures on a Letter of Transmittal must be guaranteed unless the Old
Notes tendered pursuant thereto are tendered (i) by a registered Holder of Old
Notes who has not completed the box entitled "Special Issuance and Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of any firm
that is a member of a registered national securities exchange or a member of
the National Association of Securities Dealers, Inc. (the "NASD") or a
commercial bank or trust company having an office in the United States (an
"Eligible Institution"). In the event that signatures on a Letter of
Transmittal are required to be guaranteed, such guarantee must be by an
Eligible Institution.
The method of delivery of Old Notes and other documents to the Exchange
Agent is at the election and risk of the Holder, but if delivery is by mail it
is suggested that the mailing be made sufficiently in advance of the
Expiration Date to permit delivery to the Exchange Agent before the Expiration
Date.
If the Letter of Transmittal is signed by a person other than a registered
Holder of an Old Note tendered therewith, such Old Note must be endorsed or
accompanied by appropriate bond powers, in either case signed exactly as the
name of the registered Holder appears on the Old Note.
If the Letter of Transmittal or an Old Note or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must
be submitted.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Old Notes will be resolved by the Company,
whose determination will be final and binding. The Company reserves the
absolute right to reject any or all tenders that are not in proper form or the
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any irregularities or
conditions of tender as to particular Old Notes. The Company's interpretation
of the terms and conditions of the Exchange Offer (including the instructions
in the Letter of Transmittal) will be final and binding. Unless waived, any
irregularities in connection with tenders must be cured within such time as
the Company shall determine. Neither the Company nor the Exchange Agent shall
be under any duty to give notification of defects in such tenders or shall
incur liabilities for failure to give such notification. Tenders of the Old
Notes will not be deemed to have been made until such irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering Holder, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
The Company's acceptance for exchange of Old Notes tendered pursuant to the
Exchange Offer will constitute a binding agreement between the tendering
person and the Company upon the terms and subject to the conditions of the
Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at DTC for purposes of the Exchange Offer within two business
days after the date of this Prospectus, and any financial institution that is
a participant in DTC's book-entry transfer facility systems may make book-
entry delivery of Old Notes by causing DTC to transfer such Old Notes into the
Exchange Agent's account at DTC in accordance with DTC's ATOP procedures for
transfer. However, although delivery of Old Notes may be effected through
book-entry transfer into the Exchange Agent's account at DTC, an Agent's
Message or a duly executed Letter of Transmittal, including all other
documents required by such Letter of Transmittal, must in any case be
transmitted to and received by the Exchange Agent at one of the addresses set
forth below under the caption "Exchange Agent" on or prior to the Expiration
Date or the guaranteed delivery procedures described below must be complied
with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
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GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, the Letter
of Transmittal or any other required documents to the Exchange Agent prior to
the Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder of the Old Notes, the
certificate number or numbers of such Old Notes and the principal amount of
the Old Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within five New York Stock Exchange trading days after
the Expiration Date, the Letter of Transmittal (or facsimile thereof)
together with the certificate(s) representing the Old Notes, or a Book-
Entry Confirmation, as the case may be, and any other documents required by
the Letter of Transmittal will be deposited by the Eligible Institution
with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Old Notes in proper form for transfer, or a Book-Entry Confirmation, as the
case may be, and all other documents required by the Letter of Transmittal
are received by the Exchange Agent within three New York Stock Exchange
trading days after the Expiration Date.
Upon request of the Exchange Agent, a Notice of Guaranteed Delivery (as well
as a copy of this Prospectus and the Letter of Transmittal) will be sent to
Holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any extension
of the Exchange Offer, the Company will not be required to accept for
exchange, or to exchange, any Old Notes for any Notes, and, as described
below, may terminate the Exchange Offer (whether or not any Old Notes have
theretofore been accepted for exchange) or may waive any conditions to or
amend the Exchange Offer, if any of the following conditions have occurred or
exists or have not been satisfied:
(a) there shall have occurred a change in the current interpretation by
the staff of the Commission which permits the Notes issued pursuant to the
Exchange Offer in exchange for the Old Notes to be offered for resale,
resold and otherwise transferred by the Holders thereof (other than broker-
dealers and any such Holder which is an "affiliate" of the Company within
the meaning of Rule 405 promulgated under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Notes are acquired in the ordinary
course of such Holders' business and such Holders have no arrangement or
understanding with any person to participate in the distribution of such
Notes; or
(b) any law, statute, rule or regulation shall have been adopted or
enacted which, in the judgment of the Company, would reasonably be expected
to impair its ability to proceed with the Exchange Offer; or
(c) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration
Statement, or proceedings shall have been initiated or, to the knowledge of
the Company, threatened for that purpose, or any governmental approval has
not been obtained, which approval the Company shall, in its sole
discretion, deem necessary for the consummation of the Exchange Offer as
contemplated hereby; or
(d) the Company shall have received an opinion of counsel experienced in
such matters to the effect that there exists any actual or threatened legal
impediment (including a default or prospective default under an agreement,
indenture or other instrument or obligation to which the Company is a party
or by which it is bound) to the consummation of the transactions
contemplated by the Exchange Offer.
If the Company determines in its sole and absolute discretion that any of
the foregoing events or conditions has occurred or exists or has not been
satisfied, it may, subject to applicable law, terminate the Exchange Offer
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(whether or not any Old Notes have theretofore been accepted for exchange) or
waive any such condition or otherwise amend the terms of the Exchange Offer in
any respect. If such waiver or amendment constitutes a material change to the
Exchange Offer, the Company will promptly disclose such waiver or amendment by
means of a prospectus supplement that will be distributed to the registered
Holders of the Old Notes and will extend the Exchange Offer to the extent
required by Rule 14e-1 promulgated under the Exchange Act.
The foregoing conditions are for the sole benefit of the Company and may be
waived by the Company, in whole or in part, in its reasonable discretion. Any
determination made by the Company concerning an event, development or
circumstance described or referred to above will be final and binding on all
parties.
ACCEPTANCE OF THE OLD NOTES FOR EXCHANGE; DELIVERY OF THE NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will accept all Old Notes validly tendered and not withdrawn prior to
5:00 P.M., New York City time, on the Expiration Date. The Company will
deliver the Notes in exchange for the Old Notes promptly following the
Expiration Date.
Subject to the conditions set forth under the caption "--Conditions to the
Exchange Offer," delivery of Notes in exchange for Old Notes tendered and
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of certificates for the Old Notes or a
Book-Entry Confirmation of a book-entry transfer of Old Notes into the
Exchange Agent's account at DTC, including an Agent's Message if the tendering
Holder does not deliver a Letter of Transmittal, a completed Letter of
Transmittal, or, in the case of a book-entry transfer, an Agent's Message in
lieu of the Letter of Transmittal and any other documents required by such
Letter of Transmittal. Accordingly, the delivery of Notes might not be made to
all tendering Holders at the same time, and will depend upon when certificates
for the Old Notes, Book-Entry Confirmations with respect to the Old Notes and
other required documents are received by the Exchange Agent.
Subject to the terms and conditions of the Exchange Offer, the Company will
be deemed to have accepted for exchange, and thereby exchanged, any Old Notes
validly tendered and not withdrawn as, if and when the Company gives oral or
written notice to the Exchange Agent of the Company's acceptance of such Old
Notes for exchange pursuant to the Exchange Offer. The Exchange Agent will act
as agent for the Company for the purpose of receiving tenders of the Old
Notes, the Letters of Transmittal and related documents, and as agent for the
tendering Holders for the purpose of receiving the Old Notes, the Letters of
Transmittal and related documents and transmitting Notes which will not be
held in global form by DTC or a nominee of DTC to validly tendered Holders.
Such exchange will be made promptly after the Expiration Date. If for any
reason whatsoever, acceptance for exchange or the exchange of any Old Notes
tendered pursuant to the Exchange Offer is delayed (whether before or after
the Company's acceptance for exchange of Old Notes) or the Company extends the
Exchange Offer or is unable to accept for exchange or exchange the Old Notes
tendered pursuant to the Exchange Offer, then, without prejudice to the
Company's rights set forth herein, the Exchange Agent may, nevertheless, on
behalf of the Company and subject to Rule 14e-1(c) promulgated under the
Exchange Act, retain the tendered Old Notes and such Old Notes may not be
withdrawn except to the extent tendering holders are entitled to withdrawal
rights as described under the caption "--Withdrawal Rights."
Pursuant to an Agent's Message or a Letter of Transmittal, a Holder of the
Old Notes will represent, warrant and agree in the Letter of Transmittal that
it has full power and authority to tender, exchange, sell, assign and transfer
Old Notes, that the Company will acquire good, marketable and unencumbered
title to the tendered Old Notes, free and clear of all liens, restrictions,
charges and encumbrances, and the Old Notes tendered for exchange are not
subject to any adverse claims or proxies. The Holder also will warrant and
agree that it will, upon request, execute and deliver any additional documents
deemed by the Company or the Exchange Agent to be necessary or desirable to
complete the exchange, sale, assignment, and transfer of the Old Notes
tendered pursuant to the Exchange Offer.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, any such unaccepted Old Notes will be returned, at the
27
<PAGE>
Company's expense, to the tendering Holder thereof as promptly as practicable
after the expiration or termination of the Exchange Offer.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date. For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at the address set forth below under the
caption "--Exchange Agent." Any such notice of withdrawal must specify the
name of the person having tendered the Old Notes to be withdrawn, identify the
Old Notes to be withdrawn (including the principal amount of such Old Notes),
and (where certificates for Old Notes have been transmitted) specify the name
in which such Old Notes are registered, if different from that of the
withdrawing Holder. If certificates for Old Notes have been delivered or
otherwise identified to the Exchange Agent, then, prior to the release of such
certificates the withdrawing Holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such Holder is an
Eligible Institution. If the Old Notes have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal
must specify the name and number of the account at DTC to be credited with the
withdrawn Old Notes and otherwise comply with the procedures of such facility.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Old Notes which have been tendered for
exchange but which are not exchanged for any reason will be returned to the
Holder thereof without cost to such Holder (or in the case of the Old Notes
tendered by book-entry transfer into the Exchange Agent's account at DTC
pursuant to the book-entry transfer procedures described above, such Old Notes
will be credited to an account maintained with DTC for the Old Notes) as soon
as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following
one of the procedures described above under the caption "--Procedures for
Tendering" above at any time on or prior to the Expiration Date.
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. All correspondence in connection with the Exchange Offer and the Letter
of Transmittal should be addressed to the Exchange Agent as follows:
By Registered or Certified Mail, or
Hand Delivery or Overnight Courier
101 Barclay Street
Reorganization Section/7E
New York, New York 10286
Facsimile Transmission:
(212)
Confirm by Telephone:
(212)
Requests for additional copies of the Prospectus or the Letter of
Transmittal should be directed to the Exchange Agent.
PAYMENT OF EXPENSES
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer.
28
<PAGE>
The Company, however, will pay reasonable and customary fees and reasonable
out-of-pocket expenses to the Exchange Agent in connection therewith. The
Company will also pay the cash expenses to be incurred in connection with the
Exchange Offer, including accounting, legal, printing, and related fees and
expenses.
CONSEQUENCES OF FAILURE TO EXCHANGE
Upon consummation of the Exchange Offer, certain rights under the
Registration Rights Agreement, including registration rights and the right to
receive the contingent increases in interest rate, will terminate. Old Notes
that are not exchanged for Notes pursuant to the Exchange Offer will remain
restricted securities within the meaning of Rule 144 promulgated under the
Securities Act. Accordingly, such Old Notes may be resold only (i) to the
Company or any subsidiary thereof, (ii) to a qualified institutional buyer in
compliance with Rule 144A promulgated under the Securities Act, (iii) to an
institutional accredited investor that, prior to such transfer, furnishes to
the Trustee a signed letter containing certain representations and agreements
relating to the restrictions on transfer of the Old Notes (the form of which
letter can be obtained from the Trustee) and, if such transfer is in respect
of an aggregate principal amount of Old Notes in the time of transfer of less
than $100,000, an opinion of counsel acceptable to the Company that such
transfer is in compliance with the Securities Act, (iv) pursuant to the
exemption from registration provided by Rule 144 promulgated under the
Securities Act (if available) or (v) pursuant to an effective registration
statement under the Securities Act. The liquidity of the Old Notes could be
adversely affected by the Exchange Offer. See "Risk Factors--Consequences of
Failure to Exchange."
ACCOUNTING TREATMENT
The Notes will be recorded at the same carrying value as the Old Notes, as
reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized. See
"Certain United States Federal Income Tax Considerations."
29
<PAGE>
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Notes in the Exchange Offer. In consideration for issuing the Notes as
contemplated in this Prospectus, the Company will receive Old Notes in like
principal amount. The form and terms of the Notes are identical in all
material respects to the form and terms of the Old Notes, except for certain
transfer restrictions and registration rights relating to the Old Notes and
except for certain provisions providing for an increase in the interest rate
on the Old Notes under certain circumstances relating to the timing of the
Exchange Offer. The Old Notes surrendered in exchange for the Notes will be
retired and canceled and cannot be reissued. Accordingly, issuance of the
Notes will not result in any increase in the outstanding debt of the Company.
The net proceeds to the Company from the Offering were $465,500,000 with
respect to the Old Senior Notes and approximately $365,629,948 with respect to
the Old Senior Discount Notes, in each case, after deducting selling
discounts, commissions and estimated offering expenses. The net proceeds to
the Company from the Offering were used to repay $615 million of the $1.25
billion borrowed under the Old Credit Facility and to repay $215 million of
the $345.5 million principal amount of the NAHI Bridge Note.
30
<PAGE>
CAPITALIZATION
The following table sets forth the combined capitalization of the Company at
September 30, 1997, (i) on a historical basis, and (ii) pro forma to reflect
the Offering.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
----------------------
ACTUAL PRO FORMA
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
CASH AND CASH EQUIVALENTS.............................. $ 100,267 $ 44,588
========== ==========
LONG-TERM DEBT (INCLUDING CURRENT PORTION):
Other debt (1)....................................... $ 28,658 $ 24,559
Old Credit Facility.................................. 1,250,000 635,000
Senior Notes offered hereby.......................... 475,000
Senior Discount Notes offered hereby (2)............. -- 375,000
NAHI Bridge Note..................................... 345,514 74,835
Fox Subordinated Note................................ 104,573 108,672
---------- ----------
Total long-term obligations........................ $1,728,745 $1,693,066
---------- ----------
Series A Preferred Stock, $0.001 par value; 500,000
shares authorized; 345,000 shares issued and
outstanding (3)....................................... $ 345,000 $ 345,000
STOCKHOLDERS' EQUITY:
Preferred Stock, $0.001 par value; 19,500,000 shares
authorized; no shares issued or outstanding......... -- --
Class A Common Stock, $0.001 par value; 16,000,000
shares authorized; 160,000 shares issued and
outstanding (4)..................................... -- --
Class B Common Stock, $0.001 par value; 16,000,000
shares authorized; 15,840,000 shares issued and
outstanding......................................... 16 16
Contributed capital.................................. 61,032 61,032
Cumulative translation adjustment.................... (877) (877)
Retained earnings.................................... 17,671 17,671
---------- ----------
Total stockholders' equity......................... $ 77,842 $ 77,842
---------- ----------
Total capitalization............................. $2,151,587 $2,115,908
========== ==========
</TABLE>
- --------
(1) Actual includes $14.8 million of indebtedness of Saban and its
subsidiaries, $6.4 million of indebtedness owed by IFE and $7.5 million of
indebtedness to Fox Broadcasting.
(2) Reflects estimated gross proceeds from the issuance of the Senior Discount
Notes.
(3) News Corp. and News Publishing Australia Limited ("NPAL") have jointly and
severally agreed that, upon the occurrence and during the continuation of
an event of default under the Series A Preferred Stock or liquidation,
dissolution, winding up or other similar event of the Company, News Corp.
or NPAL will advance the Company all amounts necessary to redeem in full,
or pay the liquidation distribution on, all of the outstanding Series A
Preferred Stock. See "Ownership and Control of the Company--The Series A
Preferred Stock."
(4) Does not include an aggregate of 646,548 shares of Class A Common Stock
reserved for issuance upon the exercise of options granted to certain
members of management of the Company.
31
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated condensed statements of
operations for the twelve months ended June 30, 1997 and the three months
ended September 30, 1997 reflect, on a consolidated basis, the results of
operations of the Company as if the IFE Acquisition and related financing and
the Reorganization had occurred as of the beginning of each period presented.
The pro forma consolidated statements of operations, prepared by the Company's
management, are based on the historical financial statements of the Company
and IFE giving effect to the adjustments described in the accompanying notes
to the unaudited pro forma consolidated statements of operations. These pro
forma consolidated statements of operations may not be indicative of the
results that actually would have occurred if the IFE Acquisition and
Reorganization had occurred on the dates indicated or which may be obtained in
the future. The pro forma consolidated financial statements should be read in
conjunction with the audited financial statements and notes thereto of the
Company and IFE contained elsewhere herein.
A preliminary allocation of the purchase price of IFE has been made to
major categories of assets and liabilities for purposes of the pro forma
financial statements based upon available information and assumptions that the
Company's management believes are reasonable. However, such amounts are
subject to change and final amounts may differ.
PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE TWELVE MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
THE COMPANY IFE PRO FORMA PRO FORMA
ACTUAL ACTUAL ADJUSTMENTS CONSOLIDATED
----------- -------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net revenues................. $307,820 $379,242 $(72,444)(1) $614,618
Costs and expenses:
Production and
programming............... 180,381 218,804 (96,751)(1) 306,557
4,123 (2)
Selling, general and
administrative............ 62,466 99,128 (20,094)(1) 141,500
Fox Kids Network affiliate
participations............ 6,194 -- -- 6,194
Amortization of intangible
assets ................... -- 2,204 (2,204)(1) 41,819
41,819 (2)
-------- -------- -------- --------
Operating (loss) income...... 58,779 59,106 663 118,548
Equity in loss of
unconsolidated affiliate.... 1,546 -- -- 1,546
Other (income) expense....... -- 10,443 (10,742)(1) (299)
Interest expense............. 2,226 12,445 (11,503)(1) 148,966
11,782 (3)
134,016 (4)
-------- -------- -------- --------
Income (loss) before
provision for income taxes.. 55,007 36,218 (122,890) (31,665)
Provision (benefit) for
income taxes................ 14,567 15,811 (32,159)(5) (1,781)
-------- -------- -------- --------
Net income (loss)............ $ 40,440 $ 20,407 $(90,731) $(29,884)
======== ======== ======== ========
Net loss attributable to
common shares............... $ 40,440 $(60,934)
======== ========
Net loss per common share.... $ 2.53 $ (3.81)
======== ========
Weighted average shares
outstanding................. 16,000 16,000
======== ========
</TABLE>
32
<PAGE>
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
THE COMPANY PRO FORMA PRO FORMA
ACTUAL ADJUSTMENTS CONSOLIDATED
----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net revenues............................ $122,946 $ 24,485(6) $147,431
Costs and Expenses:
Production and programming............ 68,889 10,805(6) 79,694
Selling, general and administrative... 27,244 6,404(6) 33,648
Fox Kids Network affiliate
participations....................... (448) -- (448)
Amortization of intangible assets .... 6,969 3,485(2) 10,454
-------- -------- --------
Operating income........................ 20,292 3,791 24,083
Equity in loss of unconsolidated
affiliate.............................. 1,184 -- 1,184
Other expense........................... 282 -- 282
Interest expense........................ 18,814 74(6) 38,306
19,418(4)
-------- -------- --------
Loss before provision for income taxes.. 12 (15,701) (15,689)
Provision (benefit) for income taxes.... 1,187 (4,886)(5) (3,699)
-------- -------- --------
Net loss................................ $ (1,175) $(10,815) $(11,990)
======== ======== ========
Net loss attributable to common shares.. $ (6,364) $(19,753)
======== ========
Net loss per common share............... $ (.40) $ (1.23)
======== ========
Weighted average shares outstanding..... 16,000 16,000
======== ========
</TABLE>
33
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(1) The Company plans to dispose of IFE's production and live entertainment
businesses and IFE's interests in cable and international networks not
directly related to The Family Channel. The operations of such businesses
have been eliminated from the pro forma consolidated condensed statements
of operations and will be excluded from future operating results; assets of
such businesses are reflected in historical financial statements as assets
held for sale.
(2) The IFE Acquisition was accounted for under the purchase method of
accounting. The total purchase price of approximately $1.9 billion
(including payoff of existing IFE credit facilities) was allocated to the
tangible and intangible assets acquired and liabilities assumed by the
Company based upon their respective fair values as of the acquisition date.
The pro forma statements of operations reflect the amortization of
intangible assets using a 40-year life and additional depreciation expense
resulting from the valuation of property and equipment acquired from IFE.
(3) In connection with the Reorganization, the Company issued the Fox
Subordinated Note in exchange for a $50 million interest in the LLC and
$58.6 million of amounts receivable from the LLC. The pro forma statements
of operations reflect the interest expense on the Fox Subordinated Note
using the interest rate of 10.427% as if the Reorganization had occurred as
of the beginning of each period presented.
(4) In connection with the IFE Acquisition, the Company incurred indebtedness
under the Old Credit Facility of $1.25 billion and issued the NAHI Bridge
Note in the amount of $345.5 million. Debt issue costs of $8.8 million were
incurred in connection with the establishment of the Old Credit Facility.
The proceeds from those borrowings were used to finance the IFE Acquisition
and repay certain indebtedness of the Company and IFE. The pro forma
consolidated statements of operations reflect the interest expense on those
borrowings, the amortization of the debt issue costs and the elimination of
interest expense associated with the obligations repaid as if the IFE
Acquisition had occurred as of the beginning of each period presented.
The pro forma interest charge was based on the 10.427% interest rate for the
NAHI Bridge Note and the 7.63% interest rate in effect at the time of the
IFE Acquisition for the Old Credit Facility. A change of 100 basis points in
the interest rate for the Old Credit Facility would change the pro forma
interest charge by $12.5 million.
(5) Reflects the income tax effect of the pro forma adjustments.
(6) Reflects the on-going results of operations for IFE for the period July 1,
1997 to July 31, 1997. The operations of IFE's production and live
entertainment businesses and IFE's interests in cable and international
networks not directly related to The Family Channel have been excluded.
IFE's on-going results of operations subsequent to July 31, 1997 are
consolidated with the results of the Company.
34
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The selected financial data of the Company set forth below as of June 30,
1996 and June 30, 1997, for the eight months ended June 30, 1996 and the
fiscal year ended June 30, 1997 are derived from the Company's combined
financial statements audited by Ernst & Young LLP, independent auditors,
included elsewhere in this Prospectus. The selected financial data of the
Company set forth below as of September 30, 1997 and for the three months
ended September 30, 1996 and 1997 are derived from the Company's unaudited
combined financial statements.
The selected financial data of Saban set forth below as of May 31, 1995 and
as of October 31, 1995 and for the year ended May 31, 1995 and for the five
months ended October 31, 1995 are derived from Saban's consolidated financial
statements audited by Ernst & Young LLP, independent auditors, included
elsewhere in this Prospectus. The selected financial data of Saban presented
below as of May 31, 1993 and 1994 and for each of the two years in the period
ended May 31, 1994 are derived from Saban's consolidated financial statements
audited by Ernst & Young LLP, independent auditors.
The selected financial data of FCN Holding set forth below as of July 2,
1995 and as of October 31, 1995 and for the year ended July 2, 1995 and for
the four months ended October 31, 1995 are derived from FCN Holding's
consolidated financial statements audited by Ernst & Young LLP, independent
auditors, included elsewhere in this Prospectus. The selected financial data
of FCN Holding presented below at July 3, 1994 and for the year ended July 3,
1994 are derived from FCN Holding's consolidated financial statements audited
by Ernst & Young LLP, independent auditors. The selected financial data of FCN
Holding presented below at June 27, 1993, and for the year ended June 27,
1993, are derived from FCN Holding's unaudited consolidated financial
statements. The unaudited consolidated financial statements from which such
selected financial data are derived include all adjustments, consisting of
only normal recurring accruals, which management considers necessary for a
fair presentation.
The selected financial data presented below and under "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
should be read in conjunction with the consolidated and combined financial
statements, including the notes thereto, appearing elsewhere in this
Prospectus.
35
<PAGE>
THE COMPANY
<TABLE>
<CAPTION>
EIGHT
MONTHS THREE MONTHS THREE MONTHS
ENDED ENDED ENDED
JUNE 30, YEAR ENDED SEPTEMBER 30, SEPTEMBER 30,
1996 JUNE 30, 1997 1996 1997
-------- ------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Net revenues............... $191,621 $307,820 $63,801 $122,946
Costs and expenses:
Production and
programming............. 98,937 180,381 30,384 68,889
Selling, general and
administrative.......... 23,072 62,466 12,513 27,244
Fox Kids Network
affiliate
participations.......... 8,853 6,194 4,177 (448)
Amortization of
intangible assets....... -- -- -- 6,969
-------- -------- ------- --------
Operating income........... 60,759 58,779 16,727 20,292
Investment advisory fee.... 10,000 -- -- --
Equity in loss of
unconsolidated affiliate.. -- 1,546 -- 1,184
Other expense.............. -- -- -- 282
Interest expense........... 885 2,226 648 18,814
-------- -------- ------- --------
Income before income tax
expense................... 49,874 55,007 16,079 12
Income tax expense......... 18,274 14,567 4,635 1,187
-------- -------- ------- --------
Net income (loss).......... $ 31,600 $ 40,440 $11,444 $ (1,175)
======== ======== ======= ========
Net income (loss)
attributable to common
shareholders.............. $ 31,600 $ 40,440 $11,444 $ (6,364)
======== ======== ======= ========
Net income (loss) per
common share.............. $ 1.98 $ 2.53 $ .72 $ (.40)
======== ======== ======= ========
Weighted average shares
outstanding............... 16,000 16,000 16,000 16,000
======== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
----------------- SEPTEMBER 30,
1996 1997 1997
-------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................... $ 16,044 $ 28,877 $ 100,267
Programming costs, less accumulated
amortization................................. 181,427 235,575 384,550
Total assets.................................. 336,270 412,401 2,502,633
Long-term obligations (including current
maturities).................................. 101,487 116,264 1,728,745
Stockholders' equity.......................... 72,831 132,687 77,842
</TABLE>
36
<PAGE>
SABAN ENTERTAINMENT, INC.
<TABLE>
<CAPTION>
FIVE MONTHS
YEAR ENDED MAY 31, ENDED
------------------------- OCTOBER 31,
1993 1994 1995 1995
------- -------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues(1)............................. $57,244 $ 84,372 $242,468 $105,130
Costs and expenses:
Production and programming............ 39,703 48,101 117,557 42,022
Selling, general and administrative... 6,255 8,933 51,894 11,538
------- -------- -------- --------
Operating income........................ 11,286 27,338 73,017 51,570
Interest expense........................ 1,279 2,337 1,315 539
------- -------- -------- --------
Income before provision for income
taxes.................................. 10,007 25,001 71,702 51,031
Provision for income taxes.............. 1,600 8,201 27,027 14,289
------- -------- -------- --------
Net income.............................. $ 8,407 $ 16,800 $ 44,675 $ 36,742
======= ======== ======== ========
<CAPTION>
AS OF MAY 31, AS OF
------------------------- OCTOBER 31,
1993 1994 1995 1995
------- -------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............... $ 1,554 $ 3,849 $ 14,584 $ 16,207
Programming costs, less accumulated am-
ortization............................. 60,279 85,079 115,873 118,210
Total assets............................ 94,916 136,967 218,197 207,479
Long-term obligations (including current
maturities)............................ 28,933 34,023 5,623 5,605
Stockholders' equity.................... 36,648 53,253 58,112 94,971
</TABLE>
37
<PAGE>
FCN HOLDING, INC.
<TABLE>
<CAPTION>
FOUR
YEAR ENDED MONTHS
---------------------------- ENDED
JUNE 27, JULY 3, JULY 2, OCTOBER 31,
1993 1994 1995 1995
-------- -------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues(1)..................... $ 85,729 $130,600 $168,871 $46,286
Costs and expenses:
Production and programming........ 67,804 98,725 109,259 29,698
Fees and costs to a related
party............................ 14,682 20,861 24,713 7,313
Selling, general and
administrative................... 3,810 3,579 5,202 2,566
Fox Kids Network affiliate
participations................... -- -- 11,523 6,883
-------- -------- -------- -------
Operating income (loss)(2).......... (567) 7,435 18,174 (174)
Interest expense.................... 2,017 2,218 1,630 145
-------- -------- -------- -------
Income (loss) before provision for
income taxes....................... (2,584) 5,217 16,544 (319)
Provision for income taxes.......... -- -- -- --
-------- -------- -------- -------
Net income (loss)................... $ (2,584) $ 5,217 $ 16,544 $ (319)
======== ======== ======== =======
<CAPTION>
AS OF
-----------------------------------------
JUNE 27, JULY 3, JULY 2, OCTOBER 31,
1993 1994 1995 1995
-------- -------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........... $ 304 $ 268 $ -- $ 317
Programming costs, less accumulated
amortization....................... 22,245 17,084 26,143 27,085
Total assets........................ 39,476 35,950 49,816 52,807
Long-term obligations (including
current maturities)................ 41,416 27,163 10,686 8,727
Stockholders' deficit............... (25,575) (20,356) (3,811) (4,130)
</TABLE>
38
<PAGE>
NOTES TO SELECTED HISTORICAL FINANCIAL DATA
- --------
(1) Includes revenues recognized by Saban from FCN and by FCN from Saban as set
forth below:
<TABLE>
<CAPTION>
FIVE FOUR
MONTHS MONTHS
FISCAL YEAR ENDED ENDED
---------------------- OCTOBER 31, OCTOBER 31,
1993 1994 1995 1995 1995
------ ------- ------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Saban revenues from FCN..... $2,535 $10,483 $16,228 $9,651 n/a
FCN revenues from Saban..... -- 885 14,662 n/a $973
</TABLE>
(2) Under agreements between FCN and Fox Broadcasting, for periods prior to
June 1, 1995, FCN paid administrative and other fees to Fox Broadcasting.
Effective June 1, 1995, Fox Broadcasting assigned to the Company its rights
to such payments accrued thereafter. Amounts expensed under these
agreements were $13.5 million, $19.8 million, $26.9 million and $9.1
million, for the years ended June 30, 1993, 1994 and 1995 and the four
months ended October 31, 1995, respectively.
39
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The Company's current principal operations are conducted through FCN, Saban
and IFE. FCN commenced operations with the launch, in September 1990, of the
Fox Kids Network, which is currently the top-rated children's-oriented
broadcast television network in the United States. Saban, which commenced
business in the mid-1980s, is currently one of the largest suppliers of
children's television programming in the world. IFE operates The Family
Channel, one of the largest cable television networks in the United States,
reaching approximately 95% of all U.S. cable and satellite television
households. FCN Holding (a parent of FCN) and Saban formed a joint venture
pursuant to agreements entered into on November 1, 1995. Under the terms of
the agreements relating to the joint venture, between November 1, 1995 (the
Effective Date) and August 1, 1997 (the date of the Reorganization), each of
Saban and FCN was operated by its respective management subject to the overall
supervision of a governing committee comprised of an equal number of
representatives of each of FCN and Saban. As a result of the formation of the
joint venture and the common management of the joint venture business, the
respective assets, liabilities and operations of Saban, FCN Holding and the
LLC have been combined at historical cost from and after November 1, 1995.
The Company was incorporated in August 1996 as a holding company of FCN
Holding, Saban and their respective subsidiaries. The Reorganization was
effected on August 1, 1997. The Company acquired a controlling interest in IFE
on August 1, 1997 and completed the IFE Acquisition on September 4, 1997. The
IFE Acquisition was accounted for using the purchase accounting method, and,
consequently, the historical financial statements included herein do not
reflect the results of operations of IFE prior to the date the Company first
acquired a controlling interest in IFE on August 1, 1997. In connection with
the IFE Acquisition, the Company decided that IFE's production and live
entertainment businesses are not strategic to the Company. The Company intends
to sell or otherwise discontinue use of certain of these assets which
generated $111.5 million in revenues and $150.4 million in expenses in the
twelve month period ended June 30, 1997. These assets include certain of the
assets of MTM Entertainment, Inc. and its subsidiaries ("MTM"), FiT TV
Partnership ("FiT TV") and certain other assets unrelated to the operations of
The Family Channel, and are reflected in financial statements for the three
months ended September 30, 1997 as assets held for sale; the operations of
such businesses will be excluded from future operating results.
Included in this Prospectus are (i) pro forma consolidated statements of
operations of the Company for the year ended June 30, 1997 and the three
months ended September 30, 1997, which on a hypothetical basis reflect the
accounts of the Company and IFE as if the IFE Acquisition had occurred at the
beginning of each period presented, (ii) the consolidated financial statements
of Saban covering the two year period ended May 31, 1995 and the five month
period ended October 31, 1995 (the close of business on the date prior to the
Effective Date), (iii) the consolidated financial statements of FCN Holding
covering the two year period ended July 2, 1995, and the four month period
ended October 31, 1995, (iv) the combined financial statements of the Company
for the eight month period commencing on the Effective Date and ending June
30, 1996, for the year ended June 30, 1997 and the three months ended
September 30, 1997, and (v) the consolidated financial statements of IFE for
the three year period ended December 31, 1996 and the six month period ended
June 30, 1997.
The financial statements of the Company for the eight months ended June 30,
1996 are not comparable to the financial statements of FCN Holding or Saban
prior to the Effective Date. Subsequent to the Effective Date, the operations
of the Company for the first time included both FCN Holding and Saban, and
thus the combined profit for that period can be attributable to the results of
both operations. In addition, commencing on the Effective Date, all revenues
between FCN and Saban have been eliminated in the combined financial
statements. The financial statements of the Company for the year ended June
30, 1997 are not comparable to the eight month period ended June 30, 1996 due
to the different lengths of the time periods compared and because neither
period includes the operations of IFE. In addition, the financial statements
of the Company as of and for the three
40
<PAGE>
months ended September 30, 1997 (which included the results of operations of
IFE from August 1, 1997) are not comparable to the three month period ended
September 30, 1996 as the prior period did not include the operations of IFE.
The following discussion provides information and analysis with respect to
the results of operations reflected in the financial statements included in
this Prospectus, as well as the liquidity and capital resources of the
Company. This discussion should be read in conjunction with the historical and
pro forma financial statements and related notes, "Selected Historical
Consolidated Financial Data" and "Formation of the Company," included
elsewhere in this Prospectus.
SIGNIFICANT ACCOUNTING FACTORS
Use of Estimates
As is industry practice, management has made a number of estimates and
assumptions relating to the amortization of programming costs and the
reporting of assets and liabilities in the preparation of the financial
statements discussed herein. Actual results could differ materially from these
estimates. Management periodically reviews and revises its estimates of future
airings and revenues as necessary, which may result in revised amortization of
its programming costs. Results of operations may be significantly affected by
the periodic adjustments in such amortization.
Revenue Recognition and Seasonality
Children's television programming revenues have historically represented a
significant portion of the Company's total revenues, and, for the fiscal year
ended June 30, 1997 and the three months ended September 30, 1997, accounted
for approximately 90% and 52%, respectively, of the Company's consolidated
revenues. See "--Results of Operations." Giving effect to the IFE Acquisition
as if it had occurred on July 1, 1996, children's television programming
revenues accounted for approximately 45% and 43% of the Company's pro forma
consolidated revenues for the fiscal year ended June 30, 1997 and the three
months ended September 30, 1997, respectively. Revenues from television
programming lease agreements are recognized when the lease period begins,
collectibility is reasonably assured and the product is available pursuant to
the terms of the lease agreement. Advertising revenue is recognized as earned
in the period in which the advertising commercials are broadcast. For this
reason, significant fluctuations in the Company's revenues and net income can
occur from period to period depending upon the availability dates of programs
and advertising revenues. In the United States, revenues from advertising
targeted at children are concentrated in the fourth calendar quarter, and in
the international markets, a significant portion of revenues are recognized in
April and October. While 21% of the Company's consolidated revenues and 28% of
the Company's net income for the fiscal year ended June 30, 1997 ("Fiscal
1997") were recognized in the first fiscal quarter in part as the result of
significant revenues from merchandising realized by the Company in that
quarter, the Company expects that its second and fourth fiscal quarters may
contribute a disproportionate share of total revenues and net income for any
fiscal year. During the fiscal year ended June 30, 1997, 36% and 24% of the
Company's consolidated revenues were recognized in the second fiscal quarter
and fourth fiscal quarter, respectively, of that year. See "Risk Factors--
Seasonality."
Increased International Focus
In recent years, revenues derived from international operations have become
increasingly significant to the Company (representing 35% and 30%,
respectively, of the Company's consolidated revenues for the fiscal year ended
June 30, 1997 and the three months ended September 30, 1997). As part of its
business strategy, the Company intends to expand its international program
production and distribution activities. See "Business--Business Strategies"
and "--Distribution--International Channels." Certain of these activities,
such as the rollout of new international channels, may require material
marketing and other expenses in advance of the receipt of related revenues,
thereby adversely affecting the Company's results of operations as these
activities are expanded and the international markets are developed.
41
<PAGE>
RESULTS OF OPERATIONS
THE COMPANY
The following tables set forth, for the periods indicated, certain data with
respect to revenues, and costs and expenses as a percentage of total revenues:
REVENUE SUMMARY
<TABLE>
<CAPTION>
SABAN ENTERTAINMENT, INC. FCN HOLDING, INC.
------------------------------------ --------------------------------------
FIVE FOUR
YEAR ENDED MAY 31, MONTHS YEAR ENDED MONTHS
------------------------ ENDED -------------------------- ENDED
OCTOBER 31, JUNE 27, JULY 3, JULY 2, OCTOBER 31,
1993 1994 1995 1995 1993 1994 1995 1995
------- ------- -------- ----------- -------- -------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Children's programming:
U.S. television
distribution(1)....... $ 8,837 $11,995 $ 31,529 $ 14,823 $80,008 $124,666 $148,725 $42,845
Foreign television
distribution(2)....... 27,060 16,367 29,944 19,931 -- -- -- --
Merchandising and
licensing, home
video and other
ancillary revenues.... 4,037 32,274 164,273 65,772 5,721 5,934 20,146 3,441
------- ------- -------- -------- ------- -------- -------- -------
Total.................. 39,934 60,636 225,746 100,526 85,729 130,600 168,871 46,286
------- ------- -------- -------- ------- -------- -------- -------
Telefilms/Family
programming:
U.S. distribution...... 8,156 13,954 1,196 26 -- -- -- --
Foreign distribution... 9,154 9,782 15,526 4,578 -- -- -- --
------- ------- -------- -------- ------- -------- -------- -------
Total.................. 17,310 23,736 16,722 4,604 -- -- -- --
------- ------- -------- -------- ------- -------- -------- -------
Total Revenues.......... $57,244 $84,372 $242,468 $105,130 $85,729 $130,600 $168,871 $46,286
======= ======= ======== ======== ======= ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
THE COMPANY
---------------------------------------------------------------------
EIGHT PRO FORMA THREE THREE PRO FORMA
MONTHS YEAR YEAR MONTHS MONTHS THREE MONTHS
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1997 1996 1997 1997
-------- -------- --------- ------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Children's programming:
U.S. television
distribution(1)....... $ 85,883 $126,796 $126,796 $32,055 $ 34,256 $ 34,256
Foreign television
distribution(2)....... 29,389 58,844 58,844 6,757 24,814 24,814
Merchandising and
licensing, home
video and other
ancillary revenues.... 60,541 96,766 96,766 21,297 6,414 6,414
-------- -------- -------- ------- -------- --------
Total.................. 175,813 282,406 282,406 60,109 65,484 65,484
-------- -------- -------- ------- -------- --------
Telefilms/Family
programming:
U.S. distribution...... 4,474 3,574 30,828 35 4,273 5,619
Foreign distribution... 11,334 21,840 30,714 3,657 9,654 11,251
-------- -------- -------- ------- -------- --------
Total.................. 15,808 25,414 61,542 3,692 13,927 16,870
-------- -------- -------- ------- -------- --------
Domestic cable:
Fox Family Channel(3).. -- -- 270,670 -- 43,535 65,077
-------- -------- -------- ------- -------- --------
Total Revenues.......... $191,621 $307,820 $614,618 $63,801 $122,946 $147,431
======== ======== ======== ======= ======== ========
</TABLE>
- --------
(1) Television distribution in the United States consists principally of
advertising sales generated by FCN and barter advertising sales in
syndication generated by Saban.
(2) Foreign television distribution consists principally of cash transactions
with foreign broadcasters.
(3) Domestic cable consists principally of advertising revenues and subscriber
fees.
42
<PAGE>
COSTS AND EXPENSES AS A PERCENTAGE OF TOTAL REVENUES
<TABLE>
<CAPTION>
SABAN ENTERTAINMENT, INC. FCN HOLDING, INC.
----------------------------------- ------------------------------------
FIVE FOUR
YEAR ENDED MAY 31, MONTHS YEAR ENDED MONTHS
---------------------- ENDED ------------------------ ENDED
OCTOBER 31, JUNE 27, JULY 3, JULY 2, OCTOBER 31,
1993 1994 1995 1995 1993 1994 1995 1995
------ ------ ------ ----------- -------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Costs and expenses:
Production and
programming........... 69.4% 57.0% 48.5% 40.0% 79.1% 75.6% 64.7% 64.2%
Affiliate
participations........ -- -- -- -- -- -- 6.8 14.9
Fees and costs to a
related party......... -- -- -- -- 17.1 16.0 14.6 15.8
Selling, general and
administrative........ 10.9 10.6 21.4 11.0 4.4 2.7 3.1 5.5
Amortization of
intangible assets..... -- -- -- -- -- -- -- --
------ ------ ------ ---- ----- ---- ---- -----
Total costs and
expenses.............. 80.3% 67.6% 69.9% 51.0% 100.6% 94.3% 89.2% 100.4%
Operating income
(loss)................. 19.7% 32.4% 30.1% 49.0% (0.6)% 5.7% 10.8% (0.4)%
</TABLE>
<TABLE>
<CAPTION>
THE COMPANY
----------------------------------------------------------------------------
PRO FORMA
EIGHT MONTHS PRO FORMA THREE MONTHS THREE MONTHS THREE MONTHS
ENDED YEAR ENDED YEAR ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1997 1996 1997 1997
------------ ---------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Costs and expenses:
Production and
programming........... 51.6% 58.6% 49.9% 47.6% 56.0% 54.1%
Affiliate
participations........ 4.6 2.0 1.0 6.5 (.4) (.3)
Selling, general and
administrative........ 12.0 20.3 23.0 19.6 22.2 22.8
Amortization of
intangible assets..... -- -- 6.8 -- 5.7 7.1
---- ---- ---- ---- ---- ----
Total costs and
expenses.............. 68.2% 80.9% 80.7% 73.7% 83.5% 83.7%
Operating income ....... 31.8% 19.1% 19.3% 26.3% 16.5% 16.3%
</TABLE>
Three months ended September 30, 1997 compared with the three months ended
September 30, 1996
Revenues for the three months ended September 30, 1997 were $122.9 million
as compared to $63.8 million for the three months ended September 30, 1996, an
increase of $59.1 million. The increase in revenue is primarily due to two
months of operations of IFE, acquired on August 1, 1997, which contributed
revenues of $50.0 million. In addition, higher Sweet Valley High and library
revenues and revenues from the Company's international channels, the first of
which was launched in October 1996, contributed to the increase, offsetting
lower revenues from Power Rangers.
Production and programming costs as a percentage of total revenues increased
to 56% for the three months ended September 30, 1997 from 48% for the three
months ended September 30, 1996. The increase results primarily from a higher
percentage of revenues generated by programming having a lower profit margin
for the three months ended September 30, 1997 as compared to the three months
ended September 30, 1996.
Selling, general and administrative expenses increased to 22% of total
revenues for the three months ended September 30, 1997 as compared to 20% for
the three months ended September 30, 1996. The increase is due to expenses
associated with the Company's international channels, higher marketing and
promotion costs at Fox Children's Network and the inclusion of two months of
operations of IFE.
Fox Kids Network affiliate participation costs as a percentage of total
revenues decreased from 6.5% for the three months ended September 30, 1996 to
(.4%) for the three months ended September 30, 1997. This decrease is due to a
loss at Fox Children's Network for the three months ended September 30, 1997
resulting from lower revenue levels, higher production and programming costs
and increased selling, general and administrative expenses as compared to the
three months ended September 30, 1996.
Amortization of intangible assets results from the acquisition of IFE. The
intangible assets resulting from the acquisition are being amortized over 40
years.
Interest expense for the three months ended September 30, 1997 was
$18.1 million as compared to $648,000 for the three months ended September 30,
1996. The increase is due to interest on the debt incurred in connection with
the IFE Acquisition.
The Company's provision for taxes for the period ended September 30, 1997
reflects the non-deductibility of amortization of intangible assets foreign
withholding taxes. The effective tax rate excluding the amortization of
intangible assets would have been 17% as compared to 29% for the three months
ended September 30, 1996. The decrease is due primarily to losses generated by
the Company's international channels.
43
<PAGE>
Year ended June 30, 1997 compared with the eight months ended June 30, 1996
Revenues for the year ended June 30, 1997 were $307.8 million as compared to
$191.6 million for the eight months ended June 30, 1996. For the year ended
June 30, 1997, 23% of revenues were derived from Power Rangers as compared
with 38% for the eight months ended June 30, 1996. The decrease in revenues
from Power Rangers was offset by an increase in revenues from Big Bad
BeetleBorgs and by $20 million of previously deferred revenue recognized
during the year ended June 30, 1997 in connection with the settlement and
termination of an output agreement with Warner Bros. Home Video. The Company
has replaced the Warner Bros. Home Video agreement with a long term output
agreement with Twentieth Century Fox Home Entertainment, Inc. ("Fox Video").
Production and programming costs (including costs in connection with the
settlement and termination of an output agreement with Warner Bros. Home
Video) as a percentage of total revenues increased to approximately 59% for
the year ended June 30, 1997 as compared with 52% for the eight months ended
June 30, 1996. This increase in production and programming costs as a
percentage of revenues resulted principally from the reduction in Power
Rangers revenues described above which have historically had a high profit
margin.
Selling, general and administrative expenses increased to 20% of total
revenues for the year ended June 30, 1997 as compared to 12% for the eight
months ended June 30, 1996. This increase resulted most significantly from an
increase in overhead associated with the start-up of the Company's
international channels. To a lesser extent, selling, general and
administrative expenses increased at the Fox Kids Network as a result of
greater marketing, promotional and publicity activities at the network and
increased at the Company's Paris office as a result of the acquisition of the
Paris-based Creativite & Developpement ("C&D") and Vesical Limited programming
libraries.
Fox Kids Network affiliate participation costs were approximately 2% for the
year ended June 30, 1997 as compared to approximately 5% for the eight months
ended June 30, 1996. The decrease in such costs can be attributed to lower
profits at FCN Holding resulting principally from the increased selling,
general and administrative expenses described above.
The Company's effective tax rate for the year ended June 30, 1997 was 26%.
The Company's effective tax rate for the eight months ended June 30, 1996 was
37%. This change is attributable to the non-deductible investment advisory fee
in the eight months ended June 30, 1996.
SABAN ENTERTAINMENT, INC.
Five months ended October 31, 1995
Revenues for the five months ended October 31, 1995 were $105.1 million, of
which approximately 66% represented revenues attributable to Power Rangers, as
compared to 72% of Saban total revenues for the fiscal year ended May 31, 1995
("Saban Fiscal 1995"). VR Troopers, Masked Rider and the European co-
production Iznogoud each contributed approximately 6% of revenues for the five
month period, and X-Men contributed just over 3%.
Production and programming costs for the five months ended October 31, 1995
were $42.0 million, or 40% of total revenues for the period. Cost of sales for
Saban Fiscal 1995, as a percentage of total revenues, was 48%. This
improvement in production and programming costs as a percentage of revenues is
attributable to an improvement in the gross profit margin on Power Rangers.
Gross profit from Power Rangers in Saban Fiscal 1995 had been negatively
impacted by costs of litigation which was resolved during Saban Fiscal 1995.
Selling, general and administrative expenses for the five months ended
October 31, 1995 were $11.5 million, or approximately 11% of total revenues
for the period. Selling, general and administrative expenses for Saban Fiscal
1995, as a percentage of total revenues, were approximately 21%. This
improvement in selling, general and administrative expenses as a percentage of
revenues is attributable to the elimination of the contractual bonus
44
<PAGE>
payable to Haim Saban and to a significant reduction in non-cash charges
related to stock options, both of which are discussed further below. Excluding
the effect of these items, selling, general and administrative expenses would
have been approximately 9% of revenues for Saban Fiscal 1995.
Saban's effective tax rate for the five months ended October 31, 1995 was
28%. The effective tax rate for Saban Fiscal 1995 was 38%. This change is
attributable to an increase in foreign source revenues as a percentage of
total revenues.
Year ended May 31, 1995 ("Saban Fiscal 1995") compared with the year ended
May 31, 1994 ("Saban Fiscal 1994")
Revenues for Saban Fiscal 1995 increased 187% to $242.5 million from $84.4
million for Saban Fiscal 1994. This increase is primarily attributable to the
success of Power Rangers, in particular, significant increases (687%) in toy,
merchandising and licensing royalties and, to a lesser extent, increases in
broadcast related revenues, home video royalties and ancillary revenues.
During Saban Fiscal 1995, toy, merchandising and licensing royalties increased
to $115.1 million from $13.4 million for the prior fiscal year, accounting for
64% of the increase in total revenues for the year. Home video royalties
generated by Power Rangers in Saban Fiscal 1995 increased by $9.9 million,
broadcast related revenues increased by $8.2 million, and ancillary revenues
from the Power Rangers live stage tour (all of the revenues of which were
realized in 1995), and the Power Rangers fan club, contributed another $13.0
million and $3.1 million, respectively, to the increase in revenues for the
year. The series VR Troopers and Sweet Valley High, which began broadcast in
the Fall of 1994, contributed another $22.7 million and $5.1 million,
respectively, of revenues for Saban Fiscal 1995.
Production and programming costs for Saban Fiscal 1995 decreased as a
percentage of total revenues to 48% from 57% in Saban Fiscal 1994. Production
and programming costs in Saban Fiscal 1995 increased 144% to $117.6 million
from $48.1 million for Saban Fiscal 1994. Approximately 63% of this increase
is attributable to increases in the amortization of production costs and
accrual of profit participations in connection with the significant increase
in revenues from the Power Rangers, described above. To a lesser extent,
production and programming costs increased as a result of amortization of
production costs related to the series VR Troopers and Sweet Valley High.
Selling, general and administrative expenses for Saban Fiscal 1995 increased
483% to $51.9 million from $8.9 million for Saban Fiscal 1994. This increase
is primarily attributable to $18.1 million in bonus compensation paid to Haim
Saban pursuant to his previous employment agreement and the recognition of a
non-cash $11 million charge related to stock options granted by Saban to
certain of its executive officers. On December 22, 1995, Mr. Saban entered
into a new employment agreement with the LLC pursuant to which his
compensation has been fixed, commencing July 1, 1995, at $1.0 million per
year. The charge with respect to options was required because of a provision
in the option agreements which obligates Saban, so long as it remains private,
to repurchase the option shares, and vested options, at fair market value upon
termination of the optionee's employment.
The balance of the increase in selling, general and administrative expenses
for Saban Fiscal 1995 as compared to Saban Fiscal 1994 can be attributed to
increased legal and personnel costs associated with the growth of Saban.
Excluding the effect of Mr. Saban's bonus, and charges with respect to the
options, selling, general and administrative expenses would have decreased as
a percentage of total revenues from 11% in Saban Fiscal 1994 to 9% in Saban
Fiscal 1995.
Saban's effective tax rate for Saban Fiscal 1995 increased to 38% from 33%
for Saban Fiscal 1994. This increase in the effective tax rate resulted from
an increase in income generated in the United States as a percentage of total
revenues. As noted in the notes to Saban's consolidated financial statements,
earnings from Saban's foreign subsidiaries are considered to be indefinitely
reinvested. Accordingly, no provision for U.S. Federal or state income taxes
has been recorded in connection with foreign earnings. To the extent that
Saban's international operations continue to expand, it can be expected that
the effective tax rate would decline.
45
<PAGE>
Year ended May 31, 1994 ("Saban Fiscal 1994") compared with the year ended
May 31, 1993 ("Saban Fiscal 1993")
Revenues for Saban Fiscal 1994 increased 48% to $84.4 million from $57.2
million for Saban Fiscal 1993. Of this increase, $41.7 million is attributable
to the initial release in August 1993 of Power Rangers, and $6.4 million is
attributable to an increase in revenues from telefilms, offset by a reduction
in sales of library programming. During Saban Fiscal 1994, Saban realized
significant increases in revenues generated by Power Rangers from worldwide
home video sales, worldwide licensing and merchandising royalties and
broadcast fees for Germany.
Production and programming costs for Saban Fiscal 1994 decreased as a
percentage of total revenues to 57% from 69% in Saban Fiscal 1993, but
increased in dollars by 21% to $48.1 million from $39.7 million for Saban
Fiscal 1993. Amortization of film costs and the accrual of profit
participations related to Power Rangers increased $11.7 million in Saban
Fiscal 1994 and amortization on telefilms increased by $6.1 million as a
result of the increase in related revenues. The reduction in library revenues
resulted in a decrease in amortization related thereto.
Selling, general and administrative expenses for Saban Fiscal 1994 increased
41% to $8.9 million from $6.3 million for Saban Fiscal 1993, but as a
percentage of total revenues remained relatively constant. This increase is
the result primarily of increased personnel costs associated with Saban's
revenue growth.
Saban's effective tax rate for Saban Fiscal 1994 increased to 33% from 16%
for Saban Fiscal 1993. This increase is primarily related to an increase in
U.S. revenues resulting from the release of Power Rangers in September 1993.
FCN HOLDING, INC.
Four months ended October 31, 1995
Revenues for the four months ended October 31, 1995 were $46.3 million and
cost of sales as a percentage of revenues was 64%.
Production and programming costs as a percentage of revenues for the four
month period are comparable to production and programming costs as a
percentage of revenues for Fiscal 1995. The administrative fee payable to Fox
Broadcasting is based upon a percentage of net advertising revenues, and thus
varied in direct proportion to revenues.
Selling, general and administrative expenses for the four month period
increased from the prior year, both on a pro rata basis and as a percentage of
revenues. This increase in selling, general and administrative expenses is
attributable primarily to increased promotion costs of FCN.
Year ended July 2, 1995 ("FCN Fiscal 1995") compared with the year ended July
3, 1994 ("FCN Fiscal 1994")
Revenues for FCN Fiscal 1995 increased 29% to $168.9 million from $130.6
million for FCN Fiscal 1994. This increase of $38.3 million is attributable to
an increase in net revenues from advertising sales of $24.0 million, with the
balance related to an increase in ancillary revenues. This increase in revenue
was primarily a result of the success of Power Rangers, and to a lesser
extent, to the strength of the advertising market.
Production and programming costs as a percentage of revenues were 65% for
FCN Fiscal 1995 as compared to 76% for FCN Fiscal 1994. Cost of sales for FCN
Fiscal 1995 increased 11% to $109.3 million from $98.7 million for FCN Fiscal
1994. While the overall increase in production and programming costs for FCN
Fiscal 1995 is attributable to the 29% increase in revenues described above,
the improvement in gross margin is attributable principally to the increase in
revenues related to Power Rangers, which generated significantly higher gross
margins than other FCN programming, as well as to a reduction in the number of
Warner Bros.-supplied programming hours.
46
<PAGE>
The administrative and other fees payable to Fox Broadcasting for FCN Fiscal
1995 increased 20% to $21.5 million from $17.9 million for FCN Fiscal 1994.
The administrative fee is based, in part, upon net advertising revenues and
the increase for the year is directly attributable to the increase in net
advertising revenues for the year.
The Fox Kids Network affiliation agreements provide that FCN is to pay to
each of the Fox Kids Network affiliates (including Fox's owned and operated
stations ("Fox O&O's")) participations, based upon the cumulative "net
profits" (as defined) of FCN. FCN Fiscal 1995 was the first year in which FCN
reached a level of defined net profits on a cumulative basis. Therefore, FCN
Fiscal 1994 did not reflect a charge for affiliate participations.
Since the net profits of FCN are distributed to the affiliates, no taxes
have been provided on the income of FCN.
LIQUIDITY AND CAPITAL RESOURCES
In September 1997, the Company completed the IFE Acquisition. The total
consideration for the IFE Acquisition was approximately $1.9 billion,
including assumption of debt, and was financed by $1.25 billion borrowed under
the Old Credit Facility, approximately $345 million through the issuance of
Series A Preferred Stock to Liberty IFE and the balance through the NAHI
Bridge Note. Of the net proceeds from the Offering of approximately $830
million, $215 million was used to repay a portion of the NAHI Bridge Note and
the balance of $615 million was used to repay indebtedness under the Old
Credit Facility. Approximately $105.8 million (including interest) was
outstanding under the NAHI Bridge Note at December 31, 1997; however, no
payments are due under the NAHI Bridge Note until March 2008.
As part of the Offering, the Company amended the Old Credit Facility to
include a $710 million facility, comprised of a seven-year amortizing term
loan and a seven-year reducing revolving credit facility. The Amended Credit
Facility is scheduled to terminate September 29, 2004. Borrowings under the
Amended Credit Facility bear interest at the Company's option at a rate per
annum equal to either LIBOR or a base rate plus an applicable interest rate
margin. As of December 31, 1997, $75 million was available under the Amended
Credit Facility for additional borrowings.
As a result of the IFE Acquisition and the financing transactions described
above, the Company's principal liquidity requirements arise from interest
payments. Due to the amount of interest expense and amortization of intangible
assets, the Company does not expect to have net income for fiscal 1998. The
Company further anticipates certain seasonal working capital needs related to
the development, production and acquisition of programming, the financing of
accounts receivable and other related operating costs. The Company on a
regular basis has had, and intends to continue to engage in, exploratory
discussions concerning programming and other acquisition opportunities, and
any such acquisition could result in additional capital requirements. The
Company expects to incur capital expenditures of approximately $16 million
over the next 24 months, including amounts to support its existing
international channels as well as the launch of future international channels.
Net cash used in operating activities of the Company during the year ended
June 30, 1997, was $2.0 million and for the three months ended September 30,
1997, was $17.9 million. During the year ended June 30, 1997, the Company
distributed an aggregate of $700,000 to non-Fox O&O Affiliates, and during the
three months ended September 30, 1997, the Company distributed an aggregate of
$100,000 to non-Fox O&O Affiliates.
Net cash used in investing activities of the Company during the year ended
June 30, 1997 and during the three months ended September 30, 1997, was $17.0
million and $1.295 billion, respectively. The Company's net cash flow used in
investing activities for the year ended June 30, 1997 included $13.6 million
incurred in connection with the purchase of U.S. and international programming
and libraries and the purchase of a 90% interest in TV10, a cable network in
Holland. The majority of the investing activity for the three months ended
September 30, 1997 was related to the IFE Acquisition.
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<PAGE>
Net cash provided by financing activities of the Company during the year
ended June 30, 1997 and during the three months ended September 30, 1997, was
$31.9 million and $1.384 billion, respectively. The financing activities for
the year ended June 30, 1997 consisted primarily of proceeds from bank
borrowings, while the activities for the three months ended September 30, 1997
related to bank and other borrowings in connection with the IFE Acquisition.
The Company's total unrestricted cash balances at September 30, 1997 were
$44.6 million, which excludes proceeds from the Flextech stock, which was sold
in September 1997.
The Company believes that the $75 million of available borrowings, as of the
closing of the Offering, under the Amended Credit Facility, together with cash
flow from operations, should be sufficient to fund its operations and service
its debt for the foreseeable future.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive
Income. The Statement establishes standards for the reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. The Statement applies to all enterprises that provide a
full set of general-purpose financial statements. The Statement becomes
effective for all financial statements for fiscal years beginning after
December 15, 1997, with earlier application permitted. Further, in June 1997,
the FASB issued Statement No. 131, Disclosures about Segments of an Enterprise
and Related Information. The Statement changes the way public companies report
segment information in annual financial statements and also requires those
companies to report selected segment information in interim financial reports
to shareholders. The proposal supersedes FASB Statement No. 14 on segments and
does not apply to nonpublic enterprises or to not-for-profit organizations.
The Statement becomes effective for all financial statements for fiscal years
beginning after December 15, 1997, with earlier adoption permitted. The
Company is currently reviewing those Statements and will apply such provisions
as deemed appropriate.
IMPACT OF YEAR 2000
The Year 2000 Issue is the result of computer programs being written using
two digits instead of four to define the applicable year. Any of the Company's
computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could cause a system
failure or miscalculations causing potential disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar normal business activities.
The Company has completed an assessment and has determined that it will be
required to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter. The Year 2000 project cost is not anticipated to have a material
effect on the results of operations.
The project is estimated to be completed not later than December 31, 1998
and the Company believes that with modifications to existing software and
conversions to new software, the Year 2000 Issue will not pose significant
operational problems for its computer systems. However, if such modifications
and conversions are not made or are not completed timely, the Year 2000 Issue
could have an impact on the operations of the Company.
The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated. Specific factors that
might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes and similar uncertainties.
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BUSINESS
The Company is an integrated global children's and family entertainment
company which develops, acquires, produces, broadcasts and distributes quality
television programming. The Company's principal operations comprise (i) Saban,
whose library of over 5,400 half-hours of completed and in-production
children's programming is among the largest in the world, (ii) IFE, which
operates The Family Channel, a leading basic cable television network that
provides family-oriented entertainment programming in the United States,
reaching approximately 95% of all cable and satellite television households,
(iii) the Fox Kids Network--the top-rated children's- (ages 2-11) oriented
broadcast television network in the United States and (iv) a growing portfolio
of Fox Kids branded cable and DTH satellite channels operating in
approximately 25 countries worldwide. By combining one of the world's largest
children's programming libraries with a widely distributed cable platform, a
top-rated broadcast network and the Fox Kids branded international channels,
the Company has the ability to manage children's properties and brands from
their creation through production, distribution and the merchandising of
related consumer products.
The Company is the result of the joint venture launched in 1995 by Fox
Broadcasting and Saban to match the complementary programming and broadcasting
strengths of the Fox Kids Network and the international reach of Fox
Broadcasting's parent company, News Corp., with the development, production,
distribution and merchandising strengths of Saban. In September 1997, the
Company finalized the acquisition of IFE, whose principal business is The
Family Channel. The IFE Acquisition provides the Company with several
strategic advantages, including (i) a widely distributed cable platform, which
reaches approximately 71 million homes, providing an effective means for more
vigorous competition with other children's- and family-oriented cable
services, (ii) an additional outlet for the Company's existing children's
programming library, (iii) increased awareness in the Company's primary target
market (children ages 2-11) through expanded hours, increased brand exposure
and additional licensing and merchandising opportunities and (iv) cross-
promotional opportunities with the Fox Kids Network.
The Company creates, produces and acquires quality animated and live-action
children's television programming with brand-name characters and elements
which are either widely known to children, such as the Power Rangers, Casper,
Spider-Man, X-Men, Goosebumps and Bobby's World, or which are or have been
developed or purchased due to their likelihood of maturing into popular
brands. The Company produced, financed or co-financed 14 shows for each of the
1996-1997 and the 1997-1998 broadcast seasons, including Power Rangers, which
since shortly after its launch in 1993 has been the highest rated children's
weekday strip television program broadcast in the United States among boys
ages 2-11. The Company generally retains worldwide rights to its brands, and
currently has over 500 licensees worldwide, including toy companies Bandai,
Mattel, Hasbro and Toy Biz. One of the most attractive attributes of the
Company's children's programming is its "portability," in that it generally
can be modified at modest cost and resold for exhibition in other countries
through editing and dubbing into other languages. The Company currently
distributes its programming over terrestrial broadcast services in most major
television markets throughout the world.
While maintaining the family image and general entertainment format of the
channel, the Company intends to reprogram The Family Channel with a new
schedule, look, marketing campaign and logos in August 1998 as the Fox Family
Channel. From 6 a.m. to 6 p.m., the Fox Family Channel will carry a total of
76.5 hours of weekly programming targeted principally to children. From 6 p.m.
to 11 p.m., the Fox Family Channel will broadcast programming that appeals to
the entire family and will carry advertising to be sold on adult demographics.
Programming will be selected from the Company's existing library, new original
productions produced or co-produced by the Company and original and library
product licensed from independent suppliers.
The Company also owns and operates the Fox Kids Network, the leading U.S.
children's broadcast television network, which broadcasts 19 hours of
children's programming each week to 97% of U.S. television households, the
broadest reach of any network targeting children. The Fox Kids Network was
formed by Fox Broadcasting and most of Fox Broadcasting's affiliates to
provide children's programming weekdays and Saturday mornings. The Fox Kids
Network has had the highest broadcast television viewership among children in
its time period during 20 consecutive quarterly "sweeps" periods through
November 1997. According to
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Nielsen, during the 1996-1997 broadcast season, approximately 19 million
children--50% of all children (ages 2-11) in the United States--watched the
Fox Kids Network at least once each month. The Fox Kids Network affords
advertisers the opportunity to reach children in a cost-effective manner, in
part by ensuring consistent nationwide placement of their advertisements by
generally broadcasting its programming at the same local time and on the same
day ("day-and-date") in each television market. The Fox Kids Network's
advertising customers include virtually every major advertiser to children.
To capitalize on the Company's extensive library of children's programming,
the Company has launched Fox Kids branded DTH satellite and cable channels in
approximately 25 countries throughout Europe and Latin America since 1996. The
Company also intends to leverage its relationship with News Corp., which has
significant equity interests in cable and satellite services in most major
international markets, to further its international presence. For example,
since October 1996, the Company has operated a Fox Kids branded channel as
part of British Sky Broadcasting Group Plc's ("BSkyB") Sky Multi-Channels
package, which through DTH currently reaches 3.5 million viewers in the United
Kingdom and the Republic of Ireland.
ACQUISITION OF INTERNATIONAL FAMILY ENTERTAINMENT, INC.
On August 1, 1997, the Company acquired a 50.7% interest in IFE through the
purchase for $35 per share of the stock owned by M.G. "Pat" Robertson, Tim
Robertson and certain trusts of which they are trustees, The Christian
Broadcasting Network, Inc. ("CBN") and Regent University (together, the
"Privately Owned Shares") and the exchange by Liberty IFE of all of the IFE
stock owned by it and $23 million principal amount of 6% Convertible Secured
Notes due 2004 of IFE (the "Convertible Notes") (which have since been
retired) for shares of Series A Preferred Stock of the Company. On September
4, 1997, the Company consummated a merger to acquire the remaining shares of
IFE from the public shareholders. Total consideration for the IFE Acquisition
was approximately $1.9 billion. The Company paid approximately $545 million
for the Privately Owned Shares and issued $345 million worth of its Series A
Preferred Stock to Liberty IFE as payment for the IFE stock and the
Convertible Notes. The balance of the consideration was paid to acquire the
publicly traded shares through the merger, to cash out existing options held
by IFE senior executives and employees, and to assume IFE's existing bank
debt, which has since been retired.
The Company financed the IFE Acquisition, in part, by borrowing $1.25
billion pursuant to the Old Credit Facility. On August 1, 1997, the Company
borrowed $602 million under the Old Credit Facility to finance the purchase
price of the Privately Owned Shares (and to refinance certain indebtedness of
Saban outstanding on the closing date of the acquisition of the Privately
Owned Shares). On September 4, 1997, the Company borrowed $648 million under
the Old Credit Facility in order to finance in part the cash consideration
payable to the remaining former public holders of the outstanding shares of
IFE stock for their shares in the merger, to cash out existing options held by
IFE senior executives and employees, to refinance certain indebtedness of IFE
and to pay certain related fees and expenses. See "Description of Other
Indebtedness."
IFE historically operated in three business segments: the operation of
advertiser-supported cable networks, the production ("Production") and
distribution of entertainment programming and the production of live
entertainment shows ("Live Entertainment"). The Company contemplates that it
will continue to operate The Family Channel as the Fox Family Channel but will
sell all of IFE's interests in its other cable and international networks not
directly related to The Family Channel. In addition, the Company intends to
dispose or otherwise discontinue IFE's Production and Live Entertainment
businesses.
INDUSTRY OVERVIEW
Broadcast and Cable Television
The U.S. television market is served principally by network-affiliated
stations, independent stations and cable or satellite television operators.
Because network affiliates generally broadcast network programming nationwide
at the same local time and on the same day, the formation of a children's
network, such as the Fox Kids Network, has allowed advertisers to efficiently
plan and execute their national advertising campaigns. In order to reach the
children's market, companies devote significant dollars to advertising. From
1993 to 1996
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alone, advertising in kid-specific media grew more than 50% to $1.5 billion.
Spending by these advertisers is concentrated on television commercials, and
over 80% of children report learning about new products through watching
television.
The growth in the number of international television outlets has created
additional global demand for children's programming. The increasing
privatization of the international television industry has encouraged a
ratings/revenue-oriented focus among international broadcasters, thereby
increasing the demand for high-quality television entertainment. Children's
programs produced in the United States have enjoyed wide acceptance
internationally. In addition, the number of cable and satellite programming
services addressing the international community has grown significantly in
recent years. These added programming services have created an opportunity for
distributors, including the Company, to generate significant revenue from
international markets. International television, cable, satellite and home
video sales of a children's program produced in the United States can account
for half or more of the revenue for a given program.
Suppliers and Distributors
Suppliers of children's television programming include the production
divisions and affiliated companies of the major motion picture studios,
independent production companies, syndicators, broadcast television networks,
station owners and advertising agencies. These suppliers sell programming to
broadcast networks or television stations for a fixed cash fee per episode, by
barter or a combination of cash and barter.
Distributors of children's television programming in the United States
consist primarily of networks (both broadcast television networks and basic
cable programming services) and independent television stations. Distributors
of children's programming generally sell television series to networks on a
cash basis and sell to independent television stations on a barter basis.
Networks typically pay a distributor a fixed cash license fee which entitles
the networks to a number of runs of a series over a defined period of time.
Networks are generally entitled to retain 100% of the advertising revenues
generated by the broadcast of a series and sell advertising spots to national
advertisers on the basis of guaranteed ratings.
Licensing and Merchandising
Children's programming provides broad licensing and merchandising
opportunities. Characters developed in a popular series, and often the series
themselves, may achieve a high level of recognition and popularity among
children, making them valuable assets for the licensing and merchandising
market, where they provide attractive "branding" opportunities. The children's
market is one of the fastest growing segments in licensed merchandising sales.
It is estimated that children 14 and under will directly spend approximately
$20 billion in 1997, and they will influence another $200 billion in spending.
Of the nearly $110 billion in all licensed products sold in 1996 worldwide,
$72 billion were licensed in the United States and Canada, the majority of
which were children's products. Of the $20.7 billion spent in 1996 on toys in
the United States, $7.8 billion was for licensed toys, and $10 billion was for
licensed and movie tie-in toys combined. Among the most popular licensed items
are toys, apparel, dinnerware/lunch boxes, watches, bedding and soft vinyl
goods such as boots, backpacks and raincoats.
BUSINESS STRATEGIES
The Company intends to continue to increase its presence in the children's
and family television entertainment business, with the goal of becoming the
leading worldwide producer, broadcaster and distributor of children's and
family television programming.
The Company intends to focus on the following strategies to achieve its
objective:
Capitalize on U.S. Cable Platform. While maintaining the family image and
general entertainment format of the channel, the Company plans to reprogram
The Family Channel as the Fox Family Channel in August 1998 with a new
schedule, image and promotional campaign intended to enhance ratings among the
approximately 71
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million subscribers of The Family Channel. The Fox Family Channel will feature
children's programming seven days per week during the daytime hours and
family-oriented programming during prime time. The Company also has plans to
add original series to The Family Channel's prime time schedule and to double
the number of original prime time movies premiering annually on the Fox Family
Channel from the current level of approximately 12 to 24 or more original
features. The Company believes that the availability of original and exclusive
features will enhance ratings, improve demographics and build audience loyalty
to the Fox Family Channel.
Continue to Strengthen U.S. Broadcasting Operations. The Company strives to
maintain and improve the ratings, reach and penetration of its U.S.
broadcasting network, the Fox Kids Network. The Fox Kids Network is the top-
rated children's-oriented broadcast television network, currently reaching
approximately 97% of the television households in the United States. The
Company plans to further improve its ratings for the Fox Kids Network by
continuing to develop, acquire or license quality programming which is
attractive to children. The Company, which has created such "hit" programs as
the Power Rangers and Bobby's World, currently owns most of the underlying
rights to seven of the 14 different programs broadcast on the Fox Kids Network
and will strive to increase the number of its owned programs broadcast.
Develop Strong Branded Characters and Properties. The Company intends to
continue to create and develop new entertainment properties with potential
franchise value and to build on its existing and widely recognized
institutional and programming brands in order to increase viewership on its
networks and maximize revenue from the licensing and merchandising of its
branded characters and properties. Some of the Company's programming, such as
the Power Rangers, have already achieved franchise status, and their high
consumer awareness should provide opportunities to generate revenues from
multiple sources on a long-term basis. The Company intends to capitalize on
the relationships it has built with major retailers, toy companies and more
than 500 licensees worldwide to exploit the merchandising and other ancillary
revenue potential of its entertainment properties.
Continue to Develop and Produce Cost-Effective Programming. The Company
intends to continue its practice of obtaining contractual upfront commitments
from networks, independent television stations, international broadcasters and
merchandisers prior to commencing production. The Company also intends to
continue to produce programming in a cost-effective manner while maintaining
control over critical parts of the production process to ensure continued high
quality.
Launch Additional International Channels. The Company believes that
significant expansion opportunities exist in the international television
markets, where the children's market has been relatively underserved. With its
library of over 5,400 half-hour episodes of completed and in-production
children's programming, many of which meet the local content requirement of
various European countries, the Company intends to focus significant resources
on the expansion of its international operations. The Company has an important
strategic advantage through its relationship with News Corp., whose equity
interests in international television distribution platforms and reputation
throughout the world have been helpful in securing carriage agreements on
those platforms. The Company intends to expand the Fox Kids Network globally
by launching Fox Kids branded cable and DTH satellite channels targeting
children in many major international territories. The Company's objective is
to create synergies across the base of these channels and thereby reduce
programming costs while marketing and localizing the channels to distinguish
Fox Kids from its competitors.
PROGRAMMING
The Company creates, produces and acquires quality animated and live-action
children's television programming. The Company's library of approximately
5,400 half-hour episodes of completed and in-production children's television
programming is one of the largest children's libraries in the world. The
principal programming objective of the Company is to develop or acquire
appealing characters and concepts that can be commercially exploited
throughout the world through broadcast network and cable television
exhibition, home video sales, licensing and merchandising. One of the most
attractive attributes of quality children's programming
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is its "portability." Children's programming produced for exhibition in a
particular country is considered "portable" because it can generally be
modified through editing and dubbing into other languages at a modest cost and
resold for exhibition in other countries.
Programming Library
The two principal sources of the Company's programming library are (i)
television series that have been originally produced by the Company for
broadcast in the United States and internationally (approximately 2,094 half-
hours) and (ii) programming produced by others for which the Company has
acquired various distribution rights (approximately 3,334 half-hours), of
which approximately 38% have been updated or "freshened" with new scripts,
voices and music prior to distribution. Of the Company's library, including
episodes in production as of September 30, 1997, 1,458 half-hours are original
co-produced programming that meet applicable European content requirements and
are intended for initial broadcast in Europe.
Approximately 81% of the completed and in-production programming library is
animated programming, and the balance is live-action. The Company believes
that its distribution rights are broad enough as to territory to permit it to
meet broadcasters' requirements in markets throughout the world. Of the
episodes in the Company's library of children's programming, approximately 86%
are parts of series consisting of 26 or more episodes, facilitating their
distribution as complete series in the United States and international
markets. The Company's international programming includes worldwide
distribution rights to a 445 half-hour episode library of family oriented
programming acquired in the April 1996 acquisition of Paris-based C&D, a
leading European producer of family entertainment, and a 712 half-hour episode
library of animated children's programming acquired in the April 1996
acquisition of Vesical Limited, a library of international rights to
programming originally produced by DIC. The Vesical library includes non-U.S.
rights to classic series such as Inspector Gadget, Heathcliff and Dennis the
Menace.
In January 1997, the Company obtained from FOX Television, a division of
Fox, Inc. ("FOX Television") the distribution rights to the New World
Communication Group Incorporated's ("New World") animation library of 515
half-hour episodes. The rights are terminable by FOX Television upon 30 days
written notice to the Company. See "Certain Transactions."
Creation and Development of Programming
The Company has and will continue to pursue ideas and properties for
original production from a number of sources. For example, the Company may
acquire production, distribution and possibly other rights to an existing
property (such as Marvel's X-Men and Francine Pascal's Sweet Valley High) or
series (such as DragonBall Z and Saban's Adventures of Little Mermaid),
develop internally a new property based on an existing public domain property
(such as Saban's Adventures of Oliver Twist) or create or acquire an entirely
new idea or character (such as Eek!Stravaganza). The Company also maintains a
state of the art post-production facility in Los Angeles, California. The
Company records all of the music for its programming and edits and adds audio
and sound effects to its programming. The Company also produces most of the
on-air promotions, sales films and public service announcements for its Fox
Kids Network.
The Company owns a full-service animation studio in Paris which develops
programming containing content that meets the local content requirements of
various European countries for local broadcast television. The Paris studio
has produced approximately 237 half-hours of programming since its inception
in 1990 through September 30, 1997, and has an additional 228 half-hours for
broadcast in 1998 and beyond. In general, the Company enters into strategic
co-production alliances to develop its French and European content
programming. Among the Company's European co-production partners are Canal
Plus, France 2, M6 and Television Francaise 1 in France, Radio Television
Luxembourg 4 in Holland, Compagnie Luxembourgois de Telediffusion in
Luxemburg, British Broadcasting Company in the United Kingdom, Television
Suisse Romande in Switzerland, Radio-Television Belge de la Communaute in
Belgium, Radiotelevisione Italiana in Italy, Tele 5 in Spain and
Arbeitsgemeinschaft der Oeffentlichen Rechtlichen Rundfunkanstalten
Deutschlands ("ARD") in Germany.
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Following are examples of the programs currently being broadcast in the
United States for the 1997-1998 broadcast season for which the Company owns or
controls most of the underlying property and distribution rights, and the
program schedule commencing in February 1998.
<TABLE>
<CAPTION>
EPISODES IN
PRODUCTION FOR
1997-98 PROGRAM
SERIES SEASON SCHEDULE YEARS ON AIR PROGRAM DESCRIPTION
------ -------------- -------- ------------ -------------------
<S> <C> <C> <C> <C>
FOX KIDS NETWORK:
BeetleBorgs Metallix+ 35 Monday-Thursday 2 Three kids become comic book
superheroes in this comedy
adventure series.
Bobby's World* 10 Monday-Thursday 8 Combines point of view of a 4-
year old with spirit of Howie
Mandel.
Power Rangers Turbo+ and 91 Monday-Thursday 5 The next generations of the
Power Rangers in Space+ Saturday Power Rangers adventure.
Life With Louie* 13 Monday-Thursday 3 Comedian Louie Anderson's
childhood ups 'n downs of
dodging bullies, eating pies
and going on family vacations.
Ninja Turtles: The Next 26 Friday P.M. premiere Based on the Teenage Mutuant
Mutation+ Ninja Turtles series, the
world's favorite party reptiles
use slapstick humor and high-
tech hardware to reach a new
generation of fans.
Silver Surfer* 13 Saturday A.M. premiere Marvel comic book action
adventure.
Space Goofs*(1) 26 Saturday A.M. premiere Adventures of alien monsters
who crash-land on earth and
hide out in a house for rent
until they get back home.
OTHER DISTRIBUTION OUTLETS:
Saban's Adventures of 13 Weekend A.M. 2 Inspired by Charles Dickens'
Oliver Twist* timeless classic.
DragonBall Z*(2) 26 Weekend A.M. 2 A mystical adventure series of
riveting stories, driven by
extraordinary characters who
embody the essence of good and
evil.
X-Men . . . And Marvel 52 Weekday 5 One hour of Marvel comic book
Superheroes* heroes including X-Men, Ironman
and Fantastic Four.
The All New Captain 26 Weekend A.M. premiere The classic children's program,
Kangaroo+ updated for a new generation.
Sweet Valley High+(3) 22 Sunday 4 Twins living the California
dream.
Breaker High+ 44 Sunday premiere The adventures of high school
on a cruise ship.
Incredible Hulk*(4) 8 Sunday 2 Based on the Marvel comic book
superhero.
</TABLE>
- --------
+ Live-action.
* Animation.
(1) The Company has U.S. television and U.S. and Canadian home video and
merchandising rights through 2002. Gaumont Multimedia owns the copyrights
and trademarks.
(2) The Company has exclusive U.S. distribution rights on a year-to-year basis
through 2001, although FUNimation and Toei Animation own the copyrights
and trademarks.
(3) Pursuant to an agreement dated November 27, 1996, UPN has agreed to
purchase from the Company the exclusive rights to Francine Pascal's Sweet
Valley High, committing to a 22-episode order for the 1997-1998 broadcast
season and acquiring all 66 previously aired episodes.
(4) Produced by New World Animation; the Company has worldwide distribution
rights, excluding merchandising.
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International Sales of Programming
Much of the Company's programming is distributed on a worldwide basis. The
Company believes that by owning and controlling the international distribution
rights to its programming, in addition to generating significant revenue from
the sale of its programming, it can also establish an international presence
for the Company and its properties.
The Company is currently party to distribution arrangements with
international television broadcasters and distributors to exhibit and
distribute the Company's programming to over 375 terrestrial, cable and
satellite distribution platforms in approximately 100 countries. These
distribution arrangements accounted for approximately $81 million, or 26% of
the Company's consolidated revenues for the fiscal year ended June 30, 1997
and approximately $34 million, or 28% of the Company's consolidated revenues
for the three months ended September 30, 1997, and, giving effect to the IFE
Acquisition as if it had occurred on July 1, 1996, 15% and 24% of its pro
forma consolidated revenues for the respective periods.
In January 1996, the Company entered into a distribution agreement with ARD,
the largest broadcaster in Germany, pursuant to which the Company agreed to
grant rights to at least 24 two-hour movies for television ("telefilms"), six
co-produced animated children's program series (consisting of Jim Knopf,
Wunschpunsch, Walter Melon, The Why Why Family, Princess Sissi and Saban's
Adventures of Oliver Twist), any coproduced series based on German author
Michel Ende's stories for which the Company controls the rights and 390 half-
hour episodes of other children's animated programs. The territory is limited
to German-speaking Europe. ARD's rights include the right to transmit (with
unlimited runs), broadcast, exhibit, dub and sublease within its territory
each telefilm and series, and to receive a profit participation, as defined in
the agreement, based upon net revenues, from the distribution of certain
properties covered by the agreement. The terms are ten years for the
telefilms, thirteen years for the six co-produced series and seven years for
the other half hour episodes. The Company is currently negotiating an
extension of its distribution agreement with ARD.
DISTRIBUTION
The Company distributes its own programming, as well as the programming of
others, throughout the United States and in major markets throughout the
world. The Company is uniquely positioned as a distributor as a result of its
strategic relationship with Fox Broadcasting and News Corp. and by reason of
its large programming library. See "--The Strategic Alliance with Fox/News
Corp." and "--Programming." The Company owns three distribution outlets: The
Family Channel/Fox Family Channel, the Fox Kids Network and Fox Kids branded
international channels.
The Family Channel/Fox Family Channel
The Family Channel is a basic cable network that provides family-oriented
entertainment and informational programming to approximately 95% of all U.S.
cable and satellite television households. The Company intends to reprogram
The Family Channel in August 1998 as the Fox Family Channel with a new
schedule, look, marketing campaign and logo. The new format will include day-
time programming for children followed by evening programming which will be
suitable for the entire family. Evening programming is intended to include
original series, specials and movies produced and licensed to the Fox Family
Channel, as well as programs originally televised on the major broadcast
networks. Currently, The Family Channel's programs are transmitted 24 hours a
day via satellite from the Company's uplink facility in Virginia Beach.
In general, pursuant to The Family Channel's affiliation agreements, each
cable system operator or other delivery service distributing The Family
Channel agrees to pay the Company a monthly fee per subscriber. The Family
Channel affiliation agreements are generally three, five or ten years in
duration and provide for annual per subscriber rate increases. Increases in
per subscriber fees and, to a lesser extent, increased household penetration
have generated growth in The Family Channel subscriber fee revenue. In
addition, The Family Channel earns revenue through the sale of advertising
spots.
Ratings and Programming. The Company plans to air 76.5 hours of children's
programming from 6 a.m.-6 p.m. each week, and programming suitable for the
entire family from 6 p.m.-11 p.m. Throughout the course of
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<PAGE>
the day, the Company intends to gradually target programming to more mature
audiences. Under an agreement with CBN, the Company will continue to air The
700 Club with Pat Robertson, an inspirational news and talk show, during three
time slots Monday-Friday, currently 10:00 a.m-11:30 a.m., 11 p.m.-midnight,
and 2 a.m.-3 a.m.
As of September 1997, The Family Channel billed cable systems for
approximately 65 million subscribers, as compared to Nielsen's estimate that
the network is available in 71 million households. The discrepancy may be
explained in part by sampling error, but more significantly by subscriber
theft, a common occurrence in the cable industry. According to Nielsen, The
Family Channel's prime time ratings averaged 1.11, or 759,000 of the 71
million households, for the nine months ended September 1997. For purposes of
reporting ratings, The Family Channel defines prime time as 7 p.m.-10 p.m.
Monday-Friday, 8:00 p.m.-midnight Saturday and 7:00 p.m.-11:00 p.m. Sunday.
Transmission Facilities. The Company transmits all programming for The
Family Channel from its facilities located in Virginia Beach, Virginia, by
means of an earth station transmitting antenna (an "uplink"). The uplink
facility transmits the programming signal to a transponder on an orbiting
satellite, which in turn retransmits the signal to cable systems operators,
DBS services and other alternative delivery services. Programming is
transmitted using two separate "feeds" (one for the eastern, central and
certain mountain time zones and another for all other mountain time zones and
the pacific time zones) which are transmitted to two different satellite
transponders. The Company owns the transponders for these two feeds as well as
a transponder on a third satellite. All of the Company's owned transponders
have "protected" status. "Protected" status means that should the transponder
fail, service will be transferred, subject to availability, to a spare
transponder and, if one is not available, then to a transponder with
"preemptable" status on the same satellite or on another satellite owned by
the same seller or lessor, subject to certain limitations. "Preemptable"
status means that the transponder can be preempted in the event of a failure
of a "protected" transponder. See "Risk Factors--Dependence Upon Satellite
Transponders."
Fox Kids Network
The Fox Kids Network, launched in September 1990, is the result of an
arrangement between Fox Broadcasting and participating FOX Television Member
Stations to form a broadcast television network focused on children (ages 2-
11). The Fox Kids Network was the first television network to broadcast
children's programs during the week (Monday through Friday) as well as on
Saturday. The guiding philosophy of the Fox Kids Network is to provide a
diverse slate of quality entertainment targeted toward children. Of its 19
hours of children's programming per week, the Fox Kids Network broadcasts four
hours on Saturday mornings, one hour each weekday morning and two hours each
weekday afternoon. At least three hours of programming each week are dedicated
to educational programming for children. See "--Government Regulation."
Now in its eighth broadcast season, the Fox Kids Network currently is
carried by 179 Fox Kids Network Affiliates, 164 of which are affiliated with
the FOX Television Member Stations and 12 of which are currently Fox O&O's.
The Fox Kids Network Affiliates reach approximately 97% of all U.S. television
households. The Fox Kids Network produces and acquires programs, markets and
promotes these programs, makes its schedule available to its Fox Kids Network
Affiliates and sells network advertising. The Company cross-promotes the Fox
Kids Network through its Fox Kids Club, Totally Fox Kids quarterly magazine,
Fox Kids Countdown radio show and Fox Kids website.
Under an Administration Agreement between Fox Broadcasting and FCN, Fox
Broadcasting agreed to administer certain of FCN's activities, including
network national advertising sales and the administration thereof, commercial
trafficking and broadcast operations (including the delivery of programming to
the Fox Kids Network Affiliates) and overhead charges related to Fox
Broadcasting's in-house administrative support in the areas of research,
promotion, business affairs, legal affairs and accounting. In exchange for
these services, FCN agreed to pay Fox Broadcasting an administrative fee,
currently equal to 15% of the net advertising revenues derived from Fox Kids
Network national commercials and other advertising. Effective June 1, 1995,
Fox Broadcasting assigned all of its rights under this agreement to the
Company, and has agreed to continue to
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provide the Company, for a one-time fee (which has been paid), all uplink,
transponder and other facilities necessary to deliver via satellite Fox Kids
Network programming for broadcast to the Fox Kids Network Affiliates, as well
as certain other services.
The Fox Kids Network schedule commencing in February 1998 is set forth
below. The Company believes that the programming designated below as
"educational" complies with the FCC's requirement that broadcast television
stations show at least three hours of "educational" programming per week.
SATURDAY MORNING PROGRAMMING
<TABLE>
<CAPTION>
TIME PERIOD CONSECUTIVE YEARS
(EST) PROGRAM ON AIR PROGRAM DESCRIPTION
- ----------- ------- ----------------- -------------------
<S> <C> <C> <C>
8:00-8:30 a.m. Mowgli: The New Adventures of the Jungle Book premiere Live action series inspired by
the Rudyard Kipling book "The
Jungle Book."
8:30-9:00 a.m. Ned's Newt premiere Animated comedy adventure
series of a young boy with his
7-foot tall pet salamander.
9:00-9:30 a.m. Goosebumps 3 Based on the best-selling
suspense novels by R.L. Stine.
9:30-10:00 a.m. Toonsylvania premiere Animated adventures of Dr.
Frankenstein's long-suffering
assistant, Igor.
10:00-10:30 a.m. Ultimate Goosebumps 3 Based on the best-selling
suspense novels by R.L. Stine.
10:30-11:00 a.m. Space Goofs premiere Adventures of alien monsters
who crash-land on earth and
hide out in a house for rent
until they get back home.
11:00-11:30 a.m. Eerie, Indiana: The Other Dimension premiere Spin-off series from the
original, following the
adventures of 2 kids
investigating strange going ons
in their home town.
11:30-Noon Silver Surfer premiere Based on the Marvel comic book
action adventures.
MONDAY-THURSDAY PROGRAMMING
<CAPTION>
TIME PERIOD CONSECUTIVE YEARS
(EST) PROGRAM ON AIR PROGRAM DESCRIPTION
- ----------- ------- ----------------- -------------------
<S> <C> <C> <C>
7:00-7:30 a.m. Bobby's World (educational) 8 Combines point-of-view of a 4-
year-old with the spirit of
comedian Howie Mandel.
and
7:30-8:00 a.m.
3:00-3:30 p.m. BeetleBorgs Metallix 2 The next generation of the Big
Bad BeetleBorgs.
3:30-4:00 p.m. Spider-Man 4 Based on the most popular
Marvel comic book hero in
history.
4:00-4:30 p.m. Power Rangers Turbo 5(1) The next generation of the
Power Rangers saga.
4:30-5:00 p.m. Life With Louie (educational) 3 Comedian Louie Anderson's
childhood ups 'n downs of
dodging bullies, eating pies
and going on family vacations.
</TABLE>
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FRIDAY PROGRAMMING
<TABLE>
<CAPTION>
TIME PERIOD CONSECUTIVE YEARS
(EST) PROGRAM ON AIR PROGRAM DESCRIPTION
- ----------- ------- ----------------- -------------------
<S> <C> <C> <C>
7:00-7:30 a.m. C-Bear & Jamal (educational) 2 Life of Jamal Wingo, a 10-year
old African American boy whose
thrift store teddy bear comes
to life.
7:30-8:00 a.m. Casper 2 The friendly ghost.
and
3:00-3:30 p.m.
3:30-4:00 p.m. Sam & Max premiere In the frenetic world of tough
as nails cops, none is more
dysfunctional than the duo of
Sam, the dog, and Max, the
wild, psycho rabbit.
4:00-4:30 p.m. Power Rangers In Space premiere(1) The newest generation of the
Power Rangers Saga.
4:30-5:00 p.m. Ninja Turtles: The Next Mutation premiere Based on the Teenage Mutant
Ninja Turtles series, the
world's favorite party reptiles
use slapstick humor and high-
tech hardware to reach a new
generation of fans.
</TABLE>
- --------
(1) Power Rangers, as a franchise, has been on the air for five consecutive
years. Power Rangers Turbo has been on the air for approximately two years
and Power Rangers In Space premiered this season.
Ratings. The Fox Kids Network is measured by Nielsen in terms of ratings and
share points. For the 1997-1998 broadcast season, the potential viewing
universe of children in the United States is estimated to be 39 million. Each
ratings point represents 1.0% of these children who are watching television
during a particular time slot. For the 1996-1997 broadcast season, the Fox
Kids Network averaged a 2.4 rating and 16% share, Monday-Friday, and a 4.4
rating and 21% share Saturday mornings during the hours it broadcasts. The Fox
Kids Network's ratings for Saturday morning were almost twice that of its
closest broadcast competitor, ABC (2.6 rating and 12% share). For the 1997-
1998 broadcast season to date, the Fox Kids Network averaged a 2.2 rating
Monday-Friday and a 3.7 rating on Saturday mornings during the hours it
broadcasts.
Fox Kids Affiliation Agreements. Currently, more than 93% of the FOX
Television Member Stations, including 12 of the 22 Fox O&O's, carry the Fox
Kids Network pursuant to their affiliation agreements with Fox Broadcasting.
These affiliation agreements expire over the next one to ten years and there
can be no assurance that they will be renewed.
The affiliation agreements provide that FCN is to pay to each of the Fox
Kids Network Affiliates (including the Fox O&O's) participations based upon
the "net profits" (as defined) of FCN, with the participations allocated among
the Fox Kids Network Affiliates based upon each Affiliate's percentage of
cumulative audience delivery as compared to the other Fox Kids Network
Affiliates. "Net profits" is defined on a cumulative basis to include amounts
actually received by FCN from the exhibition, distribution and other
exploitation of Fox Kids programs and the merchandising and other rights
relating thereto, less administrative fees, production/license fees,
distribution and merchandising fees (including those payable to the Company),
overhead and other expenses and reserves. Certain of the Fox O&O's have waived
in favor of the Company their rights to receive these participations, which
instead are retained by the Company. As a result of this waiver, through
December 31, 1997, $4.7 million, or approximately 30% of the total amounts
paid ($15.9 million) to all Fox Kids Network Affiliates, has been retained by
the Company.
The non-Fox O&O Fox Kids Network Affiliates have appointed a board of their
members (the "Affiliate Board") for the purpose of facilitating communications
between the non-Fox O&O Affiliates and FCN. On behalf of the Company, Fox
Broadcasting from time to time meets with the Affiliate Board to review the
operations and operating policies of FCN and the Fox Kids Network. The Company
is involved in ongoing discussions with the Fox Kids Network Affiliates with
respect to the possibility of purchasing their interest in the "net profits"
of FCN. There can be no assurance that such a proposal will be acceptable to
the Fox Kids Network Affiliates.
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International Channels
The Company believes that it is positioned strategically, particularly
through its relationship with News Corp., to take advantage of growth in
international DTH satellite and cable television services and the resulting
increase in demand for television programming. The Company has launched
branded Fox Kids channels, owned and operated by the Company, which are
distributed via DTH satellite and cable in the United Kingdom, the Republic of
Ireland, Latin America, France, Holland and Australia. The Company also has
signed agreements to launch Fox Kids branded channels in Scandinavia in early
April 1998 and Poland in mid-April 1998, and is in active discussions and
negotiations to launch additional Fox Kids branded channels in other countries
throughout the world, with particular emphasis in Germany, Spain, Italy,
Austria, Belgium, Switzerland and Turkey. The Company's objective is to become
the leading operator of international children's channels by creating fully
localized Fox Kids branded channels in every major territory.
United Kingdom and Republic of Ireland. The Company operates a Fox Kids
channel that is distributed to over 3.7 million subscribers in the United
Kingdom and the Republic of Ireland. The channel is distributed as part of
BSkyB's Sky Multi-Channels DTH package to over 3.5 million subscribers, and
over a number of cable systems to approximately 250,000 viewers. The Company
expects to grow significantly its subscriber base by increased distribution
through BSkyB, in which News Corp. owns a 40% interest, and through increased
cable distribution.
Latin America. Since November 1996, the Company has operated Fox Kids Latin
America ("FKLA"), a pan-regional Latin American channel, which simultaneously
broadcasts animated and live-action programming in Spanish, Portuguese and
English. The 24-hour service is transmitted via the PanAm Sat 5 satellite and
currently reaches 3.9 million cable and multi-channel multi-point distribution
systems ("MMDS") homes in 19 countries throughout the region. In addition, the
Fox Kids channel is carried on two emerging Sky-branded DTH platforms
currently operating in Mexico and Brazil, which reach an additional 160,000
homes.
In October 1997, the Company launched FKLA on Brazil's largest multi-system
operator, NET (a subsidiary of Globo, Brazil's largest media company with a
potential reach of approximately 1.7 million subscribers). The Company also
has recently launched on Brazil's second largest multi-system operator, TV
Abril, making FKLA available up to an additional 450,000 homes in Brazil. The
Company is aggressively positioning FKLA in the Brazilian marketplace in
anticipation of 1,500 new cable licenses to be auctioned by the government,
which should expand Brazil's multi-channel universe to more than 6 million
subscribers by the year 2000.
Holland. The Company acquired 100% of TV10 from Arcade Media Group B.V. and
Wegener N.V. (90% in March 1997 and 10% in December 1997). TV10 is distributed
in Holland via cable to 89% of all television households. Before the Company's
purchase of its interest in TV10, the channel had an average 1.8% market
share. On August 2, 1997, a Fox Kids service was launched on TV10,
broadcasting between the hours of 6:30 a.m. and 6:00 p.m. on weekdays and 5:00
p.m. on Saturday and Sunday. The Fox Kids block currently has a weekly average
of 10% market share for children 6-11, and a 12% market share for children
Monday through Friday.
France. A new Fox Kids channel was launched in France in November 1997. The
channel is distributed as part of the basic package of the Canal Satellite DTH
platform to approximately 700,000 subscribers. The channel currently is
broadcasting 15 hours per day, seven days per week. The Company is in
discussions with all major cable operators to broaden distribution, although
there currently is limited channel capacity on most of the analogue cable
systems in France.
Australia. Foxtel, an Australian-based cable service, has carried a Fox Kids
Network children's channel segment since 1994 under a license agreement
between Foxtel and an affiliate of Fox Broadcasting. This license was assigned
to the Company. As of December 31, 1997, Foxtel had over 275,000 subscribers.
Foxtel is a 50/50 partnership between News Corp. and the Australian state-
owned telephone company, Telstra.
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<PAGE>
Scandinavia. The Company plans to launch a Fox Kids channel in Sweden,
Norway, Denmark and Finland on the new digital DTH platform of Canal Digital,
a joint venture between Telenor and Canal PLUS in early April 1998. Canal
Digital will act as agent in maximizing the distribution of the channel to
cable and satellite master antenna television ("SMATV") operators. The channel
will be operated from the United Kingdom and will broadcast children's
programming 12 hours per day, fully dubbed into Norwegian, Swedish and Danish.
Discussions are taking place to obtain analogue DTH distribution as well as
with all major cable and SMATV operators for distribution of the Fox Kids
throughout Scandinavia, including distribution in Iceland.
Poland. The Company plans to launch a Fox Kids channel in Poland in mid-
April 1998, as part of @Entertainment's cable network (PTK) and new digital
DTH platform. @Entertainment is the largest provider of multi-channel
television services in Poland. Based on @Entertainment's projections, Fox Kids
is expected to reach 750,000 subscribers at launch and 1.2 million subscribers
by the end of 1998. @Entertainment will act as agent in maximizing the
distribution of the channel to cable operators in Poland. The channel will be
operated from the United Kingdom and will broadcast children's programming
12 hours per day, fully dubbed into the Polish language.
ADVERTISING
The extensive reach of The Family Channel and Fox Kids Network affords
advertisers substantial day-and-date capacity to conduct nationwide
advertising campaigns. Substantially all of the revenues of the Fox Kids
Network are derived from national network advertising and the merchandising of
its characters and related series elements. For the year ended June 30, 1997
and the three months ended September 30, 1997, the Company's revenues from
advertising were approximately $125 million or 41% and $50 million or 40% of
consolidated revenues, respectively, and, giving effect to the IFE Acquisition
as if it had occurred on July 1, 1996, $279 million, or 45%, and $61 million,
or 41%, respectively, of the Company's pro forma consolidated revenues. One of
the Company's objectives in its planned reprogramming of The Family Channel as
the Fox Family Channel is to reach viewers that are attractive to advertisers.
See "Risk Factors--Acquisition of IFE." The Company also derives revenues from
program sales which consist of sales of program length periods of time for
infomercials which currently air during certain portions of the 12 a.m. to 6
a.m. time block on The Family Channel.
MERCHANDISING AND LICENSING
The Company capitalizes on its popular characters and properties by entering
into licensing agreements with manufacturers and retailers of children's
products. By entering into licensing and merchandising agreements, the Company
earns revenue from the sale of products while limiting the costs and risks
associated with manufacturing, distributing and marketing merchandise. For the
year ended June 30, 1997 and the three months ended September 30, 1997, the
Company's licensing and merchandising activities represented approximately 18%
and 3% of the Company's consolidated revenues, respectively, and giving effect
to the IFE Acquisition as if it had occurred on July 1, 1996, approximately 9%
and 2%, respectively, of pro forma consolidated revenues. The revenue derived
from licensing and merchandising depends not only on the success, recognition
and appeal of a character, but also on the quality and extent of the
marketing, product development and retail efforts of the Company and its
licensees. Sales of licensed products also help the Company's shows by
promoting the Company's characters.
The Company has entered into toy license agreements with a number of toy
manufacturers pursuant to which the manufacturers are given the exclusive
right to create, manufacture and develop toys representing characters from the
Company's series. For example, the Company has toy licenses with Bandai,
covering Power Rangers and BeetleBorgs, and with Playmates, Inc., covering
Captain Kangaroo. These licenses generally grant the exclusive right to
manufacture and sell toys based upon the characters and other creative
elements in the licensed series. Pursuant to these agreements, the Company
generally receives an up-front advance that is non-refundable but is credited
against royalties, generally based on a percentage of net sales of the
licensed product. The Company also retains approval rights regarding
advertising, packaging and the quality of its licensed product, as well as
continued ownership of the copyright and trademark. The Company has licensing
arrangements in place with over 500 different licensees worldwide for consumer
products targeting children, such
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as toys, apparel, dinnerware/lunch boxes, watches, bedding and soft vinyl
goods, such as boots, backpacks and raincoats. Merchandise based on the
Company's characters and properties is sold in approximately 60 countries
throughout the world.
The following table sets forth examples of the licensee and products for
some of the more than 500 licensees of the Company:
<TABLE>
<CAPTION>
LICENSEE PRODUCTS
<S> <C>
Bandai Toys including action figures and video games
Creative Expressions Group, Inc. Party goods
Disguise, Inc. Ready-to-wear Halloween costumes
Ero Industries Slumber bags and play tents
Fruit of the Loom, Inc. Girl's and boy's underwear
S. Goldberg & Company Footwear
Good Humor-Breyers Ice Cream Frozen snacks and desserts
Harper Collins Picture storybooks and novelty books
Hasbro Games and puzzles
High Point Knitting Belts, hats and other apparel
Playmates, Inc. Toys
Norcom Pocket folders and notebooks
Roma Kids Luggage and backpacks
Tiger Electronics LCD Games
USA Laboratories Vitamins
</TABLE>
HOME VIDEO AND TELEFILMS
Home Video. The Company produces direct-to-video feature films, in addition
to granting home video distribution rights to manufacture and distribute video
cassettes based upon its television programming. For example, the Company
released in September 1997 the direct-to-video film, Casper--A Spirited
Beginning, and is in production on a second film based upon the character
"Casper." The Company also is in pre-production on a film based on the
character "Richie Rich," and has acquired rights to produce new live-action
television specials and series programs based upon the "The Addams Family"
characters. Through a separate agreement with Fox Video, the Company
distributes throughout the United States and Canada all of its television
programs produced for children and owned or controlled by Saban or FCN. The
Company receives royalties from the sale of home video cassettes of its
television programming. See "Certain Transactions--Certain Transactions
Between the Company and the Fox Parties."
Telefilms. Historically, the Company acquired international distribution
rights to several telefilms ranging from 12 to 15 motion pictures per year
over the past three years. While the Company occasionally acquired U.S. rights
to these films, the primary objective of acquiring telefilms was to complement
the Company's international children's programming sales activities. With the
acquisition of The Family Channel, the Company has made a decision to increase
the number of telefilms produced or acquired each year to 25 or more motion
pictures. Further, whenever possible, the Company will acquire worldwide
rights to these features. These films are typically targeted at prime time
audiences and consist of dramas, thrillers and action/adventure features. The
Company intends to air these features on the Fox Family Channel and to
distribute these features internationally to television broadcasters and home
video distributors.
THE STRATEGIC ALLIANCE WITH FOX/NEWS CORP.
News Corp., along with its subsidiaries, including Fox Broadcasting, is a
diversified international communications company principally engaged in the
production and distribution of motion pictures and television programming;
television broadcasting; the publication of newspapers, magazines, books and
free standing inserts; computer information services; and digital broadcasting
systems. As of December 1, 1997, FOX
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Television had 175 prime time primary television station affiliates and three
prime time secondary television station affiliates across the United States,
including 22 Fox O&O's, reaching over 96% of U.S. television households. Each
television station affiliate is a party with Fox Broadcasting to an
affiliation agreement which governs the terms of the relationship between
them. See "Risk Factors--Strategic Relationships with News Corp. and Fox."
The Fox Kids Network is distributed over the same broadcast facilities as
FOX Television. In December 1995, Fox Broadcasting and certain of its
affiliates (the "Fox Parties") entered into a long-term strategic alliance
with the Company for the mutual support of the Fox Parties and the Company in
the children's entertainment business. Set forth below is a summary of certain
of the material portions of the relevant strategic alliance provisions
contained in the Asset Assignment Agreement (the "Asset Assignment
Agreement"), pursuant to which the Fox Parties assigned, effective as of June
1, 1995, certain assets and interests to the Company. See "Certain
Transactions--Certain Transactions Between the Company and the Fox Parties."
License of "Fox" Name. The Fox Parties granted to the Company the
perpetual worldwide exclusive right to use the name "Fox" in conjunction
with the words "Kids," "Kid" or "Children," and agreed not to use or
license the name "Fox" to others for similar purposes.
New Services and other Noncompetition Provisions. The Fox Parties agreed
not to operate in the United States any broadcast, cable or non-standard
programming service targeted at children ages 2-11 (a "kids' service")
other than the Fox Kids Network. If the Fox Parties at any time determine
to acquire a new kids' service anywhere else in the world, which kids'
service would bear the "Fox" name, they are required to provide the Company
with a right of first refusal to acquire and own that new kids' service.
Moreover, should the Fox Parties or any of their affiliates at any time
acquire a television, cable or satellite network or any other business
which includes a kids' programming service, the Fox Parties will be
required to offer the Company the right to acquire and own that kids'
service.
First Right to Fox Parties Originated Programming. The Fox Parties have
agreed to provide the Company with the first right to acquire first run
exhibition rights to any new programming suitable for a kids' service
("kids' programming") prior to its sale or license to any third party;
however, the Fox Parties may freely license kids' programming to any broad
based entertainment network (which is not a kids' service) for prime time
or late night broadcast and programming derived from properties (such as
The Simpsons) not originally launched on the Fox Kids Network.
The Company has historically maintained a close working relationship with
the Fox Parties, pursuant to which the Company and its operating subsidiaries
have been granted access to the Fox Parties' motion picture studio and other
ancillary facilities, as well as their distribution and administrative
services (see "Certain Transactions"), and, although the Fox Parties are not
generally obligated to provide such services in the future, the Company
intends to seek access to these services where the Company believes that they
may be beneficial to the Company. Should the Fox Parties decide not to provide
these services, the Company believes similar services are readily available to
the Company at competitive prices.
COMPETITION
The businesses in which the Company engages are highly competitive. Each of
the Company's primary market business operations is subject to competition
from companies which, in some instances, have greater production, distribution
and capital resources than those of the Company.
Programming. The Company competes on the basis of relationships and pricing
for access to a limited supply of facilities and talented creative personnel
to produce its programs. The Company competes with major motion pictures
studios, such as Warner Bros. and The Walt Disney Company, and animation
production companies, including Hanna Barbera and Film Roman, for the services
of writers, producers, animators, actors and other creative personnel and
specialized production facilities.
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Distribution. In the United States, the Company competes for ratings and
related advertising revenues. The Company currently competes and expects to
continue to compete, through the Fox Kids Network and the Fox Family Channel,
with the other broadcast television networks, public television and cable
television channels, such as Nickelodeon, USA Cable Network, Turner Network
Television and The Cartoon Network for market acceptance of its programming
and for viewership ratings and advertising revenues. To the extent that the
Company produces original programming for distribution outlets it does not
own, it competes with other producers of children's programming.
Internationally, the Company competes with a large number of U.S.-based and
international distributors of children's programming, including The Walt
Disney Company, Warner Bros. and Nickelodeon, in the development or
acquisition of programming expected to appeal to international audiences. Such
programming often must comply with foreign broadcast rules and regulations,
which may stipulate certain minimum local content requirements.
GOVERNMENT REGULATION
The following does not purport to be a summary of all present and proposed
federal, state and local regulations and legislation relating to the
broadcasting and cable television industries and other industries involved in
the video marketplace; rather it attempts to identify those requirements that
could affect the Company's business. Also, other existing legislation and
regulations, copyright licensing, and, in many jurisdictions, state and local
franchise requirements, are currently the subject of a variety of judicial
proceedings, legislative hearings and administrative and legislative proposals
which could affect, in varying degrees, the manner in which the cable
television industry and other industries involved in the video marketplace
operate.
Federal Regulations and Legislation
The distribution of the Company's programming by broadcast stations and
cable systems must comply with the provisions of the Children's Television Act
of 1990 ("CTA") and the rules and policies of the FCC pertaining to the
production and distribution of television programs directed to children,
particularly with respect to the amount and type of commercial matter
broadcast during programs directed at children. Failure to comply with the
children's television commercial limitations can result in the imposition of
sanctions, including substantial monetary fines, on a broadcast television
station or cable system, which could adversely impact the Company.
FCC rules also establish a "processing guideline" for broadcast television
stations of at least three hours per week, averaged over a six-month period,
of "programming that furthers the educational and informational needs of
children 16 and under in any respect, including the child's
intellectual/cognitive or social/emotional needs." "Core Programming" has been
defined as educational and informational programming that, among other things,
(i) has serving the educational and informational needs of children "as a
significant purpose," (ii) has a specified educational and informational
objective and a specified target child audience, (iii) is regularly scheduled,
weekly programming, (iv) is at least 30 minutes in length and (v) airs between
7:00 a.m. and 10:00 p.m. Any station that satisfies the processing guideline
by broadcasting at least three weekly hours of Core Programming will receive
FCC staff-level approval of the portion of its license renewal application
pertaining to the CTA. Alternatively, a station may qualify for staff-level
approval even if it broadcasts "somewhat less" than three hours per week of
Core Programming by demonstrating that it has aired a weekly package of
different types of educational and informational programming that is "at least
equivalent" to three hours of Core Programming. At the present time, the
Company provides three hours per week of Core Programming to affiliates of
FCN, thereby enabling them to fulfill their obligations under the CTA. The
Company believes that two additional programs, Life With Louie and The All New
Captain Kangaroo, also qualify as Core Programming under the new rules.
Certain aspects of the Company's cable operations are subject, directly or
indirectly, to federal, state, and local regulation. At the federal level, the
operations of cable television systems, satellite distribution systems, other
multichannel distribution systems, broadcast television stations, and, in some
respects, vertically integrated cable programmers are subject to the
Communications Act of 1934, as amended, the Cable Communications
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Policy Act of 1984 (the "1984 Act"), the Cable Television Consumer Protection
and Competition Act (the "1992 Act"), and the Telecommunications Act of 1996
(the "1996 Act") and regulations promulgated thereunder by the Federal
Communications Commission (the "FCC"). Cable television systems are also
subject to regulation at the state and local level. See "--State and Local
Regulation."
The 1996 Act took effect in February 1996, altering the network of federal,
state, and local laws and regulations pertaining to telecommunications
providers and services. The FCC is in the process of promulgating rules
interpreting and implementing the provisions of the 1996 Act. At this time, it
is impossible to state with precision the full impact the 1996 Act will have
on the Company.
The 1996 Act phases out cable rate regulation, except with respect to the
"basic" tier (which must include all local broadcast stations and public,
educational and governmental access channels and must be provided to all
subscribers). Beyond the basic tier of cable service, which continues to be
regulated by the local franchising authorities ("LFAs"), rate regulation of
other cable services between now and 1999 will only be triggered by a valid
rate complaint by a LFA, and only in an area where no effective competition
exists. Once a system's rates are initially set, the rules permit subsequent
increases that reflect inflation and increases in existing programming costs
and certain other costs. The rules thus permit cable operators that carried,
for example, The Family Channel when their rates were initially regulated to
pass through to subscribers any subsequent increases in licensing fees,
subject to a cap which will expire this year. Systems may also increase rates
when they add new channels to regulated tiers, but there is a cap on such
increases. Alternatively, systems may create "new product tiers" consisting
entirely of services not previously offered on regulated tiers, and these new
product tiers will generally not be subject to rate regulations.
Rate regulation under the 1992 Act resulted in a reduction of rates to some
subscribers in some markets. The deregulation under the 1996 Act may, however,
result in an increase in rates in some markets. In response to the 1992 Act
and the FCC's implementing regulations, many cable systems retiered channels
to create an attractively priced basic tier consisting exclusively of
broadcast and public, educational, and governmental access channels, while
offering satellite-delivered programming services such as The Family Channel
on a different service tier or on an a la carte basis. To the extent that such
retiering or repricing of the Company's networks induces customers to
discontinue their subscriptions, the Company's financial performance could be
adversely affected. Deregulation of rates pursuant to the 1996 Act may reverse
such tiering and pricing decisions by cable system operators and,
correspondingly, reverse or ameliorate any adverse effects of the 1992 Act,
although the impact of the 1996 Act and its implementing regulations cannot be
predicted at this time.
The 1996 Act addresses obscenity, indecency and violence in connection with
telecommunications services in several respects, including the establishment
of an encrypted rating in all video programming that, when used in conjunction
with so-called "V-Chip" technology, would permit the blocking of programs with
a common rating. On January 17, 1997, an industry proposal, as revised, was
submitted to the FCC describing a voluntary ratings system for all video
programming. The industry proposal was revised and resubmitted to the FCC on
August 1, 1997. Pursuant to the 1996 Act, the FCC is conducting separate
proceedings (i) to determine whether to accept the industry proposal or
establish and implement an alternative system for rating and blocking video
programming and (ii) addressing technical issues relating to the "V-Chip." The
Company cannot predict whether the FCC will accept the industry proposal
regarding the rating and blocking of video programming, or how changes in this
proposal or the implementation of "V-Chip" technology could affect the
Company's business.
Under the FCC's closed captioning rules, which became effective January 1,
1998, program distributors, and not producers, are generally responsible for
compliance with captioning rules. However, program distributors--defined to
include entities that distribute programming to subscribers--may demand
certifications from program producers that programming meets the minimum
captioning requirements. The rules divide programming into two groups: pre-
rule programming (which is defined to be programming that was first published
or exhibited on or before January 1, 1998 by any distribution method) and new
programming (programming that was first published or exhibited after that
date). Pre-rule programming is subject to no specific requirements until the
first calendar quarter of 2008. In that quarter, 75% of all pre-rule
programming actually aired or shown by a distributor is required to be
captioned. Compliance is measured on a per-channel basis, as averaged per
calendar quarter. Beginning in the first calendar quarter of 2000, new
programming that is not
64
<PAGE>
otherwise exempt from captioning requirements is subject to a series of
quarterly benchmarks, until by January 1, 2006, 95% of all new, non-exempt
programming is to be captioned. The rules exempt new networks (cable and non-
cable) for four years from launch date; networks with less than $3 million in
annual gross revenues (not counting affiliate revenues); and companies which
have already devoted 2% of annual gross revenues to closed captioning
expenses. The FCC also may grant waivers on a case by case basis. The FCC's
rules are subject to petitions for reconsideration and the extent to which the
Company, as both a producer and distributor of programming, will be required
to comply with captioning requirements is not clear.
To the extent the 1996 Act fosters greater competition for the provision of
multichannel video services to individual subscribers, the Company should
generally be impacted either neutrally or advantageously, as additional
providers are additional potential customers for the Company. To the extent,
however, that rate deregulation causes a material increase in cable rates, the
subscriber base could be decreased potentially affecting the Company's
subscriber revenues. Further, the Company may be called upon to provide
increased closed captioning to assist in complying with rules promulgated
under the 1996 Act and may be required to provide assistance or information to
establish ratings for its programming. Either of these undertakings could
increase the Company's operating expenses.
The 1992 Act subjects cable systems to "must carry" rules, pursuant to which
local broadcast stations elect to demand carriage. It also provides favorable
channel positioning rights for broadcasters electing to exercise their must
carry rights. The 1992 Act also gives television broadcast stations the right
to withhold consent to be carried by a cable system which may result in a
station receiving compensation for carriage.
Congress and the FCC have under consideration, and in the future may
consider and adopt, new laws, regulations and policies regarding a wide
variety of matters that may affect, directly or indirectly, the operation,
ownership and profitability of the Company's business. These proposed changes
include, for example, expansion of program access requirements and potential
must-carry rights for digital television broadcast stations (which could limit
multi video program distributions ("MVPDs"') channel capacity available for
the Company's programming). In the Fourth Annual Cable Competition Report,
released January 13, 1998, the Commission expressed concern regarding recent
cable rate increases and increases in programming costs. The Chairman of the
FCC has directed the Cable Services Bureau to commence an inquiry into, among
other things, the reasons for increases in programming costs and whether such
cost increases should be passed through to subscribers. The Company is unable
to predict the outcome of future federal legislation or the impact of any such
laws or regulations on its operations.
State and Local Regulation
Cable television systems are generally constructed and operated under non-
exclusive franchises granted by a municipality or other state or local
governmental entity. Franchises are granted for fixed terms and are subject to
periodic renewal. The 1984 Act places certain limitations on a LFA's ability
to control the operations of a cable operator, and the courts from time to
time have reviewed the constitutionality of several franchise requirements,
often with inconsistent results. The 1992 Act prohibits exclusive franchises,
and allows LFAs to exercise greater control over the operation of franchised
cable television systems, especially in the areas of customer service and rate
regulation. The 1992 Act also allows LFAs to operate their own multichannel
video distribution systems without having to obtain franchises. Moreover, LFAs
are immunized from monetary damage awards arising from their regulation of
cable television systems or their decisions on franchise grants, renewals,
transfers, and amendments.
The terms and conditions of franchises vary materially from jurisdiction to
jurisdiction. Cable franchises generally contain provisions governing time
limitations on the commencement and completion of construction, and governing
conditions of service, including the number of channels, the types of
programming (but not the actual cable programming channels to be carried), and
the provision of free service to schools and certain other public
institutions. The specific terms and conditions of a franchise and the laws
and regulations under which it is granted directly affect the profitability of
the cable television system, and thus the cable television system's financial
ability to carry programming. Local governmental authorities also may certify
to regulate basic cable rates. Local rate regulation for a particular system
could result in resistance on the part of the cable operator to the amount of
subscriber fees charged by the Company for its programming.
65
<PAGE>
Various proposals have been introduced at the state and local level with
regard to the regulation of cable television systems, and a number of states
have enacted legislation subjecting cable television systems to the
jurisdiction of centralized state governmental agencies.
International
The Company is also subject to local content and quota requirements in
international markets which, although a significant portion of the Company's
library meets such current requirements in Europe, effectively limit access to
particular markets.
FACILITIES
The Company currently leases a total of approximately 217,000 square feet of
office and production space in its headquarters building in Los Angeles,
California under a lease expiring in April 2006, subject to two separate five-
year extension options. As of April 1, 1997, certain of the Fox Kids Network
employees and other Company employees relocated to a new facility in Los
Angeles which FOX Television recently acquired from New World. The Fox Kids
Network leases approximately 24,123 square feet in such facility. No rent has
been paid yet for this lease and the rate has not been negotiated. The Company
also leases a multi-purpose production facility in Valencia, California under
a lease that expires in January 1999. The Company's Paris animation studio
currently leases 1,379 square meters of office and production space under a
lease expiring February 28, 2005; this lease may be cancelled by the Company
with six months prior notice on February 28, 1999 or February 28, 2002. The
Company also leases approximately 14,500 square feet of office space for its
European headquarters in London, England under a lease expiring September 30,
2007. This lease may be cancelled after the fifth year with nine months
advance notice. In connection with IFE Acquisition, the Company acquired IFE's
executive and administrative offices, a sales office and an affiliate
relations office in Virginia Beach, Virginia. The Company also continues to
lease from CBN a portion of a corporate support building for its master
control, satellite uplink and postproduction facilities. The Company also
leases office facilities in other locations throughout the world, none of
which are considered material. The Company believes that its current office
and production space, together with space readily available without material
cost in the markets in which it operates, are adequate to meet its needs for
the foreseeable future.
EMPLOYEES
As of December 31, 1997, the Company (excluding IFE) had 500 full-time and 5
part-time employees in the United States and 121 full-time employees outside
the United States. In connection with the IFE Acquisition, the Company added
430 full-time and 150 part-time employees in the United States. As part of the
Company's planned sale or disposition of certain of IFE's businesses, the
number of IFE employees will be reduced. The Company also regularly engages
freelance creative staff and other independent contractors on a project-by-
project basis. The Company believes its relations with its employees are good.
66
<PAGE>
INTELLECTUAL PROPERTY
The Company generally holds copyrights to its owned programming in its
library. Additionally, the Company holds registered trademarks on the various
characters and series contained in its owned programming. The Company also
holds significant rights as licensee of other productions, programming,
characters and series, most of which are subject to copyrights and trademarks
owned by the respective licensors of such properties. The following table
lists the Company's network and syndication programming for the 1997-1998
season, the nature of the ownership of the copyrights and trademarks
associated with such programming and certain restrictions applicable to such
licensed copyrights and trademarks.
<TABLE>
<CAPTION>
INTELLECTUAL PROPERTY DISTRIBUTION RIGHTS
--------------------- ----------------------------------------------------------------------
HOME NON-
COPYRIGHTS TRADEMARKS TERRITORY TELEVISION VIDEO THEATRICAL THEATRICAL MERCHANDISING
---------- ---------- ---------------- ---------- ----- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Saban's Adventures of
Oliver Twist * * Worldwide * * * * *
BeetleBorgs Metallix * * Worldwide * * * * *
(except Asia)
Bobby's World * * Worldwide * * * * *
Breaker High *(1) * Worldwide * * * * *
(except Canada)
DragonBall Z --(2) --(2) United States * -- -- -- --
Eek!Stravaganza * * Worldwide * * * * *
Life With Louie * * Worldwide * * * * *
Power Rangers in Space * * Worldwide * * * * *
(except Asia)
Power Rangers Turbo * * Worldwide * * * * *
(except Asia)
Sweet Valley High * -- Worldwide * * * * *
(except
publishing)
The Tick * * Worldwide * * * * *
X-Men --(3) --(3) Worldwide * * -- -- --
Casper -- -- United States, *(4) -- -- -- --
Latin America,
United Kingdom
Goosebumps -- -- Worldwide, * -- -- -- --
except Canada
Sam & Max -- -- United States, * *(5) -- -- --
United Kingdom,
Australia,
New Zealand,
Mexico,
Central America,
South America
Silver Surfer -- -- United States * * -- -- --
Space Goofs --(6) --(6) United States, * * -- -- *
Canada
Stickin' Around -- -- United States * -- -- -- --
The All New
Captain Kangaroo * *(7) Worldwide * * * * *
Marvel Superheroes --(8) --(8) Worldwide * * -- -- --
Toonsylvania -- -- United States, *(4) -- -- -- --
Latin America,
United Kingdom
Ninja Turtles: The Next * --(9) Worldwide * * -- -- --
Mutation (except Canada)
</TABLE>
- --------
("*" Company owns the intellectual property rights or programming distribution
rights; "--" Company does not own the intellectual property rights or
programming distribution rights)
(1) The Company owns worldwide copyrights, except in Canada.
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<PAGE>
(2) FUNimation and Toei Animation own copyrights and trademarks. The Company
has exclusive U.S. distribution rights on a year-to-year basis through
2001.
(3) Marvel owns copyrights and trademarks. The Company has exclusive
distribution rights for 15 years.
(4) Company controls all forms of television in the United States, but only
cable and satellite rights in the United Kingdom and Latin America.
(5) Home Video rights are worldwide, excluding the United States.
(6) Gaumont Multimedia owns the copyrights and trademarks. The Company has
exclusive U.S. and Canadian distribution rights through 2002.
(7) The Company uses the trademarks under license from Robert Keeshan
Associates, Inc.
(8) New World and Marvel own the copyrights and trademarks. The Company has
exclusive worldwide distribution rights.
(9) The Company owns worldwide copyrights, except in Canada. Trademarks are
used under a license from Mirage Studios.
The Company considers its owned and licensed copyrights and trademarks to be
of significant value and importance to the Company's business. Accordingly,
the Company's policy is to vigorously enforce copyrights and trademarks with
respect to owned and licensed programming against unlawful infringement by
third parties.
LEGAL PROCEEDINGS
The Company currently and from time to time is engaged in litigation in the
ordinary course of its business. The Company is not currently a party to any
lawsuit or proceeding which, in the opinion of management, if decided
adversely to the Company, would be likely to have a material adverse effect on
the Company's financial condition and results of operations.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company, and their ages at
January 1, 1998, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Haim Saban.............. 53 Chairman of the Board and Chief Executive Officer of
the Company; Chairman and Chief Executive Officer
of Saban; Co-Chairman of IFE
Mel Woods............... 46 President, Chief Operating Officer, Chief Financial
Officer and Director of the Company; President and
Chief Operating Officer of Saban; Executive Vice
President and Chief Operating Officer of IFE
Shuki Levy.............. 51 Executive Vice President and Director of the Company
William Josey........... 51 Senior Vice President, Business Affairs and General
Counsel of Saban, Secretary of the Company
Mark Ittner............. 45 Chief Accounting Officer of the Company and Senior
Vice President of Finance of Saban
K. Rupert Murdoch....... 66 Director
Chase Carey............. 44 Director
Lawrence Jacobson....... 38 Director
</TABLE>
HAIM SABAN, the founder of Saban, has served as the Chairman of the Board
and Chief Executive Officer of the Company since its inception in August 1996,
and Chairman and Chief Executive Officer of Saban since the establishment of
Saban in 1983. Mr. Saban is a creator and executive producer of the Company's
live-action series, Power Rangers.
MEL WOODS has served as President, Chief Operating Officer, Chief Financial
Officer and a director of the Company since its inception in August 1996. Mr.
Woods has also been the President and Chief Operating Officer and a director
of Saban since 1991. From 1987 to 1991, Mr. Woods served as Senior Vice
President and Chief Financial Officer of DIC Enterprises, an animation
production company. Prior to joining DIC, Mr. Woods was Senior Vice President,
Chief Financial Officer and Treasurer of Orion Pictures Corp. and served as a
member of its board of directors.
SHUKI LEVY became the Executive Vice President and a director of the Company
in 1996 and is responsible for productions. Mr. Levy has served as an
independent contractor performing production related assignments for Saban
since 1983. Mr. Levy is executive producer of the Company's live-action
series, Power Rangers, and also serves as executive producer for Big Bad
BeetleBorgs and Masked Rider.
WILLIAM JOSEY has served as Secretary of the Company since its inception in
August 1996, and Senior Vice President, Business Affairs and General Counsel
of Saban since joining Saban in 1991. Prior to joining Saban, Mr. Josey served
as Senior Vice President of MGM/UA Telecommunications, supervising business
and legal matters. During the past 20 years, Mr. Josey has also held a number
of executive positions, including Vice President of Business and Legal Affairs
for The Disney Channel; Vice President of Business Affairs for Lorimar
Television and Vice President of Business Affairs for Polygram Television.
MARK ITTNER has served as Chief Accounting Officer of the Company since its
inception in August 1996, and as Senior Vice President of Finance of Saban
since 1995 and as Vice President of Finance from 1993 to 1995. From 1990 to
1993, Mr. Ittner served as Vice President and Controller of Imagine Films, a
motion picture and television production company. Prior to joining Imagine
Films, Mr. Ittner was the acting Co-Chief Financial Officer of Weintraub
Entertainment Group, after joining Weintraub as a Vice President and
Controller in January 1988. From 1979 to 1984, Mr. Ittner was first Assistant
Controller and then in 1984, Vice President and Controller, of Hanna-Barbera
Productions, Inc. and its parent company, The Taft Entertainment Company.
69
<PAGE>
K. RUPERT MURDOCH has served as a director of the Company since August 1996.
Mr. Murdoch is an Executive Director and has been the Chief Executive of News
Corp. since its formation in 1979 and has served as its Chairman since 1991.
From 1969 to 1979, Mr. Murdoch served as Chief Executive of News International
plc, which is now News Corp.'s principal operating subsidiary in the United
Kingdom. From 1953 to 1969, Mr. Murdoch served as Chief Executive of News
Limited, which is now News Corp.'s principal operating subsidiary in
Australia. Mr. Murdoch has served as Chairman of the Star Television Group
since 1993 and as a Director of BSkyB since 1990. Mr. Murdoch is also a member
of the board of directors of Philip Morris Companies, Inc.
CHASE CAREY has served as a director of the Company since August 1996. Mr.
Carey is an Executive Director and has been the Co-Chief Operating Officer of
News Corp. since October 1996. Mr. Carey has served as the Chairman and Chief
Executive Officer of FOX Television since July 1994. Mr. Carey is responsible
for all divisions of FOX Television including Fox Broadcasting, Fox Television
Stations, Twentieth Television's domestic syndication unit and FOX
Television's cable interests. Mr. Carey joined Fox Inc. in 1988 as Executive
Vice President, served as Chief Financial Officer, and assumed the title of
Chief Operating Officer in February 1992. Prior to joining FOX Television, Mr.
Carey worked at Columbia Pictures in several executive positions, including
President of Pay/Cable and Home Entertainment and Executive Vice President of
Columbia Pictures International. Mr. Carey is a member of the boards of
directors of Gateway 2000 and Colgate University.
LAWRENCE JACOBSON has served as a director of the Company since November
1997. Mr. Jacobson was named President of FOX Television Network, in September
1997. Mr. Jacobson had been Executive Vice President of Fox Television since
May 1996, and was named Executive Vice President and Chief Financial Officer
of Fox Broadcasting Company in July 1994. Mr. Jacobson joined Fox Inc. in
December 1990 as Vice President, Finance, and became Senior Vice President,
Finance in July 1992. Prior to Fox Inc., Mr. Jacobson had been Vice President
of Corporate Finance and Strategic Planning for Weintraub Entertainment Group
since December 1989. He joined the company as Vice President, Motion Picture
Division, in May 1987. He previously served as Manager, Pay Cable and Home
Entertainment Group, Columbia Pictures, from 1985 to 1987.
ELECTION OF DIRECTORS; CHANGE IN CONTROL
Pursuant to the terms of an Amended and Restated Strategic Stockholders
Agreement dated as of August 1, 1997 between, among others, Fox Broadcasting
and Haim Saban and the former Saban Stockholders (the "Amended and Restated
Strategic Stockholders Agreement"), Fox Broadcasting and Mr. Saban have agreed
to vote all of the shares of Class B Common Stock beneficially owned by each
of them to the election of three directors designated by Fox Broadcasting and
three directors designated by Mr. Saban. If in the future the Company becomes
subject to any requirement that the Company's Board of Directors include
independent directors, Fox Broadcasting and Mr. Saban are each to include
among their respective slates of nominees the number of independent directors
necessary to satisfy such requirement. Fox Broadcasting and Mr. Saban will
mutually agree on two independent directors. If they are unable to mutually
agree, Fox Broadcasting will nominate one independent director and Mr. Saban
will nominate the other and they will each vote for both nominees.
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<PAGE>
If either Haim Saban or Fox Broadcasting transfers more than one-third of
its initial holdings of Class B Common Stock (Mr. Saban's holdings to include
the shares of the former Saban Stockholders), then Fox Broadcasting or Mr.
Saban, as the case may be, has the right to designate the remaining two-thirds
of the authorized number of directors.
As part of the voting provisions of the Amended and Restated Strategic
Stockholders Agreement, both Mr. Saban and Fox Broadcasting have agreed to a
standstill whereby neither of them will, without the consent of the other,
among other things, (i) purchase, acquire, offer or agree to purchase or
acquire any shares of capital stock or other voting securities of the Company;
(ii) solicit stockholders for the approval of stockholder proposals; or (iii)
otherwise act, alone or in concert with others, to assert or encourage any
other person or entity in seeking to control the management, board of
directors or policies of the Company or to propose or effect a business
combination, restructuring, recapitalization, liquidation, dissolution or
similar transaction.
Fox Broadcasting's designees are currently K. Rupert Murdoch, Chase Carey
and Lawrence Jacobson. Haim Saban, Mel Woods and Shuki Levy are the designees
of Haim Saban.
Under an agreement among Fox Broadcasting, Haim Saban and the former Saban
Stockholders, Fox Broadcasting has the right and option, commencing in
December 2002 or earlier in certain circumstances, to acquire all of the
shares of Class B Common Stock of the Company then held by Mr. Saban and the
former Saban Stockholders, and pursuant to the Amended and Restated Strategic
Stockholders Agreement, Mr. Saban has the right and option, commencing in
December 2000, or earlier in the event of a change in control of Fox
Broadcasting or certain limited circumstances, to cause Fox Broadcasting to
purchase all of these shares. See "Certain Transactions--Formation of the LLC
and the Reorganization."
EXECUTIVE COMPENSATION
The following table sets forth the aggregate cash and non-cash compensation
paid or accrued by the Company to the Chief Executive Officer and the other
four most highly compensated executive officers ("Named Executive Officers")
compensated in excess of $100,000 for the fiscal year ended June 30, 1997.
Compensation decisions are currently made by the President and the Chief
Executive Officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
--------------------------- ---- ------ ------- ------------
<S> <C> <C> <C> <C>
Haim Saban................................ 1997 $1,000,000 -- (1)
Chairman of the Board and Chief Executive
Officer
Mel Woods................................. 1997 452,100 650,000 (1)
President, Chief Operating Officer and
Chief Financial Officer
Margaret Loesch(2)........................ 1997 562,500 455,400 (1)
Shuki Levy................................ 1997 500,000 700,000 (1)
Executive Vice President
William Josey............................. 1997 256,300 10,000 (1)
Senior Vice President, Business Affairs
and General Counsel of Saban
</TABLE>
- --------
(1) Less than either $50,000 or 10% of total annual salary and bonus.
(2) Ms. Loesch's employment with the Company was terminated effective November
21, 1997.
See "Certain Transactions--Transactions between Haim Saban, other Executive
Officers and Saban" for information with respect to certain loans, forgiveness
of loans and other transactions for the benefit of certain of the Named
Executive Officers.
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<PAGE>
STOCK OPTIONS
The following table summarizes information with respect to the number of
shares of Class A Common Stock underlying stock options held by each of the
Named Executive Officers at June 30, 1997, and the value of unexercised
options, assuming a value of $ per share, which is the .
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR-END OPTIONS AT FISCAL YEAR-END
------------------------------------------- ---------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Haim Saban.............. -- -- $ $
Mel Woods............... 96,982 64,655
Margaret Loesch(1)...... 32,327 129,310
Shuki Levy.............. 96,982 64,655
William Josey........... -- --
</TABLE>
- --------
(1) Upon the termination of Margaret Loesch's employment with the Company in
November 1997, all of her options were terminated.
Under the terms of the option agreements, an executive whose employment is
terminated must sell his or her stock options (together with any shares
acquired pursuant to the exercise of such options, the "Option Shares") to the
Company for an amount equal to the fair market value of such shares plus the
fair market value of the shares with respect to which the executive's option
has vested but has not been exercised, less the executive's purchase price.
Such amount is to be paid to the executive 10% in cash and 90% by a promissory
note to be payable in nine equal annual installments.
In addition, in the event Haim Saban, any member of his immediate family or
any of his affiliated entities (with Haim Saban and such family members, the
"Saban Entities") sells to a third party any shares of common stock of the
Company (the "Saban Company Shares"), each executive must sell the "applicable
percentage" of his or her Option Shares for the same per share consideration
paid by the third party for the Saban Company Shares. The "applicable
percentage" is equal to the percentage of the Saban Company Shares sold to the
third party out of the total shares of the Company owned by the Saban Entities
immediately prior to the sale. The Company must purchase such shares for cash
consideration equal to the applicable percentage of the per share
consideration paid by the third party for the Saban Company Shares multiplied
by the number of Option Shares with respect to which such executives' options
have vested but have not been exercised, less the purchase price.
EMPLOYMENT AGREEMENTS
Haim Saban
Haim Saban has an employment agreement with the Company which extends
through June 30, 2002. Pursuant to the terms of the agreement, Mr. Saban is to
be paid an annual salary of $1.0 million. Mr. Saban may not be removed or
replaced with or without cause until he and the other stockholders of the
Company whose shares he controls collectively transfer more than one-third of
the number of shares of Class B Common Stock they currently beneficially own.
If Mr. Saban is terminated following such an event, he will be entitled to
receive an amount equal to his annual base salary from the date of his
termination through June 30, 2002. Under the agreement, Mr. Saban may engage
in certain activities for his own account, including music publishing,
investments and charity. The agreement generally provides that Mr. Saban will
not, during the term of his employment and for a period of five years
thereafter, compete with the Company.
William Josey
William Josey has an employment agreement with Saban that extends through
March 31, 2000. Mr. Josey is to be paid an annual base salary of $300,000,
$315,000 and $330,000 for each of the 1997-98, 1998-99 and 1999-2000 periods,
respectively. The employment agreement provides that the Company may terminate
Mr. Josey's employment only for cause.
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<PAGE>
The Company has employment agreements with each of Mel Woods and Shuki Levy.
Each such agreement contains substantially the same terms and conditions as
the others. The Company may terminate each such executive's employment at any
time with or without cause, and the executive may terminate his or her
employment upon the Company's material breach of the employment agreement. If
the executive is terminated by the Company with cause, he or she will be
entitled to receive (i) annual base salary for the period in which the date of
termination falls, prorated to the date of such termination and (ii) vested
rights with respect to certain stock options granted in connection with the
employment agreement. Should the executive terminate his or her employment or
should his or her employment be terminated by the Company without cause, the
executive will be entitled to receive (i) his or her annual base salary for
the period in which the date of termination falls, pro-rated to the date of
such termination, (ii) severance pay for the balance of the term of the
employment agreement, subject to offset against the executive's future
earnings, (iii) bonus compensation for the period in which the date of
termination falls, pro-rated to the date of such termination and (iv) vested
rights with respect to certain stock options granted in connection with the
employment agreement.
Summarized below are terms of the employment agreements that are different
for each executive.
Mel Woods. The term of Mr. Woods' employment agreement with the Company
extends through May 31, 1999. Mr. Woods is to be paid an annual base salary of
$475,000 and $500,000 for each of the 1997-98 and the 1998-99 periods,
respectively, and an annual contingent bonus which is limited to $675,000 and
$700,000 for each of the 1997-98 and 1998-99 periods, respectively.
Shuki Levy. Mr. Levy's employment agreement with the Company extends through
May 31, 1999. Mr. Levy is to be paid an annual base salary of $500,000 for
each of the 1997-98 and 1998-99 periods and is eligible to receive additional
benefits.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of January 1, 1998
with respect to the shares of Class A Common Stock and Class B Common Stock
beneficially owned by (i) each director of the Company; (ii) each person known
to the Company to be the beneficial owner of more than 5% of either class of
Common Stock; (iii) each Named Executive Officer; and (iv) all directors and
executive officers of the Company as a group. Except as may be indicated in
the footnotes to the table, each of such persons has the sole voting and
investment power with respect to the shares owned, subject to applicable
community property laws. The address of each person listed is in care of the
Company, 10960 Wilshire Boulevard, Los Angeles, California 90024.
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK (1) COMMOM STOCK (1)
----------------- ------------------
PERCENT PERCENT
OF NUMBER OF
NUMBER CLASS OF CLASS
OF SHARES OWNED SHARES OWNED
--------- ------- ---------- -------
<S> <C> <C> <C> <C>
Haim Saban(2)............................ 15,840,000 100.0%
Silverlight Enterprises, L.P.(2)(3)...... 2,759,724 17.4
Fox Broadcasting(2)...................... 15,840,000 100.0
Allen & Co. Incorporated................. 160,000 100.0%
Mel Woods................................ 96,982 37.7
Margaret Loesch.......................... -- -- -- --
Shuki Levy............................... 96,982 37.7
William Josey............................ -- -- -- --
K. Rupert Murdoch........................ 15,840,100 100.0
Chase Carey.............................. 15,840,000 100.0
Lawrence Jacobson........................ -- -- -- --
All of the Company's executive officers
and directors as a group (seven
persons)................................ 193,964 54.8% 15,840,000 100.0%
</TABLE>
- --------
* Less than one percent
(1) Under Rule 13d-3 of the Exchange Act, certain shares may be deemed to be
beneficially owned by more than one person (if, for example, persons share
the power to vote or the power to dispose of the shares). In addition,
shares are deemed to be beneficially owned by a person if the person has
the right to acquire the shares (for example, upon exercise of an option)
within 60 days of the date as of which the information is provided. In
computing the percentage ownership of any person, the amount of shares
outstanding is deemed to include the amount of shares beneficially owned
by that person (and only that person) by reason of these acquisition
rights. As a result, the percentage of outstanding shares of any person as
shown in this table does not necessarily reflect the person's actual
ownership or voting power with respect to the number of shares of Common
Stock actually outstanding at January 1, 1998.
(2) Pursuant to Rule 13d-3 under the Exchange Act, Haim Saban and Fox
Broadcasting may be deemed to beneficially own all shares of Class B
Common Stock held by each of them, and by the other stockholders
identified in the following table, as the result of an agreement (the
"Voting Agreement") pursuant to which Mr. Saban and Fox Broadcasting have
the right to direct the voting of such shares with respect to all matters
submitted to a vote of stockholders, including the election of directors
of the Company. With regard to the election of directors, Fox Broadcasting
has agreed to vote in favor of three nominees designated by Haim Saban and
Haim Saban has agreed to vote in favor of three nominees designated by Fox
Broadcasting. If either Haim Saban, together with the entities he
controls, or Fox Broadcasting owns less than 2,640,000 shares of Class B
Common Stock, then, at the option of the other, the Voting Agreement will
terminate. As part of the Voting Agreement, both Mr. Saban and Fox
Broadcasting have agreed to a standstill whereby neither of them will,
without the consent of the other, among other things, (i) purchase,
acquire, offer or agree to purchase or acquire any shares of capital stock
or other voting securities of the Company; (ii) solicit stockholders for
the approval of stockholder proposals; or (iii) otherwise act, alone or in
concert with others, to assert or encourage any other person or entity in
seeking to control the management, board of directors
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<PAGE>
or policies of the Company or to propose or effect a business combination,
restructuring, recapitalization, liquidation, dissolution or similar
transaction. See "Management--Agreement Regarding Election of Directors:
Change in Control."
(3) Pursuant to Rule 13d-3 under the Exchange Act, Haim Saban may be deemed to
beneficially own all shares of Class B Common Stock held by Silverlight
Enterprises, L.P. as the result of the Voting Agreement pursuant to which
Mr. Saban has the right to direct the voting of these shares with respect
to all matters submitted to a vote of the stockholders, including the
election of directors of the Company.
Under agreements between Mr. Saban, the other Saban Stockholders and Fox
Broadcasting, Fox Broadcasting has the right and option, commencing in
December 2002 or earlier in certain circumstances, to acquire all of the
shares of Class B Common Stock of the Company held by Mr. Saban and the
other Saban Stockholders and Mr. Saban has the right and option, commencing
in December 2000, or earlier in the event of a change in control of Fox
Broadcasting or certain limited circumstances, to cause Fox Broadcasting to
purchase all of such shares.
As of January 1, 1998, the total number of shares of Class B Common Stock
and the percentage of Class B Common Stock beneficially owned by Mr. Saban,
the entities which he controls, and Fox Broadcasting over which each member
thereof had sole investment power was as follows:
<TABLE>
<CAPTION>
NUMBER AGGREGATE
OF SHARES VOTING POWER
--------- ------------
<S> <C> <C>
Haim Saban.......................................... 3,737,844 23.6%
Quartz Enterprises, L.P. ........................... 760,320 4.8
Merlot Investments, a California general
partnership........................................ 645,381 4.1
Silverlight Enterprises, L.P. ...................... 2,759,724 17.4
Celia Enterprises, L.P. ............................ 16,731 0.1
Fox Broadcasting.................................... 7,920,000 50.0%
</TABLE>
(4) Because of their positions with the Company, each of Messrs. Murdoch and
Carey may be deemed to beneficially own all of the shares of Class B
Common Stock owned or controlled by Fox Broadcasting. Each of Messrs.
Murdoch and Carey disclaims any pecuniary interest in such securities.
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<PAGE>
DESCRIPTION OF EQUITY SECURITIES
The authorized capital stock of the Company consists of 16,000,000 shares of
Class A Common Stock, 16,000,000 shares of Class B Common Stock and 20,000,000
shares of Preferred Stock, of which 500,000 shares have been designated as
Series A Preferred Stock. As of January 23, 1998, 160,000 shares of Class A
Common Stock, 15,840,000 shares of Class B Common Stock and 345,000 shares of
Series A Preferred Stock were outstanding.
The following descriptions contain material provisions of the securities of
the Company and certain provisions of the Company's Corrected Restated
Certificate of Incorporation and Amended and Restated Bylaws (the "Bylaws").
THE COMMON STOCK
The holders of Class A Common Stock (the "Class A Stockholders") are
entitled to one vote per share and the holders of Class B Common Stock (the
"Class B Stockholders") are entitled to ten votes per share. Both classes vote
together as a single class. A majority vote (or any other greater percentage)
for stockholder action requires a majority of the aggregate number of votes
entitled to be cast at such vote. The Company's Corrected Restated Certificate
of Incorporation does not provide for cumulative voting rights.
Subject to the rights of the holders of shares of any series of Preferred
Stock, the Class A and Class B Stockholders are to receive like dividends and
other similar distributions of the Company. In the case of any split,
subdivision, combination or reclassification of shares of Class A or Class B
Common Stock, an equivalent split, subdivision, combination or
reclassification must be made to the shares of Class B or Class A Common
Stock, as the case may be.
The Class A and Class B Stockholders have equivalent rights to distributions
in the event of any liquidation, dissolution or winding up (either voluntary
or involuntary) of the Company, in proportion to the number of shares held by
them without regard to class.
In the event of any corporate merger, consolidating purchase or acquisition,
the Class A and Class B Stockholders are to receive the same consideration on
a per share basis, and if the consideration in such transaction consists in
any part of voting securities, the Class B Stockholders are to receive, on a
per share basis, voting securities with ten times the number of votes per
share as those voting securities to be received by the Class A Stockholders.
The shares of Class A Common Stock are freely transferable, but the shares
of Class B Common Stock are subject to transfer restrictions as set forth more
fully in the Company's charter. The Class B Stockholders may only transfer
their shares to a "Permitted Transferee" and any unauthorized transfer will
cause an automatic conversion of such shares into shares of Class A Common
Stock. Regardless of the transfer restriction on the Class B Common Stock, any
Class B Stockholder may pledge its shares as collateral security for any
indebtedness or other obligation.
Each share of Class B Common Stock is convertible, at the option of its
holder, at any time into one validly issued, fully paid and non-assessable
share of Class A Common Stock.
THE SERIES A PREFERRED STOCK
The holders of the Series A Preferred Stock will receive cash dividends of
9% per annum in arrears, paid quarterly. Any accrued or unpaid dividends will
be added to the liquidation price and until such accrued and unpaid dividends
are paid in full, the dividend rate will increase to 11.5% of the liquidation
price. The liquidation price is $1,000 per share plus any accrued and unpaid
dividends.
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<PAGE>
Pursuant to the Funding Agreement among News Corp., NPAL, a wholly owned
subsidiary of News Corp., and the Company (the "Funding Agreement"), each of
News Corp. and NPAL has, jointly and severally, agreed that, upon the
occurrence and during the continuation of an event of default under the
provisions governing the Series A Preferred Stock in the Company's Corrected
Restated Certificate of Incorporation or liquidation, dissolution, winding up
or other similar event of the Company, News Corp. or NPAL, as the case may be,
will provide the Company with the funds necessary to redeem in full, or pay
the liquidation distribution on, all of the outstanding Series A Preferred
Stock and to pay any other amounts owing in respect of such shares. Pursuant
to the Amended and Restated Strategic Stockholders Agreement (as defined),
such funds will be, except under certain circumstances, in the form of an
advance or loan to the Company. See "Certain Transactions--Formation of the
LLC and the Reorganization." The following constitute events of default with
respect to the Series A Preferred Stock under the Corrected Restated
Certificate of Incorporation of the Company: (i) the failure by the Company to
mandatorily redeem Series A Preferred Stock at the redemption dates indicated
below; (ii) a breach for thirty days of any of the covenants contained in the
provisions governing the Series A Preferred Stock (which may include a breach
of the Funding Agreement, including a net worth covenant therein); and (iii)
an event of default under the terms of the preferred stock of NPAL, if any
shares of which are outstanding. Upon an event of default, the Series A
Preferred Stock may be redeemed, at the holder's option, at a specified
redemption price (which may include a penalty under certain circumstances). In
addition, pursuant to the Exchange Agreement among NPAL, Liberty Media
Corporation ("Liberty Media") and Liberty IFE, each of the holders of the
Series A Preferred Stock has the right, upon the occurrence and during the
continuation of an event of default under the Corrected Restated Certificate
of Incorporation or the liquidation, winding up or other similar event of the
Company, to exchange their shares for an equivalent number of shares of
preferred stock of NPAL.
The Series A Preferred Stock issued to Liberty IFE will rank senior as to
dividend, redemption and liquidation rights to all other classes and series of
capital stock of the Company authorized on the date of issuance, or to any
other class or series of capital stock issued while any shares of the Series A
Preferred Stock remain outstanding. The Series A Preferred Stock does not have
voting rights, except as required by law, nor will holders of Series A
Preferred Stock have preemptive rights over any stock or securities that may
be issued by the Company.
The Series A Preferred Stock will be redeemed in 2027 at a price equal to
the liquidation price as of the date of such redemption, payable in cash. In
years 2017 and 2022, holders of the Series A Preferred Stock have a thirty day
period commencing August 2 of such years in which they can require the Company
to redeem the Series A Preferred Stock at a price equal to the liquidation
price, payable in cash. At any time after August 1, 2007, the Company may, at
its option, repurchase all shares of Series A Preferred Stock, again at a
price equal to the liquidation price, payable in cash. Under such redemption
requirements, any failure by the Company to redeem the Series A Preferred
Stock will obligate News Corp. and NPAL to perform under the Funding
Agreement.
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<PAGE>
CERTAIN TRANSACTIONS
FORMATION OF THE LLC AND THE REORGANIZATION
In connection with the formation of the LLC, Haim Saban, Saban and the Fox
Parties entered into a series of agreements. As a result of the
Reorganization, the LLC became a subsidiary of the Company and the Company is
entitled to the benefits of and subject to these agreements.
On November 1, 1995, Saban, FCN Holding and Fox Broadcasting entered into a
LLC Formation Agreement pursuant to which the parties agreed to cause the
formation of the LLC. Pursuant thereto, Fox Broadcasting agreed to enter into
an Asset Assignment Agreement (described below) with the LLC, and to deliver
all cash, documents and other assets at the closing of the formation. In
addition, FCN Holding and Saban each paid and contributed $100,000 to the LLC.
In consideration for their respective contributions to the LLC, Fox
Broadcasting received a non-voting Class A Members Interest and each of Saban
and FCN Holding received a Class B Members Interest.
As a Class A Member of the LLC, Fox Broadcasting was granted a priority
right to receive distributions of Distributable Cash (defined below) and other
distributions until it had received aggregate distributions in an amount equal
to $40 million. "Distributable Cash" generally means the amount of cash
available for distribution by the LLC (including cash available from Saban and
FCN Holding and their respective subsidiaries), taking into account all cash,
debts, liabilities and obligations of the LLC then due and after setting aside
reserves to provide for the LLC's capital expenditures, debt service, working
capital and expansion plans. As described below, in September 1996, Fox
Broadcasting purchased, for $10 million cash, an additional $10 million of
Class A Members Interests. Fox Broadcasting also made a $64.5 million interest
free loan to the LLC, of which $14.5 million was repaid in September 1996. The
$50 million remainder of this loan was to be repaid from time to time out of
Distributable Cash of the LLC before any distributions were made on the Class
A and Class B Members Interests.
In connection with the Reorganization, Fox Broadcasting contributed to the
Company, pursuant to an Agreement Re Transfer of LLC Interests, the Class A
Members Interest and the $50 million remainder of the loan in exchange for the
Fox Subordinated Note. In addition, as part of the Agreement Re Transfer of
LLC Interests, the Company agreed to convert the Class A Members Interest into
a Class B Members Interest, as a result of which the Class B Members Interests
are held one-third by each of FCN Holding, Saban and the Company.
Pursuant to the Asset Assignment Agreement (which survived the
Reorganization), the Fox Parties agreed to provide the LLC certain business
opportunities (see "Business--The Strategic Alliance with Fox/News Corp."),
and the parties further agreed to the following:
Programming. The LLC agreed to make programming available at market rates
to any program services which were offered to and rejected by the LLC and
thereafter operated by the Fox Parties or their affiliates.
Distribution Services. The Fox Parties and their affiliates were granted
a right of first negotiation and first refusal, with certain exceptions, to
provide any of the distribution services which the Fox Parties typically
provide and which the LLC decides to obtain from a third party. If the Fox
Parties or their affiliates do not accept the offer, the LLC may obtain the
services from a third party. In the event of any material change in terms,
the LLC must reoffer the opportunity to the Fox Parties.
Other Agreements. The Fox Parties also assigned to the LLC most of their
other agreements with FCN, including agreements which had granted the Fox
Parties the right, for a fee, to provide programming, distribution and
merchandising services for FCN (discussed below). The Fox Parties also
assigned to the LLC all of their rights in an Administration Agreement
(discussed below) between Fox Broadcasting and FCN pursuant to which Fox
Broadcasting agreed to provide for a fee certain administrative services to
FCN, including network national advertising sales, commercial trafficking
and broadcast operations and certain in-house administrative support in the
areas of research, promotions, business affairs, legal affairs and
accounting. See "Business--Distribution--Fox Kids Network."
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<PAGE>
In addition to assigning to the LLC the agreements referred to above, the
Fox Parties agreed to pay to the LLC (i) an amount equal to the aggregate of
the distribution fees and commissions received by or credited to the Fox
Parties in connection with the merchandising and distribution agreements
described under "Other Strategic Relationships," (ii) certain "net" revenues
with respect to the existing series properties and (iii) fees and commissions
under the Administration Agreement, in each case for the period from June 1,
1995 through December 22, 1995. All of the payments were due on or before July
15, 1996, with interest on the amount in excess of $14.5 million at a rate of
7% per annum. Fox Broadcasting also agreed to contribute to the LLC an amount
equal to the difference, if any, between approximately $35.8 million and the
amount of actual cash payments made to the LLC pursuant to the Asset
Assignment Agreement plus certain dividends paid to a subsidiary of FCN
Holding pursuant to the terms of the LLC's Operating Agreement. In September
1996, Fox Broadcasting paid $31 million to satisfy its obligations to the LLC
pursuant to these provisions.
As part of the formation of the LLC, Saban, the Saban Stockholders, Fox
Broadcasting, FCN Holding and one of its subsidiaries entered into a Strategic
Stockholders Agreement, which provided, among other things, for restrictions
on transfer of the stock held by the parties, certain voting rights between
them, as well as the terms of the Reorganization. The parties to the Strategic
Stockholders Agreement also agreed to provide Haim Saban and the Saban
Stockholders and Fox Broadcasting certain registration rights. On August 1,
1997, the Strategic Stockholders Agreement was amended and restated to add
provisions regarding voting between Fox Broadcasting and the former Saban
Stockholders. See "Ownership and Control of the Company."
As part of the Amended and Restated Strategic Stockholders Agreement, Haim
Saban agreed with Fox Broadcasting Sub as follows: if the Company is unable to
meet its obligations (i) to pay any dividend under the terms of the Series A
Preferred Stock or to redeem the Series A Preferred Stock, (ii) under its
lease of 10960 Wilshire Boulevard, Los Angeles, California, or any obligation
guaranteed by News Corp., or (iii) under the Funding Agreement, and either
News Corp. or NPAL provides funds to the Company, the advance shall be treated
as a loan, or if Citibank, in its sole discretion as administrative agent
under the Amended Credit Facility, determines it is unacceptable to treat the
advance as a loan, the advance will be treated as preferred stock.
To the extent the advance is treated as a loan and the amount exceeds $50
million, if the advance is not repaid after 18 months (or 12 months for all
advances after the third anniversary of the agreement), all or any portion of
the advance in excess of $50 million may be converted into shares of Class B
Common Stock. If Fox Broadcasting Sub elects to convert any portion of the
advance into Class B Common Stock, Haim Saban shall have the right to purchase
from Fox Broadcasting Sub up to 50% of the number of shares of Class B Common
Stock issued pursuant to the conversion.
If instead, the advance is treated as preferred stock, the first $50 million
of the advance shall be applied to the issuance of shares of Series B
Preferred Stock, and the remainder of the advance shall be applied to the
issuance of Series C Convertible Preferred Stock, which is convertible into
Class B Common Stock at the election of the holder. Each of the Series B and
Series C Preferred Stock shall have a liquidation preference equal to its
issue price of $100,000 per share. The Series B and Series C Preferred Stock
shall be entitled to dividends at an annual rate of 11.7% of its liquidation
value. If Fox Broadcasting Sub elects to convert the Series C Convertible
Preferred Stock into Class B Common Stock, Haim Saban shall have the right to
purchase up to 50% of the number of shares of Class B Common Stock issued
pursuant to the conversion. Notwithstanding the agreements, News Corp. has no
obligation to make any advances, and the Company has no obligation to accept
any amounts from News Corp.
In September 1996, the LLC paid to Fox Broadcasting $10 million,
representing the unpaid balance of a fee for providing all uplink, transponder
and other facilities necessary to deliver via satellite Fox Kids Network
programming for broadcast to the Fox Kids Network Affiliates, and certain
other services. Immediately upon receipt of this $10 million payment, Fox
Broadcasting made a contribution to the LLC of $10 million in exchange for the
additional Class A Members Interest described above.
Pursuant to a Stock Ownership Agreement dated December 22, 1995, the LLC was
granted an option to purchase, upon the occurrence of certain events, all of
the Class B Common Stock held by the Saban
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Stockholders, and any of their transferees. The option may be exercised as
follows: (i) for a period of one year following the death of Haim Saban, if he
dies prior to December 22, 2012; (ii) upon delivery of written notice by Fox
Broadcasting at any time on or after December 22, 2002, or before December 22,
2012; or (iii) upon receipt by Fox Broadcasting of written notice (which
generally cannot be delivered prior to December 22, 2000) from Haim Saban of
his desire to cause Fox Broadcasting to purchase all of the shares of Class B
Common Stock held by the Saban Stockholders. The LLC paid to the Saban
Stockholders an aggregate of $80.1 million for the grant of the option. The
purchase price formula under the option is based on the fair market value of
the Company. In September 1996 the LLC distributed the Stock Ownership
Agreement to FCN Holding, which immediately distributed that agreement to Fox
Broadcasting Sub.
CERTAIN TRANSACTIONS BETWEEN THE COMPANY AND THE FOX PARTIES
In October 1997, the Company reached an agreement in principle with
Fox/Liberty Networks, LLC ("Fox/Liberty"), a joint venture between News Corp.
and Liberty Media, a wholly owned subsidiary of Tele-Communications, Inc., to
sell a majority ownership interest in FiT TV to Fox/Liberty (or an affiliate
of Fox/Liberty). The Company acquired FiT TV in September 1997 as part of the
IFE Acquisition.
In October 1997, the Company entered into an interim agreement with
Twentieth Century Fox Film Corp. ("Twentieth Century Fox"), pursuant to which
Twentieth Century Fox will distribute the programming library of MTM, one of
the assets acquired in the IFE Acquisition. The Company is in discussions to
sell certain MTM assets to Twentieth Century Fox.
As part of the Reorganization, on July 31, 1997, the Company issued the Fox
Subordinated Note to Fox Broadcasting in the principal amount of approximately
$104.6 million, which amount was increased to $108.6 million (exclusive of any
capitalized interest) on October 28, 1997, and which is to be repaid in May
2008. The parties recently have agreed to restate the Fox Subordinated Note to
reflect a change in the interest rate, effective as of the date of issuance.
As restated, interest on the original principal amount on the Fox Subordinated
Note will accrete quarterly at the rate of 10.427% per annum and interest on
the increased principal amount of the Fox Subordinated Note will accrete
quarterly at the rate of 10.427% per annum. The Company may prepay the Fox
Subordinated Note in whole or in part, subject to the terms of the Amended
Credit Facility and the Indentures.
On August 29, 1997, in connection with the IFE Acquisition, the Company
issued the NAHI Bridge Note to NAHI upon substantially the same terms and
conditions as the Fox Subordinated Note, except that the NAHI Bridge Note has
a principal amount of $345.5 million. The parties recently have agreed to
restate the NAHI Bridge Note to reflect a change in the interest rate,
effective as of the date of issuance. As restated, the NAHI Bridge Note will
accrete interest at a rate of approximately 10.427% per annum. The Company may
repay the NAHI Bridge Note in whole or in part, subject to the terms of the
Amended Credit Facility and the Indentures. The payment of principal and
interest under the NAHI Bridge Note will be subordinated in right to the
obligations of the Company under the Old Credit Facility or the Amended Credit
Facility, as applicable, and the Notes.
On August 1, 1997, Saban entered into an amendment to the lease for its
corporate headquarters at 10960 Wilshire Boulevard in Los Angeles (the
original lease dated July 17, 1995 together with the amendment, the "Lease").
Pursuant to a Guaranty of Lease entered into on August 1, 1997 (the
"Guaranty"), News Corp. and NPAL have guaranteed certain of Saban's
obligations under the Lease. The Guaranty continues until Saban has paid all
obligations due under the Lease. Under the Guaranty, News Corp. and NPAL are
liable, jointly and severally, for any amounts not paid by Saban. News Corp.'s
and NPAL's aggregate liability under the Guaranty is limited to approximately
$8.6 million, to be reduced annually over five years on a straight-line basis.
In May 1996, Saban entered into an agreement with Fox Video (the "Fox Video
Agreement") for the production and distribution of a live-action feature film
for the home video market based upon the animated character of Casper (the
"Film") which was released by Fox Video in the United States on September 9,
1997. See "Business--Home Video and Telefilms." The distribution term runs
through September 8, 2004. Saban has
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<PAGE>
the right and obligation to market, distribute (for no fee) and exploit the
Film in all forms of television, non-theatrical and airline markets. Fox Video
has the right and obligation to market, manufacture, package, distribute (for
no fee) and exploit the Film in home video formats, and will release the Film
in major international territories during the next six months. Saban and Fox
Video each contributed one-half of the production costs of the Film subject to
the rights of both parties to recoup certain of these costs. Saban and Fox
Video will share the television net income 55% and 45%, respectively, and the
home video net income 45% and 55%, respectively, subject to the participation
rights of the Harvey Entertainment Company ("Harvey"), which holds the
copyright to Casper.
Saban has entered into an agreement in principle with Fox Video for the
production and distribution of, and currently is in production on, a second
live-action feature film for the home video market based upon Casper (the
"Sequel"), which Fox Video presently intends to release in the U.S. during
September 1998 and in certain major international territories within six
months thereafter. The distribution term runs for seven years following
initial U.S. release. Saban has the right and obligation to market,
distribute, and exploit the Sequel in all forms of television, non-theatrical
and airline markets. Fox Video has the right and obligation to market,
manufacture, package, distribute, and exploit the Sequel in home video
formats. Distribution fees which Saban is entitled to retain in its Casper
rights agreement with Harvey are to be contributed by Fox Video and Saban to
the gross income to be distributed between Fox Video and Saban. Saban and Fox
Video each will contribute one-half of the production costs of the Sequel
subject to the rights of both parties to recoup certain of these costs. Saban
and Fox Video will share the combined television, non-theatrical, airline, and
home video receipts equally, subject to the participation rights of Harvey.
In August 1996, Fox Video and Saban entered into a Home Video Rights
Acquisition Agreement pursuant to which Saban granted to Fox Video the
exclusive home video rights to distribute English and Spanish language
versions throughout the United States and to distribute English language
versions throughout Canada of certain of its programs, including Sweet Valley
High, all television programs produced for children and owned or controlled by
Saban or FCN, all television programs produced or to be produced pursuant to
an agreement with Marvel and all television programs which are owned or
controlled first by Marvel and subsequently by Saban, the LLC or the Company.
The beginning of the term of this agreement varies by type of program, but the
term ends as to all programs between seven and nine years from September 11,
1996. Saban is required to make available for release by Fox Video a minimum
of six video titles each year, at least two of which will not have been
previously released for home video distribution in any of the territories
covered by the agreement. In consideration for the grant of the distribution
rights, Fox Video has agreed to pay Saban 50% of gross receipts from these
home videos, after deduction of certain expenses.
In January 1998, Fox Video and Saban concluded a Home Video Rights
Acquisition Agreement which was effective as of May 1997 pursuant to which
Saban International N.V. granted to Fox Video the exclusive home video rights
to distribute local language versions in the "Fox Territories" of certain of
Saban's television programs produced for children and owned or controlled by
Saban or FCN. The "Fox Territories" are Australia, Denmark, Finland, France,
Germany, Italy, Japan, Korea, Mexico, New Zealand, Norway, Spain, Sweden, and
the United Kingdom. The term of this agreement began as of May 5, 1997, and
ends as to all programs between four and seven years thereafter. Each year
during the term, Saban is required to make available for release by Fox Video
a minimum of 24 one-hour videocassettes selected from among all children's
series not previously licensed in the Fox Territories in home video and which
have been broadcast in at least five key Fox Territories. In consideration for
the grant of the distribution rights, Fox Video has agreed to pay Saban a $3
million minimum guarantee against 50% of receipts from these home videos,
after deduction of the minimum guarantee and certain expenses.
Saban and Fox Broadcasting are parties to a Barter Syndication Agreement
dated as of January 5, 1996, pursuant to which Saban engaged Fox Broadcasting
to provide barter advertising sales for the 1996-1997 and 1997-1998 broadcast
seasons for the Saban Kids Network. Fox Broadcasting's services include
advertising sales, sales administration, account maintenance, ratings
processing, credit and collection, sales data entry and reporting and
commercials broadcast standards and practices. In consideration for the
services rendered by Fox Broadcasting to Saban, Saban has agreed to pay Fox
Broadcasting a barter advertising sales fee of $800,000 for the 1996-1997
broadcast season and $840,000 for the 1997-1998 broadcast season.
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FCN and Fox Broadcasting are parties to an Administration Agreement dated as
of February 7, 1990, pursuant to which Fox Broadcasting agreed to provide the
following services to FCN: network national advertising sales and the
administration thereof, commercial trafficking and broadcast operations
(including program delivery to Fox Kids Network Affiliates) and overhead
charges related to Fox Broadcasting in-house administrative support in the
areas of research, promotion, business affairs, legal affairs and accounting.
FCN agreed to pay to Fox Broadcasting a fee equal to 15% of the net
advertising revenue (gross advertising revenue less advertising agency
commissions) derived with respect to national commercials, commercial material
or other advertising matter included or used in connection with any of the
programs exhibited on the Fox Kids Network. For the fiscal years ended June
30, 1994 and 1995, FCN paid to Fox Broadcasting approximately $16.2 million
and $21.3 million, respectively, in fees pursuant to this agreement. On
December 22, 1995, in connection with the terms of the LLC's Operating
Agreement, this agreement, and all rights of Fox Broadcasting to receive
management fees on or subsequent to June 1, 1995, were assigned to the LLC by
the Fox Parties.
Saban is party to an agreement with Fox Family Films, Inc. ("Distributor")
for the distribution of Turbo: A Power Rangers Movie, a "PG-rated" sequel to
the original Mighty Morphin Power Rangers motion picture (the "Sequel"), which
was released theatrically in the United States in Spring 1997 and in home
video in late Summer 1997. Under the terms of the agreement, Saban produced
and delivered the Sequel to Distributor for worldwide distribution and granted
to Distributor all rights necessary to advertise, promote, publicize and
distribute the Sequel. Distributor will hold in perpetuity worldwide
theatrical, non-theatrical, home video, and television rights in the movie
(except for Israel and the territory reserved to Toei Company Ltd.). Saban
will hold the copyright to the Sequel as well as certain rights including,
without limitation, merchandising, television series, live stage, publication,
radio, theme park and touring, music publishing and soundtrack. Commercial
tie-in rights will be mutually controlled by Saban and Distributor. Saban will
receive 100% of gross receipts after certain distribution fees and expenses
are deducted, based upon a formula set forth in the agreement.
Saban is party to various program exhibition agreements for the 1996-1997
and 1997-1998 broadcast seasons with FOX Television and one with FoxNet, both
subsidiaries of Fox Broadcasting, pursuant to which Saban licenses certain of
FOX Television's owned and operated stations and the FoxNet cable television
service the right to broadcast certain series. All series are licensed on a
barter basis.
In January 1997, the Company obtained from FOX Television distribution
rights to the New World animation library of 515 half-hour episodes of
children's programming, which FOX Television acquired as part of its purchase
of New World. The Company is in discussions with FOX Television to acquire the
New World animation library.
TRANSACTIONS BETWEEN HAIM SABAN, OTHER EXECUTIVE OFFICERS AND SABAN
From time to time, Saban has loaned and advanced funds to Haim Saban, the
Company's Chairman and Chief Executive Officer. The highest aggregate amounts
outstanding from Mr. Saban to Saban were approximately $2.7 million for the
fiscal year ended June 30, 1995, and $2.7 million for the fiscal year ended
June 30, 1996. In connection with the formation of the LLC, on December 22,
1995, Saban forgave in full all amounts then owing from Haim Saban,
aggregating $2,649,000. All of these loans accrued interest at the rate of one
percent over City National Bank's prime rate.
Haim Saban has in the past loaned and advanced funds to Saban to cover the
working capital needs of Saban. The highest aggregate amounts outstanding from
Saban to Mr. Saban were approximately $13.3 million for the fiscal year ended
June 30, 1994 and $9.0 million for the fiscal year ended June 30, 1995. The
balance of these loans was repaid in full in October 1994. All of the loans
owing to Mr. Saban accrued interest at the rate of one percent over City
National Bank's prime rate.
From time to time, Saban has loaned and advanced funds to Shuki Levy, the
Company's Executive Vice President. For the past four fiscal years, the
highest aggregate amounts outstanding from Mr. Levy to Saban were
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$1.0 million for the fiscal year ended June 30, 1995, $1.2 million for the
fiscal years ended June 30, 1996 and June 30, 1997 and the three months ended
September 30, 1997. As of September 30, 1997, the total amount outstanding,
including accrued and unpaid interest, was $1.2 million. All of the amounts
outstanding under these loans accrued interest at rates ranging from 5% to 9%
per annum.
Saban currently leases and distributes certain of its properties (e.g.,
motion pictures, television programs, merchandising and licensing rights) in
Israel through Duveen Trading Ltd., a corporation wholly owned by Haim Saban's
brother. The term of the agreement extends through December 31, 2000. $500,000
is currently owed to Saban by Duveen Trading Ltd. under this agreement.
In connection with Mr. Saban's employment agreement, the LLC agreed to
reimburse Mr. Saban for all out-of-pocket costs and expenses for domestic and
international travel, including private air charter which may include aircraft
owned by Mr. Saban. Saban has entered into a contract with the agency which
leases Mr. Saban's airplane to charter from that agency Mr. Saban's or another
similar airplane for a minimum of fifty charter hours during a twelve-month
period. From July 1, 1996 through June 30, 1997, Saban paid approximately
$875,000 for such services. For the three months ended September 30, 1997,
Saban paid approximately $57,000 for such services.
In September 1994, Saban entered into a music services agreement (the "Music
Agreement") with Haim Saban, which agreement was amended in June 1995 and
assigned to a corporation wholly owned by Mr. Saban in January 1996. Under the
terms of the Music Agreement, all original theme music, underscores, cues and
songs for use in all programming produced by Saban will be supplied to Saban
through Mr. Saban. Saban is entitled to license third party musical
compositions for use in its programming so long as such compositions neither
are used as opening or closing themes nor constitute more than 15% of the
total musical content of any program or episode, without Mr. Saban's prior
written consent. Saban has the royalty-free right to use the compositions in
articles of merchandise such as home video units, video games and interactive
toys. Saban has been granted the non-exclusive, worldwide and perpetual
license to (i) synchronize and perform compositions in theatrical motion
pictures and (ii) synchronize compositions in all other forms of programming.
Saban creates and owns all right, title and interest in master recordings of
compositions for use in Saban's programming, and Saban owns the proceeds
derived from all forms of exploitation thereof. In consideration for the
provision of the compositions to Saban, Mr. Saban is entitled to receive all
publishing income, directly or through Saban, in connection with the
exploitation of such compositions. Saban is entitled to reimbursement from Mr.
Saban of certain costs associated with the creation of the compositions. For
the year ended June 30, 1997, and for the three months ended September 30,
1997, Mr. Saban paid approximately $374,000 and $211,000, respectively, to
Saban for reimbursement of costs to Saban. For the eight months ended June 30,
1996, Mr. Saban made no payments for reimbursement of costs to Saban. At June
30, 1997 and September 30, 1997, approximately $211,000 and $85,000,
respectively, was owed to Saban by Mr. Saban pursuant to the Music Agreement.
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DESCRIPTION OF OTHER INDEBTEDNESS
Amended Credit Facility. On October 28, 1997, upon consummation of the
Offering, the Old Credit Facility was amended to provide for a $710 million
facility comprised of a seven-year amortizing term loan and a seven-year
reducing revolving credit facility under which FCN Holding, Saban and IFE are
borrowers (the "Co-borrowers"). Fox Kids Worldwide, Inc. is not a borrower
under the Amended Credit Facility but is a guarantor. Fox Kids Holdings, LLC,
a newly created, wholly owned subsidiary of Fox Kids Worldwide, Inc. ("FK
Holdings"), holds the equity interests of the Co-Borrowers and also guarantees
the obligations under the Amended Credit Facility. The following summary does
not purport to be a complete description of the Amended Credit Facility.
Borrowings under the Amended Credit Facility are unconditionally guaranteed
by each Co-borrower and each subsidiary that is wholly owned, directly or
indirectly, by any of the Co-borrowers (subject to certain limitations for
foreign subsidiaries). In addition, borrowings under the Amended Credit
Facility and the guarantees are secured by the equity interests of FK
Holdings, the borrowers and their subsidiaries (subject to certain limitations
for foreign and less than wholly owned subsidiaries) and intercompany
indebtedness.
Under the Amended Credit Facility, subject to certain conditions, the Co-
borrowers will be required to make certain mandatory prepayments. The
borrowings under the Amended Credit Facility will bear interest at the
Company's option at a rate per annum equal to either LIBOR or a base rate
plus, in each case, an applicable interest rate margin. In connection with the
Amended Credit Facility, the Company pays a commitment fee on the unused and
available amounts under the Amended Credit Facility.
The Amended Credit Facility contains a number of significant covenants that,
among other things, limit the ability of FK Holdings and the Co-borrowers and
their respective subsidiaries to incur additional indebtedness, create liens
and other encumbrances, make certain payments and investments, make capital
expenditures, make distributions to owners and repurchase debt and equity. In
addition, the Amended Credit Facility requires the maintenance of certain
specified financial and operating covenants, including, without limitation,
capital expenditure limitations and ratios of EBITDA to fixed charges, total
debt to EBITDA and EBITDA to interest expense. The Amended Credit Facility
also contains representations, warranties, covenants, conditions and events of
default customary for senior credit facilities of similar size and nature.
Fox Subordinated Note. As part of the Reorganization, on July 31, 1997, the
Company issued the Fox Subordinated Note to Fox Broadcasting in the principal
amount of approximately $104.6 million, which amount was increased to $108.6
million (exclusive of any capitalized interest) on October 28, 1997, and which
is to be repaid in May 2008. The parties recently have agreed to restate the
Fox Subordinated Note to reflect a change in the interest rate, effective as
of the date of issuance. As restated, interest on the original principal
amount on the Fox Subordinated Note will accrete quarterly at the rate of
10.427% per annum and interest on the increased principal amount of the Fox
Subordinated Note will accrete quarterly at the rate of 10.427% per annum. The
Company may prepay the Fox Subordinated Note in whole or in part, subject to
the terms of the Amended Credit Facility and the Indentures. The payment of
principal and interest under the Fox Subordinated Note will be subordinated in
right to the obligations of the Company under the Old Credit Facility or the
Amended Credit Facility, as applicable, and the Notes.
NAHI Bridge Note. On August 29, 1997, in connection with the IFE
Acquisition, the Company issued the NAHI Bridge Note to NAHI upon
substantially the same terms and conditions as the Fox Subordinated Note,
except that the NAHI Bridge Note has a principal amount of $345.5 million. The
parties recently have agreed to restate the NAHI Bridge Note to reflect a
change in the interest rate, effective as of the date of issuance. As
restated, the NAHI Bridge Note will accrete interest at a rate of
approximately 10.427% per annum. The Company may repay the NAHI Bridge Note in
whole or in part, subject to the terms of the Amended Credit Facility and the
Indentures. The payment of principal and interest under the NAHI Bridge Note
will be subordinated in right to the obligations of the Company under the Old
Credit Facility or the Amended Credit Facility, as applicable, and the Notes.
Approximately $105.8 million (including interest) was outstanding under the
NAHI Bridge Note as of December 31, 1997; however, no payments are due until
March 2008.
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DESCRIPTION OF THE NOTES
THE TERMS OF THE NOTES ARE IDENTICAL IN ALL MATERIAL RESPECTS TO THE OLD
NOTES, EXCEPT FOR CERTAIN TRANSFER RESTRICTIONS AND REGISTRATION RIGHTS
RELATING TO THE OLD NOTES. THE DESCRIPTION OF THE NOTES CONTAINED HEREIN
ASSUMES THAT ALL OLD NOTES ARE EXCHANGED FOR NOTES IN THE EXCHANGE OFFER. TO
THE EXTENT THAT OLD NOTES REMAIN OUTSTANDING AFTER THE CONSUMMATION OF THE
EXCHANGE OFFER, THE OLD NOTES AND THE NOTES WILL BE REDEEMED OR REPURCHASED
PRO RATA PURSUANT TO THE PROVISIONS CONTAINED IN THE INDENTURES AND DESCRIBED
HEREIN. IN ADDITION, AS THE OLD NOTES WERE, AND THE NOTES WILL BE, ISSUED
UNDER THE INDENTURES, TO THE EXTENT THAT OLD NOTES REMAIN OUTSTANDING AFTER
CONSUMMATION OF THE EXCHANGE OFFER, ANY ACTION DESCRIBED HEREIN AS PERMITTED
OR REQUIRED TO BE TAKEN THEREUNDER BY A SPECIFIED PORTION OF THE HOLDERS OF
THE NOTES MAY ONLY BE TAKEN BY SUCH PORTION OF THE HOLDERS OF THE OLD NOTES
AND THE NOTES, COUNTED AS A SINGLE SERIES.
The Old Senior Notes were issued, and the Senior Notes will be issued, under
an Indenture dated as of October 28, 1997 (the "Senior Notes Indenture")
between the Company and The Bank of New York, as trustee (the "Trustee"). The
Old Senior Discount Notes were issued, and the Senior Discount Notes will be
issued, under an Indenture dated as of October 28, 1997 (the "Senior Discount
Notes Indenture" and, together with the Senior Notes Indenture, the
"Indentures"), between the Company and The Bank of New York, as Trustee. The
Indentures are not and will not be qualified under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"), except upon effectiveness of a
registration statement for the Exchange Offer. By their terms, however, the
Indentures will incorporate certain provisions of the Trust Indenture Act and,
upon consummation of the Exchange Offer, the Indentures will be subject to and
governed by the Trust Indenture Act. The following summary of the material
provisions of the Indentures and the Notes does not purport to be complete and
is subject to, and qualified in its entirety by, reference to the provisions
of the Indentures and the Notes, including the definitions of certain terms
contained therein and those terms made part of the Indentures by reference to
the Trust Indenture Act. A copy of each of the Indentures is attached as an
exhibit to the Registration Statement. The definition of certain capitalized
terms used in the following summary are set forth below under "--Certain
Definitions." References in this section to the Company refer to Fox Kids
Worldwide, Inc. without its subsidiaries.
GENERAL
The Notes will be issued only in registered form without coupons, in
denominations of $1,000 and integral multiples thereof. The Company has
appointed The Bank of New York to serve as registrar and paying agent under
the Indentures at its offices at 101 Barclay Street, New York, New York. No
service charge will be made for any transfer, exchange or redemption of Notes,
except in certain circumstances for any tax or other governmental charge that
may be imposed in connection therewith.
RANKING
The Notes will be senior unsecured obligations of the Company and will rank
senior in right of payment to all future subordinated indebtedness of the
Company. Claims of the holders of the Notes will effectively be subordinated
to the claims of creditors of the Company's subsidiaries, including the banks
under the Bank Facility.
MATURITY, INTEREST AND PRINCIPAL OF THE SENIOR NOTES
The Senior Notes will be limited to $475,000,000 aggregate principal amount
and will mature on November 1, 2007. Cash interest on the Senior Notes will
accrue at the rate of 9 1/4% per annum and will be payable semi-annually in
arrears on each May 1 and November 1, commencing May 1, 1998, to the holders
of record of the Senior Notes at the close of business on the April 15 and
October 15 immediately preceding such interest payment date. Interest on the
Senior Notes will accrue from the most recent date to which interest has been
paid
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or, if no interest has been paid, from the original date of issuance (the
"Issue Date"). Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
MATURITY, INTEREST AND PRINCIPAL OF THE SENIOR DISCOUNT NOTES
The Senior Discount Notes will be limited to $618,670,000 aggregate
principal amount at maturity and will mature on November 1, 2007. The Senior
Discount Notes will be issued in exchange for the Old Senior Discount Notes
which were issued at a discount to their aggregate principal amount at
maturity and generated gross proceeds of approximately $375,000,000. Based on
the issue price thereof, the yield to maturity of the Senior Discount Notes is
10 1/4% (computed on a semi-annual bond equivalent basis), calculated from
October 28, 1997. See "Certain United States Federal Income Tax
Considerations."
Cash interest will not accrue or be payable on the Senior Discount Notes
prior to November 1, 2002. Thereafter, cash interest on the Senior Discount
Notes will accrue at a rate of 10 1/4% per annum and will be payable semi-
annually in arrears on each May 1 and November 1, commencing on May 1, 2003,
to the holders of record of the Senior Discount Notes at the close of business
on the April 15 and October 15, respectively, immediately preceding such
interest payment date; provided, however, that at any time prior to November
1, 2002, the Company may elect (the "Cash Interest Election") on any interest
payment date (the date of such Cash Interest Election, the "Cash Interest
Election Date") to commence the accrual of cash interest from and after the
Cash Interest Election Date, in which case the principal amount at maturity of
each Senior Discount Note will on such interest payment date be reduced to the
Accreted Value of such Senior Discount Note as of such interest payment date,
and cash interest (accruing at a rate of 10 1/4% per annum from the Cash
Interest Election Date) shall be payable with respect to such Senior Discount
Note on each interest payment date thereafter. Cash interest will accrue from
the most recent interest payment date to which interest has been paid or, if
no interest has been paid, from the earlier of November 1, 2002 or the Cash
Interest Election Date. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
OPTIONAL REDEMPTION
Optional Redemption of Senior Notes. The Senior Notes will be redeemable at
the option of the Company, in whole or in part, at any time on or after
November 1, 2002, at the redemption prices (expressed as percentages of
principal amount) set forth below, plus accrued and unpaid interest, if any,
to the redemption date, if redeemed during the 12-month period beginning on
November 1 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2002................................... 104.625%
2003................................... 103.083%
2004................................... 101.542%
2005 and thereafter.................... 100.000%
</TABLE>
In addition, at any time, or from time to time, on or prior to November 1,
2000, the Company may, at its option, use the net cash proceeds of (a) one or
more Public Equity Offerings (as defined below) or (b) sales of Qualified
Equity Interests to Strategic Equity Investors resulting in gross cash
proceeds to the Company of at least $100,000,000 to redeem, on a pro rata
basis, up to an aggregate of 35% of the principal amount of the Senior Notes
originally issued, at a redemption price equal to 109.25% of the principal
amount thereof plus accrued and unpaid interest, if any, to the redemption
date; provided that at least 65% of the originally issued principal amount of
Senior Notes remains outstanding immediately after the occurrence of such
redemption.
"Public Equity Offering" means an underwritten public offering of Qualified
Equity Interests of the Company pursuant to a registration statement filed
with the Commission in accordance with the Securities Act, which public equity
offering results in gross cash proceeds to the Company of not less than
$100,000,000.
Optional Redemption of Senior Discount Notes. The Senior Discount Notes will
be redeemable at the option of the Company, in whole or in part, at any time
on or after November 1, 2002, at the redemption prices
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(expressed as a percentage of principal amount at maturity) set forth below,
plus accrued and unpaid interest thereon, if any, to the redemption date, if
redeemed during the 12-month period beginning on November 1 of the years
indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2002................................... 105.125%
2003................................... 103.417%
2004................................... 101.708%
2005 and thereafter.................... 100.000%
</TABLE>
In addition, prior to November 1, 2000, the Company may redeem up to 35% of
the originally issued principal amount at maturity of the Senior Discount
Notes at a redemption price equal to 110.25% of the Accreted Value of the
Senior Discount Notes so redeemed at the redemption date or, if a Cash
Interest Election has been made, 110.25% of the principal amount at maturity
of the Senior Discount Notes so redeemed, plus accrued and unpaid interest
thereon, if any, to the redemption date, with the net cash proceeds of (a) one
or more Public Equity Offerings or (b) sales of Qualified Equity Interests of
the Company to one or more Strategic Equity Investors resulting in gross cash
proceeds to the Company of at least $100,000,000 in the aggregate; provided,
however, that at least 65% of the originally issued principal amount at
maturity of the Senior Discount Notes would remain outstanding immediately
after giving effect to any such redemption.
Selection and Notice. In the event that less than all of an issue of Notes
are to be redeemed at any time, selection of such Notes for redemption will be
made by the applicable Trustee in compliance with the requirements of the
principal national securities exchange, if any, on which the Notes are listed
or, if the Notes are not then listed on a national securities exchange, on a
pro rata basis, by lot or by such method as the Trustee shall deem fair and
appropriate; provided, however, that Notes shall only be redeemable in
principal amounts of $1,000 or an integral multiple of $1,000, provided,
further, that any redemption following one or more Public Equity Offerings or
sales of Qualified Equity Interests shall be made on a pro rata basis or as
nearly a pro rata basis as practicable (subject to the procedures of DTC).
Notice of redemption shall be mailed by or on behalf of the Company by first-
class mail at least 30 but not more than 60 days before the redemption date to
each holder of Notes to be redeemed at its registered address. In order to
effect a redemption with the proceeds of any Public Equity Offering or sales
of Qualified Equity Interests to one or more Strategic Equity Investors, the
Company shall send a redemption notice to the applicable Trustee not later
than 60 days after the consummation of any such Public Equity Offering or sale
of Qualified Equity Interests to one or more Strategic Equity Investors, as
the case may be. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in a principal amount equal to the
unredeemed portion thereof will be issued in the name of the holder thereof
upon surrender for cancellation of the original Note. On and after the
redemption date, interest will cease to accrue on Notes or portions thereof
called for redemption, unless the Company defaults in the payment of the
redemption price.
SINKING FUND
The Notes will not be entitled to the benefit of any mandatory sinking fund.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company shall be obligated
to make an offer to purchase (a "Change of Control Offer"), on a business day
(the "Change of Control Purchase Date") not more than 60 nor less than 30 days
following the occurrence of the Change of Control, all of the then outstanding
Notes tendered at a purchase price in cash (the "Change of Control Purchase
Price") equal to (x) with respect to the Senior Notes, 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the Change of
Control Purchase Date and (y) with respect to the Senior Discount Notes, 101%
of the Accreted Value on the Change of Control Purchase Date, unless the
Change of Control Purchase Date is on or after the earlier to occur of
November 1, 2002 and the Cash Interest Election Date, in which case such
Change of Control Purchase Price
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shall be equal to 101% of the aggregate principal amount at maturity thereof,
plus accrued and unpaid interest thereon, if any, to the Change of Control
Purchase Date. The Company shall be required to purchase all Notes tendered
into the Change of Control Offer and not withdrawn. The Change of Control
Offer is required to remain open for at least 20 business days and until the
close of business on the Change of Control Purchase Date.
In order to effect such Change of Control Offer, the Company shall, not
later than the 30th day after the Change of Control, mail to each holder of
Notes notice of the Change of Control Offer, which notice shall govern the
terms of the Change of Control Offer and shall state, among other things, the
procedures that holders of Notes must follow to accept the Change of Control
Offer. Prior to mailing a notice of a Change of Control Offer, but in any
event within 30 days following a Change of Control, the Company shall either
permanently repay all outstanding amounts under the Bank Facility and
terminate all commitments of the lenders thereunder or offer to permanently
repay in full all outstanding amounts under the Bank Facility and permanently
repay the Obligations held by each lender who has accepted such offer or
obtain the requisite consents, if any, under the Bank Facility to permit the
repurchase of the Notes required hereby. The failure to mail notice of the
Change of Control Offer when required will nonetheless constitute a Default
under the Indentures.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
Purchase Price for all of the Notes that might be delivered by holders of
Notes seeking to accept the Change of Control Offer. The Company shall not be
required to make a Change of Control Offer upon a Change of Control if a third
party makes the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements applicable to a Change of
Control Offer made by the Company and purchases all Notes validly tendered and
not withdrawn under such Change of Control Offer.
The definition of "Change of Control" excludes certain transactions by
Permitted Holders, including a direct or indirect sale, lease, exchange or
other transfer of all or substantially all of the assets of the Company to
Permitted Holders. The provisions of the Indentures may not afford Noteholders
protection in the event of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction involving the Company if such
transaction is not a transaction defined as a "Change of Control."
The use of the term "all or substantially all" in provisions of the
Indentures such as clause (b) of the definition of "Change of Control" and
under "--Consolidation, Mergers, Sale of Assets, Etc." has no clearly
established meaning under New York law (which governs the Indentures) and has
been the subject of limited judicial interpretation in only a few
jurisdictions. Accordingly, there may be a degree of uncertainty in
ascertaining whether any particular transaction would involve a disposition of
"all or substantially all" of the assets of a person, which uncertainty should
be considered by prospective purchasers of Notes.
The Company will comply with Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder, to the extent such laws or
regulations are applicable, in the event that a Change of Control occurs and
the Company is required to purchase Notes as described above.
CERTAIN COVENANTS
The Indentures contain the following covenants, among others; provided
however, that if no Default shall have occurred and be continuing, after the
Notes are rated by both Moody's Investor Services, Inc. (or its successors)
and Standard & Poor's Rating Group (or its successors) in one of its generic
rating categories which signifies investment grade (which at the date hereof
are the four highest rating categories (within which there are sub-categories
indicating relative standing)) the limitations set forth below under the
captions "Limitation on Indebtedness," "Limitation on Restricted Payments,"
"Disposition of Proceeds of Asset Sales," "Limitation on Preferred Stock of
Subsidiaries," "Limitation on Transactions with Affiliates," "Limitation on
Dividends and other Payment Restrictions Affecting Restricted Subsidiaries,"
"Limitation on Sale-Leaseback Transactions" and "Limitation on Designation of
Unrestricted Subsidiaries" and in clause (c) under "Consolidation, Merger,
Sale of Assets, etc." shall no longer be applicable.
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Limitation on Indebtedness. The Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur,
issue, assume, guarantee or in any manner become directly or indirectly
liable, contingently or otherwise (in each case, to "incur"), for the payment
of any Indebtedness (including any Acquired Indebtedness) other than Permitted
Indebtedness, unless the ratio of (i) the aggregate consolidated principal
amount of Indebtedness of the Company and its Restricted Subsidiaries
outstanding as of the most recently available quarterly or annual consolidated
balance sheet, after giving pro forma effect to the incurrence of such
Indebtedness and any other Indebtedness incurred since such balance sheet date
and the receipt and application of the proceeds thereof, to (ii) Consolidated
Cash Flow of the Company and its Restricted Subsidiaries for the four full
fiscal quarters next preceding the incurrence of such Indebtedness for which
consolidated financial statements are available, determined on a pro forma
basis as if any such Indebtedness had been incurred and the proceeds thereof
had been applied at the beginning of such four fiscal quarters, would be less
than 6.0 to 1.
Limitation on Restricted Payments. The Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly:
(a) declare or pay any dividend or make any other distribution or payment
on or in respect of Capital Stock of the Company or any of its Restricted
Subsidiaries or make any payment to the direct or indirect holders (in
their capacities as such) of Capital Stock of the Company or any of its
Restricted Subsidiaries (other than dividends or distributions payable
solely in Capital Stock of the Company (other than Redeemable Capital
Stock) or in options, warrants or other rights to purchase Capital Stock of
the Company (other than Redeemable Capital Stock)) (other than the
declaration or payment of dividends or other distributions to the extent
declared or paid to the Company or any Restricted Subsidiary),
(b) purchase, redeem, defease or otherwise acquire or retire for value
any Capital Stock (other than Redeemable Capital Stock) of the Company (or
of any Restricted Subsidiary of the Company if such Capital Stock is owned
by an Affiliate of the Company) or any options, warrants, or other rights
to purchase any such Capital Stock (other than any such securities owned by
a Restricted Subsidiary),
(c) make any principal payment on, or purchase, defease, repurchase,
redeem or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment, scheduled sinking fund payment or other
Stated Maturity, any Redeemable Capital Stock or Subordinated Indebtedness
of the Company (other than any such Redeemable Capital Stock or
Subordinated Indebtedness owned by the Company or a Restricted Subsidiary),
(d) make any Investment (other than any Permitted Investment) in any
person, or
(e) (i) make any principal, interest or other payments on or in respect
of Deeply Subordinated Shareholder Loans or (ii) make any principal,
interest (other than interest payments after November 1, 2002) or other
payments on or in respect of the Existing Subordinated Notes or any
Existing Subordinated Note Refinancing Debt
(such payments or Investments described in the preceding clauses (a), (b),
(c), (d) and (e) are collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to the proposed Restricted
Payment (the amount of any such Restricted Payment, if other than cash, shall
be the Fair Market Value of the asset(s) proposed to be transferred by the
Company or such Restricted Subsidiary, as the case may be, pursuant to such
Restricted Payment), (A) no Default or Event of Default shall have occurred
and be continuing, (B) immediately prior to and after giving effect to such
Restricted Payment, the Company would be able to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) and (C) the aggregate amount
of all Restricted Payments declared or made from and after the Issue Date
would not exceed the sum of:
(1) the excess of the aggregate Consolidated Cash Flow of the Company
minus the product of 1.5 times the Consolidated Interest Expense of the
Company accrued on a cumulative basis during the period beginning on the
Issue Date and ending on the last day of the fiscal quarter of the Company
immediately preceding the date of such proposed Restricted Payment;
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(2) the aggregate net cash proceeds received by the Company as capital
contributions to the Company after the Issue Date and which constitute
shareholders' equity of the Company in accordance with GAAP;
(3) the aggregate net cash proceeds received by the Company from the
issuance or sale of Capital Stock (excluding Redeemable Capital Stock) of
the Company to any person (other than to a Subsidiary of the Company) after
the Issue Date;
(4) the aggregate net cash proceeds received by the Company from any
person (other than a Subsidiary of the Company) upon the exercise of any
options, warrants or rights to purchase shares of Capital Stock (other than
Redeemable Capital Stock) of the Company after the Issue Date;
(5) the aggregate net cash proceeds received after the Issue Date by the
Company from any person (other than a Subsidiary of the Company) for debt
securities that have been converted or exchanged into or for Capital Stock
of the Company (other than Redeemable Capital Stock) (to the extent such
debt securities were originally sold for cash) plus the aggregate amount of
cash received by the Company (other than from a Subsidiary of the Company)
in connection with such conversion or exchange;
(6) the aggregate net cash proceeds received after the Issue Date by the
Company from the issuance of Deeply Subordinated Shareholder Loans to a
Permitted Holder (other than a Subsidiary of the Company);
(7) in the case of the disposition or repayment of any Investment
constituting a Restricted Payment after the Issue Date, an amount equal to
the lesser of the return of capital with respect to such Investment and the
initial amount of such Investment, in either case, less the cost of the
disposition of such Investment; and
(8) so long as the Designation thereof was treated as a Restricted
Payment made after the Issue Date, with respect to any Unrestricted
Subsidiary that has been redesignated as a Restricted Subsidiary after the
Issue Date in accordance with "--Limitation on Designations of Unrestricted
Subsidiaries" below, the Fair Market Value of the Company's interest in
such Subsidiary calculated in accordance with GAAP, provided that such
amount shall not in any case exceed the Designation Amount with respect to
such Restricted Subsidiary upon its Designation,
minus:
the Designation Amount (measured as of the date of Designation) with
respect to any Subsidiary of the Company which has been designated as an
Unrestricted Subsidiary after the Issue Date in accordance with "--
Limitations on Designations of Unrestricted Subsidiaries" below.
For purposes of the preceding clause (C)(4), the value of the aggregate net
proceeds received by the Company upon the issuance of Capital Stock upon the
exercise of options, warrants or rights will be the net cash proceeds received
upon the issuance of such options, warrants or rights plus the incremental
amount received by the Company upon the exercise thereof.
None of the foregoing provisions will prohibit, so long, in the case of
clauses (ii) through (v) and (viii) below, as there is no Default or Event of
Default continuing, (i) the payment of any dividend or distribution within 60
days after the date of its declaration, if at the date of declaration such
payment would be permitted by the foregoing paragraph; (ii) the redemption,
repurchase or other acquisition or retirement of any shares of any class of
Capital Stock in exchange for, or out of the net cash proceeds of, a
substantially concurrent issue and sale of other shares of Capital Stock
(other than Redeemable Capital Stock) of the Company to any person (other than
to a Subsidiary of the Company); provided, however, that such net cash
proceeds are excluded from clause (C) of the preceding paragraph; (iii) any
redemption, repurchase or other acquisition or retirement of Subordinated
Indebtedness by exchange for, or out of the net cash proceeds of, a
substantially concurrent issue and sale of (1) Capital Stock (other than
Redeemable Capital Stock) of the Company to any person (other than to a
Subsidiary of the Company); provided, however, that any such net cash proceeds
are excluded from clause (C) of the preceding paragraph; or (2) Indebtedness
of the Company so long as such Indebtedness is Subordinated Indebtedness which
(w) has no Stated Maturity earlier than the 91st day after the Maturity Date,
(x) has an Average Life to Stated Maturity greater than the remaining Average
Life to Stated Maturity of the Notes, (y) is subordinated to the Notes in the
same manner and to the same extent as the Subordinated Indebtedness so
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purchased, exchanged, redeemed, acquired or retired and (z) if the proceeds of
such Indebtedness is to purchase, redeem, acquire or retire all of the
Existing Subordinated Notes ("Existing Subordinated Note Refinancing Debt"),
such Existing Subordinated Note Refinancing Debt provides for no cash payments
of interest prior to November 1, 2002 other than cash payments otherwise
permitted by this covenant; (iv) any redemption, repurchase or other
acquisition or retirement of Deeply Subordinated Shareholder Loans by exchange
for, or out of the net cash proceeds of, a substantially concurrent issue and
sale of (1) Capital Stock (other than Redeemable Capital Stock) of the Company
to any person (other than a Subsidiary of the Company) or (2) other Deeply
Subordinated Shareholder Loans to any Permitted Holder, provided, however,
that, in either case, such net cash proceeds are excluded from clause (C) of
the preceding paragraph; (v) Investments constituting Restricted Payments made
as a result of the receipt of non-cash consideration from any Asset Sale made
pursuant to and in compliance with the Indentures; (vi) payments to purchase
Capital Stock of the Company from management or employees of the Company or
any of its Subsidiaries, or their authorized representatives, upon the
happening of an event which provides for payment under any applicable plan, or
upon the death, disability or termination of employment of such employees, in
aggregate amounts under this clause (vi) not to exceed $8,000,000 in any
fiscal year of the Company; (vii) the payment of pro rata dividends to holders
of Capital Stock of Restricted Subsidiaries; (viii) the payment of dividends
on the Existing Preferred in accordance with its terms as in effect on the
Issue Date (or payments in comparable amounts to such dividends and at
comparable times in respect of claims by News Corp. or NPAL arising from News
Corp. or NPAL having cured or avoided a default by the Company in respect of
the Existing Preferred or the Company's Wilshire Boulevard lease; provided
amounts contributed to the Company by News Corp. or NPAL for such purpose
shall not be included in the calculation of clause (C) above); (ix) the
payment of in-kind interest in respect of Deeply Subordinated Shareholder
Loans and in respect of Existing Subordinated Notes; and (x) the repayment of
the Existing Subordinated Notes contemplated under "Use of Proceeds" in this
Prospectus. Any payments made pursuant to clauses (i), (v) and (vi) (to the
extent that such dividends are not included in Consolidated Interest Expense)
of this paragraph shall, without duplication, be taken into account in
calculating the amount of Restricted Payments made from and after the Issue
Date.
Limitation on Liens. The Company will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Liens of any
kind against or upon any of its property or assets, or any proceeds therefrom,
unless the Notes are equally and ratably secured (except that Liens securing
Subordinated Indebtedness shall not be permitted in any circumstances), except
for (a) Liens securing the Notes; (b) Liens securing Indebtedness which is (i)
incurred to refinance Indebtedness which has been secured by a Lien permitted
under the Indenture and (ii) incurred in accordance with the provisions of the
Indenture; provided, however, that such Liens do not extend to or cover any
property or assets of the Company or any of its Restricted Subsidiaries not
securing the Indebtedness so refinanced; and (c) Permitted Liens.
Disposition of Proceeds of Asset Sales. The Company will not, and will not
permit any of its Restricted Subsidiaries to, make any Asset Sale unless (a)
the Company or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the shares or assets sold or otherwise disposed of and (b) at least
75% of such consideration consists of cash or Cash Equivalents or properties
or assets that will be used in the business of the Company and its Restricted
Subsidiaries provided that the amount of any liabilities (other than
Subordinated Indebtedness or Indebtedness of a Restricted Subsidiary that
would not constitute Restricted Subsidiary Indebtedness) that are assumed by
the transferee of any such assets pursuant to an agreement that
unconditionally releases the Company or such Restricted Subsidiary, as the
case may be, from further liability shall be treated as cash for purposes of
this covenant. The Company or the applicable Restricted Subsidiary, as the
case may be, shall, at the Company's option, (i) apply the Net Cash Proceeds
from any such Asset Sale within 365 days of the receipt thereof to repay
Indebtedness under the Bank Facility and elect to permanently reduce the
commitments thereunder by the amount of Indebtedness so repaid, (ii) apply the
Net Cash Proceeds from any such Asset Sale within 365 days of the receipt
thereof to repay an amount of other Indebtedness (other than Subordinated
Indebtedness) of the Company in an amount not exceeding the Other Senior Debt
Pro Rata Share and, in such case, elect to permanently reduce the amount of
the commitments thereunder by the amount of the Indebtedness so repaid, (iii)
apply the Net Cash
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Proceeds from any such Asset Sale by the Company or a Restricted Subsidiary to
repay any Restricted Subsidiary Indebtedness and elect to permanently reduce
the commitments thereunder by the amount of the Indebtedness so repaid and/or
(iv) apply the Net Cash Proceeds from any Asset Sale by the Company or a
Restricted Subsidiary, (x) to repay Indebtedness incurred not more than 90
days before such Asset Sale to purchase, or (y) to the purchase price for an
acquisition consummated not more than 90 days before such Asset Sale of, or
(z) within 365 days after such Asset Sale to an investment in, properties and
assets that replace the properties and assets that were the subject of such
Asset Sale or in properties and assets that will be used in the business of
the Company and its Restricted Subsidiaries existing on the Issue Date or in
businesses reasonably related thereto ("Replacement Assets"). Pending the
final application of any such Net Cash Proceeds, the Company or such
Restricted Subsidiary may temporarily reduce Indebtedness under a revolving
credit facility, if any, or otherwise invest such Net Cash Proceeds in Cash
Equivalents. Any Net Cash Proceeds from any Asset Sale that are neither used
to repay, and permanently reduce the commitments under, any Restricted
Subsidiary Indebtedness as set forth in clause (iii) of the second preceding
sentence or invested in Replacement Assets within the 365-day period as set
forth in clause (iv) shall constitute "Excess Proceeds." Any Excess Proceeds
not used as set forth in clause (i) or (ii) of the third preceding sentence
shall constitute "Offer Excess Proceeds" subject to disposition as provided
below.
When the aggregate amount of Offer Proceeds equals or exceeds $15,000,000,
the Company shall make an offer to purchase (an "Asset Sale Offer"), from all
holders of the Notes, an aggregate principal amount of Notes equal to such
Excess Proceeds, at a price (the "Asset Sale Purchase Price") in cash equal to
(x) with respect to the Senior Notes, 100% of the outstanding principal amount
thereof plus accrued and unpaid interest, if any, to the purchase date and (y)
with respect to the Senior Discount Notes, 100% of the Accreted Value on the
purchase date, unless the purchase date is on or after the earlier to occur of
November 1, 2002 and the Cash Interest Election Date, in which case such
purchase price shall be equal to 100% of the principal amount at maturity
thereof, plus accrued and unpaid interest, if any, to the purchase date. To
the extent that the aggregate principal amount of Notes tendered pursuant to
an Asset Sale Offer is less than the Offer Proceeds, the Company may use such
deficiency for any purpose not prohibited hereunder. The Notes shall be
purchased by the Company, at the option of the holder thereof, in whole or in
part in integral multiples of $1,000 of principal amount, on a date that is
not earlier than 30 days and not later than 60 days from the date the notice
is given to holders, or such later date as may be necessary for the Company to
comply with the requirements under the Exchange Act. If the aggregate purchase
price of Notes validly tendered and not withdrawn by holders thereof exceeds
the Offer Proceeds, Notes to be purchased will be selected on a pro rata
basis, based on the Asset Sale Purchase Price thereof. Upon completion of such
Asset Sale Offer, the amount of Excess Proceeds shall be reset to zero.
Notwithstanding the two immediately preceding paragraphs, the Company and
its Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent (i) at least 75% of the
consideration of such Asset Sale constitutes Replacement Assets, cash or Cash
Equivalents (including obligations deemed to be cash under this covenant) and
(ii) such Asset Sale is for Fair Market Value; provided that (i) any
consideration constituting (or deemed to constitute) cash or Cash Equivalents
received by the Company or any of its Restricted Subsidiaries in connection
with any Asset Sale permitted to be consummated under this paragraph shall
constitute Net Cash Proceeds subject to the provisions of the two preceding
paragraphs and (ii) to the extent such replacement Assets include any Capital
Stock of any person, such person becomes a Restricted Subsidiary.
The Company will comply with Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder, to the extent such laws and
regulations are applicable, in the event that an Asset Sale occurs and the
Company is required to purchase Notes as described above.
Limitation on Preferred Stock of Restricted Subsidiaries. The Company will
not permit any Restricted Subsidiary to issue any Preferred Stock other than
Preferred Stock issued to the Company or a Restricted Subsidiary. The Company
will not sell, transfer or otherwise dispose of Preferred Stock issued by a
Restricted Subsidiary of the Company or permit a Restricted Subsidiary to
sell, transfer or otherwise dispose of Preferred Stock issued by a Restricted
Subsidiary, other than to the Company or a Restricted Subsidiary.
Notwithstanding
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the foregoing, nothing in such covenant will prohibit the ownership of
Preferred Stock issued by a person prior to the time (A) such person becomes a
Restricted Subsidiary of the Company, (B) such person merges with or into a
Restricted Subsidiary of the Company or (C) a Restricted Subsidiary of the
Company merges with or into such person; provided, further, that such
Preferred Stock was not issued or incurred by such person in anticipation of a
transaction contemplated by subclause (A), (B), or (C) above.
Limitation on Transactions with Affiliates. The Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly,
enter into any transaction or series of related transactions (including,
without limitation, the sale, transfer, disposition, purchase, exchange or
lease of assets, property or services) with, or for the benefit of, any of its
Affiliates (other than Restricted Subsidiaries), except (a) on terms that are
no less favorable to the Company or such Restricted Subsidiary, as the case
may be, than those which could have been obtained in a comparable transaction
at such time from persons who are not Affiliates of the Company, (b) with
respect to a transaction or series of related transactions involving aggregate
payments or value equal to or greater than $25,000,000, the Company shall have
delivered an officer's certificate to the Trustee certifying that such
transaction or transactions comply with the preceding clause (a) and that such
transaction or transactions have been approved by a majority of the
Disinterested Members of the Board of Directors of the Company, and (c) with
respect to a transaction or series of related transactions involving aggregate
payments or value equal to or greater than $50,000,000 (other than agreements
whereby the Company or a Restricted Subsidiary of the Company obtains or
grants a license or other rights to syndicated entertainment programs in the
ordinary course of business), the Company shall have obtained a written
opinion from an Independent Financial Advisor stating that the terms of such
transaction or series of transactions are fair, from a financial point of
view, to the Company or the Restricted Subsidiary involved, as the case may
be.
Notwithstanding the foregoing, the restrictions set forth in this covenant
shall not apply to (i) transactions with or among the Company and the
Restricted Subsidiaries, (ii) customary directors' fees, indemnification and
similar arrangements, consulting fees, employee salaries, bonuses or
employment agreements, compensation or employee benefit arrangements and
incentive arrangements with any officer, director or employee of the Company
or any Restricted Subsidiary entered into in the ordinary course of business,
(iii) any dividends made in compliance with "--Limitation on Restricted
Payments" above, (iv) Permitted Investments, (v) loans and advances to
officers, directors and employees of the Company or any Restricted Subsidiary
for travel, entertainment, moving and other relocation expenses, in each case
made in the ordinary course of business, (vi) transactions pursuant to
agreements existing on the date of the Indentures or amendment thereto so long
as not disadvantageous to the holders of the Notes, (vii) Deeply Subordinated
Shareholder Loans and loans and advances in the same terms as the Existing
Subordinated Notes, or (viii) the incurrence of intercompany Indebtedness
which constitutes Permitted Indebtedness.
Limitation on Dividends and other Payment Restrictions Affecting Restricted
Subsidiaries. The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer
to exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends, in
cash or otherwise, or make any other distributions on or in respect of its
Capital Stock or any other interest or participation in, or measured by, its
profits, (b) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary of the Company, (c) make loans or advances to the Company or any
other Restricted Subsidiary of the Company, (d) transfer any of its properties
or assets to the Company or any other Restricted Subsidiary of the Company or
(e) guarantee any Indebtedness of the Company or any other Restricted
Subsidiary of the Company, except for such encumbrances or restrictions
existing under or by reason of (i) applicable law, (ii) customary non-
subletting, non-assignment or other non-transfer provisions of any license,
contract or any lease governing a leasehold interest of the Company or any
Restricted Subsidiary of the Company, (iii) customary restrictions on
transfers of property subject to a Lien permitted under the Indenture, (iv)
the Bank Facility, but only if the Bank Facility permits payments to the
Company by its Restricted Subsidiaries in amounts sufficient to make interest
payments on the Notes unless there is a continuing default under the Bank
Facility or the making of any such interest payment would (with or without the
giving of notice or passage of time or both) result in a default under the
Bank Facility, (v) any
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agreement or other instrument of a person acquired by the Company or any
Restricted Subsidiary of the Company in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance or
restriction is not applicable to any person or any of its Subsidiaries, or the
properties or assets of any person or any of its Subsidiaries, other than the
person, or the property or assets of the person, so acquired, (vi) an
agreement entered into for the sale or disposition of all or substantially all
of the Capital Stock or assets of a Restricted Subsidiary or an agreement
entered into for the sale of specified assets (in either case, so long as such
encumbrance or restriction, by its terms, terminates on the earlier of the
termination of such agreement or the consummation of such agreement and so
long as such restriction applies only to the Capital Stock or assets to be
sold), (vii) any encumbrance or restriction in effect on the Issue Date and
(viii) any agreement that amends, extends, refinances, renews or replaces any
agreement described in the foregoing clauses, provided that the terms and
conditions of any such agreement are not materially less favorable to the
holders of the Notes than those under or pursuant to the agreement amended,
extended, refinanced, renewed or replaced.
Limitation on Designations of Unrestricted Subsidiaries. The Company may
designate after the Issue Date any Restricted Subsidiary as an "Unrestricted
Subsidiary" under the Indentures (a "Designation") only if:
(i) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation;
(ii) the Company would be permitted to make an Investment (other than a
Permitted Investment) at the time of Designation (assuming the
effectiveness of such Designation) pursuant to the "--Limitation on
Restricted Payments" above in an amount (the "Designation Amount") equal to
the Fair Market Value of the Company's interest in such Subsidiary on such
date calculated in accordance with GAAP; and
(iii) the Company would be permitted under the Indenture to incur $1.00
of additional Indebtedness (other than Permitted Indebtedness) pursuant to
the covenant described under "--Limitation on Indebtedness" at the time of
such Designation (assuming the effectiveness of such Designation).
In the event of any such Designation, the Company shall be deemed to have
made an Investment constituting a Restricted Payment pursuant to the covenant
"--Limitation on Restricted Payments" for all purposes of the Indenture in the
Designation Amount. Each of the Subsidiaries conducting the businesses
identified as assets held for disposition or discontinuance in this Prospectus
shall constitute "Unrestricted Subsidiaries" on the Issue Date.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, at any time (x) provide credit support (other than guarantees
or pledges under the Bank Facility) for or subject any of its property or
assets (other than the Capital Stock of any Unrestricted Subsidiary) to the
satisfaction of, any Indebtedness of any Unrestricted Subsidiary (including
any undertaking, agreement or instrument evidencing such Indebtedness), (y) be
directly or indirectly liable for any Indebtedness of any Unrestricted
Subsidiary or (z) be directly or indirectly liable for any Indebtedness which
provides that the holder thereof may (upon notice, lapse of time or both)
declare a default thereon or cause the payment thereof to be accelerated or
payable prior to its final scheduled maturity upon the occurrence of a default
with respect to any Indebtedness of any Unrestricted Subsidiary (including any
right to take enforcement action against such Unrestricted Subsidiary), except
any non-recourse guarantee given solely to support the pledge by the Company
or any Restricted Subsidiary of the Capital Stock of an Unrestricted
Subsidiary. No Unrestricted Subsidiary shall at any time guarantee or
otherwise provide credit support for any obligation of the Company or any
Restricted Subsidiary, except as provided in the Bank Facility. All
Subsidiaries of Unrestricted Subsidiaries shall automatically be deemed to be
Unrestricted Subsidiaries.
The Company may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation") if:
(i) no Default shall have occurred and be continuing at the time of and
after giving effect to such Revocation;
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of the
Indenture; and
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(iii) any transaction (or series of related transactions) between such
Subsidiary and any of its Affiliates that occurred on or after the Issue
Date while such Subsidiary was an Unrestricted Subsidiary would be
permitted by "--Limitation on Transactions with Affiliates" above as if
such transaction (or series of related transactions) had occurred at the
time of such Revocation.
In the event the Company or a Restricted Subsidiary makes any Investment in
any person which was not previously a Subsidiary and such person thereby
becomes a Subsidiary, such person shall automatically be an Unrestricted
Subsidiary and the Company may designate such Subsidiary as a Restricted
Subsidiary only if it meets the foregoing requirements of clauses (i) and
(ii).
All Designations and Revocations must be evidenced by Board Resolutions of
the Company delivered to the Trustee certifying compliance with the foregoing
provisions.
Limitation on Sale-Leaseback Transactions. The Company will not, and will
not permit any of its Restricted Subsidiaries to, enter into any Sale-
Leaseback Transaction with respect to any property of the Company or any of
its Restricted Subsidiaries. Notwithstanding the foregoing, the Company and
its Restricted Subsidiaries may enter into Sale-Leaseback Transactions,
provided, that (a) the Attributable Value of such Sale-Leaseback Transaction
shall be deemed to be Indebtedness of the Company or a Restricted Subsidiary
and (b) after giving pro forma effect to any such Sale-Leaseback Transaction
and the foregoing clause (a), the Company or a Restricted Subsidiary would be
able to incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the covenant described under "Limitation on
Indebtedness" above.
Reporting Requirements. For so long as the Notes are outstanding, whether or
not the Company is subject to Section 13(a) or 15(d) of the Exchange Act, or
any successor provision thereto, the Company shall file with the Commission
(if permitted by Commission practice and applicable law and regulations) the
annual reports, quarterly reports and other documents which the Company would
have been required to file with the Commission (if permitted by Commission
practice and applicable law and regulations) pursuant to such Section 13(a) or
15(d) or any successor provision thereto if the Company were so subject, such
documents to be filed with the Commission on or prior to the respective dates
(the "Required Filing Dates") by which the Company would have been required so
to file such documents if the Company were so subject. The Company shall also
in any event (a) within 15 days after each Required Filing Date (whether or
not permitted or required to be filed with the Commission) (i) transmit (or
cause to be transmitted) by mail to all holders of Notes, as their names and
addresses appear in the Note register, without cost to such Holders, and (ii)
file with the Trustee, copies of the annual reports, quarterly reports and
other documents which the Company is required to file with the Commission
pursuant to the preceding sentence, or, if such filing is not so permitted,
information and data of a similar nature, and (b) if, notwithstanding the
preceding sentence, filing such documents by the Company with the Commission
is not permitted by Commission practice or applicable law or regulations,
promptly upon written request supply copies of such documents to any holder of
Notes. In addition, for so long as any Notes remain outstanding, the Company
will furnish to the holders of Notes and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act, and, to any
beneficial holder of Notes, if not obtainable from the Commission, information
of the type that would be filed with the Commission pursuant to the foregoing
provisions upon the request of any such holder.
CONSOLIDATION, MERGER, SALE OF ASSETS, ETC.
The Company will not, in any transaction or series of transactions, merge or
consolidate with or into, or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets as
an entirety to, any person or persons, and the Company will not permit any of
its Restricted Subsidiaries to enter into any such transaction or series of
transactions if such transaction or series of transactions, in the aggregate,
would result in a sale, assignment, conveyance, transfer, lease or other
disposition of all or substantially all of the properties and assets of the
Company or the Company and its Restricted Subsidiaries, taken as a whole, to
any other person or persons, unless at the time and after giving effect
thereto (a) either (i) if the transaction or transactions is a merger or
consolidation, the Company or such Restricted Subsidiary, as the case may be,
shall
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be the surviving person of such merger or consolidation, or (ii) the person
formed by such consolidation or into which the Company, or such Restricted
Subsidiary, as the case may be, is merged or to which the properties and
assets of the Company or such Restricted Subsidiary, as the case may be,
substantially as an entirety, are transferred (any such surviving person or
transferee person being the "Surviving Entity") shall be a corporation
organized and existing under the laws of the United States of America, any
state thereof or the District of Columbia and shall expressly assume by
supplemental indentures executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of the Company under the
Notes and the Indentures and the Registration Rights Agreement, and in each
case, the Indentures shall remain in full force and effect; (b) immediately
before and immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), no Default or Event of
Default shall have occurred and be continuing; and (c) the Company or the
Surviving Entity, as the case may be, after giving effect to such transaction
or series of transactions on a pro forma basis (including, without limitation,
any Indebtedness incurred or anticipated to be incurred in connection with or
in respect of such transaction or series of transactions), could incur $1.00
of additional Indebtedness (other than Permitted Indebtedness) under the
covenant described under "--Certain Covenants--Limitation on Indebtedness"
above.
In connection with any consolidation, merger, transfer, lease, assignment or
other disposition contemplated hereby, the Company shall deliver, or cause to
be delivered, to the Trustee, in form and substance reasonably satisfactory to
the Trustee, an officers' certificate and an opinion of counsel, each stating
that such consolidation, merger, transfer, lease, assignment or other
disposition and the supplemental indenture in respect thereof comply with the
requirements under the Indenture.
Upon any consolidation or merger, or any sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties
and assets of the Company in accordance with the immediately preceding
paragraphs, the successor person formed by such consolidation or into which
the Company or a Restricted Subsidiary, as the case may be, is merged or the
successor person to which such sale, assignment, conveyance, transfer, lease
or disposition is made shall succeed to, and be substituted for, and may
exercise every right and power of the Company under the Notes, Indentures
and/or the Registration Rights Agreement, as the case may be, with the same
effect as if such successor had been named as the Company in the Notes, the
Indentures and/or in the Registration Rights Agreement, as the case may be.
EVENTS OF DEFAULT
The following will be "Events of Default" under each Indenture with respect
to the Notes issued under such Indenture:
(i) default in the payment of the principal of or premium, if any, when
due and payable, on any of the Notes (at Stated Maturity, upon optional
redemption, required purchase or otherwise); or
(ii) default in the payment of an installment of interest on any of the
Notes, when due and payable, for 30 days; or
(iii) (a) default in the performance, or breach, of any covenant or
agreement of the Company under the applicable Indenture (other than a
default in the performance or breach of a covenant or agreement which is
specifically dealt with in clauses (i) or (ii) or subclauses (b), (c) or
(d) of this clause (iii)) and such default or breach shall continue for a
period of 45 days after written notice has been given, by certified mail,
(x) to the Company by the applicable Trustee or (y) to the Company and the
applicable Trustee by the holders of at least 25% in aggregate principal
amount of the outstanding Senior Notes or at least 25% in aggregate
principal amount at maturity of the Senior Discount Notes, as the case may
be; (b) there shall be a default in the performance or breach of the
provisions of "Consolidation, Merger and Sale of Assets, etc."; (c) the
Company shall have failed to make or consummate an Offer in accordance with
the provisions of the applicable Indenture described under "--Certain
Covenants--Dispositions of Proceeds of Asset Sales"; or (d) the Company
shall have failed to make or consummate a Change of Control Offer in
accordance with the provisions of the Indenture described under "Change of
Control"; or
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(iv) default or defaults under one or more agreements, instruments,
mortgages, bonds, debentures or other evidences of Indebtedness under which
the Company or any Significant Subsidiary of the Company then has
outstanding Indebtedness in excess of $20,000,000, individually or in the
aggregate, and either (a) such Indebtedness is already due and payable in
full or (b) such default or defaults have resulted in the acceleration of
the maturity of such Indebtedness; or
(v) one or more judgments, orders or decrees of any court or regulatory
or administrative agency of competent jurisdiction for the payment of money
in excess of $20,000,000 (net of any amounts covered by insurance therefor
which the insurance provider has been notified and not challenged coverage)
either individually or in the aggregate, shall be entered against the
Company or any Significant Subsidiary of the Company or any of their
respective properties and shall not be discharged and there shall have been
a period of 60 days after the date on which any period for appeal has
expired and during which a stay of enforcement of such judgment, order or
decree, shall not be in effect; or
(vi) the entry of a decree or order by a court having jurisdiction in the
premises (A) for relief in respect of the Company or any Significant
Subsidiary in an involuntary case or proceeding under the Federal
Bankruptcy Code or any other federal, state or foreign bankruptcy,
insolvency, reorganization or similar law or (B) adjudging the Company or
any Significant Subsidiary bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment or composition of or in respect of
the Company or any Significant Subsidiary under the Federal Bankruptcy Code
or any other similar federal, state or foreign law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Company or any Significant Subsidiary or of any
substantial part of any of their properties, or ordering the winding up or
liquidation of any of their affairs, and the continuance of any such decree
or order unstayed and in effect for a period of 60 consecutive days; or
(vii) the institution by the Company or any Significant Subsidiary of a
voluntary case or proceeding under the Federal Bankruptcy Code or any other
similar federal, state or foreign law or any other case or proceedings to
be adjudicated a bankrupt or insolvent, or the consent by the Company or
any Significant Subsidiary to the entry of a decree or order for relief in
respect of the Company or any Significant Subsidiary in any involuntary
case or proceeding under the Federal Bankruptcy Code or any other similar
federal, state or foreign law or to the institution of bankruptcy or
insolvency proceedings against the Company or any Significant Subsidiary,
or the filing by the Company or any Significant Subsidiary of a petition or
answer or consent seeking reorganization or relief under the Federal
Bankruptcy Code or any other similar federal, state or foreign law, or the
consent by it to the filing of any such petition or to the appointment of
or taking possession by a custodian, receiver, liquidator, assignee,
trustee or sequestrator (or other similar official) of any of the Company
or any Significant Subsidiary or of any substantial part of its property,
or the making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally as
they become due or the taking of corporate action by the Company or any
Significant Subsidiary in furtherance of any such action.
If an Event of Default with respect to the Senior Notes or the Senior
Discount Notes (other than those covered by clause (vi) or (vii) above with
respect to the Company) shall occur and be continuing, the Trustee under the
applicable Indenture, by notice to the Company, or the holders of at least 25%
in aggregate principal amount of the Senior Notes then outstanding, or the
holders of at least 25% in aggregate principal amount at maturity of the
Senior Discount Notes then outstanding, as the case may be, by notice to the
applicable Trustee and the Company, may declare the Default Amount on all of
the outstanding Senior Notes or Senior Discount Notes, as the case may be, due
and payable immediately, upon which declaration, the Default Amount shall be
immediately due and payable; provided, however, that so long as the Bank
Facility shall be in full force and effect, if any acceleration arising from
any Event of Default (other than an Event of Default with respect to the
Company described in clause (vi) or (vii) of the preceding paragraph) shall
not become effective until the earlier to occur of (x) five Business Days
following delivery of written notice of such acceleration of the Notes to the
agent under the Bank Facility and (y) the acceleration (ipso facto or
otherwise) of any Indebtedness under the Bank Facility. If an Event of Default
specified in clause (vi) or (vii) above with respect to the Company occurs
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and is continuing, then the Default Amount on the outstanding Notes shall ipso
facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any holder of Notes.
"Default Amount" means, with respect to (i) the Senior Discount Notes prior
to the earlier to occur of the Cash Interest Election Date and November 1,
2002, the Accreted Value thereof as of the payment date, (ii) the Senior
Notes, the principal amount thereof, and (iii) the Senior Discount Notes after
the earlier to occur of the Cash Interest Election Date and November 1, 2002,
the principal amount at maturity thereof, plus, in the case of clause (ii) and
clause (iii), accrued and unpaid interest thereon, if any, to the payment
date.
After a declaration of acceleration under the applicable Indenture, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee thereunder, the holders of a majority in aggregate principal
amount of the outstanding Senior Notes, or the holders of a majority in
aggregate principal amount at maturity of the outstanding Senior Discount
Notes, as the case may be, by written notice to the Company and the applicable
Trustee, may rescind such declaration if (a) the Company has paid or deposited
with the applicable Trustee a sum sufficient to pay (i) all sums paid or
advanced by the applicable Trustee under the applicable Indenture and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, (ii) all overdue interest on all Senior Notes or
Senior Discount Notes, as the case may be, (iii) the principal of and premium,
if any, on any Senior Notes or Senior Discount Notes which have become due
otherwise than by such declaration of acceleration and interest thereon at the
rate borne by such Notes, and (iv) to the extent that payment of such interest
is lawful, interest upon overdue interest and overdue principal at the rate
borne by such Notes which has become due otherwise than by such declaration of
acceleration; (b) the rescission would not conflict with any judgment or
decree of a court of competent jurisdiction; and (c) all Events of Default,
other than the non-payment of principal of, premium, if any, and interest on
the Senior Notes or Senior Discount Notes, as the case may be, that has become
due solely by such declaration of acceleration, have been cured or waived.
In the event of a declaration of acceleration under the Indentures because
of an Event of Default set forth in clause (iv) above has occurred and is
continuing as a result of the failure of the Company or any of its Significant
Subsidiaries to pay the principal of any Indebtedness upon the final maturity
thereof or the acceleration of such maturity, such declaration of acceleration
shall be automatically rescinded and annulled if either (i) the failure to pay
any such Indebtedness at the final maturity thereof shall have been waived or
the acceleration of the maturity thereof shall have been rescinded within 30
days of such maturity or declaration of acceleration, as the case may be, or
(ii) such Indebtedness shall have been discharged, or the underlying default
has been cured, within 30 days of such maturity or declaration of
acceleration, as the case may be.
The holders of not less than a majority in aggregate principal amount of the
outstanding Senior Notes or the Senior Discount Notes, as the case may be, may
on behalf of the holders of all Senior Notes or Senior Discount Notes, as the
case may be, waive any past defaults under the applicable Indenture, except a
default in the payment of the principal of, premium, if any, or interest on
any Note, or in respect of a covenant or provision which under such Indenture
cannot be modified or amended without the consent of the holder of each Senior
Note or Senior Discount Note outstanding.
No holder of any of the Notes has any right to institute any proceeding with
respect to an Indenture or any remedy thereunder, unless the holders of at
least 25% in aggregate principal amount of the outstanding Senior Notes, or
the holders of at least 25% in aggregate principal amount at maturity of the
outstanding Senior Discount Notes, as the case may be, have made written
request, and offered reasonable indemnity, to the applicable Trustee to
institute such proceeding as Trustee under such Notes and the applicable
Indenture, the applicable Trustee has failed to institute such proceeding
within 15 days after receipt of such notice and the applicable Trustee, within
such 15-day period, has not received directions inconsistent with such written
request by holders of a majority in aggregate principal amount of the
outstanding Senior Notes or, in the case of the Senior Discount Notes, the
holders of a majority in aggregate principal amount at maturity. Such
limitations do not apply, however, to a suit instituted by a holder of a Note
for the enforcement of the payment of the principal of, premium, if any, or
interest on such Note on or after the respective due dates expressed in such
Note.
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During the existence of an Event of Default, each Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs. Subject to the provisions of an Indenture relating to the duties of
the Trustee thereunder, whether or not an Event of Default shall occur and be
continuing, such Trustee is not under any obligation to exercise any of its
rights or powers under the applicable Indenture at the request or direction of
any of the holders unless such holders shall have offered to the applicable
Trustee reasonable security or indemnity. Subject to certain provisions
concerning the rights of the Trustee, the holders of a majority in aggregate
principal amount of the outstanding Senior Notes or, with respect to the
Senior Discount Notes, the holders of a majority in aggregate principal amount
at maturity, have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any
trust or power conferred on the Trustee under the applicable Indenture.
If a Default or an Event of Default occurs and is continuing and is known to
the Trustee, the Trustee shall mail to each holder of the Notes affected
notice of the Default or Event of Default within 30 days after obtaining
knowledge thereof. Except in the case of a Default or an Event of Default in
payment of principal of, premium, if any, or interest on any Notes, the
applicable Trustee may withhold the notice to the holders of such Notes if a
committee of its trust officers in good faith determines that withholding the
notice is in the interest of the Noteholders.
The Company is required to furnish to each Trustee annual and quarterly
statements as to the performance by the Company of its obligations under the
Indentures and as to any default in such performance. The Company is also
required to notify each Trustee within five days of any event which is, or
after notice or lapse of time or both would become, an Event of Default.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, terminate its obligations
with respect to the outstanding Notes issued under the Indentures
("defeasance") to the extent set forth below are satisfied. Such defeasance
means that the Company shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Notes issued under such Indenture,
except for (i) the rights of holders of outstanding Notes to receive payment
in respect of the principal of, premium, if any, and interest on such Notes
when such payments are due, (ii) the Company's obligations to issue temporary
Notes, register the transfer or exchange of any Notes, replace mutilated,
destroyed, lost or stolen Notes and maintain an office or agency for payments
in respect of the Notes, (iii) the rights, powers, trusts, duties and
immunities of the Trustee, and (iv) the defeasance provisions of such
Indentures. In addition, in connection with defeasance, the Company may, at
its option and at any time, elect to terminate the obligations of the Company
with respect to certain covenants ("covenant defeasance") that are set forth
in the Indentures, and are described under "--Certain Covenants" above. Upon
the exercise of the covenant of defeasance, the Company shall be released from
all obligations with respect to such covenants, and any subsequent failure to
comply with such obligations shall not constitute a Default or an Event of
Default with respect to the Notes issued under the Indentures.
In order to exercise either defeasance or covenant defeasance with respect
to an Indenture, (i) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the holders of the Notes issued thereunder, cash in
United States dollars, U.S. Government Obligations (as defined in the
Indenture), or a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest on the
outstanding Notes to redemption or maturity (except lost, stolen or destroyed
Notes which have been replaced or paid); (ii) the Company shall have delivered
to the applicable Trustee an opinion of counsel to the effect that the holders
of the outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such defeasance or covenant defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such defeasance or
covenant defeasance had not occurred (in the case of defeasance, such opinion
must refer to and be based upon a ruling of the Internal Revenue Service or a
change in applicable federal income tax laws); (iii) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit;
(iv) such defeasance or covenant defeasance shall not cause the applicable
Trustee to have a conflicting interest with respect to any securities of the
Company; (v) such defeasance or covenant
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defeasance shall not result in a breach or violation of, or constitute a
default under, any agreement or instrument to which the Company is a party or
by which it is bound; (vi) the Company shall have delivered to the applicable
Trustee an opinion of counsel to the effect that after the 91st day following
the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; (vii) the Company shall have delivered to the
applicable Trustee an officers' certificate stating that the deposit was not
made by the Company with the intent of preferring the holders of the Notes
over the other creditors of the Company with the intent of hindering, delaying
or defrauding creditors of the Company or others; (viii) no event or condition
shall exist that would prevent the Company from making payments of the
principal of, premium, if any, and interest on the Notes on the date of such
deposit or at any time ending on the 91st day after the date of such deposit;
and (ix) the Company shall have delivered to the applicable Trustee an
officers' certificate and an opinion of counsel, each stating that all
conditions precedent under the applicable Indenture to either defeasance or
covenant defeasance, as the case may be, have been complied with.
SATISFACTION AND DISCHARGE
Each Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
issued under such Indenture when (i) either (a) all the Notes theretofore
authenticated and delivered thereunder (except lost, stolen or destroyed Notes
which have been replaced or repaid and Notes for whose payment money has
theretofore been deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from such trust)
have been delivered to the Trustee for cancellation or (b) all Notes issued
thereunder not theretofore delivered to the applicable Trustee for
cancellation (except lost, stolen or destroyed Notes which have been replaced
or paid) have become due and payable and the Company has irrevocably deposited
or caused to be deposited with the applicable Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the applicable Trustee for cancellation, for
principal of, premium, if any, and interest on the Notes to the date of
deposit together with irrevocable instructions from the Company directing the
applicable Trustee to apply such funds to the payment thereof at maturity or
redemption, as the case may be; (ii) the Company has paid all other sums
payable under the Indenture by the Company; and (iii) the Company has
delivered to the applicable Trustee an officers' certificate and an opinion of
counsel stating that all conditions precedent under such Indenture relating to
the satisfaction and discharge of the Indenture have been complied with.
AMENDMENTS AND WAIVERS
From time to time, the Company, when authorized by a resolution of its Board
of Directors, and the Trustee under the Indenture may, without the consent of
the holders of any outstanding Notes, amend, waive or supplement an Indenture
or the Notes issued thereunder for certain specified purposes, including,
among other things, curing ambiguities, defects or inconsistencies,
qualifying, or maintaining the qualification of, the Indenture under the Trust
Indenture Act of 1939, or making any change that does not adversely affect the
rights of any holder of Notes issued thereunder. Other amendments and
modifications of each Indenture or the Notes issued thereunder may be made by
the Company and the applicable Trustee with the consent of the holders of not
less than a majority of the aggregate principal amount of the outstanding
Senior Notes or, in the case of the Senior Discount Notes, the holders of a
majority of the aggregate principal amount at maturity; provided, however,
that no such modification or amendment may, without the consent of the holder
of each outstanding Note issued under such Indenture affected thereby, (i)
reduce the principal amount of, extend the fixed maturity of or alter the
redemption provisions of, such Notes, (ii) change the currency in which such
Notes or any premium or the interest thereon is payable, (iii) reduce the
percentage in principal amount of outstanding Notes issued thereunder that
must consent to an amendment, supplement or waiver or consent to take any
action under such Indenture or Notes, (iv) impair the right to institute suit
for the enforcement of any payment on or with respect to such Notes, (v) waive
a default in payment with respect to such Notes, (vi) following the occurrence
of a Change of Control or an Asset Sale, amend, change or modify the
obligation of the Company to make and consummate a Change of Control Offer or
make and consummate the offer with respect to any Asset Sale or modify any of
the provisions or definitions with respect thereto, (vii) reduce or change the
rate or time for
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payment of interest on such Notes or, in the case of the Senior Discount
Notes, amend or modify the definition of Accreted Value or (viii) modify or
change any provision of the Indenture affecting the ranking of such Notes in a
manner adverse to the holders of such Notes.
THE TRUSTEE
Each Indenture provides that, except during the continuance of an Event of
Default, the Trustee thereunder will perform only such duties as are
specifically set forth in the Indenture. If an Event of Default has occurred
and is continuing, the Trustee will exercise such rights and powers vested in
it under the Indenture and use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
The Indentures and provisions of the Trust Indenture Act of 1939, as
amended, incorporated by reference therein contain limitations on the rights
of the Trustee thereunder, should it become a creditor of the Company, to
obtain payment of claims in certain cases or to realize on certain property
received by it in respect of any such claims, as security or otherwise. The
Trustee is permitted to engage in other transactions; provided, however, that
if it acquires any conflicting interest (as defined in such Act) it must
eliminate such conflict or resign. Such a conflicting interest could occur if
the Company were to default on the Senior Notes and not on the Senior Discount
Notes or on the Senior Discount Notes and not on the Senior Notes.
GOVERNING LAW
The Indentures and the Notes are and will be governed by the laws of the
State of New York, without regard to the principles of conflicts of law.
CERTAIN DEFINITIONS
"Accreted Value" means (a) as of any date prior to the Cash Interest
Election Date, if any (the "Specified Date"), with respect to each $1,000
principal face amount at maturity of Senior Discount Notes:
(i) if the Specified Date is one of the following dates (each a "Semi-
Annual Accrual Date"), the amount set forth opposite such date below:
<TABLE>
<CAPTION>
SEMI-ANNUAL ACCRETED
ACCRUAL DATE VALUE
------------ ---------
<S> <C>
Issue Date...................................................... $ 606.14
November 1, 1997................................................ 606.65
May 1, 1998..................................................... 637.74
November 1, 1998................................................ 670.43
May 1, 1999..................................................... 704.79
November 1, 1999................................................ 740.91
May 1, 2000..................................................... 778.88
November 1, 2000................................................ 818.80
May 1, 2001..................................................... 860.76
November 1, 2001................................................ 904.87
May 1, 2002..................................................... 951.25
November 1, 2002................................................ $1,000.00;
</TABLE>
(ii) if the Specified Date occurs between two Semi-Annual Accrual Dates,
the sum of (a) the Accreted Value for the Semi-Annual Accrual Date
immediately preceding the Specified Date and (b) an amount equal to the
product of (x) the Accreted Value for the Semi-Annual Accrual Date
immediately following the Specified Date less the Accreted Value for the
Semi-Annual Accrual Date immediately preceding the Specified Date and (y) a
fraction, the numerator of which is the number of days actually elapsed
from the immediately preceding Semi-Annual Accrual Date to the Specified
Date, using a 360-day year of twelve 30-day months, and the denominator of
which is 180; and
(iii) if the Specified Date is after November 1, 2002, $1,000; and
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(b) on and after the Cash Interest Election Date, with respect to each
$1,000 principal face amount of Senior Discount Notes, the Accreted Value
determined in accordance with the foregoing as of such Cash Interest Election
Date (without any further accretion).
"Acquired Indebtedness" means Indebtedness of a person (a) assumed in
connection with an Asset Acquisition from such person or (b) existing at the
time such person becomes a Subsidiary of any other person and not incurred in
connection with, or in contemplation of, such Asset Acquisition or such person
becoming a Subsidiary.
"Affiliate" means, with respect to any specified person, (i) any other
person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person, (ii) any other person that
owns, directly or indirectly, 10% or more of such specified person's Capital
Stock, (iii) any officer or director of (A) any such specified person, (B) any
Subsidiary of such specified person or (C) any person described in clauses (i)
or (ii) above or (iv) the spouse of any natural person described in clauses
(i), (ii) or (iii) above or any person directly or indirectly controlling or
controlled by or under direct or indirect common control with such spouse.
"Asset Acquisition" means (a) an Investment by the Company or any Restricted
Subsidiary of the Company in any other person pursuant to which such person
shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any person which
constitute all or substantially all of the assets of such person, any division
or line of business of such person or any other properties or assets of such
person other than in the ordinary course of business.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition by the Company or any Restricted Subsidiary of the Company to any
person other than the Company or a Restricted Subsidiary of the Company, in
one or a series of related transactions for an aggregate consideration of more
than $1,000,000, of (a) any Capital Stock of any Subsidiary of the Company;
(b) all or substantially all of the properties and assets of any division or
line of business of the Company or any Restricted Subsidiary of the Company;
or (c) any other properties or assets of the Company or any Restricted
Subsidiary of the Company other than in the ordinary course of business
including any disposition of obsolete or worn-out assets. For purposes of the
covenant "Limitation on Disposition of Proceeds of Asset Sales," the following
shall not be deemed an Asset Sale: (i) any sale or other disposition by the
Company or a Restricted Subsidiary of the Company of the assets held for
disposition or discontinuance of IFE identified in this Prospectus for Fair
Market Value or (ii) an Investment of cash not prohibited by the Indentures.
For the purposes of this definition, the term "Asset Sale" shall not include
any sale, issuance, conveyance, transfer, lease or other disposition of
properties or assets that is governed by the provisions described under "--
Consolidation, Merger, Sale of Assets, Etc."
"Attributable Value" means, as to any particular lease under which any
person is at the time liable other than a Capitalized Lease Obligation, and at
any date as of which the amount thereof is to be determined, the total net
amount of rent required to be paid by such person under such lease during the
remaining term thereof (whether or not such lease is terminable at the option
of the lessee prior to the end of such term), including any period for which
such lease has been, or may, at the option of the lessor, be extended,
discounted from the last date of such term to the date of determination at a
rate per annum equal to the discount rate which would be applicable to a
Capitalized Lease Obligation with like term in accordance with GAAP. The net
amount of rent required to be paid under any lease for any such period shall
be the aggregate amount of rent payable by the lessee with respect to such
period after excluding amounts required to be paid on account of insurance,
taxes, assessments, utility, operating and labor costs and similar charges.
"Attributable Value" means, as to a Capitalized Lease Obligation under which
any person is at the time liable and at any date as of which the amount
thereof is to be determined, the capitalized amount thereof that would appear
on the face of a balance sheet of such person in accordance with GAAP.
"Average Life to Stated Maturity" means, with respect to any Indebtedness,
as at any date of determination, the quotient obtained by dividing (i) the sum
of the products of (a) the number of years from such date to the
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date or dates of each successive scheduled principal payment (including,
without limitation, any sinking fund requirements) of such Indebtedness and
(b) the amount of each such principal payment by (ii) the sum of all such
principal payments.
"Bank Facility" means the Second Amended and Restated Credit Agreement dated
as of October 28, 1997 among FCN Holding, IFE and Saban, as borrowers, and FK
Holdings, as guarantor, and the initial lenders named therein, as initial
lenders, and Citicorp USA, Inc., as administrative agent, and Citicorp
Securities, Inc. and BankBoston N.A., as co-arrangers, including any initial
or successive deferrals, renewals, waivers, extensions, replacements,
refinancings (in whole or part) or refundings thereof, or any amendments,
modifications or supplements, thereto and including any related notes,
guarantees, security agreements, pledge agreements, mortgages and other
collateral documents executed in connection therewith.
"Board of Directors" means the board of directors of a company or its
equivalent, including managers of a limited liability company (or members of a
member managed limited liability company), general partners of a partnership
or trustees of a business trust, or any duly authorized committee thereof.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such person's capital stock or equity participations, and any rights (other
than debt securities convertible into capital stock), warrants or options
exchangeable for or convertible into such capital stock and, including,
without limitation, with respect to partnerships, limited liability companies
or business trusts, ownership interests (whether general or limited) and any
other interest or participation that confers on a Person the right to receive
a share of the profits and losses of, or distributions of assets of, such
partnerships, limited liability companies or business trusts.
"Capitalized Lease Obligation" means any obligation under a lease of (or
other agreement conveying the right to use) any property (whether real,
personal or mixed) that is required to be classified and accounted for as a
capital lease obligation under GAAP, and, for the purpose of the Indentures,
the amount of such obligation at any date shall be the capitalized amount
thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means, at any time, (i) any evidence of Indebtedness with
a maturity of 365 days or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United States of
America is pledged in support thereof); (ii) certificates of deposit or
acceptances with a maturity of 365 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500,000,000, whose debt is
rated at least A-1 by S&P or at least P-1 by Moody's or at least an equivalent
rating category of another nationally recognized rating agency; (iii)
commercial paper with a maturity of 365 days or less issued by a corporation
that is not an Affiliate of the Company organized under the laws of any state
of the United States or the District of Columbia and rated at least A-1 by S&P
or at least P-1 by Moody's or at least an equivalent rating category of
another nationally recognized securities rating agency; (iv) repurchase
agreements and reverse repurchase agreements relating to marketable direct
obligations issued or unconditionally guaranteed by the government of the
United States of America or issued by any agency thereof and backed by the
full faith and credit of the United States of America, in each case maturing
within 365 days
from the date of acquisition; and (v) money market instruments which are
principally invested in Cash Equivalents referred to in the preceding clauses
(i) through (iv).
"Change of Control" means the occurrence of any of the following events:
(a)(i) the Permitted Holders cease to own at least 50% of the total Voting
Stock of the Company or (ii) The News Corporation Limited, the Murdoch Family
or any of their respective Affiliates cease to own at least 30% of the total
Voting Stock of the Company; (b) the Company consolidates with, or merges with
or into, another person or sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets to any person, or
any person consolidates with, or merges with or into, the Company, in any such
event pursuant to a transaction in which the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other property,
other than any such transaction where (i) the outstanding Voting Stock of the
Company is converted into or exchanged for Voting Stock (other than Redeemable
Capital Stock) of the surviving or transferee corporation
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and immediately after such transaction (i) the Permitted Holders own at least
50% of the total Voting Stock of the surviving or transferee corporation and
(ii) The News Corporation Limited, the Murdoch Family or any of their
respective Affiliates own at least 30% of the total Voting Stock of the
surviving or transferee corporation; (c) during any consecutive two-year
period, individuals who at the beginning of such period constituted the Board
of Directors of the Company (together with any new directors whose election by
such Board of Directors or whose nomination for election by the stockholders
of the Company was approved by a vote of 66 2/3% of the directors then still
in office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute at least 50% of the Board of Directors of the Company
then in office; or (d) the Company is liquidated or dissolved or adopts a plan
of liquidation or any order, judgment or decree shall be entered against the
Company decreeing the dissolution or splitup of the Company and such order
shall remain undischarged or unstayed for a period in excess of 60 days.
"Consolidated Cash Flow" means, with respect to any person for any period,
(i) the sum of, without duplication, the amounts for such period, taken as a
single accounting period, of (a) Consolidated Net Income, (b) Consolidated
Non-cash Charges, (c) Consolidated Interest Expense, (d) Consolidated Income
Tax Expense (other than income tax expense (either positive or negative)
attributable to extraordinary and nonrecurring gains or losses), (e) an amount
equal to any extraordinary and nonrecurring losses (to the extent such losses
were deducted in computing Consolidated Net Income), less (ii) non-cash items
increasing Consolidated Net Income; provided, however, that if, during such
period, such person or any of its Restricted Subsidiaries shall have made any
Asset Sales or Asset Acquisitions, Consolidated Cash Flow for such person and
its Restricted Subsidiaries for such period shall be adjusted to give pro
forma effect to the Consolidated Cash Flow directly attributable to the assets
which are the subject of such Asset Sales or Asset Acquisitions during such
period.
"Consolidated Income Tax Expense" means, with respect to any person for any
period, the provision for federal, state, local and foreign income taxes of
such person and its Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any person for any
period, without duplication, the sum of (i) the interest expense of such
person and its Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP, including, without limitation, (a)
any amortization of debt discount, (b) the net cost under Interest Rate
Protection Obligations (including any amortization of discounts), (c) the
interest portion of any deferred payment obligation, excluding accretion
recorded based upon liabilities arising from purchase accounting adjustments
from the acquisition of IFE, (d) all commissions, discounts and other fees and
charges owed with respect to letters of credit, bankers' acceptance financing
or similar facilities and (e) all capitalized and accrued interest and (ii)
the interest component of Capitalized Lease Obligations paid, accrued and/or
scheduled to be paid or accrued by such person and its Restricted Subsidiaries
during such period and (iii) the aggregate amount of dividends and other
distributions paid or accrued during such period in respect of Redeemable
Capital Stock (other than payments made in respect of the redemption of such
Redeemable Capital Stock (other than accrued and unpaid dividends thereon)) of
such person and its Restricted Subsidiaries on a consolidated basis, as
determined on a consolidated basis in accordance with GAAP. In no event shall
Consolidated Interest Expense include interest expense associated with Deeply
Subordinated Shareholder Loans.
"Consolidated Net Income" means, with respect to any person for any period,
the consolidated net income (or loss) of such person and its Restricted
Subsidiaries for such period as determined in accordance with GAAP, adjusted,
to the extent included in calculating such net income, by excluding, without
duplication, (i) all extraordinary gains or losses (net of fees and expenses
relating to the transaction giving rise thereto), (ii) the portion of net
income of such person and its Restricted Subsidiaries derived from or in
respect of Investments in persons other than Restricted Subsidiaries except to
the extent that cash dividends or distributions have not actually been
received by such person or one of its Restricted Subsidiaries, (iii) net
income (or loss) of any person combined with such person or one of its
Restricted Subsidiaries on a "pooling of interests" basis attributable to any
period prior to the date of combination, (iv) gains or losses in respect of
any Asset Sales by such person or one of its Restricted Subsidiaries (net of
fees and expenses relating to the transaction giving rise thereto), on an
after-tax basis, (v) the net income of any Restricted Subsidiary of such
person to the extent that
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the declaration of dividends or similar distributions by that Restricted
Subsidiary of that income is not at the time permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulations
applicable to that Restricted Subsidiary or its stockholders and (vi) any gain
or loss realized as a result of the cumulative effect of a change in
accounting principles.
"Consolidated Net Tangible Assets" of any person means, as of any date, (a)
all amounts that would be shown as assets on a consolidated balance sheet of
such person and its Restricted Subsidiaries prepared in accordance with GAAP,
less (b) the amount thereof constituting goodwill and other intangible assets
as calculated in accordance with GAAP.
"Consolidated Non-cash Charges" means, with respect to any person for any
period, the aggregate depreciation, amortization (excluding amortization of
programming costs) and other non-cash expenses of such person and its
Restricted Subsidiaries reducing Consolidated Net Income of such person and
its Restricted Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP (excluding any such charges constituting an
extraordinary item or loss or any such charge which requires an accrual of or
a reserve for cash charges for any future period).
"control" when used with respect to any specified person means the power to
direct the management and policies of such person, directly or indirectly,
whether through ownership of voting securities, by contract or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any of its Restricted Subsidiaries against fluctuations in currency
values.
"Deeply Subordinated Shareholder Loans" means any Indebtedness of the
Company for money borrowed from and held by either (x) a Permitted Holder or
(y) another person whose obligations have been guaranteed by a Permitted
Holder, provided that, except to the extent expressly permitted by the
covenant "Limitation on Restricted Payments," such Indebtedness of the Company
(i) has been expressly subordinated in right of payment as to all payments of
interest and principal to the Notes, (ii) provides for no payments of interest
(other than payments in-kind) or principal prior to the earlier of (a) the end
of the sixth month after the final maturity of the Notes and (b) the payment
in full cash of all Notes (or due provision therefor which results in the
discharge of all obligations under the Indenture); provided, further, that the
terms of any such Indebtedness shall be evidenced by a note in the form
annexed to the Indenture and the Company shall have delivered the specified
Opinions of Counsel as to the validity and enforceability of the subordination
terms thereof.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disinterested Member of the Board of Directors of the Company" means, with
respect to any transaction or series of transactions, a member of the Board of
Directors of the Company other than a member who has any material direct or
indirect financial interest in or with respect to such transaction or series
of transactions or who is an officer, director or an employee of any person
who has any direct or indirect financial interest in or with respect to such
transaction or series of transactions (other than the Company or a Restricted
Subsidiary of the Company).
"Entertainment/Programming Business" means a business engaged primarily in
the ownership, operation, acquisition, development, production, distribution
or syndication of general entertainment or children's programming including,
without limitation, any business engaged in by the Company and its Restricted
Subsidiaries on the Issue Date.
"Event of Default" has the meaning set forth under "Events of Default"
herein.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Existing Preferred" means the Series A Preferred Stock outstanding on the
Issue Date.
"Existing Subordinated Notes" means (i) the Subordinated Note of the Company
issued to News America Holdings Incorporated in the principal amount
(excluding accreted interest) of approximately $345.5 million outstanding on
the Issue Date (before giving effect to the use of proceeds from the Offering
and the Flextech Transaction) and (ii) the Subordinated Note of the Company
issued to Fox Broadcasting Company in the principal amount (excluding accreted
interest) of approximately $108.6 million outstanding on the Issue Date
(before giving effect to the use of proceeds from the Offering).
Notwithstanding anything herein to the contrary, the Company may amend the
term of the Existing Subordinated Notes to make them Deeply Subordinated
Shareholder Loans.
"Fair Market Value" means, with respect to any asset, the price which could
be negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing buyer, neither of which is under pressure or
compulsion to complete the transaction; provided, however, that, except with
respect to any Asset Sale which involves an asset or assets constituting less
than $25,000,000, the determination of the Fair Market Value of any asset or
assets shall be approved by the Board of Directors of the Company, acting in
good faith and shall be evidenced by resolutions of the Board of Directors of
the Company delivered to the Trustee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States of America, which are applicable at the date
of the Indenture.
"guarantee" means, as applied to any obligation, (i) a guarantee (other than
by endorsement of negotiable instruments for collection in the ordinary course
of business), direct or indirect, in any manner, of any part or all of such
obligation and (ii) an agreement, direct or indirect, contingent or otherwise,
the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of nonperformance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts available to be drawn down under letters of credit of
another person.
"Indebtedness" means, with respect to any person, without duplication, (a)
all liabilities of such person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities and liabilities for entertainment programming,
participations or residuals incurred in the ordinary course of business, but
including, without limitation, all obligations, contingent or otherwise, of
such person in connection with any letters of credit, banker's acceptance or
other similar credit transaction, (b) all obligations of such person evidenced
by bonds, notes, debentures or other similar instruments, (c) all indebtedness
created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such person (even if the rights
and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), but excluding
trade accounts payable arising in the ordinary course of business, (d) all
Capitalized Lease Obligations of such person, (e) all Indebtedness referred to
in the preceding clauses of other persons and all dividends of other persons,
the payment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon property (including, without limitation, accounts and contract
rights) owned by such person, even though such person has not assumed or
become liable for the payment of such Indebtedness, (f) all guarantees of
Indebtedness referred to in this definition by such person, (g) all Redeemable
Capital Stock of such person valued at the greater of its voluntary or
involuntary maximum fixed repurchase price plus accrued dividends, (h) all
obligations under or in respect of Interest Rate Protection Obligations of
such person, and (i) any amendment, supplement, modification, deferral,
renewal, extension, refinancing or refunding of any liability of the types
referred to in clauses (a) through (h) above. For purposes hereof, the
"maximum fixed repurchase price" of any Redeemable Capital Stock which does
not have a fixed repurchase price shall be calculated in accordance with the
terms of such Redeemable Capital Stock as if such Redeemable Capital Stock
were purchased on any date on which Indebtedness shall be required to be
determined pursuant to
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the Indenture, and if such price is based upon, or measured by, the fair
market value of such Redeemable Capital Stock, such fair market value shall be
approved in good faith by the board of directors of the issuer of such
Redeemable Capital Stock. In the case of Indebtedness of other persons, the
payment of which is secured by a Lien on property owned by a person as
referred to in clause (e) above, the amount of the Indebtedness of such person
attributable to such Lien at any date shall be the lesser of the Fair Market
Value at such date of any asset subject to such Lien and the amount of the
Indebtedness secured. In no event shall "Indebtedness" include (i) Deeply
Subordinated Shareholder Loans so long as they are issued to and held by a
Permitted Holder or (ii) the Existing Preferred to the extent the terms
thereof are as in effect on the Issue Date.
"Independent Financial Advisor" means a nationally recognized accounting,
appraisal or investment banking firm (i) which does not, and whose directors,
officers and employees or Affiliates do not have, a direct or indirect
financial interest in the Company and (ii) which, in the judgment of the Board
of Directors of the Company, is otherwise independent and qualified to perform
the task for which it is to be engaged.
"Interest Rate Protection Agreement" means, with respect to any person, any
arrangement with any other person whereby, directly or indirectly, such person
is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such person calculated by
applying a fixed or a floating rate of interest on the same notional amount
and shall include, without limitation, interest rate swaps, caps, floors,
collars and similar agreements.
"Interest Rate Protection Obligations" means the obligations of any person
pursuant to any Interest Rate Protection Agreements.
"Investment" means, with respect to any person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any other person.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or
preference or priority or other encumbrance upon or with respect to any
property of any kind. A person shall be deemed to own subject to a Lien any
property which such person has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement.
"Maturity Date" means November 1, 2007.
"Murdoch Family" means one or more of (a) K. Rupert Murdoch, his wife,
parents, children or more remote issue, or brothers or sisters or children or
more remote issue of a brother or sister, (b) any person directly or
indirectly controlled by one or more of the persons referred to in clause (a)
of this definition or (c) a trust in which the majority of the trustees are
persons referred to in clause (a) or (b) of this definition or can be removed
or replaced by one or more of the persons referred to in clause (a) or (b) of
this definition.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to the Company or any Restricted Subsidiary of the Company) net
of (i) brokerage commissions and other fees and expenses (including, without
limitation, fees and expenses of legal counsel and investment bankers) related
to such Asset Sale, (ii) provisions for all taxes payable as a result of such
Asset Sale and relocation costs, (iii) amounts required to be paid to any
person (other than the Company or any Restricted Subsidiary of the Company)
owning a beneficial interest in or a Lien upon the assets subject to the Asset
Sale, (iv) payments made to retire Indebtedness where payment of such
Indebtedness is secured by the assets or properties the subject of
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such Asset Sale, and (v) appropriate amounts to be provided by the Company or
any Restricted Subsidiary of the Company, as the case may be, as a reserve
required in accordance with GAAP against any liabilities associated with such
Asset Sale and retained by the Company or any Restricted Subsidiary of the
Company, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as reflected in an officers'
certificate delivered to the Trustee.
"Offer" has the meaning set forth in the definition of "Offer to Purchase"
below.
"Offer to Purchase" means a written offer (the "Offer") sent by or on behalf
of the Company by first-class mail, postage prepaid, to each holder at his
address appearing in the register for the Notes on the date of the Offer
offering to purchase up to the principal amount or Accreted Value of Notes
specified in such Offer at the purchase price specified in such Offer (as
determined pursuant to the applicable Indenture). Unless otherwise provided
for in the Indentures or otherwise required by applicable law, the Offer shall
specify an expiration date (the "Expiration Date") of the Offer to Purchase,
which shall be not less than 20 Business Days nor more than 60 days after the
date of such Offer, and a settlement date (the "Purchase Date") for purchase
of Notes to occur no later than five Business Days after the Expiration Date.
The Company shall notify the applicable Trustee at least 15 Business Days
(or such shorter period as is acceptable to the applicable Trustee) prior to
the mailing of the Offer of the Company's obligation to make an Offer to
Purchase, and the Offer shall be mailed by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company. The
Offer shall contain all the information required by applicable law to be
included therein. The Offer shall also contain information concerning the
business of the Company and its Subsidiaries which the Company in good faith
believes will enable such Holders to make an informed decision with respect to
the Offer to Purchase (which at a minimum will include (i) the most recent
annual and quarterly financial statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained in the
document required to be filed with the Trustee pursuant to the Indenture
(which requirements may be satisfied by delivery of such documents together
with the Offer), (ii) a description of material developments in the Company's
business subsequent to the date of the latest of such financial statements
referred to in clause (i) (including a description of the events requiring the
Company to make the Offer to Purchase), (iii) if applicable, appropriate pro
forma financial information concerning the Offer to Purchase and the events
requiring the Company to make the Offer to Purchase and (iv) any other
information required by applicable law to be included therein). The Offer
shall contain all instructions and materials necessary to enable such Holders
to tender Notes pursuant to the Offer to Purchase. The Offer shall also state:
(1) the Section of the Indenture pursuant to which the Offer to Purchase
is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the outstanding Notes offered to be
purchased by the Company pursuant to the Offer to Purchase (including, if
less than 100%, the manner by which such amount has been determined
pursuant to the Section of the Indenture requiring the Offer to Purchase)
(the "Purchase Amount");
(4) in the case of the Senior Notes, the purchase price to be paid by the
Company for each $1,000 aggregate principal amount of Notes accepted for
payment (as specified pursuant to the Senior Notes Indenture) (the
"Purchase Price" with respect to the Senior Notes) and (b) in the case of
the Senior Discount Notes, the purchase price to be paid by the Company for
each $1,000 of Accreted Value (if the Purchase Date is prior to the earlier
of November 1, 2002 or the Cash Interest Election Date) or $1,000 aggregate
principal amount at maturity (if the Purchase Date is on or after such
earlier date) of Notes accepted for payment (as specified pursuant to the
Senior Discount Notes Indenture) (the "Purchase Price" with respect to the
Senior Discount Notes);
(5) that the holder may tender all or any portion of the Notes registered
in the name of such holder and that any portion of a Note tendered must be
tendered in an integral multiple of $1,000 principal face amount;
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(6) the place or places where Notes are to be surrendered for tender
pursuant to the Offer to Purchase;
(7) that interest on any Note not tendered or tendered but not purchased
by the Company pursuant to the Offer to Purchase will continue to accrue;
(8) that on the Purchase Date the Purchase Price will become due and
payable upon each Note being accepted for payment pursuant to the Offer to
Purchase and that interest thereon shall cease to accrue on and after the
Purchase Date;
(9) that each holder electing to tender all or any portion of a Note
pursuant to the Offer to Purchase will be required to surrender such Note
at the place or places specified in the Offer prior to the close of
business on the Expiration Date (such Note being, if the Company or the
Trustee so requires, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Trustee
duly executed by, the holder thereof or his attorney duly authorized in
writing);
(10) that holders will be entitled to withdraw all or any portion of
Notes tendered if the Company (or its paying agent) receives, not later
than the close of business on the fifth Business Day next preceding the
Expiration Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the holder, the principal amount of the Note the
holder tendered, the certificate number of the Note the holder tendered and
a statement that such holder is withdrawing all or a portion of his tender;
(11) that (a) if Notes in an aggregate principal amount less than or
equal to the Purchase Amount are duly tendered and not withdrawn pursuant
to the Offer to Purchase, the Company shall purchase all such Notes and (b)
if Notes in an aggregate principal amount in excess of the Purchase Amount
are tendered and not withdrawn pursuant to the Offer to Purchase, the
Company shall purchase Notes having an aggregate principal amount equal to
the Purchase Amount on a pro rata basis (with such adjustments as may be
deemed appropriate so that only Notes in denominations of $1,000 principal
amount at maturity or integral multiples thereof shall be purchased); and
(12) that in the case of any holder whose Note is purchased only in part,
the Company shall execute and the Trustee shall authenticate and deliver to
the holder of such Note without service charge, a new Note or Notes, of any
authorized denomination as requested by such holder, in an aggregate
principal amount equal to and in exchange for the unpurchased portion of
the Note so tendered.
An Offer to Purchase shall be governed by and effected in accordance with
the provisions pertaining to the type of Offer to which it relates. References
above to principal amount shall mean and refer to principal amount at maturity
with respect to the Senior Discount Notes, unless the context otherwise
requires.
"Other Senior Debt Pro Rata Share" means under an Indenture the amount of
the applicable Excess Proceeds obtained by multiplying the amount of such
Excess Proceeds by a fraction, (i) the numerator of which is the aggregate
accreted value and/or principal amount, as the case may be, of all
Indebtedness (other than (x) the Notes issued thereunder and (y) Subordinated
Indebtedness) of the Company outstanding at the time of the applicable Asset
Sale with respect to which the Company is required to use Exceed Proceeds to
repay or make an offer to purchase or repay and (ii) the denominator of which
is the sum of (a) the aggregate principal amount of all Notes issued
thereunder that are outstanding at the time of the offer to purchase or repay
with respect to the applicable Asset Sale and (b) the aggregate principal
amount or the aggregate accreted value, as the case may be, of all other
Indebtedness (other than Subordinated Indebtedness) of the Company outstanding
at the time of the applicable Asset Sale Offer with respect to which the
Company is required to use the applicable Excess Proceeds to offer to repay or
make an offer to purchase or repay.
"Permitted Holder" means any member of the Murdoch Family, The News
Corporation Limited, Haim Saban and their respective controlled Affiliates.
"Permitted Indebtedness" means, without duplication:
(a) Indebtedness of the Company evidenced by the Notes;
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(b) Indebtedness of the Company and Restricted Subsidiaries under the
Bank Facility in an aggregate principal amount at any one time outstanding
not to exceed $725 million, less any amounts permanently repaid in
accordance with the covenant described under "Disposition of Proceeds of
Asset Sales";
(c) Indebtedness of the Company or any Restricted Subsidiary outstanding
on the date of the Indenture;
(d) Indebtedness to third parties for the production of television
programming by one or more special purpose partnerships, corporations,
joint ventures or similar structures (in which any interest of the Company
or any of its Restricted Subsidiaries is held through a Special Purpose
Vehicle), the production decisions in respect of which are controlled by
the Company or a Restricted Subsidiary;
(e) Indebtedness consisting of the liabilities and obligations,
contingent or otherwise, incurred by the Company or its Restricted
Subsidiaries in the ordinary course of business (other than for borrowed
money) to acquire, produce, license or distribute television programming;
(f) Indebtedness of the Company or any Restricted Subsidiary of the
Company incurred in respect of performance bonds, bankers' acceptances and
letters of credit in the ordinary course of business, including
Indebtedness evidenced by letters of credit issued in the ordinary course
of business to support the insurance or self-insurance obligations of the
Company or any of its Restricted Subsidiaries (including to secure workers'
compensation and other similar insurance coverages), in the aggregate
amount not to exceed $10 million at any time; but excluding letters of
credit issued to secure money borrowed;
(g)(i) Interest Rate Protection Obligations of the Company covering
Indebtedness of the Company and (ii) Interest Rate Protection Obligations
of any Restricted Subsidiary covering Indebtedness of such Restricted
Subsidiary provided that, in the case of either clause (i) or (ii), the
notional principal amount of any such Interest Rate Protection Obligations
that exceeds the principal amount of the Indebtedness to which such
Interest Rate Protection Obligations relate is otherwise permitted to be
incurred under the Indenture;
(h) Indebtedness of the Company or any Restricted Subsidiaries under
Currency Agreements; provided that (x) such Currency Agreements relate to
Indebtedness or the purchase price of goods purchased or sold by the
Company or any Restricted Subsidiary in the ordinary course of its business
and (y) such Currency Agreements do not increase the Indebtedness or other
obligations of the Company or a Restricted Subsidiary outstanding other
than as a result of fluctuations in foreign currency exchange rates or by
reason of fees, indemnities and compensation payable thereunder;
(i) Indebtedness of a Restricted Subsidiary owed to and held by the
Company or another Restricted Subsidiary, except that (i) any transfer of
such Indebtedness by the Company or a Restricted Subsidiary (other than to
the Company or another Restricted Subsidiary) and (ii) the sale, transfer
or other disposition by the Company or any Restricted Subsidiary of the
Company of Capital Stock of a Restricted Subsidiary (other than to the
Company or a Restricted Subsidiary) which is owed Indebtedness of another
Restricted Subsidiary shall, in each case, be an incurrence of Indebtedness
by such Restricted Subsidiary subject to the other provisions of the
Indentures;
(j) Indebtedness of the Company owed to and held by a Restricted
Subsidiary which is unsecured and subordinated in right of payment to the
payment and performance of the obligations of the Company under the
Indentures and the Notes, except that (i) any transfer of such Indebtedness
by the Company or a Restricted Subsidiary (other than to another Restricted
Subsidiary) and (ii) the sale, transfer or other disposition by the Company
or any Restricted Subsidiary of the Company of Capital Stock of a
Restricted Subsidiary (other than to the Company or a Restricted
Subsidiary) which is owed Indebtedness of the Company shall, in each case,
be an incurrence of Indebtedness by the Company, subject to the other
provisions of the Indentures;
(k) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instruments inadvertently (except
in the case of daylight overdrafts) drawn against insufficient funds in the
ordinary course of business; provided, however, that such Indebtedness is
extinguished within five business days of incurrence;
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(l) Indebtedness of the Company, in addition to that described in clauses
(a) through (k) of this definition, in an aggregate principal amount
outstanding at any time not to exceed $150 million;
(m) Indebtedness represented by obligations to purchase Capital Stock of
the Company pursuant to agreements, as in effect on the Issue Date, with
employees of the Company and its Restricted Subsidiaries upon the
termination of their employment in an aggregate principal amount not to
exceed $30 million during the term of the Indenture; and
(n) (i) Indebtedness of the Company the proceeds of which are used solely
to refinance (whether by amendment, renewal, extension or refunding)
Indebtedness of the Company or any of its Restricted Subsidiaries and (ii)
Indebtedness of any Restricted Subsidiary of the Company the proceeds of
which are used solely to refinance (whether by amendment, renewal,
extension or refunding) Indebtedness of any Restricted Subsidiary (in each
case other than the Indebtedness to be refinanced, redeemed or retired as
described under "Use of Proceeds" herein, and Indebtedness under clause (b)
or (g) through (m) of this definition); provided, however, that (x) the
principal amount of Indebtedness incurred pursuant to this clause (n) (or,
if such Indebtedness provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration of the
maturity thereof, the original issue price of such Indebtedness) shall not
exceed the sum of the principal amount of Indebtedness so refinanced, plus
the amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of such Indebtedness or the amount of any
premium reasonably determined by the Company as necessary to accomplish
such refinancing by means of a tender offer or privately negotiated
purchase, plus the amount of expenses in connection therewith, and (y) in
the case of Indebtedness incurred by the Company pursuant to this clause
(n) to refinance Subordinated Indebtedness, such Indebtedness (A) has no
scheduled principal payment prior to the 91st day after the Maturity Date,
(B) has an Average Life to Stated Maturity of the Notes and (C) is
subordinated to the Notes in the same manner and to the same extent that
the Subordinated Indebtedness being refinanced is subordinated to the
Notes.
"Permitted Investments" means any of the following: (i) Investments in the
Company or in a Restricted Subsidiary; (ii) Investments in another person, if
as a result of such Investment (A) such other person becomes a Restricted
Subsidiary or (B) such other person is merged or consolidated with or into, or
transfers or conveys all or substantially all of its assets to the Company or
a Restricted Subsidiary; (iii) Investments representing Capital Stock or
obligations issued to the Company or any of its Restricted Subsidiaries in
settlement of claims against any other person by reason of a composition or
readjustment of debt or a reorganization of any debtor of the Company or such
Restricted Subsidiary; (iv) Investments in Interest Rate Protection Agreements
on commercially reasonable terms entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business in connection with
the operations of the business of the Company or its Restricted Subsidiaries
to hedge against fluctuations in interest rates on its outstanding
Indebtedness; (v) Investments in the Notes; (vi) Investments in Cash
Equivalents; (vii) Investments acquired by the Company or any Restricted
Subsidiary in connection with an Asset Sale permitted under "--Certain
Covenants--Disposition of Proceeds of Asset Sales" to the extent such
Investments are non-cash proceeds as permitted under such covenant; (viii)
advances to employees or officers of the Company in the ordinary course of
business; (ix) any Investment to the extent that the consideration therefor is
Capital Stock (other than Redeemable Capital Stock) of the Company; and
(x) Investments in any person engaged in the Entertainment/Programming
Business not to exceed $65,000,000 at any time outstanding.
"Permitted Liens" means the following types of Liens:
(a) any Lien existing as of the date of the Indenture;
(b) Liens securing Indebtedness and other amounts owing under the Bank
Facility;
(c) any Lien securing Acquired Indebtedness created prior to (and not
created in connection with, or in contemplation of) the incurrence of such
Indebtedness by the Company or any Restricted Subsidiary, if such Lien does
not attach to any property or assets of the Company or any Restricted
Subsidiary other than the property or assets subject to the Lien prior to
such incurrence;
(d) Liens in favor of the Company or a Restricted Subsidiary;
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(e) Liens on and pledges of the Capital Stock of any Unrestricted
Subsidiary securing any Indebtedness of such Unrestricted Subsidiary;
(f) Liens for taxes, assessments or governmental charges or claims either
(i) not delinquent for 90 days or more or (ii) contested in good faith by
appropriate proceedings and as to which the Company or its Restricted
Subsidiaries shall have set aside on its books such reserves as may be
required pursuant to GAAP;
(g) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent for
90 days or more or being contested in good faith and as to which reserves
or other appropriate provisions, if any, as shall be required by GAAP shall
have been made in respect thereof;
(h) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(i) judgment Liens not giving rise to an Event of Default so long as such
Lien is adequately bonded and any appropriate legal proceedings which may
have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(j) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Restricted Subsidiaries;
(k) any interest or title of a lessor or sublessor and any restriction or
encumbrance to which the interest or title of such lessor or sublessor may
be subject;
(l) purchase money Liens to finance property or assets of the Company or
any Restricted Subsidiary of the Company acquired in the ordinary course of
business; provided, however, that (i) the related purchase money
Indebtedness shall not be secured by any property or assets of the Company
or any Restricted Subsidiary of the Company other than the property and
assets so acquired and (ii) the Lien securing such Indebtedness shall be
created within 180 days of such acquisition;
(m) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to
such letters of credit and products and proceeds thereof;
(n) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and set-
off;
(o) Liens securing Interest Rate Protection Obligations which Interest
Rate Protection Obligations relate to Indebtedness that is secured by Liens
otherwise permitted under this Indenture;
(p) Liens on assets of Unrestricted Subsidiaries;
(q) Liens securing Capitalized Lease Obligations or incurred in
connection with Sale-Leaseback Transactions;
(r) Liens securing other Indebtedness in an aggregate amount not to
exceed 10% of the Company's Consolidated Net Tangible Assets as of the last
day of the Company's most recently completed fiscal period for which
financial information is available;
(s) Liens in favor of the Screen Actors Guild, the Writers Guild of
America, the Directors Guild of America or any other unions, guilds or
collective bargaining units under the collective bargaining agreements,
which Liens are incurred in the ordinary course of business solely to
secure the payment of residuals and other collective bargaining obligations
required to be paid by the Company or any of its Restricted Subsidiaries
under any such collective bargaining agreement;
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(t) Liens arising in connection with completion guarantees entered into
in the ordinary course of business and consistent with then current
industry practices, securing obligations (other than Indebtedness for
borrowed money) of the Company or any of its Restricted Subsidiaries not
yet due and payable;
(u) Liens in favor of suppliers and/or producers of any programming that
are incurred in the ordinary course of business solely to secure the
purchase price of such programming and such directly related rights or the
rendering of services necessary for the production of such programming;
provided, however, that no such Lien shall extend to or cover any property
or assets other than the programming and the rights directly related
thereto being so acquired or produced; and provided further that any
payment obligations secured by such Liens shall by their terms be payable
solely from the revenues that are derived directly from the exhibition,
syndication, exploitation, distribution or disposition of such item of
programming and/or such directly related rights;
(v) Liens upon any item of programming and rights directly relating
thereto in favor of distributors of such item of programming that are
incurred in each case in the ordinary course of business solely to secure
delivery of such item of programming and the licensing of the rights in
such item of programming directly related thereto; provided, however, that
no such Lien shall extend to or cover any property or assets other than the
item of programming being so delivered and the rights directly related
thereto; and provided further that any payment obligations secured by such
Liens shall by their terms be payable solely from the revenues that are
derived directly from the exhibition, syndication, exploitation,
distribution or disposition of such item of Product and/or such directly
related rights; and
(w) Liens on assets or Capital Stock of a Special Purpose Vehicle.
"person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Preferred Stock," as applied to any person, means Capital Stock of any
class or classes (however designated) which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such person, over
shares of Capital Stock of any other class of such person.
"principal amount at maturity" means, with respect to the Senior Discount
Notes, $1,000 per $1,000 face amount of Senior Discount Notes; provided,
however, that if the Company shall have made a Cash Interest Election, the
principal amount at maturity with respect to each Senior Discount Note shall
be the Accreted Value of such Senior Discount Note as of the Cash Interest
Election Date.
"Qualified Equity Interest" in a person means any interest in Capital Stock
of such person, other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any class or series of Capital Stock that,
either by its terms, by the terms of any security into which it is convertible
or exchangeable or by contract or otherwise, is or upon the happening of an
event or passage of time would be, required to be redeemed prior to the
Maturity Date or is redeemable at the option of the holder thereof at any time
prior to the Maturity Date, or is convertible into or exchangeable for debt
securities at any time prior to the Maturity Date.
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"Restricted Subsidiary Indebtedness" means Indebtedness of any Restricted
Subsidiary (i) which is not subordinated to any other Indebtedness of such
Restricted Subsidiary and (ii) in respect of which the Company is not also
obligated (by means of a guarantee or otherwise) other than, in the case of
this clause (ii), Indebtedness under the Bank Facility.
"Sale-Leaseback Transaction" of any person means an arrangement with any
lender or investor or to which such lender or investor is a party providing
for the leasing by such person of any property or asset of such person
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which has been or is being sold or transferred by such Person after the
acquisition thereof or the completion of construction or commencement of
operation thereof to such lender or investor or to any person to whom funds
have been or are to be advanced by such lender or investor on the security of
such property or asset. The stated maturity of such arrangement shall be the
date of the last payment of rent or any other amount due under such
arrangement prior to the first date on which such arrangement may be
terminated by the lessee without payment of a penalty.
"Significant Subsidiary" of any person means a Restricted Subsidiary of such
person which would be a significant subsidiary of such person as determined in
accordance with the definition in Section 210.1-02(w) of Regulation S-X
promulgated by the Commission and as in effect on the date of the Indenture.
"Special Purpose Vehicle" means a person which is, or was, established: (i)
with separate legal identity and limited liability; (ii) as an Affiliate of
the Company; and (iii) for the sole purpose of a single transaction, or series
of related transactions, and which has no assets and liabilities other than
those directly acquired or incurred in connection with such transaction(s).
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is
due and payable, and when used with respect to any other Indebtedness, means
the date specified in the instrument governing such Indebtedness as the fixed
date on which the principal of such Indebtedness, or any installment of
interest thereon, is due and payable.
"Strategic Equity Investor" means a corporation or entity with an equity
market capitalization, a net asset value or annual revenues of at least $1.0
billion that primarily owns and operates businesses in the entertainment,
cable television, programming or similar or related industries.
"Subordinated Indebtedness" means, with respect to the Company, Indebtedness
of the Company which is expressly subordinated in right of payment to the
Notes.
"Subsidiary" means, with respect to any person, (i) a corporation at least
50% of whose Voting Stock is at the time, directly or indirectly, owned by
such person, by one or more Subsidiaries of such person or by such person and
one or more Subsidiaries thereof and (ii) any other person (other than a
corporation), including, without limitation, a partnership, limited liability
company, business trust or joint venture, in which such person, one or more
Subsidiaries thereof or such person and one or more Subsidiaries thereof,
directly or indirectly, at the date of determination thereof, has at least a
50% ownership interest entitled to vote in the election of directors, managers
or trustees thereof (or other person performing similar functions). For
purposes of this definition, any directors' qualifying shares or investments
by foreign nationals mandated by applicable law shall be disregarded in
determining the ownership of a Subsidiary.
"Unrestricted Subsidiary" means each Subsidiary of the Company designated as
such pursuant to and in compliance with the covenant described under "--
Certain Covenants--Limitation on Designations of Unrestricted Subsidiaries."
"Voting Stock" means any class or classes of Capital Stock pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect at least 50% of the board of directors, managers or trustees of any
person (irrespective of whether or not, at the time, stock of any other class
or classes shall have, or might have, voting power by reason of the happening
of any contingency).
BOOK-ENTRY; DELIVERY AND FORM
The Notes will be represented by a single, permanent global note in
definitive, fully registered book-entry form for each of the Senior Notes and
Senior Discount Notes (a "Global Security") which will be registered in the
name of a nominee of DTC and deposited on behalf of purchasers of the Notes
represented thereby with a custodian for DTC for credit to the respective
accounts of the purchasers (or to such other accounts as they may direct) at
DTC.
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The Global Securities. The Company expects that pursuant to procedures
established by DTC (a) upon deposit of the Global Securities, DTC or its
custodian will credit on its internal system portions of the Global Securities
which shall be comprised of the corresponding respective amounts of the Global
Securities to the respective accounts of persons who have accounts with such
depositary and (b) ownership of the Notes will be shown on, and the transfer
of ownership thereof will be effected only through, records maintained by DTC
or its nominee (with respect to interests of Participants (as defined below))
and the records of Participants (with respect to interests of persons other
than Participants). Ownership of beneficial interests in the Global Securities
will be limited to persons who have accounts with DTC ("Participants") or
persons who hold interests through Participants. Investors may hold their
interests in the Global Security directly through DTC if they are Participants
in such system, or indirectly through organizations which are Participants in
such system.
So long as DTC or its nominee is the registered owner or holder of any of
the Notes, DTC or such nominee will be considered the sole owner or holder of
such Notes represented by the Global Securities for all purposes under the
Indentures and under the Notes represented thereby. No beneficial owner of an
interest in the Global Securities will be able to transfer such interest
except in accordance with the applicable procedures of DTC in addition to
those provided for under the Indentures.
Payments of the principal of, premium, if any, and interest (including
Additional Interest) on the Notes represented by the Global Securities will be
made to DTC or its nominee, as the case may be, as the registered owner
thereof. None of the Company, the Trustee or any paying agent under the
Indenture will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Securities or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
the principal of, premium, if any, and interest (including Additional
Interest) on the Notes represented by the Global Securities, will credit
Participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the Global Securities as shown in the
records of DTC or its nominee. The Company also expects that payments by
Participants to owners of beneficial interests in the Global Securities held
through such Participants will be governed by standing instructions and
customary practice as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such payment
will be the responsibility of such Participants.
Transfers between Participants in DTC will be effected in accordance with
DTC rules and will be settled in immediately available funds. If a holder
requires physical delivery of a Certificated Security for any reason,
including to sell Notes to persons in states which require physical delivery
of such securities or to pledge such securities, such holder must transfer its
interest in the Global Securities in accordance with the normal procedures of
DTC and in accordance with the procedures set forth in the Indenture.
Any beneficial interest in one of the Global Securities that is transferred
to a person who takes delivery in the form of an interest in the other Global
Security will, upon transfer, cease to be an interest in such Global Security
and, accordingly, will thereafter be subject to all transfer restrictions, if
any, and other procedures applicable to beneficial interests in such other
Global Security with respect to the applicable notes for as long as it remains
such an interest.
DTC has advised the Company that DTC will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange
as described below) only at the direction of one or more Participants to whose
account the DTC interests in the Global Securities are credited and only in
respect of the aggregate principal amount as to which such Participant or
Participants has or have given such direction. However, if there is an Event
of Default under the Indenture, DTC will exchange the Global Securities for
Certificated Securities, which it will distribute to its Participants and
which will be legended as set forth under the heading "Notice to Investors."
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the
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meaning of the Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its Participants and facilitate the clearance and
settlement of securities transactions between Participants through electronic
book-entry changes in accounts of its Participants, thereby eliminating the
need for physical movement of certificates. Participants include securities
brokers and dealers, banks, trust companies and clearing corporations and
certain other organizations. Indirect access to the DTC system is available to
others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in the Global Securities among Participants
of DTC, it is under no obligation to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company nor the
Trustee will have any responsibility for the performance by DTC, or its
respective direct or indirect participants of their respective obligations
under the rules and procedures governing their operations.
Certificated Securities. Interests in the Global Securities will be
exchanged for Certificated Securities if (i) DTC notifies the Company that it
is unwilling or unable to continue as depositary for the Global Securities, or
DTC ceases to be a "Clearing Agency" registered under the Exchange Act, and a
successor depositary is not appointed by the Company within 40 days, or (ii)
an Event of Default has occurred and is continuing with respect to the Notes.
Upon the occurrence of any of the events described in the preceding sentence,
the Company will cause the appropriate Certificated Securities to be
delivered.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
THE FOLLOWING SUMMARY OF THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES IS APPLICABLE IN ALL
MATERIAL RESPECTS TO THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE OLD NOTES.
UNLESS THE CONTEXT OTHERWISE REQUIRES, FOR PURPOSES OF THIS SUMMARY REFERENCES
TO THE "NOTES" ARE TO THE NOTES AND THE OLD NOTES, COLLECTIVELY, REFERENCES TO
THE "SENIOR NOTES" ARE TO THE SENIOR NOTES AND THE OLD SENIOR NOTES,
COLLECTIVELY, AND REFERENCES TO THE "SENIOR DISCOUNT NOTES" ARE TO THE SENIOR
DISCOUNT NOTES AND THE OLD SENIOR DISCOUNT NOTES, COLLECTIVELY.
The following is a summary of certain of the material United States federal
income tax consequences of the purchase, ownership and disposition of the
Notes. It is intended only as a descriptive summary and does not purport to be
a complete technical analysis or listing of all potential tax effects to
Holders. Unless otherwise stated, this summary only deals with Notes held as
capital assets by U.S. Holders (as defined herein) who purchased such Notes
upon original issuance at the issue price therefor. As used herein, "U.S.
Holder" means a beneficial owner of the Notes that is (a) an individual
citizen or resident of the United States or any political subdivision thereof,
(b) a corporation or partnership organized in or under the laws of the United
States or a state, (c) an estate the income of which is subject to United
States federal income taxation regardless of its source, or (d) a trust if (i)
a court within the United States is able to exercise primary supervision over
the administration of the trust and (ii) one or more United States persons
have the authority to control all substantial decisions of the trust. This
discussion does not deal with all classes of holders, such as banks, thrifts,
real estate investment trusts, regulated investment companies, dealers in
securities or currencies, tax-exempt investors, persons that have a functional
currency other than the U.S. dollar or persons that will hold the Notes as
part of a "synthetic security," "hedge," "straddle," "conversion transaction,"
or other than as a capital asset. This summary is based upon the Internal
Revenue Code of 1986, as amended, Treasury Regulations thereunder and
administrative and judicial interpretations thereof, as of the date hereof,
all of which are subject to change, possibly on a retroactive basis.
Prospective purchasers of the Notes should consult with their tax advisors
concerning issues including (i) the application of United States federal
income tax laws to them stemming from an investment in the Notes, (ii) any
consequences to them arising under the laws of any other taxing jurisdiction,
including, without limitation, the laws of any state, local or foreign taxing
jurisdiction, and (iii) the consequences of purchasing the Notes at a price
other than the issue price.
INTEREST
It is not expected that the Senior Notes will be issued with OID in excess
of a de minimis amount. Accordingly, interest on the Senior Notes will be
taxable to a U.S. Holder as ordinary interest income in accordance with the
U.S. Holder's method of tax accounting at the time that such interest is
accrued or (actually or constructively) received.
ORIGINAL ISSUE DISCOUNT
For United States federal income tax purposes, the Senior Discount Notes
will be considered to be issued with OID. The amount of OID will be the excess
of a Senior Discount Note's stated redemption price at maturity over its issue
price. The issue price of a Senior Discount Note will equal the first price at
which a substantial amount of the Senior Discount Notes are sold. The stated
redemption price at maturity of a Senior Discount Note will equal the amount
payable at maturity (i.e., 100% of the initial principal amount of the Senior
Discount Note) plus all stated interest thereon.
A U.S. Holder of a Senior Discount Note will be required to include OID in
its gross taxable income (as ordinary income) periodically over the term of
the Senior Discount Note before receipt of the cash attributable to such
income, using a constant yield method that takes into account the compounding
of interest. Such
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treatment will continue to apply whether or not the Company makes the Cash
Interest Election. The Company's exercise of the Cash Interest Election and
reduction of the principal amount at maturity of the Senior Discount Notes
will not represent a taxable event to a U.S. Holder of a Senior Discount Note.
The receipt of cash interest payments under a Senior Discount Note will not be
taxable to a holder; rather such payments will be treated as payments of OID
which will reduce the holder's adjusted tax basis in the Senior Discount Note.
The Company will furnish annually to the U.S. Internal Revenue Service and
to U.S. Holders (other than with respect to certain exempt holders, including,
in particular, corporations) information with respect to the OID accruing
while the Senior Discount Notes were held by the U.S. Holders. Such
information will be based on the accruals of OID as if the holder were the
original holder of the Senior Discount Note.
SALE, EXCHANGE AND RETIREMENT OF NOTES
A U.S. Holder will recognize gain or loss equal to the difference between
the amount realized upon the sale, exchange or retirement of the Notes and the
U.S. Holder's adjusted tax basis in the Notes. A U.S. Holder's adjusted tax
basis in a Senior Discount Note will generally equal the issue price of such
Senior Discount Note, increased by the amount of any OID previously included
in income by such U.S. Holder with respect to such Senior Discount Note and
reduced by any principal and interest payments received by the U.S. Holder
with respect to such Senior Discount Note. Except with respect to accrued but
unpaid interest, such gain or loss will be capital gain or loss. Under the
recently enacted Taxpayer Relief Act of 1997, net capital gain (i.e.,
generally, capital gain in excess of capital loss) recognized by an individual
upon the sale or exchange of a capital asset that has been held for more than
18 months will generally be subject to tax at a rate not to exceed 20%. Net
capital gain recognized by an individual from the sale or exchange of a
capital asset that has been held for more than 12 months but not for more than
18 months will continue to be subject to tax at a rate not to exceed 28%, and
net capital gain recognized from the sale or exchange of a capital asset that
has been held for 12 months or less will continue to be subject to tax at
ordinary income tax rates. In addition, net capital gain recognized by a
corporate taxpayer will continue to be subject to tax at the ordinary income
tax rates applicable to corporations.
EXCHANGE OFFER
The exchange of Old Notes for Notes pursuant to the Exchange Offer will not
be taxable to the U.S. Holders of the Notes.
BACKUP WITHHOLDING
The backup withholding rules require the Company to deduct and withhold
federal income tax at the rate of 31% with respect to payments made to
noncorporate holders who are not otherwise exempt if (a) the holder fails to
furnish a taxpayer identification number ("TIN") to the Company, (b) the IRS
notifies the Company that the TIN furnished by the holder is incorrect, (c)
there has been notified payee underpaying, or (d) there has been payee
certification failure. Any amounts withheld from a payment to a holder under
the backup withholding rules will be allowed as a refund or credit against
such holder's federal income tax, provided that the required information is
furnished to the IRS.
NON-UNITED STATES HOLDERS
Payments of interest and OID on the Notes to a Holder who is not a U.S.
Holder (a "Non-U.S. Holder") may, if certain conditions are met, be exempt
from United States federal income tax, including withholding tax, unless the
interest and OID is effectively connected with the conduct of a trade or
business of the Non-U.S. Holder in the Untied States or, if a treaty applies,
the interest and OID is generally attributable to the United States permanent
establishment maintained by the Non-U.S. Holder.
A Non-U.S. Holder of the Notes will not be subject to United States federal
income tax, including withholding tax, on gain realized on the sale or other
disposition of the Notes unless (i) such gain is effectively connected with
the conduct by the Non-U.S. Holder of a trade or business within the United
States or, if a treaty applies, the gain is generally attributable to the
United States permanent establishment maintained by the Non-U.S. Holder, or
(ii) in the case of gain realized by an individual holder, the Holder is
present in the United States for at least 183 days in the taxable year of the
disposition and certain other conditions are met.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives the Notes for its own account pursuant to
the Exchange Offer (a "Participating Broker") must acknowledge that it will
deliver a prospectus in connection with any resale of such Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker in connection with resales of the Notes
received in exchange for the Old Notes where such Old Notes were acquired as a
result of market-making activities or other trading activities. The Company
has agreed that for a period of 90 days after the Expiration Date, it will
make this Prospectus, as amended or supplemented, available to any
Participating Broker for use in connection with any such resale. In addition,
until , 1998 (90 days after the date of this Prospectus), all dealers
effecting transactions in the Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of the Notes by
broker-dealers. The Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related
to such prevailing market prices or negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Notes. Any broker-dealer that
resells Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of Notes and any commissions
or concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that,
by acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
For a period of 90 days after the Expiration Date, the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any Participating Broker that requests such documents in
the Letter of Transmittal. The Company has agreed to pay all expenses incident
to the Exchange Offer (including the expenses of one counsel for the holders
of the Old Notes) other than commissions or concessions of any brokers or
dealers and will indemnify the holders of the Old Notes (including any
Participating Broker) against certain liabilities, including liabilities under
the Securities Act.
LEGAL MATTERS
The validity of the Notes will be passed upon for the Company by Squadron,
Ellenoff, Plesent & Sheinfeld, LLP, New York, New York. The Company has been
advised by Troop Meisinger Steuber & Pasich, LLP, Los Angeles, California and
Squadron, Ellenoff, Plesent & Sheinfeld, LLP, New York, New York with respect
to the Exchange Offer.
EXPERTS
The consolidated financial statements of Saban Entertainment, Inc. at May
31, 1995 and at October 31, 1995, and for the year ended May 31, 1995 and the
five month period ended October 31, 1995, appearing in this Prospectus and
Registration Statement, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
The consolidated financial statements of FCN Holding, Inc. at July 2, 1995
and October 29, 1995, and for the year ended July 2, 1995 and for the four
months ended October 29, 1995 appearing in this Prospectus and Registration
Statement, have been audited by Ernst & Young LLP, independent auditors, as
set forth in their report thereon appearing elsewhere herein, and are included
in reliance upon such report given upon the authority of such firm as experts
in accounting and auditing.
119
<PAGE>
The combined financial statements of FCN Holding, Inc., Saban Entertainment,
Inc. and Fox Kids Worldwide, L.L.C. (from and after the date of the
Reorganization, Fox Kids Worldwide, Inc.) at June 30, 1996 and 1997 and for
the eight months ended June 30, 1996 and for the year ended June 30, 1997,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of International Family Entertainment,
Inc. at December 31, 1995 and 1996 and for each of the years in the three year
period ended December 31, 1996 have been included herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm, as experts in accounting and auditing.
120
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC. AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
<S> <C>
Report of Independent Auditors.......................................... F-2
Combined Balance Sheets as of June 30, 1996 and 1997 and Consolidated
Balance Sheet as of September 30, 1997 (unaudited)..................... F-3
Combined Statements of Operations for the eight months ended June 30,
1996, for the year ended June 30, 1997 and for the three months ended
September 30, 1996 (unaudited) and Consolidated Statement of Operations
for the three months ended September 30, 1997 (unaudited).............. F-4
Combined Statements of Stockholders' Equity for the eight months ended
June 30, 1996, for the year ended June 30, 1997 and Consolidated
Statement of Stockholders' Equity for the three months ended
September 30, 1997 (unaudited)......................................... F-5
Combined Statements of Cash Flows for the eight months ended June 30,
1996 and for the year ended June 30, 1997 and for the three months
ended September 30, 1996 (unaudited) and Consolidated Statement of Cash
Flows for the three months ended Septemhber 30, 1997 (unaudited)....... F-6
Notes to Combined Financial Statements.................................. F-8
FCN HOLDING, INC.
Report of Independent Auditors.......................................... F-32
Consolidated Balance Sheets as of July 2, 1995 and October 31, 1995..... F-33
Consolidated Statements of Operations for the periods ended July 2, 1995
and October 31, 1995................................................... F-34
Consolidated Statements of Stockholder's Equity for the periods ended
July 2, 1995 and October 31, 1995...................................... F-35
Consolidated Statements of Cash Flows for the period ended July 2, 1995
and October 31, 1995................................................... F-36
Notes to Consolidated Financial Statements.............................. F-37
SABAN ENTERTAINMENT, INC.
Report of Independent Auditors.......................................... F-42
Consolidated Balance Sheets as of May 31, 1995 and October 31, 1995..... F-43
Consolidated Statements of Operations for the years ended May 31, 1995
and for the five months ended October 31, 1995......................... F-44
Consolidated Statements of Stockholders' Equity for the years ended May
31, 1995 and for the five months ended October 31, 1995................ F-45
Consolidated Statements of Cash Flows for the years ended May 31, 1995
and for the five months ended October 31, 1995......................... F-46
Notes to Consolidated Financial Statements.............................. F-47
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
Consolidated Balance Sheets as of December 31, 1996 and June 30, 1997
(unaudited)............................................................ F-57
Consolidated Statements of Operations for the six months ended June 30,
1996 and 1997 (unaudited).............................................. F-58
Consolidated Statements of Cash Flows for the six months ended June 30,
1996 and 1997 (unaudited).............................................. F-59
Notes to Consolidated Financial Statements (unaudited).................. F-60
Independent Auditors' Report............................................ F-64
Consolidated Balance Sheets as of December 31, 1995 and 1996............ F-65
Consolidated Statements of Operations for the years ended December 31,
1994, 1995 and 1996.................................................... F-66
Consolidated Statements of Cash Flows for the years ended December 31,
1994, 1995 and 1996 ................................................... F-67
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1994, 1995 and 1996....................................... F-68
Notes to Consolidated Financial Statements.............................. F-69
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
FCN Holding, Inc., Saban Entertainment, Inc. and Fox Kids Worldwide, L.L.C.
We have audited the combined financial statements of FCN Holding, Inc.,
Saban Entertainment, Inc. and Fox Kids Worldwide, L.L.C. (from and after the
date of the Reorganization (Note 1), Fox Kids Worldwide, Inc.) as of June 30,
1996 and 1997 and the related combined statements of operations, stockholders
equity, and cash flows for the eight months ended June 30, 1996 and the year
ended June 30, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of FCN Holding,
Inc., Saban Entertainment, Inc. and Fox Kids Worldwide, L.L.C. (from and after
the date of the Reorganization (Note 1), Fox Kids Worldwide, Inc.) at June 30,
1996 and 1997 and the combined results of their operations and their cash
flows for the eight months ended June 30, 1996 and the year ended June 30,
1997, in conformity with generally accepted accounting principles.
Ernst & Young LLP
Los Angeles, California
September 29, 1997,
except for the 2nd, 3rd, 6th,
and 7th sentence of the 35th
paragraph of Note 1, as to
which the date is January 21,
1998.
F-2
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
BALANCE SHEETS
<TABLE>
<CAPTION>
COMBINED CONSOLIDATED
-------------------------- --------------
SEPTEMBER 30,
JUNE 30, JUNE 30, 1997
1996 1997 (UNAUDITED)
------------ ------------ --------------
<S> <C> <C> <C>
Assets
Cash and cash equivalents......... $ 16,044,000 $ 28,877,000 $ 100,267,000
Restricted cash................... 8,000,000 8,000,000 8,000,000
Accounts receivable, net of
allowance for doubtful accounts
of $1,690,000 (June 30, 1996) and
$1,410,000 (June 30, 1997 and
September 30, 1997).............. 53,106,000 63,316,000 135,468,000
Amounts receivable from related
parties.......................... 28,908,000 29,037,000 30,348,000
Programming costs, less
accumulated amortization......... 181,427,000 235,575,000 384,550,000
Property and equipment, at cost,
less accumulated depreciation.... 8,711,000 8,921,000 74,859,000
Deferred income taxes............. 27,023,000 17,651,000 38,654,000
Investment in and advances to
affiliates....................... -- 7,102,000 5,950,000
Assets held for sale, net......... -- -- 17,110,000
Intangible assets, less
accumulated amortization......... -- -- 1,665,445,000
Other assets, including $1,284,000
(June 30, 1997) associated with
related parties.................. 13,051,000 13,922,000 41,982,000
------------ ------------ --------------
Total assets...................... $336,270,000 $412,401,000 $2,502,633,000
============ ============ ==============
Liabilities and stockholders'
equity
Accounts payable (including
$3,088,000 (June 30, 1997) due to
related parties)................. $ 10,706,000 $ 19,481,000 $ 53,088,000
Accrued liabilities (including
$236,000 (June 30, 1996) and
$4,576,000 (June 30, 1997) due to
related parties)................. 27,733,000 42,991,000 114,750,000
Deferred revenue (including
$6,962,000 (June 30, 1997) from
related parties)................. 67,882,000 40,794,000 46,570,000
Fox Kids Network affiliate
participation payable............ 13,738,000 21,853,000 21,304,000
Accrued programming expenditures.. 15,179,000 9,796,000 85,568,000
Accrued residuals and
participations................... 22,040,000 24,028,000 24,317,000
Income taxes payable.............. 3,884,000 3,257,000 3,246,000
Deferred income taxes............. 790,000 1,250,000 2,203,000
Debt.............................. 19,916,000 57,592,000 1,271,140,000
Amounts payable to related
parties.......................... 81,571,000 58,672,000 7,518,000
NAHI Bridge Note.................. -- -- 345,514,000
Fox Subordinated Note............. -- -- 104,573,000
------------ ------------ --------------
Total liabilities................. 263,439,000 279,714,000 2,079,791,000
Commitments and contingencies
Series A Preferred Stock, $0.001
par value; 500,000 shares
authorized; 345,000 shares issued
and outstanding ($1,000 per share
liquidation value)............... -- -- 345,000,000
Stockholders' equity: -- -- --
Preferred Stock, $0.001 par
value; 19,500,000 shares
authorized; no shares issued or
outstanding.................... -- -- --
Preferred class A members
interest....................... 40,000,000 50,000,000 --
Common stock, $.01 par value:
10,000 shares authorized
800 shares issued and
outstanding (Saban
Entertainment, Inc.)......... -- -- --
Common stock, no par value:
2,000 (June 30, 1996) and
1,000 (June 30, 1997) shares
authorized
2,000 (June 30, 1996) and
816.16 (June 30, 1997) shares
issued and outstanding (FCN
Holding, Inc.)............... 2,000 800 --
Class A Common Stock, $0.001 par
value; 16,000,000 shares
authorized; 160,000 shares
issued and outstanding......... -- -- 160
Class B Common Stock, $0.001 par
value; 16,000,000 shares
authorized; 15,840,000 shares
issued and outstanding......... 15,840
Contributed capital............. 49,245,000 59,454,200 61,032,000
Cumulative translation
adjustment..................... (11,000) (803,000) (877,000)
Retained (deficit) earnings..... (16,405,000) 24,035,000 17,671,000
------------ ------------ --------------
Total stockholders' equity........ 72,831,000 132,687,000 77,842,000
------------ ------------ --------------
Total liabilities and
stockholders' equity............. $336,270,000 $412,401,000 $2,502,633,000
============ ============ ==============
</TABLE>
See accompanying notes.
F-3
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
COMBINED CONSOLIDATED
------------------------------------------ -------------
THREE MONTHS THREE MONTHS
ENDED ENDED
EIGHT MONTHS SEPTEMBER 30, SEPTEMBER 30,
ENDED JUNE 30, YEAR ENDED 1996 1997
1996 JUNE 30, 1997 (UNAUDITED) (UNAUDITED)
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net revenues (including
$5,498,000 (1996) and
$21,316,000 (1997) from
related parties)....... $191,621,000 $307,820,000 $63,801,000 $122,946,000
Costs and expenses:
Production and
programming
(including $4,301,000
(1997) to a related
party)............... 98,937,000 180,381,000 30,384,000 68,889,000
Selling, general and
administrative
(including $1,114,000
(1996) and $2,322,000
(1997) to a related
party)............... 23,072,000 62,466,000 12,513,000 27,244,000
Fox Kids Network
affiliate
participations....... 8,853,000 6,194,000 4,177,000 (448,000)
Amortization of
intangible assets ... -- -- -- 6,969,000
------------ ------------ ----------- ------------
Operating income........ 60,759,000 58,779,000 16,727,000 20,292,000
Investment advisory
fee.................... 10,000,000 -- -- --
Equity in loss of
unconsolidated
affiliate.............. -- 1,546,000 -- 1,184,000
Other expense........... -- -- -- 282,000
Interest expense
(including $170,000
(1996) and $854,000
(1997) to a related
party)................. 885,000 2,226,000 648,000 18,814,000
------------ ------------ ----------- ------------
Income before provision
for income taxes....... 49,874,000 55,007,000 16,079,000 12,000
Provision for income
taxes.................. 18,274,000 14,567,000 4,635,000 1,187,000
------------ ------------ ----------- ------------
Net income (loss)....... $ 31,600,000 $ 40,440,000 $11,444,000 $ (1,175,000)
============ ============ =========== ============
Net income (loss)
attributable to common
shareholders........... $ 31,600,000 $ 40,440,000 $11,444,000 $ (6,364,000)
============ ============ =========== ============
Net income (loss) per
common share........... $ 1.98 $ 2.53 $ .72 $ (.40)
============ ============ =========== ============
Weighted average shares
outstanding............ 16,000,000 16,000,000 16,000,000 16,000,000
============ ============ =========== ============
</TABLE>
See accompanying notes.
F-4
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED CLASS A
MEMBERS INTEREST COMMON STOCK CUMULATIVE RETAINED
------------------ ------------------- CONTRIBUTED TRANSLATION EARNINGS
SHARES AMOUNT SHARES AMOUNT CAPITAL ADJUSTMENT (DEFICIT) TOTAL
------ ----------- ---------- ------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at November 1, 1995
(combined)................ -- $ -- 2,000 $ 2,000 $ -- $ -- $(4,132,000) $ (4,130,000)
Transactions at November
1, 1995:
Capital contributions.... -- -- -- -- 29,344,000 -- -- 29,344,000
Forgiveness of debt...... -- -- -- -- 5,124,000 -- -- 5,124,000
Distribution............. -- -- -- -- -- -- (2,700,000) (2,700,000)
Saban Entertainment,
Inc..................... -- -- 800 -- 11,751,000 46,000 83,174,000 94,971,000
Elimination of certain
amounts between FCN
Holding, Inc. and Saban
Entertainment, Inc...... -- -- -- -- -- -- (4,247,000) (4,247,000)
Payment to a related party
for a stock purchase
option................... -- -- -- -- -- -- (80,100,000) (80,100,000)
Related party tax
obligation............... -- -- -- -- 3,026,000 -- -- 3,026,000
Exchange loss on
translation of foreign
subsidiaries' financial
statements............... -- -- -- -- -- (57,000) -- (57,000)
Net income................ -- -- -- -- -- -- 31,600,000 31,600,000
Amount attributable to
Preferred Class A Members
Interest................. -- 40,000,000 -- -- -- -- (40,000,000) --
--- ----------- ---------- ------- ----------- --------- ----------- ------------
Balance at June 30, 1996
(combined)................ -- 40,000,000 2,800 2,000 49,245,000 (11,000) (16,405,000) 72,831,000
Issuance of Preferred
Class A Members
Interest................. -- 10,000,000 -- -- -- -- -- 10,000,000
Capital contribution...... (1,183.84) (1,200) 1,200
Capital contributions..... -- -- -- -- 5,376,000 -- -- 5,376,000
Exchange loss on
translation of foreign
subsidiaries' financial
statements............... -- -- -- -- -- (792,000) -- (792,000)
Related party tax
obligation............... -- -- -- -- 4,832,000 -- -- 4,832,000
Net income................ -- -- -- -- -- -- 40,440,000 40,440,000
--- ----------- ---------- ------- ----------- --------- ----------- ------------
Balance at June 30, 1997
(combined)................ -- $50,000,000 1,616.16 $ 800 $59,454,200 $(803,000) $24,035,000 $132,687,000
Transactions related to
the reorganization:
Exchange of Preferred
Class A Members
Interest................ (50,000,000) (50,000,000)
Issuance of Class A
Common Stock............ 160,000 160 160
Issuance of Class B
Common Stock............ 15,840,000 15,840 (5,200) 10,640
Exchange of Common
Stock................... (1,616.16) (800) (800)
Capital contributions.... 1,583,000 1,583,000
Exchange loss on
translation of foreign
subsidiaries' financial
statements.............. (74,000) (74,000)
Dividends on Series A
Preferred Stock......... (5,189,000) (5,189,000)
Net loss................. (1,175,000) (1,175,000)
--- ----------- ---------- ------- ----------- --------- ----------- ------------
Balance at September 30,
1997
(consolidated)(unaudited).. $ -- 16,000,000 $16,000 $61,032,000 $(877,000) $17,671,000 $ 77,842,000
=== =========== ========== ======= =========== ========= =========== ============
</TABLE>
See accompanying notes.
F-5
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
COMBINED CONSOLIDATED
------------------------------------------- ---------------
THREE MONTHS THREE MONTHS
EIGHT MONTHS ENDED ENDED
ENDED JUNE 30, YEAR ENDED SEPTEMBER 30, SEPTEMBER 30,
1996 JUNE 30, 1997 1996 1997
-------------- ------------- ------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)....... $ 31,600,000 $ 40,440,000 $11,444,000 $ (1,175,000)
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Amortization of
programming costs.... 83,485,000 144,713,000 34,170,000 57,633,000
Depreciation.......... 1,585,000 3,226,000 733,000 2,555,000
Amortization of
intangible assets.... -- -- -- 6,969,000
Cumulative translation
adjustment........... (57,000) (792,000) 151,000 (74,000)
Equity in loss of
unconsolidated
affiliate............ -- 1,546,000 -- 1,184,000
Investment advisory
fee.................. 10,000,000 -- -- --
Changes in operating
assets and
liabilities:
Restricted cash..... (3,000,000) -- --
Investment in
marketable
securities......... -- -- -- 5,717,000
Accounts
receivable......... 16,035,000 (10,210,000) (7,901,000) (6,026,000)
Amounts receivable
from related
parties............ (11,791,000) 3,860,000 24,698,000 (1,311,000)
Additions to
programming costs.. (113,506,000) (198,861,000) (58,133,000) (69,022,000)
Other assets........ 2,194,000 (872,000) (977,000) (15,087,000)
Accounts payable.... (5,495,000) 8,775,000 2,447,000 12,550,000
Accrued
liabilities........ (2,290,000) 15,259,000 1,452,000 5,861,000
Accrued residuals
and
participations..... 5,771,000 1,988,000 836,000 (184,000)
Administration fee
payable to a
related party...... (6,173,000) (769,000) 375,000 --
Income taxes payable
and deferred income
taxes.............. (9,583,000) 14,038,000 2,732,000 397,000
Deferred revenue.... 23,437,000 (27,088,000) (6,190,000) (12,666,000)
Fox Kids Network
affiliate
participation
payable............ (4,682,000) 8,115,000 8,744,000 (549,000)
Accrued programming
expenditures....... (4,637,000) (5,383,000) (1,450,000) (4,654,000)
------------ ------------ ----------- ---------------
Net cash (used in)
provided by operating
activities............. 12,893,000 (2,015,000) 13,131,000 (17,882,000)
INVESTING ACTIVITIES
Purchase of property and
equipment.............. (3,053,000) (3,435,000) (961,000) (1,156,000)
Acquisition of
programming rights..... (7,200,000) (4,800,000) -- --
Acquisition of
Creativite &
Developpement SA....... (1,722,000) (176,000) -- --
Acquisition of TV10..... -- (8,648,000) -- --
Acquisition of
International Family
Entertainment, Inc.,
net of preferred
stock.................. -- -- -- (1,368,381,000)
Sale of marketable
securities............. -- -- -- 55,679,000
Cash acquired in
acquisition of
Creativite &
Developpement SA....... 3,151,000 -- -- --
Cash acquired in deemed
acquisition of Saban
Entertainment, Inc..... 16,207,000 -- -- --
Cash acquired in
acquisition of
International Family
Entertainment, Inc. ... -- -- -- 19,241,000
------------ ------------ ----------- ---------------
Net cash (used in)
provided by investing
activities............. 7,383,000 (17,059,000) (961,000) (1,294,617,000)
FINANCING ACTIVITIES
Proceeds from bank
borrowings............. $ 15,880,000 $ 52,569,000 $ 129,000 1,281,654,000
Payments on bank
borrowings............. (11,606,000) (9,917,000) (1,334,000) (205,491,000)
Payment to a related
party for a stock
purchase option........ (80,100,000) -- -- --
Dividends on preferred
stock.................. -- -- -- (5,189,000)
Proceeds from issuance
of Preferred Class A
Members interest....... -- 10,000,000 10,000,000 --
Proceeds from NAHI
Bridge loan............ -- -- -- 345,514,000
Increase in assets held
for sale............... -- -- -- (37,611,000)
Issuance of common
stock.................. -- -- -- 10,000
Advances from related
parties................ 67,967,000 (20,285,000) (7,459,000) 5,002,000
Capital contributions
from related parties... 3,310,000 -- -- --
Capital distribution to
related party.......... -- (460,000) -- --
------------ ------------ ----------- ---------------
Net cash provided by
(used in) financing
activities............. (4,549,000) 31,907,000 1,336,000 1,383,889,000
------------ ------------ ----------- ---------------
Increase in cash and
cash equivalents....... 15,727,000 12,833,000 13,506,000 71,390,000
Cash and cash
equivalents at
beginning of period.... 317,000 16,044,000 16,044,000 28,877,000
------------ ------------ ----------- ---------------
$ 16,044,000 $ 28,877,000 $29,550,000 $ 100,267,000
============ ============ =========== ===============
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION
Cash paid during the
period for:
Interest (net of
amounts
capitalized)......... $ 414,000 $ 1,466,000 $ 359,000 $ 7,070,000
============ ============ =========== ===============
Income taxes.......... $ 27,796,000 $ 3,553,000 $ -- $ 385,000
============ ============ =========== ===============
</TABLE>
See accompanying notes.
F-6
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
STATEMENTS OF CASH FLOW--(CONTINUED)
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTMENT ACTIVITIES
Eight months ended June 30, 1996
Amounts payable to a related party of $5,124,000 were forgiven and recorded
as contributed capital.
The Company accrued $10,000,000 in other assets and amounts payable to
related parties in connection with the formation of the L.L.C.
A receivable from a related party of $2,700,000 was forgiven and charged to
retained earnings.
The Company recorded $3,026,000 arising under a tax sharing obligation which
was deemed to be contributed capital by the related party.
Year ended June 30, 1997
Amounts payable to a related party of $5,835,000 were forgiven and recorded
as contributed capital.
The Company recorded $4,832,000 arising under a tax sharing obligation which
was deemed to be contributed capital by the related party.
Three months ended September 30, 1997
Amounts payable to a related party of $1,583,000 were forgiven and recorded
to contributed capital.
The Company issued a subordinated note to Fox Broadcasting ("FOX") in the
amount of $104,573,000 in exchange for FOX's $50,000,000 preferred Class A
members interest in the LLC, its $50,000,000 contingent note receivable and
certain other Company obligations.
Preferred stock in the amount of $345,000,000 was issued in connection with
the acquisition of International Family Entertainment, Inc.
See accompanying notes.
F-7
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND TO THE THREE MONTH PERIODS
ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
1. BASIS OF FINANCIAL STATEMENT PRESENTATION, ORGANIZATION AND RELATED PARTY
TRANSACTIONS
On November 1, 1995 (the Effective date), FCN Holding, Inc. (FCN Holding)
and Saban Entertainment, Inc. (Saban) formed a joint venture, Fox Kids
Worldwide, L.L.C. (the LLC), a limited liability company, for the purpose of
jointly expanding the worldwide children's' businesses of FCN Holding and
Saban. Since the Effective Date, FCN Holding and Saban have been operated by
their respective managements subject to the overall supervision of the Members
Committee of the LLC. On August 1, 1997, a reorganization (the Reorganization)
referred to below was effected pursuant to which Saban, FCN Holding and the
LLC became wholly-owned subsidiaries of Fox Kids Worldwide, Inc. (Fox Kids
Worldwide or the Company). As a result of the formation of the joint venture
and the common management of the joint venture businesses, the respective
assets, liabilities and operations of Saban, FCN Holding and the LLC have been
combined at historical cost from and after the Effective Date. The combined
financial statements of the Company (as the deemed successor to Saban, FCN
Holding and the LLC) included herein represent the historical financial
statements of FCN Holdings (after giving effect to such combination as of the
Effective Date).
The combined financial statements of the Company include the balance sheets
of FCN Holding, Saban and the LLC at June 30, 1996 and 1997 together with the
combined results of operations of FCN Holding, Saban and the LLC since
November 1, 1995. The operations of certain foreign subsidiaries of Saban have
been combined at May 31, 1996 and 1997 and eight month period ended May 31,
1996 and 1997. Unaudited pro forma combined statements of operations for the
period from July 3, 1995 to June 30, 1996, which combine the results of
operations of FCN Holding, Saban and the LLC from the beginning of the
respective periods are presented below.
<TABLE>
<CAPTION>
PERIOD FROM
JULY 3, 1995 TO
JUNE 30, 1996
---------------
<S> <C>
Pro forma revenues..................... $327,105,000
Pro forma net income................... $ 71,370,000
</TABLE>
The Company is an integrated global children's and family entertainment
company, which develops, acquires, produces, broadcasts and distributes
quality television programming. The Company's principal operations are
comprised of (i) Saban, whose library of over 5,300 half-hours of completed
and in-production children's programming is among the largest in the world,
(ii) the Fox Children's Network, Inc. (FCN), the-top-rated children's (ages 2-
11) oriented broadcast television network in the United States, and (iii) a
growing business of Fox Kids-branded cable and direct-to-home (DTH) satellite
international channels operating in approximately 25 countries worldwide. The
Company is the result of the joint venture (the LLC) formed in 1995 by Fox
Broadcasting Company (Fox Broadcasting) and Saban. All significant
intercompany transactions and accounts have been eliminated.
The Reorganization
Fox Kids Worldwide was incorporated in August 1996 as a holding company of
FCN Holding, Saban and the LLC. Between August 1996 and August 1997, the
Company conducted no business or operations. On August 1, 1997, in connection
with the Company's acquisition of a controlling interest in International
Family Entertainment, Inc. (IFE), see Note 12, (i) Fox Broadcasting Sub, Inc,
Inc., a wholly-owned indirect subsidiary of Fox Broadcasting ("Fox
Broadcasting Sub"), exchanged its capital stock in FCN Holding, which
indirectly owns FCN, for 7,920,000 shares of Class B Common stock of the
Company, (ii) the other stockholder of
F-8
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND TO THE THREE MONTH PERIODS
ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
FCN Holding exchanged its capital stock in FCN Holding for an aggregate of
160,000 shares of Class A Common Stock of the Company, (iii) Haim Saban and
the other stockholders of Saban (together, the "Saban Stockholders") exchanged
their capital stock of Saban for an aggregate of 7,920,000 shares of the Class
B Common Stock of the Company, and (iv) all outstanding management options to
purchase Saban capital stock became options to purchase an aggregate of
646,548 shares of the Class A Common Stock of the Company. In addition, as
described more fully below under Other Related Party Transactions --the "FBC
Subordinated Note," Fox Broadcasting exchanged its preferred, non-voting
interest in the LLC and its $50 million contingent note receivable from the
LLC for a new $108.6 million subordinated pay in kind note from the Company
due March 2008 bearing interest at 11.8%. As a result of these transactions,
which are referred to as the "Reorganization," FCN Holding, FCN, Saban and the
LLC became direct or indirect wholly-owned subsidiaries of the Company.
Acquisition of International Family Entertainment, Inc.
On August 1, 1997, the Company acquired a 50.7% interest in IFE through the
purchase for $35.00 per share of the stock owned by M.G. "Pat" Robertson, Tim
Robertson and certain trusts of which they are trustees, The Christian
Broadcasting Network, Inc. ("CBN") and Regent University (together, the
"Privately Owned Shares") and the exchange by Liberty IFE, Inc. ("Liberty
IFE") of all of the IFE stock owned by it and $23 million principal amount of
6% Convertible Secured Notes due 2004 of IFE (the "Convertible Notes") (which
have since been retired) for shares of Series A Preferred Stock of the
Company. On September 4, 1997, the Company consummated a merger to acquire the
remaining shares of IFE from the public shareholders. Total consideration for
the IFE Acquisition was approximately $1.9 billion including assumption of
liabilities. The Company paid approximately $545 million for the Privately
Owned Shares and issued $345 million of its Series A Preferred Stock to
Liberty IFE as payment for the IFE stock and the Notes. The balance of the
consideration was paid to acquire the publicly traded shares through the
merger, to cash out existing options to acquire shares of IFE stock held by
IFE senior executives and employees, and to assume IFE's existing bank debt,
which has since been retired.
The Company financed the IFE Acquisition, in part, by borrowing $1.25
billion pursuant to the Existing Credit Facility as described below. On August
1, 1997, the Company borrowed $602 million under the Existing Credit Facility
to finance the purchase price of the Privately Owned Shares (and to refinance
certain indebtedness of Saban outstanding on the closing date of the
acquisition of the Privately Owned Shares). On September 4, 1997, the Company
borrowed $648 million under the Existing Credit Facility in order to finance
in part the cash consideration payable to the remaining former public holders
of the outstanding shares of IFE stock for their shares in the merger, to cash
out existing options held by IFE senior executives and employees, to refinance
certain indebtedness of IFE and to pay certain related fees and expenses.
IFE historically operated in three business segments: the operation of
advertiser-supported cable networks ("Cable Networks"), the production and
distribution of entertainment programming ("Production & Distribution"), and
the production of live entertainment shows ("Live Entertainment"). The Company
contemplates that it will continue to operate IFE's The Family Channel as the
Fox Family Channel but will sell all of IFE's interests in its other cable and
international networks not directly related to The Family Channel. In
addition, the Company intends to sell IFE's Production and Distribution and
Live Entertainment businesses.
Related Party Transactions in Connection with the Formation of the LLC and
the Subsequent Reorganization
As described more fully below, in connection with the formation of the LLC
and the subsequent Reorganization, various corporate affiliates of Fox
Broadcasting transferred certain distribution rights and other
F-9
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND TO THE THREE MONTH PERIODS
ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
contractual rights to the LLC, made a cash loan to the LLC and committed to
provide certain administrative services to FCN Holding on an on-going basis.
In consideration, Fox Broadcasting is entitled to receive payment of its loan
and certain other cash distributions in priority to the common stockholders of
the Company.
FCN and Fox Broadcasting are parties to an Administration Agreement, dated
as of February 7, 1990, pursuant to which Fox Broadcasting agreed to provide
the following services to FCN: network national advertising sales and the
administration thereof, commercial trafficking and broadcasting operations
(including all uplink, transponder and other facilities necessary to deliver
via satellite Fox Kids Network programming for broadcast to the Fox Kids
Network Affiliates (defined below)) and overhead charges related to Fox
Broadcasting's in-house administrative support in the areas of research,
promotion, business affairs, legal affairs and accounting. FCN agreed to pay
to Fox Broadcasting a fee equal to 15% of 100% of the net advertising revenue
(gross advertising revenue less advertising agency commissions) derived with
respect to national commercials, commercial material or other advertising
material included or used in connection with any of the programs exhibited on
the Fox Kids Network. On December 22, 1995, in connection with the terms of
the LLC, this agreement, and all rights of Fox Broadcasting to receive
management fees on or subsequent to June 1, 1995, were assigned to the LLC by
the Fox Parties. Concurrently, the Company agreed to pay to Fox Broadcasting a
fee of $10 million for providing these services and such amount is included in
other assets. In September 1996, the Company paid this fee and, immediately
upon receipt of this $10 million payment, Fox Broadcasting made a contribution
to the LLC of $10 million in exchange for additional Preferred Class A Members
Interest, described above. Fox Broadcasting continues to be obligated to
provide the services described above and estimates the incremental costs for
providing these services to the Company to be $2,200,000 per annum.
Accordingly, the Company is amortizing the $10 million fee over approximately
five years, representing the period over which the value of the services is
estimated to be incurred, and has recorded amortization expense of $1,467,000
and $2,200,000 for the eight months ended June 30, 1996 and the twelve months
ended June 30, 1997, respectively. Fox Broadcasting believes that these
estimates were made on a reasonable basis. However, these estimates may not
necessarily be indicative of the level of expenses that might have been
incurred had the Company operated on a stand-alone basis. Fox Broadcasting has
not made a study or any attempt to obtain quotes from third parties to
determine what the costs of obtaining such services from third parties would
have been.
Pursuant to terms of the affiliation agreements (Agreements) among the
Company, Fox Broadcasting and substantially all of its affiliated television
stations (Fox Kids Network Affiliates), the Fox Kids Network Affiliates,
including owned and operated television stations of certain affiliates of Fox
Broadcasting (Fox O&O's) are entitled to compensation which is equal to 100%
of FCN's programming Net Profits (as defined below). Amounts payable under
these compensation arrangements are due quarterly in amounts derived pursuant
to the provisions in the Agreements. "Net Profits" is defined on a cumulative
basis to include amounts actually received by FCN from the exhibition,
distribution and other exploitation of the Company's programs and the
merchandising and other rights relating thereto, less administrative fees,
production/license fees, distribution and merchandising fees (including those
payable to the Company), overhead and other expenses and reserves. Certain of
the Fox O&O's have waived in favor of the Company their rights to receive
these participations.
In addition to assigning to the LLC the agreements and Net Profit
participations referred to above, Fox Broadcasting agreed that the net cash
flow to the LLC from such agreements and participations for the twelve months
ended June 30, 1996 would be a minimum of $35,755,000. For the eight months
ended June 30, 1996, the Company recorded $16,611,000 as a decrease in
expenses. The remaining balance of $19,144,000 was recorded as a capital
contribution. Subsequent to June 30, 1996, the outstanding balance was paid.
For the year ended June 30, 1997 such amounts totaled $20,508,000 and was
recorded as a decrease in expenses.
F-10
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND TO THE THREE MONTH PERIODS
ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
In connection with the formation of the LLC, Fox Broadcasting made a $64.5
million interest free loan to the LLC, of which $14.5 million of the loan was
repaid in September 1996. The $50 million balance of this loan must be paid
out of Distributable Cash (as defined below) of the LLC before any
distributions are made on the Class A and Class B Members Interest.
Distributable Cash means the amount of cash available for distribution by the
LLC (including cash available from Saban and FCN Holding), taking into account
all cash, debts, liabilities and obligations of the LLC then due and after
setting aside reserves to provide for the LLC's capital expenditures, debt
service, working capital and expansion plans (Distributable Cash).
In addition to the priority distributions described in the paragraph above,
in connection with the formation of the LLC, Fox Broadcasting was also granted
a priority right to receive distributions of Distributable Cash and other
distributions until it receives aggregate distributions in an amount equal to
$40 million. As described above, in September 1996, Fox Broadcasting
purchased, for $10 million cash, an additional $10 million of Class A Members
Interest. In connection with the Reorganization, Fox Broadcasting contributed
to the Company, pursuant to an Agreement regarding Transfer of LLC Interests,
the note receivable from the LLC representing the $50 million remainder of the
loan and the Class A Members Interest in exchange for a note from the Company
(see Other Related Party Transactions--the "Fox Subordinated Note"). The $40
million difference between the carrying value of the Class A Members Interest
and the liquidation value has been charged against retained earnings.
Pursuant to an agreement, dated December 22, 1995, between the LLC and the
stockholders of Saban, the LLC was granted an option to purchase, upon the
occurrence of certain events, all of the Class B Common Stock held by the
stockholders of Saban, and any of their transferees (Stock Ownership
Agreement). The option may be exercised as follows: (i) for a period of one
year following the death of Haim Saban, if he dies prior to December 22, 2012;
(ii) upon delivery of written notice by Fox Broadcasting at any time on or
after December 22, 2002 or before December 22, 2012; or (iii) upon receipt by
Fox Broadcasting of written notice (which generally cannot be delivered prior
to December 22, 2000) from Haim Saban of his desire to cause Fox Broadcasting
to purchase all of the shares of Class B Common Stock held by the former
stockholders of Saban. The LLC paid to the stockholders of Saban an aggregate
of $80.1 million for payment under the Stock Ownership Agreement. The purchase
price formula under the option is based on the fair market value of the
Company. In September 1996 the LLC distributed the Stock Ownership Agreement
to FCN Holding, which immediately distributed that agreement to Fox
Broadcasting Sub.
As part of the closing of the formation of the LLC, Saban, the Saban
Stockholders, Fox Broadcasting, FCN Holding and one of its subsidiaries
entered into a Strategic Stockholders Agreement which provided, among other
things, for restrictions on transfer of the stock held by the parties, certain
voting rights between them, as well as the terms of the Reorganization. The
parties to the Strategic Stockholders Agreement also agreed to provide Haim
Saban and the Saban Stockholders and Fox Broadcasting certain registration
rights. On August 1, 1997, the Strategic Stockholders Agreement was amended
and restated to add provisions regarding voting rights between Fox
Broadcasting and the former Saban Stockholders.
As part of the Amended and Restated Strategic Stockholders Agreement, dated
August 1, 1997, Haim Saban agreed with Fox Broadcasting Sub as follows: if the
Company is unable to meet its obligations (i) to pay any dividend under the
terms of the Series A Preferred Stock or to redeem the Series A Preferred
Stock, (ii) under its lease of 10960 Wilshire Boulevard, Los Angeles,
California, or any obligation guaranteed by The News Corporation Limited (News
Corp.), the parent of Fox Broadcasting, or (iii) under the Funding Agreement
dated
F-11
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND TO THE THREE MONTH PERIODS
ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
as of June 11, 1997, and either News Corp. or News Publishing Australia
Limited ("NPAL") provides funds to the Company, the advance shall be treated
as a loan, or if Citicorp USA, Inc., in its sole discretion, as administrative
agent under the Existing Credit Facility, determines it is unacceptable to
treat the advance as a loan, the advance will be treated as preferred stock.
To the extent the advance is treated as a loan and the amount exceeds $50
million, if the advance is not repaid after 18 months (or 12 months for all
advances after the third anniversary of the agreement), all or any portion of
the advance in excess of $50 million may be converted into shares of Class B
Common Stock. If Fox Broadcasting Sub elects to convert any portion of the
advance into Class B Common Stock, Haim Sabam shall have the right to purchase
from Fox Broadcasting Sub up to 50% of the number of shares of Class B Common
Stock issued pursuant to the conversion.
If instead, the advance is treated as preferred stock, the first $50 million
of the advance shall be applied to the issuance of shares of Series B
Preferred Stock, and the remainder of the advance shall be applied to the
issuance of Series C Convertible Preferred Stock which is convertible into
Class B Common Stock at the election of the holder. The Series B and Series C
Preferred Stock shall be entitled to dividends at an annual rate of 11.7% of
its liquidation preference. Each of the Series B and Series C Preferred Stock
shall have a liquidation preference equal to $100,000 per share. The Series B
and Series C Preferred Stock shall be entitled to dividends at an annual rate
of 11.7% of its liquidation value. If Fox Broadcasting Sub elects to convert
the Series C Convertible Preferred Stock into Class B Common Stock, Haim Saban
shall have the right to purchase up to 50% of the number of shares of Class B
Common Stock issued pursuant to the conversion. Notwithstanding the
agreements, News Corp. has no obligation to make any advances, and the Company
has no obligation to accept any amounts from News Corp.
Other Related Party Transactions
Receivables from related parties include advances of $1,329,000 at June 30,
1996 and 1997 to certain non-stockholder officers and directors of the
Company.
The Company distributes product to related parties in the normal course of
business, and accordingly, included in Amounts Receivable from Related Parties
are $3,119,000 (1996) and $12,965,000 (1997) due from those related parties.
Saban and Fox Broadcasting are parties to a Barter Syndication Agreement
dated as of January 5, 1996, pursuant to which Saban engaged Fox Broadcasting
to provide barter advertising sales for the 1996-1997 and 1997-1998 broadcast
season for the Saban Kids Network. Fox Broadcasting's services include
advertising sales, sales administration, account maintenance, ratings,
processing, credit and collection, sales data entry and reporting, and
commercials broadcast standards and practices. In consideration for the
services rendered by Fox Broadcasting to Saban, Saban has agreed to pay Fox
Broadcasting a barter advertising sales fee of $800,000 for the 1996-1997
broadcast season and $840,000 for the 1997-1998 broadcast season.
Related companies of Fox Broadcasting have funded certain of the operations
of the Company from its inception through loans to the Company. Amounts due to
the related companies of Fox Broadcasting in connection therewith, including
interest, totaled $7,071,000 and $8,672,000 at June 30, 1996 and 1997,
respectively.
F-12
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND TO THE THREE MONTH PERIODS
ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
In October 1996, the Company commenced operations of Fox Kids U.K., a cable
and satellite channel broadcasting from 6 a.m. to 7 p.m. each day. The channel
is currently broadcast via analogue transponder. The channel is distributed as
part of British Sky Broadcasting, Group plc's ("BSkyB") Sky Multichannels DTH
package in the United Kingdom and the Republic of Ireland. News Corp. holds a
40% interest in BSkyB, a public company, which operates the leading pay
television broadcasting service in the United Kingdom and the Republic of
Ireland. The Fox Kids U.K. channel is also distributed via cable over a number
of systems, the largest of which are the systems operated by Comcast.
Discussions are also at an advanced stage with other major cable operators.
However, due to lack of capacity and the pre-existence of four other
children's channels, carriage is not guaranteed. As part of its agreement with
BSkyB, the Company acquired for approximately $3.7 million, all of BSkyB's
United Kingdom license rights to children's programming which had been
acquired for broadcast by BSkyB prior to the launch of this channel.
Additionally, as part of the agreement with BSkyB, the Company has entered
into an analog transponder sublease agreement whereby the Company will lease
the analog transponder from BSkyB through February 1, 2001 subject to
extension in certain circumstances requiring a financial commitment of
approximately $28,188,000. The Company has also entered into a digital
transponder and uplink sublease agreement with BSkyB whereby the Company will
lease the digital transponder from BSkyB for eight years from the analog
launch date requiring an annual financial commitment of approximately
$1,115,000 per channel subject to reduction in certain circumstances. Further,
as part of this arrangement with BSkyB, BskyB shall provide support services
for the sale by the Company of programming sponsorship, advertising and other
air-time for broadcast on the channel as well as other operational and
facilities support services. In consideration for the services being provided
to the Company, BSkyB shall be entitled to receive a fee equal to 15% of Net
Revenue, as defined in the agreement, plus a 5% bonus commission where Net
Revenue exceeds mutually pre-agreed annual targets plus an annual fee of
approximately $326,000, subject to adjustment in certain circumstances.
In November 1996, the Company launched Fox Kids Latin America ("FKLA"), a
Fox Kids branded pan-regional Latin American channel, which simultaneously
broadcasts animated and live-action programming in Spanish, Portuguese and
English. The Company has entered into a cost sharing arrangement for employees
and service support in connection with the operation of the channel with Canal
Fox, a related party. The Company believes that such arrangement for employees
and service support are at rates which approximate fair market value.
Foxtel, an Australian-based cable service, has carried a Fox Kids Network
children's channel segment since 1994 under a license agreement between Foxtel
and an affiliate of Fox Broadcasting. This license was assigned to the
Company. Foxtel is a 50/50 partnership between News Corp. and the Australian
telephone company, Telstra.
From time to time, Saban has loaned and advanced funds to Haim Saban. In
connection with the formation of the LLC on December 22, 1995, Saban forgave
in full the loan plus accrued interest owing from Haim Saban in the amount of
approximately $2,700,000. This amount was treated as a distribution and
charged to retained earnings in the eight months ended June 30, 1996. In
connection with Haim Saban's employment agreement, dated December 22, 1995,
with the LLC, the LLC agreed to reimburse Haim Saban for all out-of-pocket
costs and expenses for domestic and international travel, including private
air charter which may include aircraft owned directly or indirectly by Haim
Saban. Saban has entered into a contract with the agency which leases Mr.
Saban's airplane to charter from that agency Mr. Saban's or another similar
airplane for a minimum of fifty
F-13
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND TO THE THREE MONTH PERIODS
ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
charter hours during a twelve month period. For the eight months ended June
30, 1996 and the twelve months ended June 30, 1997, Saban has paid
approximately $370,000 and $875,000, respectively, for such services.
Saban currently leases and distributes its entertainment properties (e.g.,
motion pictures, television programs, merchandising and licensing rights) in
Israel through Duveen Trading Ltd. (Distributor), a corporation wholly-owned
by Haim Saban's brother. The term of the agreement extends through December
31, 1997, subject to extension by Saban for an additional three years. The
Company currently intends to extend this relationship. At June 30, 1996 and
1997, the Company was due $500,000 under this agreement.
In September 1994, Saban entered into a music services agreement (the "Music
Agreement") with Haim Saban, which agreement was amended in June 1995 and
assigned to a corporation wholly-owned by Mr. Saban in January 1996. Under the
terms of the Music Agreement, all original theme music, underscores, cues and
songs for use in all programming produced by Saban will be supplied to Saban
through Mr. Saban. Saban is entitled to license third-party musical
compositions for use in its programming so long as such compositions neither
are used as opening or closing themes nor constitute more than 15% of the
total musical content of any program or episode, without Mr. Saban's prior
written consent. Saban has the royalty-free right to use the compositions in
articles of merchandise such as home video units, video games and interactive
toys. Saban has been granted the non-exclusive, worldwide, and perpetual
license to (i) synchronize and perform compositions in theatrical motion
pictures and (ii) synchronize compositions in all other forms of programming.
Saban creates and owns all right, title and interest in master recordings of
compositions for use in Saban's programming, and Saban owns the proceeds
derived from all forms of exploitation thereof. In consideration for the
provision of the compositions to Saban, Mr. Saban is entitled to receive all
publishing income, directly or through Saban, in connection with the
exploitation of such compositions. Saban is entitled to reimbursement from Mr.
Saban of certain costs associated with the creation of the compositions. For
the year ended June 30, 1997, Mr. Saban paid approximately $374,000 to Saban
for reimbursement of costs to Saban. For the eight months ended June 30, 1996,
Mr. Saban made no payments for reimbursement of costs to Saban. At June 30,
1996, Saban owed Mr. Saban approximately $262,000 pursuant to the Music
Agreement. At June 30, 1997, approximately $211,000 was owed to Saban by Mr.
Saban pursuant to the Music Agreement.
Saban is party to an agreement with Fox Family Films, Inc. ("Distributor")
for the distribution in Spring 1997 of Turbo: A Power Rangers Movie, a "PG-
rated" sequel to the original Mighty Morphin Power Rangers motion picture (the
"Sequel"), which was released theatrically in the United States in Spring 1997
and in home video in late Summer 1997. Under the terms of the agreement, Saban
produced and delivered the Sequel to Distributor for worldwide distribution
and granted to Distributor all rights necessary to advertise, promote,
publicize and distribute the Sequel. Distributor will hold in perpetuity
worldwide theatrical, non-theatrical, home video, and television rights in the
movie (except for the territories of Japan and certain Asian territories and
Israel). Saban will hold the copyright to the Sequel as well as certain rights
including, without limitation, merchandising, television series, stage,
publication, radio, theme park and touring, music publishing and soundtrack.
Commercial tie-in rights will be mutually controlled by Saban and Distributor.
Saban will receive 100% of gross receipts after certain distribution fees and
expenses are deducted, based upon a formula set forth in the agreement.
Saban is party to six program exhibition agreements for the 1996-1997
broadcast season with FOX Television and one with FoxNet, both subsidiaries of
Fox Broadcasting, pursuant to which Saban licenses certain of FOX Television's
owned and operated stations and the FoxNet cable television service the right
to broadcast certain series which are part of the Saban Kids Network. All
series are licensed on a barter basis.
F-14
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND TO THE THREE MONTH PERIODS
ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
In October 1997, the Company reached an agreement in principle with
Fox/Liberty Networks, LLC a joint venture between News Corp. and Liberty Media
Corporation, a wholly owned subsidiary of Tele-Communications, Inc., to sell a
majority ownership interest in Fit TV to Fox/Liberty Networks, LLC. The
Company acquired Fit TV in September 1997 as part of the IFE Acquisition.
In January 1997, the Company obtained from Fox Television, a division of
Fox, Inc. ("Fox Television"), distribution rights to the New World
Communications Group Incorporated's ("New World") animation library of
children's programming, which Fox Television acquired as part of its purchase
of New World. During the year ended June 30, 1997, the Company spent
approximately $726,000 in distribution costs in connection with this product
which will be recoupable against New World's share of revenues. At June 30,
1997, such amount is included in accounts receivable from related parties. The
Company is in discussions with FOX Television to acquire the New World
animation library.
In October 1997, the Company entered into an interim agreement with
Twentieth Century Fox Film Corp. ("Twentieth Century Fox"), pursuant to which
Twentieth Century Fox will distribute the programming library of MTM
Entertainment, one of the assets acquired in the IFE Acquisition. The Company
is in discussions with Twentieth Century Fox to sell MTM to Twentieth Century
Fox.
As part of the Reorganization, on July 31, 1997, the Company issued a
subordinated promissory pay in kind note (the "Fox Subordinated Note") to Fox
Broadcasting in the principal amount of approximately $104 million, which
amount will be increased to $108.6 million (exclusive of any capitalized
interest) and which is to be repaid in May 2008. The parties recently have
agreed to restate the Fox Subordinated Note to reflect a change in the
interest rate, effective as of the date of issuance. As restated, interest on
the Fox Subordinated Note will accrete quarterly at the rate of 10.427% per
annum. At any time after the Existing Credit Facility or the Amended Credit
Facility, as applicable, has been paid in full, the Company may prepay the Fox
Subordinated Note in whole or in part, subject to the terms of the Indentures.
On August 29, 1997, in connection with the IFE Acquisition, the Company issued
a subordinated promissory pay in kind note to News America Holdings
Incorporated (the "NAHI Bridge Note"), upon substantially the same terms and
conditions as the Fox Subordinated Note including maturity dates, except that
the NAHI Bridge Note has a principal amount of $345.5 million. The parties
recently have agreed to restate the NAHI Bridge Note to reflect a change in
the interest rate, effective as of the date of issuance. As restated, the NAHI
Bridge Note will accrete interest at a rate of approximately 10.427% per
annum. The payment of principal and interest under both the Fox Subordinated
Note and the NAHI Bridge Note is subordinated in right to the obligations of
the Company under the Existing Credit Facility.
On August 1, 1997, Saban entered into an amendment to the lease for its
corporate headquarters at 10960 Wilshire Boulevard in Los Angeles (the
original lease dated July 17, 1995 together with the amendment, the "Lease").
The amendment provides for an annual base rent for the entire premises of
$620,505 through February 15, 2002 and $676,915 from February 16, 2002 through
March 31, 2006. Pursuant to a Guaranty of Lease entered into on August 1, 1997
(the "Guaranty"), News Corp. and NPAL have guaranteed certain of Saban's
obligations under the Lease. The Guaranty continues until Saban has paid all
obligations due under the Lease. Under the Guaranty, News Corp. and NPAL are
liable, jointly and severally, for any amounts not paid by Saban. News Corp.'s
and NPAL's aggregate liability under the Guaranty is limited to approximately
$8.6 million, to be reduced annually over five years on a straight-line basis.
In May 1996, Saban entered into an agreement in principle with Fox Video
(the "Fox Video Agreement") for the production and distribution of a live-
action feature film for the home video market based upon the animated
character of Casper (the "Film") which was released by Fox Video in the United
States on September 9, 1997. The distribution term runs through September 8,
2004. Pursuant to the Fox Video Agreement,
F-15
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND TO THE THREE MONTH PERIODS
ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
Saban developed, produced and delivered the Film to Fox Video. Saban has the
right and obligation to market, distribute (for no fee) and exploit the Film
in all forms of television, non-theatrical and airline markets. Fox Video has
the right and obligation to market, manufacture, package, distribute (for no
fee) and exploit the Film in home video formats, and will release the Film in
major international territories during the next six months. Saban and Fox
Video each contributed one-half of the production costs of the Film subject to
the rights of both parties to recoup certain of these costs. Saban and Fox
Video will share the television net income 55% and 45%, respectively, and the
home video net income 45% and 55%, respectively, subject to the participation
rights of the Harvey Entertainment Company, which holds the copyright to
Casper.
In August 1996, Fox Video and Saban entered into a Home Video Rights
Acquisition Agreement pursuant to which Saban granted to Fox Video the
exclusive home video rights to distribute English and Spanish language
versions throughout the United States and to distribute English language
versions throughout Canada of certain of its programs, all television programs
produced for children and owned or controlled by Saban or FCN, all television
programs produced or to be produced pursuant to an agreement with Marvel and
all television programs which are owned or controlled first by Marvel and
subsequently by Saban, the LLC or the Company. The beginning of the term of
this agreement varies by type of program, but the term ends as to all programs
between seven and nine years from September 11, 1996. Saban is required to
make available for release by Fox Video a minimum of six video titles each
year, at least two of which will not have been previously released for home
video distribution in any of the territories covered by the agreement. In
consideration for the grant of the distribution rights, Fox Video has agreed
to pay Saban 50% of gross receipts from these home videos, after deduction of
certain expenses. In connection with this Agreement Saban received $8,000,000.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year-End
The Company's fiscal year ends on June 30.
Interim Financial Information
The unaudited consolidated financial statements as of September 30, 1997,
and for the three months ended September 30, 1997 and the unaudited combined
financial statements for the three months ended September 30, 1996, include,
in the opinion of management, all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the Company's consolidated/combined
financial position, results of operations and cash flows. Operating results
for the three months ended September 30, 1997, are not necessarily indicative
of the results that may be expected for the year ended June 30, 1998.
Revenue Recognition
Advertising revenue is recognized as earned in the period in which the
advertising commercials are telecast. Revenues from television, music, and
merchandising lease agreements, which provide for the receipt by the Company
of nonrefundable guaranteed amounts, are recognized when the lease period
begins, collectibility is reasonably assured and the product is available
pursuant to the terms of the lease agreement. Amounts in excess of minimum
guarantees under these lease agreements are recognized when earned. Amounts
received in advance of recognition of revenue are recorded as deferred
revenue. FCN Holding generally provides advertisers with guaranteed ratings in
connection with its domestic network broadcasts. Revenue is recorded net of
estimated
F-16
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND TO THE THREE MONTH PERIODS
ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
shortfalls, which are settled either by additional advertising time ("make
goods") or cash refunds to the advertiser. FCN Holding accounts for the full
amount of the estimated shortfall. Subscriber revenue is recognized by the
international channels monthly based upon the reported level of subscribers.
Barter revenues, representing the exchange of programming for advertising time
on a television station, are recognized upon the airing of an advertisement
during such advertising time and related program costs are amortized in
accordance with the individual film forecast method.
Production and Programming Costs
Programming costs, consisting of direct production costs, acquisition of
story rights, costs to acquire distribution rights, allocable production
overhead, interest and exploitation costs (which benefit future periods) are
capitalized as incurred. The individual film forecast method is used to
amortize programming costs in which the Company owns or controls distribution
rights. Costs accumulated in the production of a program are amortized in the
proportion that gross revenues realized bear to management's estimate of the
total gross revenues expected to be received. Estimated liabilities for
residuals and participations are accrued and expensed in the same manner as
programming cost inventories are amortized. Production and programming costs
also include the use of satellite transponders and costs associated with
engineering and technical support services in connection with the
international channels.
For programs in which the Company acquires only network broadcast rights,
the Company amortizes such program costs over the estimated number of
telecasts. The Company evaluates its programming rights for possible changes
in the estimated number of telecasts or the possibility of impairment.
Revenue estimates on a program-by-program basis are reviewed periodically by
management and are revised, if warranted, based upon management's appraisal of
current market conditions. Based on this review, if estimated future gross
revenues from a program are not sufficient to recover the unamortized costs,
the unamortized programming cost will be written down to net realizable value.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentration
of credit risk consist principally of temporary cash investments and trade
receivables. The Company places its temporary cash investments with high
credit quality financial institutions or in a mutual fund which invests in
government securities and therefore are subject to reduced risk. The Company
has not incurred any losses relating to these investments.
The Company leases its product to distributors and broadcasters throughout
the world. The Company performs periodic credit evaluations of its customers'
financial condition and generally does not require collateral. Generally,
payment is received in full or in part prior to the Company's release of
product to such distributors and broadcasters. At June 30, 1997 and June 30,
1996, substantially all of the Company's trade receivables were from customers
in the entertainment or broadcast industries or from advertising agencies.
Receivables generally are due within 30 days. Credit losses relating to
customers in the entertainment and broadcast industries or advertising
agencies consistently have been within management's expectations.
Cash and Cash Equivalents
For the purposes of balance sheet classification and the statement of cash
flows, the Company considers all highly liquid investments that are both
readily convertible into cash with maturities when purchased of three months
or less to be cash equivalents.
F-17
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND TO THE THREE MONTH PERIODS
ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
Restricted Cash
Restricted cash represents amounts held by financial institutions as
collateral on outstanding debt.
Financial Instruments
Financial instruments are carried at historical cost which approximates fair
value.
Property and Equipment
Property and equipment are carried at cost and depreciation is compounded
using the straight-line method over their estimated useful lives of three to
five years. Leasehold improvements are amortized over the lesser of the term
of the lease or the estimated useful lives of the improvement using the
straight-line method.
Foreign Currency Translation and Cumulative Adjustment
Saban International N.V. (SINV), which after the Effective Date is deemed to
be a wholly-owned subsidiary of the Company, uses the U.S. dollar as the
functional currency. All other foreign subsidiaries of the Company use local
currency as the functional currency. Assets and liabilities are translated
into U.S. dollars at current exchange rates. Revenue and expenses have been
translated into U.S. dollars based generally on the average rates prevailing
during the period.
Gains and losses arising from foreign currency transactions are included in
determining net income for the period. The aggregate transaction (losses)
gains for the eight months ended June 30, 1996 and the year ended June 30,
1997 were $132,000 and $(643,000), respectively.
The cumulative translation adjustment in stockholders' equity at June 30,
1996 and 1997, represents the Company's net unrealized exchange losses on the
translation of foreign subsidiaries' financial statements.
Income Taxes
The Company provides for income taxes based on the liability method. Under
this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes including amortization of programming costs. Actual results
could differ from those estimates. Management periodically reviews and revises
its estimates of future airings and revenues, as necessary, which may result
in revised amortization of its programming costs. Results of operations may be
significantly affected by the periodic adjustments in such amortization.
Stock-Based Compensation
The Company accounts for its stock compensation arrangements under the
provisions of Accounting Principles board No. 25, "Accounting for Stock Issued
to Employees," and intends to continue to do so.
F-18
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND TO THE THREE MONTH PERIODS
ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
Advertising Costs
Included in selling, general and administrative expenses are advertising
expenses amounting to $2,401,000 and $9,732,000 for the eight months ended
June 30, 1996 and the year ended June 30, 1997, respectively.
Net Income (Loss) per Common Share
The per share data is based upon 16,000,000 shares deemed to be outstanding
during each period which represents the number of shares of common stock that
would have been outstanding had the Reorganization described in Note 1
occurred on November 1, 1995. Common equivalent shares consisting of
outstanding stock options are included in the calculation to the extent they
are dilutive. For the three months ended September 30, 1997 (unaudited), the
net loss per common share gives effect to dividends on the Series A Preferred
Stock which amounted to $5,189,000.
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, Earnings Per Share, which is effective for annual and interim
financial statements issued for periods ending after December 15, 1997 and
early adoption is not permitted. When adopted, the statement will require
restatement of prior years' earnings per share ("EPS"). SFAS No. 128 was
issued to simplify the standards for calculating EPS previously found in
APB No. 15, Earnings Per Share. SFAS 128 replaces the presentation of primary
EPS with a presentation of basic EPS. The new rules also require dual
presentation of basic and diluted EPS on the face of the statement of
operations for companies with a complex capital structure. For the Company,
basic EPS will exclude the dilutive effects of stock options and warrants.
Diluted EPS for the Company will reflect all potential dilutive securities.
Under the provisions of FAS 128, basic and diluted EPS would have been the
same as the amounts reported herein.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive
Income. The Statement establishes standards for the reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. The Statement applies to all enterprises that provide a
full set of general-purpose financial statements. The Statement becomes
effective for all financial statements for fiscal years beginning after
December 15, 1997, with earlier application permitted. Further, in June 1997,
the FASB issued Statement No. 131, Disclosures about Segments of an Enterprise
and Related Information. The Statement changes the way public companies report
segment information in annual financial statements and also requires those
companies to report selected segment information in interim financial reports
to shareholders. The proposal supersedes FASB Statement No. 14 on segments and
does not apply to nonpublic enterprises or to not-for-profit organizations.
The Statement becomes effective for all financial statements for fiscal years
beginning after December 15, 1997, with earlier adoption permitted. The
Company is currently reviewing those Statements and will apply such provisions
as deemed appropriate.
F-19
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND TO THE THREE MONTH PERIODS
ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
3. PROGRAMMING COSTS
Programming costs, net of accumulated amortization, are comprised of the
following:
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------------------------
NET
ACCUMULATED PROGRAMMING
COST AMORTIZATION COSTS
-------------- ------------ ------------
<S> <C> <C> <C>
Children's programming............ $ 694,690,000 $589,160,000 $105,530,000
Movies and mini-series/Family pro-
gramming......................... 121,642,000 88,642,000 33,000,000
Projects in production............ 40,647,000 -- 40,647,000
Development....................... 2,648,000 398,000 2,250,000
-------------- ------------ ------------
$ 859,627,000 $678,200,000 $181,427,000
============== ============ ============
<CAPTION>
JUNE 30, 1997
----------------------------------------
NET
ACCUMULATED PROGRAMMING
COST AMORTIZATION COSTS
-------------- ------------ ------------
<S> <C> <C> <C>
Children's programming............ $ 860,582,000 $723,751,000 $136,831,000
Movies and mini-series/Family pro-
gramming......................... 135,685,000 99,162,000 36,523,000
Projects in production............ 58,167,000 -- 58,167,000
Development....................... 4,054,000 -- 4,054,000
-------------- ------------ ------------
$1,058,488,000 $822,913,000 $235,575,000
============== ============ ============
<CAPTION>
SEPTEMBER 30, 1997 (UNAUDITED)
----------------------------------------
NET
ACCUMULATED PROGRAMMING
COST AMORTIZATION COSTS
-------------- ------------ ------------
<S> <C> <C> <C>
Children's programming............ $ 913,161,000 $755,704,000 $157,457,000
Movies and mini-series/Family
programming...................... 297,434,000 124,842,000 172,592,000
Projects in production............ 49,329,000 -- 49,329,000
Development....................... 5,172,000 -- 5,172,000
-------------- ------------ ------------
$1,265,096,000 $880,546,000 $384,550,000
============== ============ ============
</TABLE>
Based on the Company's estimate of future revenues, approximately 73% of
unamortized released programming costs at June 30, 1997 will be amortized
during the three years ending June 30, 2000. Interest amounting to $1,146,000
and $346,000 was capitalized to programming costs for the year ended June 30,
1997 and the three months ended September 30, 1997, respectively.
4. PROPERTY AND EQUIPMENT
Property and equipment is comprised of the following:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Studio equipment.................................... $ 8,338,000 $10,997,000
Office furniture and fixtures....................... 3,257,000 3,417,000
Leasehold improvements.............................. 2,455,000 2,957,000
Other............................................... 64,000 179,000
----------- -----------
14,114,000 17,550,000
Less accumulated depreciation....................... 5,403,000 8,629,000
----------- -----------
$ 8,711,000 $ 8,921,000
=========== ===========
</TABLE>
F-20
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND TO THE THREE MONTH PERIODS
ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
5. DEBT
Debt is comprised of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1996 1997 1997
----------- ----------- --------------
(UNAUDITED)
<S> <C> <C> <C>
DeNationale Investeringsbank N.V.;
secured line of credit due April
18, 1999; interest at three month
LIBOR (5.78% at June 30, 1997;
5.77% at September 30, 1997) plus
0.4% paid quarterly; maximum
borrowings of $8,000,000........... $ 6,862,000 $ 7,093,000 $ 7,333,000
Secured lines of credit with varying
due dates between December 31, 1997
and April 13, 1998; maximum
borrowing availability varying
between FF 3,500,000 ($607,000 at
June 30, 1997) and FF 16,462,000
($2,855,000 at June 30, 1997);
varying interest rates (between
3.98% and 8.60% at June 30, 1997;
between 4.04% and 8.60% at
September 30, 1997) paid
quarterly.......................... 3,554,000 3,879,000 4,127,000
Secured promissory notes with
varying due dates between April 16,
1997 and August 5, 1999; original
principal amounts paid quarterly or
at maturity; notes are non-interest
bearing............................ 6,484,000 1,280,000 975,000
Promissory note due February 1,
2002; principal amounts paid
annually starting February 1999;
interest at 6%..................... -- -- 6,365,000
Norwest Equipment Finance, Inc.;
secured promissory note due
February 9, 2000 and principal paid
annually; original principal of
$3,912,000; interest at 7.5% per
annum and paid annually............ 3,016,000 2,340,000 2,340,000
Imperial Bank; secured revolving
line of credit; interest at prime
rate (8.5% at June 30, 1997 and
September 30, 1997) plus .5% or
one-month LIBOR (5.69% at June 30,
1997) plus 2% paid monthly; maximum
borrowings of $50,000,000.......... -- 43,000,000 --
Citicorp USA; secured revolving line
of credit; interest at prime rate
(8.5% at September 30, 1997) plus
1.25% or 30-day LIBOR (5.66% at
September 30, 1997) plus 2.25%;
maximum borrowings of
$900,000,000....................... -- -- 900,000,000
Citicorp USA; secured term loan
facility; interest at prime rate
(8.5% at September 30, 1997) plus
1.25% or 30-day LIBOR (5.66% at
September 30, 1997) plus 2.25%;
maximum borrowings of
$350,000,000....................... -- -- 350,000,000
----------- ----------- --------------
$19,916,000 $57,592,000 $1,271,140,000
=========== =========== ==============
</TABLE>
F-21
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND TO THE THREE MONTH PERIODS
ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
Payments of principal on promissory notes in future periods are as follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30
-------------------
<S> <C>
1998........................................................... $ 1,924,000
1999........................................................... 892,000
2000........................................................... 804,000
2001........................................................... --
-----------
$ 3,620,000
===========
</TABLE>
In July 1995, Saban and SINV separately entered into credit agreements with
Imperial bank (Imperial), as agent, and a group of lenders for secured
revolving credit facilities (Credit Facilities) aggregating $50 million
maturing on July 31, 1998. Interest on the borrowings is at either the prime
rate (8.5% at June 30, 1997) plus .5% or .25% depending on Saban's and SINV's
tangible net worth or three month or six month LIBOR (5.78% and 5.91%,
respectively, at June 30, 1997) plus 2.25% or 2% (2% at June 30, 1997)
depending on Saban's and SINV's tangible net worth. Interest is payable at the
end of the interest period which is either one, three or six months. Saban and
SINV are required to pay a quarterly commitment fee of .25% per annum of the
average daily unused portion of the commitment. Saban and SINV also paid a
loan fee amounting to .75% of the commitment. The combined amount available
for borrowing under the Credit Facilities at any time is limited in accordance
with a formula based upon the value of collateral in Saban's and SINV's
borrowing bases. The borrowing bases include on and off balance sheet
receivables and amounts attributable to the value of Saban's and SINV's film
libraries. Saban's credit facility is secured by substantially all of the
assets of Saban and its subsidiaries (excluding SINV and other foreign
subsidiaries of Saban) and SINV's credit facility is secured by substantially
all of the assets of Saban and its subsidiaries. The Credit Facilities
restrict the payment of dividends.
The Credit Facilities contain restrictive covenants regarding, among other
things, additional indebtedness payments and advances for product, the
maintenance of certain financial ratios and restrictions on the disposition of
assets. At June 30, 1997, the Company and SINV were in compliance or had
obtained waivers for these covenants. In August 1997, the Credit Facilities
were paid in full and terminated.
6. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Deferred tax liabilities:
Accounts receivable........................... $ 581,000 $ 1,250,000
State taxes................................... 209,000 --
------------ ------------
Total deferred tax liabilities.................. 790,000 1,250,000
Deferred tax assets:
State taxes................................... -- 483,000
Deferred revenue.............................. 18,813,000 5,978,000
Book over tax amortization.................... 665,000 17,696,000
Accrued expenses and reserves................. 6,095,000 7,625,000
Other......................................... 1,450,000 807,000
------------ ------------
Total deferred tax assets....................... 27,023,000 32,589,000
Valuation allowance for deferred tax assets..... -- (14,938,000)
------------ ------------
Deferred tax assets............................. 27,023,000 17,651,000
------------ ------------
Net deferred tax assets......................... $(26,233,000) $(16,401,000)
============ ============
</TABLE>
F-22
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND TO THE THREE MONTH PERIODS
ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
For financial reporting purposes, income before income taxes includes the
following components:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Pretax income:
United States....................................... $31,149,000 $31,605,000
Foreign............................................. 16,725,000 23,402,000
----------- -----------
$49,874,000 $55,007,000
=========== ===========
</TABLE>
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Current:
Federal.......................................... $14,316,000 $ 3,430,000
State............................................ 3,964,000 (508,000)
Foreign.......................................... 586,000 1,881,000
----------- -----------
18,866,000 4,803,000
Deferred:
Federal.......................................... (431,000) 6,970,000
State............................................ (161,000) 2,794,000
Foreign.......................................... -- --
----------- -----------
(592,000) 9,764,000
----------- -----------
$18,274,000 $14,567,000
=========== ===========
</TABLE>
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense is:
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Tax at U.S. statutory rates..................................... 35% 35%
State taxes, net of federal benefit............................. 5 3
Foreign subsidiary's income not subject to state or federal
tax............................................................ (13) (15)
Foreign taxes................................................... 1 3
Other........................................................... 1 --
Non-deductible investment advisory fees......................... 8 --
--- ---
37% 26%
=== ===
</TABLE>
A liability attributable to the tax provision of FCN Holding was deemed to
be contributed to capital by a related party.
Undistributed earnings of the Company's foreign subsidiaries amounted to
approximately $79,700,000 at June 30, 1997. Those earnings are considered to
be indefinitely reinvested and, accordingly, no provision for U.S. federal and
state income taxes has been provided thereon. Upon distribution of those
earnings in the form of dividends or otherwise, the Company would be subject
to both U.S. income taxes (subject to an adjustment for foreign tax credits)
and withholding taxes payable to the various foreign countries. Determination
of the amount of unrecognized deferred U.S. income tax liability is not
practicable because of the complexities associated with its hypothetical
calculation; however, unrecognized foreign tax credit carryforwards would be
available to reduce some portion of the U.S. liability. It is possible that
the Internal Revenue Service could under certain theories attempt to tax the
foreign subsidiaries' income. Currently, management of the Company believe
that any such theories would be without merit.
F-23
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND TO THE THREE MONTH PERIODS
ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
7. COMMITMENTS AND CONTINGENCIES
The Company leases office space in Paris, France, Cologne, Germany and
London, England under nine year, five year and three year operating leases,
respectively. The Paris, France leases provide for early termination on
February 28, 1999 or February 28, 2002, upon six months advance written
notice. The London, England lease provides for early termination upon six
months advance written notice.
In July 1995, the Company entered into a 10 year written lease commencing on
April 1, 1996 for office space in Los Angeles, California subject to two
separate five year extension options. The lease provides for early termination
at the end of the sixth and eighth years upon payment of a termination fee.
The lease calls for monthly payments plus maintenance and property tax
payments. The Company also has a two-year lease for production facilities in
Valencia, California expiring in January 1998 and subject to a one-year
extension.
In August 1997, the Company entered into a 10 year lease for office space in
London, England. The lease provides for early termination at the end of the
fifth year upon nine months advance written notice.
Noncancelable future minimum payments for the remainder of the initial,
noncancelable lease periods are as follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30
-------------------
<S> <C>
1998.......................................................... $ 4,546,000
1999.......................................................... 5,391,000
2000.......................................................... 6,442,000
2001.......................................................... 6,652,000
2002.......................................................... 7,618,000
Thereafter.................................................... 23,532,000
-----------
$54,181,000
===========
</TABLE>
Rent expense for the eight months ended June 30, 1996 and for the year ended
June 30, 1997, net of amounts capitalized, was approximately $1,006,000 and
$2,573,000, respectively.
The Fox Kids Network occupies approximately 6,134 square feet in a facility
subleased from FOX Television Stations, Inc. (FOX Television) on a month to
month arrangement. The Fox Kids Network currently pays to FOX Television an
annual rate of $25.17 per square foot for use of this space. As of April 1,
1997, the other Fox Kids Network employees and certain other of the Company's
employees relocated to a new facility in Los Angeles which FOX Television
recently acquired from New World. The Fox Kids Network leases 36,450 square
feet. No rent has been paid yet for this lease and the rate has not been
negotiated.
The Company is involved in various lawsuits, both as a plaintiff and
defendant, in the ordinary course of its business. Based on an evaluation
which included consultation with counsel concerning legal and factual issues
involved, management is of the opinion that the foregoing claims and lawsuits
will not have a material adverse effect on the Company's consolidated
financial position.
The Company has entered into employment agreements with certain key members
of management. Such agreements are for terms originally ranging from one to
six and one-half years and generally include bonus provisions. Additionally,
one key member of management has entered into a five-year, non-exclusive
consulting agreement pursuant to which, among other things, the Company agreed
that if the employment agreement is not extended beyond the current five-year
term, the Company would, on the terms set forth therein, be obligated to
F-24
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND TO THE THREE MONTH PERIODS
ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
pay this individual over a five-year period an annual consulting fee at a rate
not exceeding $250,000 per year. Future minimum payments under these
agreements approximate $21,949,000 of which $10,795,000 is due in 1998,
$4,800,000 is due in 1999, $2,671,000 is due in 2000, $1,559,000 is due in
2001, and $1,250,000 is due in 2002 and $875,000 is due thereafter.
Effective June 1994, Saban issued to two employees and a consultant options
to purchase an aggregate of 48.981 shares of common stock, 29.388 of which
were exercisable at June 30, 1997. These options vest ratably over five years
and are exercisable at $122,496 per share, which approximates the fair value
at the time of grant. Effective January 1996, Saban issued to one key employee
options to purchase 16.327 shares of common stock, 6.531 of which were
exercisable at June 30, 1997. These options vest ratably over five years and
are exercisable at $612,500 per share, which approximates the fair market
value at the time of grant. No options have been exercised at June 30, 1997.
With respect to termination for any reason, so long as the Company is not
public, the Company will purchase from the employee and the employee will sell
to the Company any and all option shares owned by the employee and the option
granted to the employee for an amount equal to the fair market value of the
option shares owned by the employee plus the fair market value of the option
shares with respect to which the employee's option has vested but not
exercised less the exercise price. Included in selling, general and
administrative expenses for the eight months ended June 30, 1996 and the year
ended June 30, 1997 is $3,800,000 and $3,760,000, respectively, and in accrued
liabilities at June 30, 1996 and June 30, 1997 is $17,200,000 and $20,960,000,
respectively, related to compensation recorded in connection with these
options.
In connection with the Reorganization as described in Note 1, all options
became options to purchase 646,548 shares of the Class A Common Stock at
exercise prices of $12.37 and $61.87 and will have a term of 10 years from the
date of grant, unless terminated earlier as provided in the agreement granting
the options.
As of June 30, 1997, 65.308 shares (646,548 shares of Class A Common Stock)
of Saban common stock are reserved for future issuance related to options.
Future estimated program commitments are approximately $32,611,000.
FCN Holding issued to an investment banker 16.16 shares of common stock of
FCN Holding (160,000 shares of Class A Common Stock) as compensation for
certain financial advisory and other investment banking services rendered in
connection with the negotiations, structuring, formation and capitalization of
the LLC. In connection therewith, $10,000,000 is included in the combined
statement of operations for the eight months ended June 30, 1996. FCN Holding
has reserved 16.16 shares (160,000 shares of Class A Common Stock) for future
issuances.
8. PROFIT SHARING PLAN
Saban has a qualified tax deferred profit sharing plan (the Plan) for all of
its eligible employees. Under the Plan, employees become eligible on the first
January 1 following such employees' completion of six months of service with
Saban. Each participant is permitted to make voluntary contributions, not to
exceed 15% of his or her respective compensation and the applicable statutory
limitations, which are immediately 100% vested. Saban, at the discretion of
the Board of Directors, may make matching contributions to the Plan. Related
expense for the eight months ended June 30, 1996 and the year ended June 30,
1997 was approximately $43,000 and $101,000, respectively.
F-25
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND TO THE THREE MONTH PERIODS
ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
9. ACQUISITIONS
On April 6, 1996, the Company acquired the stock of Creativite &
Developpement SA (C&D), a leading Paris-based producer of family
entertainment, for $2,869,000, $1,721,000 paid upon closing and $1,148,000
payable approximately one year later subject to certain specified conditions
and is secured by letters of credit. The acquisition was accounted for as a
purchase and the entire purchase price was allocated principally to
international distribution rights to children's programming. The results of
operations of C&D since the purchase date of April 16, 1996, have been
included with the Company's results of operations for the eight months ended
June 30, 1997 and for the year ended June 30, 1997. Unaudited pro forma
combined statements of operations for the years ended July 2, 1995 and June
30, 1996, which would combine the results of operations of the Company and
C&D, are not presented herein as such information is not material to the
combined results of operations.
In December 1996, the Company purchased from Vesical Limited (Vesical) its
interest and rights to certain television programming and related accounts
receivable balances for $12,000,000, $7,200,000 paid upon closing (April 18,
1996) and $4,800,000 paid in April 1997. The Company allocated the purchase
price between the account receivable balances and the television programming
rights based upon the respective assets fair market values using a discounted
cash flow analysis.
In March 1997, the Company acquired 90% of the shares in TV10 from Arcade
Media Group B.V. and Wegener N.V. TV10 operates a channel in Holland that is
distributed via cable. The Company intends to sell 50% of its interest in TV10
to a third party. Since the Company's control of TV10 is only temporary, the
Company has accounted for its investment under the equity method of accounting
and has recorded its share of TV10 operations since the acquisition date.
During the year ended June 30, 1997, the Company advanced TV10 approximately
$830,000 to fund operations.
10. SIGNIFICANT CUSTOMERS AND PROPERTIES AND GEOGRAPHICAL INFORMATION
The Company operates in one business segment which is the acquisition,
production and worldwide broadcast, distribution and leasing of entertainment
properties. For the eight months ended June 30, 1996 and the year ended June
30, 1997, the Company earned revenues from one significant customer of
approximately $32,148,000 (17%) and $35,500,000 (12%), respectively. The
Company earned revenues of $72,668,000 (38%) and $70,810,000 (23%) for the
eight months ended June 30, 1996 and for the year ended June 30, 1997,
respectively, from one significant property (Power Rangers).
F-26
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND TO THE THREE MONTH PERIODS
ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
Geographical information concerning the Company's operations is as follows:
<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Revenues:
Domestic....................................... $129,645,000 $199,575,000
International, principally Europe(2)........... 61,976,000 108,245,000
------------ ------------
191,621,000 307,820,000
Operating profit(1)
Domestic....................................... 67,970,000 84,295,000
International, principally Europe(2)........... 24,714,000 43,144,000
------------ ------------
92,684,000 127,439,000
Selling, general and administrative expense...... 23,072,000 62,466,000
Fox Kids Network affiliate participants.......... 8,853,000 6,194,000
Equity in loss of unconsolidated affiliate
(Europe)........................................ -- 1,546,000
Investment advisory fee.......................... 10,000,000 --
Interest expense................................. 885,000 2,226,000
------------ ------------
Income before provision for income taxes......... $ 49,874,000 $ 55,007,000
============ ============
Identifiable assets:
Domestic....................................... $197,315,000 $164,481,000
International, principally Europe(2)........... 138,955,000 247,920,000
------------ ------------
$336,270,000 $412,401,000
============ ============
</TABLE>
- --------
(1) For purposes of this presentation, operating profit is total revenues less
amortization of programming costs residuals and profit participations.
(2) International amounts relate principally to Western Europe in connection
with the Company's subsidiary, SINV, a Netherlands Antilles company with
offices in Switzerland.
11. STOCK BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25), and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock-Based Compensation," requires use of
option valuation models that were not developed for use in valuing employee
stock options.
Pro forma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using the minimum value method with the following weighted-average
assumptions, respectively: risk-free interest rate of 5.86%; dividend yields
of 0%; and a weighted-average expected life of the option of 5 years.
The fair value of the options granted in January 1996 is $2,623,000 and the
remaining contractual life of these options is 8.5 years.
The minimum value valuation method was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options.
F-27
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND TO THE THREE MONTH PERIODS
ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
The pro forma net income determined as if the Company had accounted for its
employee stock options under the fair value method would be $31,338,000 and
$41,389,000 for the eight months ended June 30, 1996 and the year ended June
30, 1997, respectively.
12. SUBSEQUENT EVENTS
Description of Bank Facility
Existing Credit Facility. Fox Kids Worldwide Inc., FCN Holding, Saban and
IFE currently are borrowers (the co-borrowers) under the Existing Credit
Facility with a group of banks led by Citicorp in the amount of $1.25 billion.
The Existing Credit Facility comprises a $602 million seven-year secured
reducing revolving credit facility, a $298 million seven-year secured reducing
revolving credit facility and a $350 million nine year secured term loan
facility. The proceeds of the loans under the Existing Credit Facility were
used to finance, in part, the IFE Acquisition and to repay certain obligations
of subsidiaries of the Company and will be used, in part, for working capital
purposes.
Borrowings under the Existing Credit Facility are unconditionally guaranteed
by each Co-borrower and each subsidiary that is wholly-owned, directly or
indirectly, by any of the Co-borrowers. In addition, borrowings under the
Existing Credit Facility and the guarantees are secured by substantially all
of the assets of the Co-borrowers and their subsidiaries, who guaranteed the
obligations.
Revolving credit commitments will reduce on a quarterly basis commencing the
quarter ending December 28, 2000, and will continue through the quarter ending
September 29, 2004. Under the Existing Credit Facility, subject to certain
conditions, the Co-borrowers will be required to make certain mandatory
prepayments.
The borrowings under the Existing Credit Facility will bear interest at the
Company's option at a rate per annum equal to either LIBOR or a base rate
plus, in each case, an applicable interest rate margin.
In connection with the Existing Credit Facility, the Company will pay a
commitment fee on the unused and available amounts under the Existing Credit
Facility.
The Existing Credit Facility contains a number of significant covenants
that, among other things, limit the ability of the Co-borrowers and their
respective subsidiaries to incur additional indebtedness, create liens and
other encumbrances, make certain payments and investments, make capital
expenditures, make distributions to owners and repurchase debt and equity. In
addition, the Existing Credit Facility requires the maintenance of certain
specified financial and operating covenants, including, without limitation,
capital expenditure limitations and ratios of EBITDA to fixed charges, total
debt to EBITDA and EBITDA to interest expense. The Existing Credit Facility
also contains representations, warranties, covenants, conditions and events of
default customary for senior credit facilities of similar size and nature.
Amended Credit Facility. Upon consummation from an offering that the Company
plans to consummate in the latter part of calendar 1997, the Existing Credit
Facility will be amended (as amended, the "Amended Credit Facility") to
consist of a $355 million seven-year term loan and a $355 million seven-year
reducing revolving credit facility. Fox Kids Worldwide, Inc. will not be a
borrower under the Amended Credit Facility. Instead, Fox Kids Worldwide, Inc.
will create a wholly-owned subsidiary organized as a limited liability company
("FK Holdings"), which will hold the equity interests of FCN Holding, Saban
and IFE (which will remain borrowers) and which will guarantee the Amended
Credit Facility.
F-28
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND TO THE THREE MONTH PERIODS
ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
The collateral for the Amended Credit Facility will be limited to the equity
interests of FK Holdings, the borrowers and their subsidiaries (subject to
certain limitations for foreign and less than wholly owned subsidiaries) and
intercompany indebtedness. Scheduled payments on the term loan will begin
September 28, 2000, with 10% of the term loan being reduced in year 3 of the
loan, 20% in each of years 4 and 5 and 25% in each of years 6 and 7. Scheduled
quarterly reductions to the revolving credit commitment will begin September
27, 2002, with 15% of the commitment being reduced in each of years 5 and 6
and 70% in year 7. Certain of the baskets and exceptions to the negative
covenants in the Existing Credit Facility will be broadened in the Amended
Credit Facility to allow more flexibility. Additionally, certain financial
covenants will be adjusted to reflect the new structure.
Equity Ownership
After the Reorganization as described above and the IFE acquisition as
described below, the equity ownership of the Company is as follows: Haim Saban
and the former Saban Stockholders collectively own 7,920,000 shares (50%) of
the Class B Common Stock, par value $.001 per share ("Class B Common Stock"),
and an indirect wholly-owned subsidiary of Fox Broadcasting Company (itself a
subsidiary of News Corp.) owns 7,920,000 shares (50%) of the Class B Common
Stock. Allen & Company Incorporated owns 160,000 shares (100%) of the Class A
Common Stock, par value $.001 (the "Class A Common Stock"). Liberty IFE owns
345,000 shares (100%) of Series A Preferred Stock.
The Common Stock
The holders of Class A Common Stock (the "Class A Stockholders") are
entitled to one vote per share and the holders of Class B Common Stock (the
"Class B Stockholders") are entitled to ten votes per share. Both classes vote
together as a single class. A "majority" vote (or any other greater
percentage) for stockholder action requires a majority of the aggregate number
of votes entitled to be cast at such vote. The Company's Certificate of
Incorporation does not provide for cumulative voting rights.
Subject to the rights of the holders of shares of any series of Preferred
Stock, the Class A and Class B Stockholders are to receive like dividends and
other similar distributions of the Company. In the case of any split,
subdivision, combination or reclassification of shares of Class A or Class B
Common Stock, an equivalent split, subdivision, combination or
reclassification must be made to the shares of Class B or Class A Common
Stock, as the case may be.
The Class A and Class B Stockholders have equivalent rights to distributions
in the event of any liquidation, dissolution or winding up (either voluntary
or involuntary) of the Company, in proportion to the number of shares held by
them without regard to class.
In the event of any corporate merger, consolidating purchase or acquisition,
the Class A and Class B Stockholders are to receive the same consideration on
a per share basis, and if the consideration in such transaction consists in
any part of voting securities, the Class B Stockholders are to receive, on a
per share basis, voting securities with ten times the number of votes per
share as those voting securities to be received by the Class A Stockholders.
The shares of Class A Common Stock are freely transferable, but the shares
of Class B Common Stock are subject to transfer restrictions as set forth more
fully in the Company's charter. The Class B Stockholders may only transfer
their shares to a "Permitted Transferee" and any unauthorized transfer will
cause an automatic
F-29
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND TO THE THREE MONTH PERIODS
ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
conversion of such shares into shares of Class A Common Stock. Regardless of
the transfer restriction on the Class B Common Stock, any Class B Stockholder
may pledge its shares as collateral security for any indebtedness or other
obligation.
Each share of Class B Common Stock is convertible, at the option of its
holder, at any time into one validly issued, fully paid and non-assessable
shares of Class A Common Stock.
The Series A Preferred Stock
The holders of the Series A Preferred Stock (or the "Liberty Preferred")
will receive cash dividends of 9% per annum in arrears, paid quarterly. Any
accrued or unpaid dividends will be added to the liquidation price and until
such accrued and unpaid dividends are paid in full, the dividend rate will
increase to 11.5% of the liquidation price. The liquidation price is $1,000
per share plus any accrued and unpaid dividends.
Pursuant to the Funding Agreement among News Corp., News Publishing
Australia Limited ("NPAL"), a wholly-owned subsidiary of News Corp., and the
Company (the "Funding Agreement"), each of News Corp. and NPAL has
unconditionally agreed that, upon the occurrence and during the continuation
of an event of default under the provisions governing the Series A Preferred
Stock in the Company's Corrected Restated Certificate of Incorporation or
liquidation, dissolution, winding up or other similar event of the Company,
News Corp. or NPAL, as the case may be, will provide the Company with the
funds necessary to redeem in full, or pay the liquidation distribution on all
of the outstanding Series A Preferred Stock and to pay any other amounts owing
in respect of such shares. Pursuant to the Amended and Restated Strategic
Stockholders Agreement (as defined), such funds will be, except under certain
circumstances, in the form of an advance or loan to the Company. The following
constitute events of default with respect to the Series A Preferred Stock
under the Corrected Restated Certificate of Incorporation: (i) the failure of
the Company to mandatorily redeem Series A Preferred Stock at the redemption
dates indicated below; (ii) a breach for thirty days of any of the covenants
contained in the provisions governing the Series A Preferred Stock; and (iii)
an event of default under the terms of the preferred stock of NPAL, if any
shares of which are outstanding. In addition, pursuant to the Exchange
Agreement among NPAL, Liberty Media Corporation ("Liberty Media") and Liberty
IFE (the "Exchange Agreement"), each of the holders of the Series A Preferred
Stock has the right, upon the occurrence and during the continuation of an
event of default under the Corrected Restated Certificate of Incorporation or
the liquidation, winding up or other similar event of the Company, to exchange
their shares for an equivalent number of shares of preferred stock of NPAL.
The Series A Preferred Stock issued to Liberty IFE will rank senior as to
dividend, redemption and liquidation rights to all other classes and series of
capital stock of the Company authorized on the date of issuance, or to any
other class or series of capital stock issued while any shares of the Series A
Preferred Stock remain outstanding. The Series A Preferred Stock does not have
voting rights, except as required by law, nor will stockholders of Series A
Preferred Stock have preemptive rights over any stock or securities that may
be issued by the Company.
The Series A Preferred Stock will be redeemed in 2027 at a price equal to
the liquidation price as of the date of such redemption, payable in cash. In
years 2017 and 2022, holders of the Series A Preferred Stock have a thirty day
period commencing August 2 of such years in which they can require the Company
to redeem the Series A Preferred Stock at a price equal to the liquidation
price, payable in cash. At any time after August 1, 2007, the Company may, at
its option, repurchase all shares of Series A Preferred Stock, again at a
price equal to the liquidation price, payable in cash. Under such redemption
requirements, any failure by the Company to redeem the Series A Preferred
Stock will obligate News Corp. and NPAL to perform under the Funding
Agreement.
F-30
<PAGE>
FCN HOLDING, INC., SABAN ENTERTAINMENT, INC.
AND FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE OF THE REORGANIZATION (NOTE 1), FOX KIDS WORLDWIDE,
INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 1997 AND TO THE THREE MONTH PERIODS
ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
13. EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT AUDITOR'S
REPORT
The acquisition of IFE was accounted for as a purchase by the Company of
IFE. Based upon a preliminary review by management, the aggregate purchase
price of IFE in excess of the fair value of the identifiable assets of IFE at
the date of acquisition was approximately $1.7 billion and is being amortized
over 40 years. These intangible assets are reviewed periodically to determine
if the facts and circumstances suggest that it may be impaired. If this review
indicates that these intangible assets will not be recoverable, as determined
based upon discounted cash flows of the acquired business over the remaining
amortization period, then the carrying value of the related intangible assets
will be reduced by the estimated shortfalls of cash flows. The results of
operations of IFE since the purchase date of August 1, 1997 have been included
with the Company's results of operations for the three months ended September
30, 1997.
Certain operations and assets of IFE are intended to be sold by the Company.
Accordingly, such assets have been reflected as assets held for sale in the
September 30, 1997 balance sheet.
The following unaudited pro forma information for the three months ended
September 30, 1996 and 1997 reflect the results of the Company's consolidated
operations as if the acquisition occurred at the beginning of each period
presented. The unaudited pro forma consolidated financial results are not
necessarily indicative of the actual results that would have occurred had the
acquisition occurred at the beginning of each period presented.
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1997
------------------ ------------------
<S> <C> <C>
Revenues.................................. $131,702,000 $147,431,000
Net loss.................................. (8,117,000) (11,990,000)
Net loss per common share................. (.99) (1.23)
</TABLE>
On October 28, 1997, the Company issued $475,000,000 aggregate principal
amount of 9 1/4% Senior Notes Due 2007 and $618,670,000 aggregate principal
amount at maturity of 10 1/4% Senior Discount Notes Due 2007 in a transaction
not registered under the Securities Act in reliance upon an exemption from the
registration requirements of the Securities Act. Gross proceeds from the
offering amounted to $850,000,000.
F-31
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
FCN Holding, Inc.
We have audited the accompanying consolidated balance sheets of FCN Holding,
Inc., as of July 2, 1995 and October 31, 1995, and the related consolidated
statements of operations, stockholder's equity, and cash flows for the period
from July 4, 1994 to July 2, 1995 and the period from July 3, 1995 to October
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of FCN Holding, Inc. and the results of its operations and its cash flows for
the period from July 4, 1994 to July 2, 1995 and the period from July 3, 1995
to October 31, 1995, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Los Angeles, California
September 27, 1996, except for
the second paragraph
of Note 10 as to which
the date is September 29, 1997
F-32
<PAGE>
FCN HOLDING, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 2, OCTOBER 31,
1995 1995
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents............................ $ -- $ 317,000
Accounts receivable, including $2,265,000 (July 2,
1995) and $2,341,000 (October 31, 1995) from related
parties............................................. 23,539,000 24,195,000
Programming costs, less accumulated amortization..... 26,143,000 27,085,000
Property and equipment, at cost, less accumulated
depreciation ....................................... 85,000 103,000
Other assets......................................... 49,000 1,107,000
----------- -----------
Total assets......................................... $49,816,000 $52,807,000
=========== ===========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Accounts payable..................................... $ 1,991,000 1,718,000
Accrued liabilities.................................. 876,000 1,291,000
Deferred revenue..................................... 1,763,000 791,000
Fox Kids Network affiliate participation payable..... 11,523,000 18,421,000
Accrued programming expenditures..................... 21,960,000 19,816,000
Administrative fee payable to a related party........ 4,828,000 6,173,000
Amounts payable to related parties................... 10,686,000 8,727,000
----------- -----------
Total liabilities.................................... 53,627,000 56,937,000
Commitments and contingencies -- --
Stockholder's deficit:
Common stock, no par value, 2,000 authorized,
issued and outstanding 2,000 shares............... 2,000 2,000
Retained deficit................................... (3,813,000) (4,132,000)
----------- -----------
Total stockholder's deficit.......................... (3,811,000) (4,130,000)
----------- -----------
Total liabilities and stockholder's deficit.......... $49,816,000 $52,807,000
=========== ===========
</TABLE>
See accompanying notes.
F-33
<PAGE>
FCN HOLDING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
JULY 4, 1994 JULY 3, 1995
TO TO
JULY 2, 1995 OCTOBER 31, 1995
------------ ----------------
<S> <C> <C>
Net revenues (including $8,443,000 (July 2, 1995)
and $2,822,000 (October 31, 1995) from related
parties)........................................ $168,871,000 $46,286,000
Costs and expenses:
Production and programming .................... 109,259,000 29,698,000
Ancillary market distribution costs to a
related party ................................ 3,255,000 1,140,000
Administrative fee to a related party.......... 21,458,000 6,173,000
Selling, general and administrative (including
$1,075,000 (July 2, 1995) and $448,000
(October 31, 1995) to related parties)........ 5,202,000 2,566,000
Fox Kids Network affiliate participations...... 11,523,000 6,883,000
------------ -----------
Operating income (loss).......................... 18,174,000 (174,000)
------------ -----------
Interest expense to a related party.............. 1,630,000 145,000
------------ -----------
Income (loss) before provision for income taxes.. 16,544,000 (319,000)
Provision for income taxes....................... -- --
------------ -----------
Net income (loss)................................ $ 16,544,000 $ (319,000)
============ ===========
</TABLE>
See accompanying notes.
F-34
<PAGE>
FCN HOLDING, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------- RETAINED
SHARES AMOUNT DEFICIT TOTAL
------ ------ ----------- -----------
<S> <C> <C> <C> <C>
Balance at July 3, 1994................ 1,000 1,000 (20,357,000) (20,356,000)
Net income........................... -- -- 16,544,000 16,544,000
Issuance of stock.................... 1,000 1,000 -- 1,000
----- ------ ----------- -----------
Balance at July 2, 1995................ 2,000 2,000 (3,813,000) (3,811,000)
Net loss............................. -- -- (319,000) (319,000)
----- ------ ----------- -----------
Balance at October 31, 1995............ 2,000 $2,000 $(4,132,000) $(4,130,000)
===== ====== =========== ===========
</TABLE>
See accompanying notes.
F-35
<PAGE>
FCN HOLDING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
JULY 4, 1994 JULY 3, 1995
TO TO
JULY 2, 1995 OCTOBER 31, 1995
------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)............................. $ 16,544,000 $ (319,000)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Amortization of programming costs........... 98,309,000 27,942,000
Depreciation................................ 17,000 13,000
Provision for doubtful accounts............. 480,000 --
Changes in operating assets and liabilities:
Accounts receivable....................... (5,528,000) (656,000)
Additions to programming costs ........... (107,368,000) (28,884,000)
Other assets.............................. 48,000 (1,058,000)
Accounts payable.......................... (376,000) (273,000)
Accrued liabilities....................... (219,000) 415,000
Administration fee payable to a related
party.................................... 199,000 1,345,000
Deferred revenue.......................... 1,763,000 (972,000)
Fox Kids Network affiliate participation
payable.................................. 11,523,000 6,898,000
Accrued programming expenditures.......... 908,000 (2,144,000)
------------- ------------
Net cash provided by operating activities..... 16,300,000 2,307,000
INVESTING ACTIVITIES
Purchase of property and equipment............ (91,000) (31,000)
------------- ------------
Net cash used in investing activities......... (91,000) (31,000)
FINANCING ACTIVITIES
Proceeds from related parties................. 180,765,000 68,308,000
Payments to related parties................... (197,242,000) (70,267,000)
------------- ------------
Net cash used in financing activities......... (16,477,000) (1,959,000)
------------- ------------
(Decrease) increase in cash and cash
equivalents.................................. (268,000) 317,000
Cash and cash equivalents at beginning of
period....................................... 268,000 --
------------- ------------
Cash and cash equivalents at end of period.... $ -- $ 317,000
============= ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest.................................... $ 2,053,000 $ 201,000
============= ============
Income taxes................................ $ -- $ --
============= ============
</TABLE>
See accompanying notes.
F-36
<PAGE>
FCN HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1995
1. BASIS OF FINANCIAL STATEMENT PRESENTATION AND ORGANIZATION
The accompanying consolidated financial statements include the accounts of
FCN Holding, Inc. and its wholly-owned subsidiaries, Fox Kids Club, Fox Kids
Countdown and Fox Storymakers (collectively "FCN Holding"). All significant
intercompany transactions and accounts have been eliminated.
FCN Holding is an indirect subsidiary of Fox Broadcasting Company ("Fox
Broadcasting"), itself an indirect subsidiary of The News Corporation Limited.
FCN Holding's largest operating entity is an indirect wholly-owned subsidiary,
Fox Children's Network, Inc. ("FCN"), which began primary operations on
September 8, 1990. FCN Holding produces and licenses children's animated and
live-action television shows with initial exploitation on the Fox Broadcasting
television network followed by distribution in ancillary markets when such
rights exist.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR-END
FCN Holding's fiscal year ends on the Sunday closest to June 30.
REVENUE RECOGNITION
Advertising revenue is recognized as earned in the period in which the
advertising commercials are telecast and are net of agency commission fees of
$25,429,000 and $7,305,000 for the periods ended July 2, 1995 and October 31,
1995, respectively. Revenues from foreign and merchandising license
agreements, which provide for the receipt by FCN Holding of nonrefundable
guaranteed amounts, are recognized when the license period begins and the
product is available pursuant to the terms of the license agreement. Amounts
in excess of minimum guarantees under these license agreements are recognized
when earned. Amounts received in advance of recognition of revenue are
recorded as deferred revenue. FCN Holding generally provides advertisers with
guaranteed ratings in connection with its domestic network broadcasts. Revenue
is recorded net of estimated shortfalls, which are settled either by
additional advertising time ("make goods") or cash refunds to the advertiser.
FCN Holding accounts for the full amount of the estimated shortfall.
PROGRAMMING COSTS
Program licenses and rights include exhibition and exploitation rights
acquired under license agreements and costs of developing and producing
original programming for use by FCN Holding on its network. The individual
film forecast method is used to amortize programming costs in which FCN
Holding owns or controls distribution rights. Costs accumulated in the
production of a program are amortized in the proportion that gross revenues
realized bear to management's estimate of the total gross revenues expected to
be received. Estimated liabilities for residuals and participations are
accrued and expensed in the same manner as programming cost inventories are
amortized.
For programs in which the Company acquires only broadcast network rights,
the Company amortizes such program costs over the estimated number of
telecasts. The Company evaluates its programming rights for possible changes
in the estimated number of telecasts or the possibility of impairment.
Revenue estimates on a program-by-program basis are reviewed periodically by
management and are revised, if warranted, based upon management's appraisal of
current market conditions, such as changes in the
F-37
<PAGE>
FCN HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
distribution marketplace or changes in expected usage of a program on the
network. Based on this review, if estimated future gross revenues from a
program are not sufficient to recover the unamortized costs, the unamortized
programming cost will be written down to net realizable value.
CONCENTRATION OF CREDIT RISKS
Financial instruments which potentially subject FCN Holding to concentration
of credit risk consist principally of temporary cash investments and trade
receivables. FCN Holding places its temporary cash investments with high
credit quality financial institutions and therefore is subject to reduced
risk. FCN Holding has not incurred any losses relating to these investments.
At October 31, 1995, substantially all of FCN Holding's trade receivables
were from advertising agencies. FCN Holding performs periodic credit
evaluations of its customers' financial condition and generally does not
require collateral. Receivables generally are due within 30 days. Credit
losses relating to advertising agencies consistently have been within
management's expectations.
CASH AND CASH EQUIVALENTS
For the purposes of balance sheet classification and the statement of cash
flows, FCN Holding considers all highly liquid investments that are both
readily convertible into cash with original maturities when purchased of three
months or less to be cash equivalents.
FINANCIAL INSTRUMENTS
Financial instruments are carried at historical cost which approximates fair
value.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost and depreciation is computed
using the straight-line method over their estimated useful lives of three to
five years. Leasehold improvements are amortized over the lesser of the term
of the lease or the estimated useful lives of the improvements using the
straight-line method.
INCOME TAXES
FCN Holding provides for income taxes based on the liability method under
Statement of Financial Accounting Standards No. 109. Under this method,
deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes including amortization of programming costs. Actual results
could differ from those estimates. Management periodically reviews and revises
its estimates of future airings and revenues for program costs, as necessary,
which may result in revised amortization of its program costs and may be
significantly affected by the periodic adjustments in such amortization.
ADVERTISING COSTS
Included in selling, general and administrative expenses are advertising
expenses amounting to $1,639,000 and $1,350,000 for the year ended July 2,
1995 and for the four months ended October 31, 1995, respectively.
F-38
<PAGE>
FCN HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. PROGRAMMING COSTS
Programming costs, net of accumulated amortization, are comprised of the
following:
<TABLE>
<CAPTION>
JULY 2, OCTOBER 31,
1995 1995
------------ ------------
<S> <C> <C>
Programming costs, broadcast................... $244,599,000 $261,078,000
Programming costs, produced.................... 89,493,000 99,730,000
Programming costs in development and
production.................................... 1,298,000 3,466,000
------------ ------------
335,390,000 364,274,000
------------ ------------
Accumulated amortization....................... 309,247,000 337,189,000
------------ ------------
$ 26,143,000 $ 27,085,000
============ ============
</TABLE>
Based on FCN Holding's estimate of future revenues, substantially all of the
unamortized released programming costs at October 31, 1995 will be amortized
during the three year period ending October 31, 1998.
4. PROPERTY AND EQUIPMENT
Property and equipment is comprised of the following:
<TABLE>
<CAPTION>
JULY 2, OCTOBER 31,
1995 1995
------- -----------
<S> <C> <C>
Computer equipment..................................... $93,000 $100,000
Office furniture and fixtures.......................... 4,000 28,000
Machinery and equipment................................ 41,000 41,000
Leasehold improvements................................. 32,000 32,000
------- --------
170,000 201,000
Less accumulated depreciation.......................... 85,000 98,000
------- --------
$85,000 $103,000
======= ========
</TABLE>
5. RELATED PARTY TRANSACTIONS
FCN and Twentieth Century Fox Licensing and Merchandising, a unit of Fox,
Inc. ("Twentieth Fox Licensing") are parties to a Merchandising Rights
Acquisition Agreement, dated as of July 1, 1990, pursuant to which FCN
licenses to Twentieth Fox Licensing the worldwide merchandising and licensing
rights, in perpetuity, to programming owned or controlled by FCN. In
consideration for the rights granted, Twentieth Fox Licensing agreed to pay to
FCN an amount equal to 100% of net profits, which equaled gross receipts less
distribution fees and expenses.
FCN and Twentieth Century Fox Film Corporation ("Twentieth Century Fox") are
parties to a Distribution Rights Acquisition Agreement, dated as of September
1, 1990, pursuant to which FCN licensed to Twentieth Century Fox the worldwide
distribution rights, in perpetuity, with respect to programming owned or
controlled by FCN. In consideration for the rights granted, Twentieth Century
Fox agreed to pay to FCN 100% of net profits as defined in the agreement.
FCN and Fox Broadcasting are parties to an Administration Agreement, dated
as of February 7, 1990, pursuant to which Fox Broadcasting agreed to provide
the following services to FCN: network national advertising sales and the
administration thereof, commercial trafficking and broadcast operations
(including program delivery to Fox Kids Network Affiliates (see Note 8--"Fox
Kids Network Affiliate Participation
F-39
<PAGE>
FCN HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Payable")) and overhead charges related to Fox Broadcasting in-house
administrative support in the areas of research, promotion, business affairs,
legal affairs and accounting. FCN agreed to pay to Fox Broadcasting a fee
equal to 15% of 100% of the net advertising revenue (gross advertising revenue
less advertising agency commissions) derived with respect to national
commercials, commercial material or other advertising matter included or used
in connection with any of the programs exhibited on the Fox Kids Network.
FCN Holding leases office space on a month to month basis from a company
related to Fox Broadcasting. Rent expense to this related party was $231,000
and $88,000 for the periods ended July 2, 1995 and October 31, 1995.
Related companies of Fox Broadcasting have funded the operation of FCN
Holding from its inception through loans to FCN Holding. All amounts derived
by the operations of FCN Holding are used to reduce such outstanding
borrowings. Amounts outstanding bear interest at the prime rate (8.75% at
October 31, 1995). Amounts due to the related companies of Fox Broadcasting
including interest totalled $10,686,000 and $8,727,000 at July 2, 1995 and
October 31, 1995, respectively.
6. INCOME TAXES
FCN Holding, together with other related companies of Fox Broadcasting,
files consolidated federal and state income tax returns. No deferred tax
assets or liabilities arising from FCN Holding's activities have been
allocated.
FCN Holding did not incur any current or deferred tax expense due to the
utilization of prior year net operating loss carryforwards.
The actual tax expense differs from the "expected" federal tax rate of 35%
as follows:
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
JULY 4, 1994 JULY 3, 1995
TO TO
JULY 2, 1995 OCTOBER 31, 1995
------------ ----------------
<S> <C> <C>
Computed "expected" tax expense.............. 35 % -- %
Impact of utilized net operating loss
carryforward................................ (35)% -- %
--- ---
-- --
=== ===
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
Future estimated program commitments are approximately $58,648,000.
FCN Holding is involved in certain legal proceedings arising from the normal
course of operations. Management believes that the ultimate resolution of
these matters will not have a material effect on its financial position or
results of operations.
FCN Holding has entered into employment agreements with several key
employees extending through fiscal year 1999 requiring future payments of
$1,135,000 in the one year period ended October 31, 1996, $788,000 in the one
year period ended October 31, 1997 and $257,000 in the one year period ended
October 31, 1998.
8. FOX KIDS NETWORK AFFILIATE PARTICIPATION PAYABLE
Pursuant to the terms of the affiliation agreements ("Agreement") among Fox
Broadcasting and substantially all of its affiliated television stations ("Fox
Kids Network Affiliates"), the Fox Kids Network Affiliates in total are
entitled to compensation which is equal to 100% of FCN's programming Net
Profits (as
F-40
<PAGE>
FCN HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
defined below). Amounts payable under these compensation arrangements are due
quarterly in amounts derived pursuant to the provisions in the Agreement. Net
profits are defined on a cumulative basis to include amounts actually received
by FCN from the exhibition, distribution and other exploitation of FCN
Holding's programs and the merchandising and other rights relating thereto,
less amounts paid for administrative fees, production/license fees,
distribution and merchandising fees (including those payable to FCN Holding),
overhead and other expenses and reserves.
9. MAJOR CUSTOMERS AND PROPERTIES
For the period ended July 2, 1995, FCN Holding earned net revenues from two
significant customers of approximately $16,662,000 (10%) and $16,061,000
(10%). For the period ended October 31, 1995, FCN earned net revenues from
three significant customers of approximately $5,527,000 (12%), $5,706,000
(12%) and $4,724,000 (10%). For the periods ended July 2, 1995 and October 31,
1995, FCN Holding earned net revenues from one significant property (Power
Rangers) of $55,805,000 (33%) and $10,847,000 (23%), respectively.
10. SUBSEQUENT EVENT
On November 1, 1995 (the "Effective Date") FCN Holding and Saban
Entertainment, Inc. ("Saban") formed Fox Kids Worldwide, L.L.C. (the "LLC"), a
limited liability company, for the purpose of jointly expanding the worldwide
childrens' businesses of FCN Holding and Saban. Since the Effective Date, FCN
Holding and Saban have been operated by their respective managements subject
to the overall supervision of the members committee of the LLC.
THE REORGANIZATION
Fox Kids Worldwide Inc. was incorporated in August 1996 to act as a holding
company of FCN Holding, Saban and the LLC. Between August 1996 and August
1997, it conducted no business or operations. On August 1, 1997, in connection
with Fox Kids Worldwide Inc.'s acquisition of a controlling interest in
International Family Entertainment, Inc., (i) Fox Broadcasting Sub, Inc., a
wholly owned indirect subsidiary of Fox Broadcasting, exchanged its capital
stock in FCN Holding, which indirectly owned the FCN, for 7,920,000 shares of
Class B Common Stock of Fox Kids Worldwide Inc., (ii) the other stockholder of
FCN Holding exchanged its capital stock in FCN Holding for an aggregate of
160,000 shares of Class A Common Stock of Fox Kids Worldwide Inc., (iii) Haim
Saban and the other stockholders of Saban exchanged their capital stock of
Saban for an aggregate of 7,920,000 shares of Class B Common Stock of Fox Kids
Worldwide Inc. and (iv) all outstanding management options to purchase Saban
capital stock became options to purchase an aggregate of 646,548 shares of
Class A Common Stock of Fox Kids Worldwide Inc. In addition, Fox Broadcasting
exchanged its preferred, non-voting interest in the LLC and its $50 million
contingent note receivable from the LLC for a new approximately $108.6 million
subordinated note from Fox Kids Worldwide Inc. (which also included
approximately $8.6 million of intercompany indebtedness). As a result of these
transactions, FCN Holding, FCN, Saban and the LLC became direct or indirect
wholly owned subsidiaries of Fox Kids Worldwide Inc.
F-41
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Saban Entertainment, Inc.
We have audited the accompanying consolidated balance sheets of Saban
Entertainment, Inc. as of May 31, 1995 and as of October 31, 1995, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the year ended May 31, 1995 and for the five months ended October
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Saban Entertainment, Inc. at May 31, 1995, and at October 31, 1995 and the
results of its operations and its cash flows for the year ended May 31, 1995
and for the five months ended October 31, 1995, in conformity with generally
accepted accounting principles.
Ernst & Young LLP
Los Angeles, California
September 27, 1996 except for
the third paragraph of
Note 11 as to which the
date is September 29, 1997.
F-42
<PAGE>
SABAN ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MAY 31, OCTOBER 31,
1995 1995
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents........................... $ 14,584,000 $ 16,207,000
Restricted cash..................................... 5,000,000 5,000,000
Accounts receivable, net of allowance for doubtful
accounts of $1,385,000 at May 31, 1995 and
$1,385,000 at October 31, 1995..................... 37,338,000 30,157,000
Amounts receivable from related parties............. 3,796,000 3,832,000
Programming costs, less accumulated amortization.... 115,873,000 118,210,000
Property and equipment, at cost, less accumulated
depreciation ...................................... 3,630,000 7,079,000
Deferred income taxes............................... 35,473,000 26,186,000
Other assets........................................ 2,503,000 808,000
------------ ------------
Total assets........................................ $218,197,000 $207,479,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable.................................... $ 6,818,000 $ 8,817,000
Accrued liabilities................................. 29,606,000 23,411,000
Deferred revenue.................................... 62,755,000 48,155,000
Accrued residuals and participations................ 9,672,000 10,074,000
Income taxes payable................................ 36,378,000 15,680,000
Deferred income taxes............................... 9,233,000 766,000
Debt................................................ 5,623,000 5,605,000
Amounts payable to related parties.................. -- --
------------ ------------
160,085,000 112,508,000
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 10,000 shares
authorized, 800 shares issued and outstanding at
May 31, 1995 and October 31, 1995 ............... -- --
Contributed capital............................... 11,751,000 11,751,000
Cumulative translation adjustment................. (71,000) 46,000
Retained earnings................................. 46,432,000 83,174,000
------------ ------------
Total stockholders' equity.......................... 58,112,000 94,971,000
------------ ------------
Total liabilities and stockholders' equity.......... $218,197,000 $207,479,000
============ ============
</TABLE>
See accompanying notes.
F-43
<PAGE>
SABAN ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FIVE MONTHS ENDED
YEAR ENDED OCTOBER 31,
MAY 31, 1995 1995
------------ -----------------
<S> <C> <C>
Revenues......................................... $242,468,000 $105,130,000
Costs and expenses:
Production and programming..................... 117,557,000 42,022,000
Selling, general and administrative............ 51,894,000 11,538,000
------------ ------------
Operating income................................. 73,017,000 51,570,000
Interest expense................................. 1,315,000 539,000
------------ ------------
Income before provision for income taxes......... 71,702,000 51,031,000
Provision for income taxes....................... 27,027,000 14,289,000
------------ ------------
Net income....................................... $ 44,675,000 $ 36,742,000
============ ============
</TABLE>
See accompanying notes.
F-44
<PAGE>
SABAN ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK CUMULATIVE
-------------- CONTRIBUTED TRANSLATION RETAINED
SHARES AMOUNT CAPITAL ADJUSTMENT EARNINGS TOTAL
------ ------ ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at May 31, 1994....... 1,067 $-- $11,751,000 $(255,000) $ 41,757,000 $ 53,253,000
Exchange gain on translation
of foreign subsidiaries'
financial statements....... -- -- -- 184,000 -- 184,000
Purchase of minority
stockholder shares......... (267) -- -- -- (40,000,000) (40,000,000)
Net income.................. -- -- -- -- 44,675,000 44,675,000
----- ---- ----------- --------- ------------ ------------
Balance at May 31, 1995....... 800 -- 11,751,000 (71,000) 46,432,000 58,112,000
Exchange gain on translation
of foreign subsidiaries'
financial statements....... -- -- -- 117,000 -- 117,000
Net income.................. -- -- -- -- 36,742,000 36,742,000
----- ---- ----------- --------- ------------ ------------
Balance at October 31, 1995... 800 $-- $11,751,000 $ 46,000 $ 83,174,000 $ 94,971,000
===== ==== =========== ========= ============ ============
</TABLE>
See accompanying notes.
F-45
<PAGE>
SABAN ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FIVE MONTHS
ENDED
YEAR ENDED OCTOBER 31,
MAY 31, 1995 1995
------------- ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income....................................... $ 44,675,000 $ 36,742,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Amortization of programming costs.............. 84,109,000 32,651,000
Depreciation................................... 1,296,000 571,000
Cumulative translation adjustment.............. 184,000 117,000
Provision for doubtful accounts................ 1,000,000
Changes in operating assets and liabilities:
Restricted cash.............................. (4,701,000) --
Accounts receivable.......................... (100,000) 7,181,000
Amounts receivable from related parties...... (2,649,000) (36,000)
Additions to programming costs............... (114,903,000) (34,988,000)
Other assets................................. (1,752,000) 1,695,000
Accounts payable............................. 2,610,000 1,999,000
Accrued liabilities.......................... 26,127,000 (6,195,000)
Accrued residuals and participations......... (2,663,000) 402,000
Accrued interest to related parties.......... (2,359,000) --
Income taxes payable and deferred income
taxes....................................... 153,000 (19,878,000)
Deferred revenue............................. 47,991,000 (14,600,000)
------------- ------------
Net cash (used in) provided by operating
activities...................................... 79,018,000 5,661,000
INVESTING ACTIVITIES
Purchase of property and equipment............... (2,242,000) (4,020,000)
------------- ------------
Net cash used in investing activities............ (2,242,000) (4,020,000)
FINANCING ACTIVITIES
Proceeds from bank borrowings.................... 7,395,000 11,000,000
Payments on bank borrowings...................... (21,663,000) (11,018,000)
Proceeds from related parties.................... 1,000,000 --
Payments to related parties...................... (12,773,000) --
Purchase of minority stockholder shares.......... (40,000,000) --
------------- ------------
Net cash provided by (used in) financing
activities...................................... (66,041,000) (18,000)
------------- ------------
Increase in cash and cash equivalents............ 10,735,000 1,623,000
Cash and cash equivalents at beginning of year... 3,849,000 14,584,000
------------- ------------
Cash and cash equivalents at end of year......... $ 14,584,000 $ 16,207,000
============= ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest (net of amounts capitalized).......... $ 3,280,000 $ 347,000
============= ============
Income taxes................................... $ 26,884,000 $ 34,156,000
============= ============
</TABLE>
See accompanying notes.
F-46
<PAGE>
SABAN ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1995
1. BASIS OF FINANCIAL STATEMENTS PRESENTATION AND ORGANIZATION
Saban Entertainment, Inc. and its subsidiaries (collectively "Saban"), is a
broad-based entertainment company specializing in the creation, production,
acquisition, distribution, merchandising and licensing of animated and live-
action children's programming in the worldwide entertainment marketplace.
Saban is one of the largest independent suppliers of children's programming
in the world and its library of children's television programming is one of
the largest children's libraries in the world. Saban provides programming in
all dayparts for network, first-run syndication and cable television for both
domestic and international television. In the United States, Saban syndicates
its programming under the Saban Kids Network name.
In addition, Saban is involved in the creation and production of music and
the acquisition of international distribution rights to telefilms and mini
series. Saban's operations are conducted through offices in the United States,
France, Switzerland, Germany, Italy and the United Kingdom.
The accompanying consolidated financial statements include the accounts of
Saban Entertainment, Inc. and subsidiaries. All significant intercompany
transactions and accounts have been eliminated.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Revenues from television, music and merchandising lease agreements, which
provide for the receipt by the Company of nonrefundable guaranteed amounts,
are recognized when the lease period begins, collectibility is reasonably
assured and the product is available pursuant to the terms of the lease
agreement. Amounts in excess of minimum guarantees under these lease
agreements are recognized when earned. Amounts received in advance of
recognition of revenue are recorded as deferred revenue. Barter revenues,
representing the exchange of programming for advertising time on a television
station, are recognized upon the airing of an advertisement during such
advertising time and related programming costs are amortized in accordance
with the individual film forecast method.
PROGRAMMING COSTS
Programming costs, consisting of direct production costs, acquisition of
story rights, costs to acquire distribution rights, allocable production
overhead, interest and exploitation costs (which benefit future periods) are
capitalized as incurred. The individual film forecast method is used to
amortize programming costs in which Saban owns or controls distribution
rights. Costs accumulated in the production of a program are amortized in the
proportion that gross revenues realized bear to management's estimate of the
total gross revenues expected to be received. Estimated liabilities for
residuals and participations are accrued and expensed in the same manner as
programming cost inventories are amortized.
Revenue estimates on a program-by-program basis are reviewed periodically by
management and are revised, if warranted, based upon management's appraisal of
current market conditions. Based on this review, if estimated future gross
revenues from a program are not sufficient to recover the unamortized costs,
the unamortized programming cost will be written down to net realizable value.
CONCENTRATION OF CREDIT RISKS
Financial instruments which potentially subject Saban to concentration of
credit risk consist principally of temporary cash investments and trade
receivables. Saban places its temporary cash investments principally in a
F-47
<PAGE>
SABAN ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
mutual fund which invests in government securities and therefore are subject
to reduced risk. Saban has not incurred any losses relating to these
investments.
Saban leases its product to distributors and broadcasters throughout the
world. Saban performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral. Generally, payment is
received in full or in part prior to Saban's release of product to such
distributors and broadcasters. At October 31, 1995, substantially all of
Saban's trade receivables were from customers in the entertainment or
broadcast industries. Receivables generally are due within 30 days. Credit
losses relating to customers in the entertainment and broadcast industries
consistently have been within management's expectations.
CASH AND CASH EQUIVALENTS
For the purposes of balance sheet classification and the statement of cash
flows, Saban considers all highly liquid investments that are both readily
convertible into cash with original maturities when purchased of three months
or less to be cash equivalents.
RESTRICTED CASH
Restricted cash represents amounts held by financial institutions as
collateral on outstanding debt.
FINANCIAL INSTRUMENTS
Financial instruments are carried at historical cost which approximates fair
value.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost and depreciation is computed
using the straight-line method over their estimated useful lives of five
years. Leasehold improvements are amortized over the lesser of the term of the
lease or the estimated useful lives of the improvement using the straight-line
method.
FOREIGN CURRENCY TRANSLATION AND CUMULATIVE ADJUSTMENT
Saban International N.V. ("SINV"), a wholly-owned subsidiary of Saban uses
the U.S. dollar as the functional currency. Saban International Paris S.A.R.L.
("SIP"), Saban Entertainment Germany GmbH and Saban Merchandising and
Licensing GmbH and Saban Entertainment (UK) Limited, all foreign subsidiaries
of Saban, use local currency as the functional currency. Assets and
liabilities are translated into U.S. dollars at current exchange rates.
Revenue and expenses have been translated into U.S. dollars based generally on
the average rates prevailing during the period.
Gains and losses arising from foreign currency transactions are included in
determining net income for the period. The aggregate transaction gains for the
years ended May 31, 1995, and for the five months ended October 31, 1995 were
$577,000 and $135,000, respectively.
The cumulative translation adjustment in stockholders' equity at May 31,
1994 and 1995, and at October 31, 1995, represents Saban's net unrealized
exchange (losses) gains on the translation of foreign subsidiaries' financial
statements.
INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("FAS") No. 109, "Accounting for Income
Taxes." Saban adopted the provisions of the new
F-48
<PAGE>
SABAN ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
standard in its financial statements for the year ended May 31, 1994. As
permitted by the FAS, prior year financial statements have not been restated
to reflect the change in accounting method. The cumulative effect as of June
1, 1993, of adopting FAS 109 was not material to Saban's financial statements.
Under FAS 109, the liability method is used in accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. Prior to the adoption
of FAS 109, income tax expense was determined using the deferred method.
Deferred tax expense was based on items of income and expense that were
reported in different years in the financial statements and the tax returns
and were measured at the tax rate in effect in the year the difference
originated.
STOCK-BASED COMPENSATION
Saban accounts for its stock compensation arrangements under the provisions
of Accounting Principles Board No. 25, "Accounting for Stock Issued to
Employees" and intends to continue to do so.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes including amortization of programming costs. Actual results
could differ from those estimates. Management periodically reviews and revises
its estimates of future airings and revenues for program costs, as necessary,
which may result in revised amortization of its program costs and may be
significantly affected by the periodic adjustments in such amortization.
3. PROGRAMMING COSTS
Programming costs, net of accumulated amortization, is comprised of the
following:
<TABLE>
<CAPTION>
MAY 31, 1995
-----------------------------------------
ACCUMULATED NET PROGRAMMING
COST AMORTIZATION COSTS
------------ ------------ ---------------
<S> <C> <C> <C>
Children's programming............... $203,765,000 $147,813,000 $ 55,952,000
Movies and mini-series............... 101,656,000 76,211,000 25,445,000
Projects in production............... 33,008,000 -- 33,008,000
Development.......................... 1,468,000 -- 1,468,000
------------ ------------ ------------
$339,897,000 $224,024,000 $115,873,000
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
OCTOBER 31, 1995
-----------------------------------------
ACCUMULATED NET PROGRAMMING
COST AMORTIZATION COSTS
------------ ------------ ---------------
<S> <C> <C> <C>
Children's programming............... $237,286,000 $177,232,000 $ 60,054,000
Movies and mini-series............... 112,554,000 79,443,000 33,111,000
Projects in production............... 24,177,000 -- 24,177,000
Development.......................... 868,000 -- 868,000
------------ ------------ ------------
$374,885,000 $256,675,000 $118,210,000
============ ============ ============
</TABLE>
F-49
<PAGE>
SABAN ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Based on Saban's estimate of future revenues, approximately 70% of
unamortized released programming costs at October 31, 1995 will be amortized
during the three years ending October 31, 1998. Interest in the amount of
$304,000 and $32,000 was capitalized to programming costs during the years
ended May 31, 1995 and for the five months ended October 31, 1995,
respectively.
4. PROPERTY AND EQUIPMENT
Property and equipment is comprised of the following:
<TABLE>
<CAPTION>
MAY 31, OCTOBER 31,
1995 1995
---------- -----------
<S> <C> <C>
Studio equipment ....................................... $5,280,000 $ 5,832,000
Office furniture and fixtures........................... 907,000 1,505,000
Leasehold improvements.................................. 1,095,000 3,965,000
Other................................................... 64,000 64,000
---------- -----------
7,346,000 11,366,000
Less accumulated depreciation........................... 3,716,000 4,287,000
---------- -----------
$3,630,000 $ 7,079,000
========== ===========
</TABLE>
5. DEBT
Debt is comprised of the following:
<TABLE>
<CAPTION>
MAY 31, OCTOBER 31,
1995 1995
---------- -----------
<S> <C> <C>
Imperial Bank; secured revolving line of credit;
interest at prime rate (8.75% at October 31, 1995) plus
.5% due monthly; maximum borrowings of $25,000,000
(terminated on December 4, 1995)....................... $ -- $ --
DeNationale Investeringsbank N.V.; secured line of
credit due
July 31, 1997; interest at three month or six month
LIBOR (5.94% and 5.88%, respectively, at October 31,
1995) plus 0.4% paid quarterly; maximum borrowings of
$5,000,000............................................. 5,000,000 5,000,000
Coficine; secured revolving credit facility due March
28, 1996; interest at the bank's basis rate (8.1% at
October 31, 1995) plus 1% paid quarterly; maximum
borrowings of FF 7,200,000............................. 623,000 605,000
---------- ----------
$5,623,000 $5,605,000
========== ==========
</TABLE>
In July 1995, Saban and SINV separately entered into credit agreements with
Imperial Bank ("Imperial"), as agent, and a group of lenders for secured
revolving credit facilities ("Credit Facilities") aggregating $50 million
maturing on July 31, 1998. Interest on the borrowings is at either the prime
rate (8.75% at October 31, 1995) plus .5% or .25% depending on Saban's and
SINV's tangible net worth or at three month or six month LIBOR (5.94% and
5.88%, respectively, at October 31, 1995) plus 2.25% or 2% depending on
Saban's and SINV's tangible net worth. Interest is payable at the end of the
interest period which is either one, three or six months. Saban and SINV are
required to pay a quarterly commitment fee of .25% per annum of the average
daily unused portion of the commitment. Saban and SINV also paid a loan fee
amounting to .75% of the commitment. The combined amount available for
borrowing under the Credit Facilities at any time is limited in accordance
with a formula based upon the value of collateral in Saban's and SINV's
borrowing bases. The borrowing bases include on and off balance sheet
receivables and amounts attributable to the value of Saban's
F-50
<PAGE>
SABAN ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
and SINV's film library. Saban's credit facility is secured by substantially
all of the assets of Saban and its subsidiaries (excluding SINV and other
foreign subsidiaries of Saban) and SINV's credit facility is secured by
substantially all of the assets of Saban and its subsidiaries. The Credit
Facilities restrict the payment of dividends. The Credit Facilities contain
restrictive covenants regarding, among other things, additional indebtedness,
payments and advances for product, the maintenance of certain financial ratios
and restrictions on the disposition of assets. At October 31, 1995 Saban and
SINV were in compliance or had obtained waivers for those covenants. At
October 31, 1995 no amounts have been borrowed under the Credit Facilities.
In June 1993, SINV entered into a credit agreement with Imperial as agent
and DeNationale Investeringsbank N.V. (the "Bank Facility"). An additional
bank, Banque Nationale de Paris was added to the Bank Facility in March 1994.
SINV paid a quarterly commitment fee of .5% per annum of the average daily
unused portion of the commitment. Substantially all of SINV's cash collections
were paid into accounts controlled by Imperial and applied to repayment of
borrowings under the Bank Facility. The restricted cash balance of $299,000 at
May 31, 1994, represented cash held by Imperial and not yet transferred to
Saban. The amount that SINV borrowed was based upon the value of collateral in
the borrowing base which consists principally of accounts receivable. All
borrowings were collateralized by substantially all of the assets of Saban.
Further, Saban agreed to maintain, on a quarterly average basis, $1,000,000 in
compensating balances at Imperial. The Bank Facility contained restrictive
covenants regarding, among other things, additional indebtedness, payments and
advances for product, the maintenance of certain financial ratios and
restrictions on the disposition of assets. On December 4, 1995, the Bank
Facility was replaced by the Credit Facilities and any outstanding obligation
plus interest was paid.
SIP has a revolving credit facility with Coficine bank which provides for
borrowings against project receivables up to a maximum of FF 7,200,000
($1,475,000 at October 31, 1995). In March 1996 the outstanding obligation
plus interest was paid in full.
In September 1994, SIP entered into a credit agreement with DeNationale
Investeringsbank N.V. ("NIB"). The facility provides for maximum borrowings of
$5,000,000. The facility is secured by a $5,000,000 deposit at NIB pledged by
SINV. Such $5,000,000 deposit is included in restricted cash at October 31,
1995 and at May 31, 1995. In April 1996 the outstanding obligation plus
interest was paid in full and SIP and NIB entered into a new agreement for a
facility with similar terms, providing maximum borrowings of $8,000,000. The
new facility is secured by an $8,000,000 deposit at NIB pledged by SINV.
6. RELATED PARTY TRANSACTIONS
In March 1995, Saban purchased all of the outstanding shares of Saban held
by a former minority stockholder.
Receivables from stockholders and related parties consist of the following:
<TABLE>
<CAPTION>
MAY 31 OCTOBER 31
1995 1995
---------- ----------
<S> <C> <C>
Advances due from the Chairman and Chief Executive
Officer of Saban ("Haim Saban"), or entities controlled
by Haim Saban, interest at prime rate (8.75% at October
31, 1995) plus 1% and due on demand.................... $2,649,000 $2,610,000
Advances to certain non-stockholder officers and
directors of Saban ($885,000 at 5% and $337,000
noninterest bearing with varying due dates)............ 1,147,000 1,222,000
---------- ----------
$3,796,000 $3,832,000
========== ==========
</TABLE>
F-51
<PAGE>
SABAN ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
An outside director of Saban acts as a legal consultant to Saban. Fees paid
to this director were approximately $153,000 and $62,000 for the years ended
May 31, 1995 and for the five months ended October 31, 1995, respectively.
In September 1994, Saban entered into a music services agreement (the "Music
Agreement") with Haim Saban. The Music Agreement remains in effect until
August 31, 2001. Under the terms of the Music Agreement, all original theme
music, underscore, cues and songs for use in all programming produced by Saban
will be supplied through Haim Saban. Saban has been granted the non-exclusive,
worldwide, perpetual license to (i) synchronize and perform compositions in
theatrical motion pictures and (ii) synchronize composition in all other forms
of programming and has the royalty-free right to use the compositions in
articles of merchandise such as home video units, video games and interactive
toys. All music publishing income earned in connection with such musical
compositions is retained by Haim Saban. As of October 31, 1995, no amounts
were owed to Haim Saban pursuant to the terms of the Music Agreement.
Saban currently licenses and distributes its entertainment properties (e.g.,
motion pictures, television programs, merchandising and licensing rights) in
Israel through Duveen Trading Ltd. ("Distributor"), a corporation owned wholly
by Haim Saban's brother. The term of the agreement extends through
December 31, 1997, subject to extension by Saban for an additional three
years. Duveen Trading Ltd. is not obligated to make any payments to Saban
under this agreement.
7. COMMITMENTS AND CONTINGENCIES
Saban leased office space in Burbank, California, under a ten year lease
which was terminated in December 1995, and a lease termination fee of $305,000
was paid. Saban also leases office space in New York City under a three year
lease which is cancelable after the end of each year by payment of a
termination fee. In addition, Saban leases office space in Paris, France,
Cologne, Germany and London, England under nine year, five year and three year
operating leases, respectively. The Paris, France lease provides for
termination on February 28, 1999 and February 28, 2002, both upon six months
advance written notice. The London, England lease provides for early
termination upon six months advance written notice.
In July 1995, Saban entered into a 10 year lease which commenced on April 1,
1996 for office space in Los Angeles, California. The lease contains two
separate five-year extension options and provides for early termination at the
end of the sixth and eighth years upon payment of a termination fee. The lease
calls for monthly payments plus maintenance and property tax payments. Saban
also has two leases for production facilities, one is a short-term lease in
Los Angeles, California originally expiring in November 1995 and subsequently
extended to March 1997, and the other is a two year lease in Valencia,
California expiring in January 1997 and subject to two separate one-year
extension options.
Noncancelable future minimum payments for the remainder of the initial,
noncancelable lease periods are as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
OCTOBER 31,
- -------------------
<S> <C>
1996.......................................................... $ 2,449,000
1997.......................................................... 2,921,000
1998.......................................................... 1,838,000
1999.......................................................... 2,589,000
2000.......................................................... 3,157,000
Thereafter.................................................... 20,105,000
-----------
$33,059,000
===========
</TABLE>
F-52
<PAGE>
SABAN ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Rent expense for the years ended May 31, 1995 and for the five months ended
October 31, 1995, net of amounts capitalized, was approximately $797,000 and
$365,000, respectively.
Saban is involved in various lawsuits, both as a plaintiff and defendant, in
the ordinary course of its business. Based on an evaluation which included
consultation with counsel concerning legal and factual issues involved,
management is of the opinion that the foregoing claims and lawsuits will not
have a material adverse effect on Saban's consolidated financial position.
Saban has entered into employment agreements with certain key members of
management including Haim Saban. Such agreements are for terms ranging from
one to seven years and generally include bonus provisions. Future minimum
payments under these agreements approximate $20,939,000 of which $5,184,000 is
due for the twelve months ended October 31, 1996, $5,104,000 is due in the
twelve months ended October 31, 1997, $4,434,000 is due in the twelve months
ended October 31, 1998 and $6,216,000 is due thereafter.
Effective June 1994, Saban issued to two employees and a consultant options
to purchase an aggregate of 48.981 shares of common stock, 9.796 of which were
exercisable at October 31, 1995. These options vest ratably over five years
and are exercisable at $122,496 per share, which approximates the fair market
value at the time of grant. No options have been exercised at October 31,
1995. With respect to termination for any reason, so long as the Company is
not public, the Company will purchase from the employee and the employee will
sell to the Company any and all option shares owned by the employee and the
option granted to the employee for an amount equal to the fair market value of
the option shares owned by the employee plus the fair market value of the
option shares with respect to which the employee's option has vested but not
exercised less the exercise price. Included in selling, general and
administrative expenses is $11,000,000 and $2,400,000 for the year ended
May 31, 1995 and the five months ended October 31, 1995, respectively, and in
accrued liabilities is $11,000,000 and $13,400,000 at May 31, 1995 and October
31, 1995, respectively, related to compensation recorded in connection with
these options.
As of October 31, 1995, 48.981 shares of common stock are reserved for
future issuance related to options.
8. PROFIT SHARING PLAN
Saban has a qualified tax deferred profit sharing plan (the "Plan") for all
of its eligible employees. Under the Plan, employees become eligible on the
first January 1 following such employees' completion of six months of service
with Saban. Each participant is permitted to make voluntary contributions, not
to exceed 15% of his or her respective compensation and the applicable
statutory limitation, which are immediately 100% vested. Saban, at the
discretion of the Board of Directors, may make matching contributions to the
Plan. Related expense for the years ended May 31, 1995, and for the five
months ended October 31, 1995 was approximately $40,000 and $10,000,
respectively.
9. INCOME TAXES
Effective June 1, 1993, Saban changed its method of accounting for income
taxes from the deferred method to the liability method required by FAS 109,
"Accounting for Income Taxes" (see Note 2 "Income Taxes"). As permitted under
the new rules, prior years' financial statements have not been restated.
The cumulative effect of adopting FAS 109 as of June 1, 1993, was not
material to Saban's financial statements.
F-53
<PAGE>
SABAN ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of Saban's deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
MAY 31, OCTOBER 31,
1995 1995
------------ ------------
<S> <C> <C>
Deferred tax liabilities:
Accounts receivable................................ $ 3,181,000 $ 563,000
Tax over book amortization......................... 6,052,000 --
State taxes........................................ -- 203,000
------------ ------------
Total deferred tax liabilities..................... $ 9,233,000 $ 766,000
Deferred tax assets:
State taxes........................................ $ 1,511,000 $ --
Deferred revenue................................... 20,268,000 18,244,000
Accrued expenses and reserves...................... 12,015,000 4,590,000
Tax over book amortization......................... -- 2,299,000
Other.............................................. 1,679,000 1,053,000
------------ ------------
Total deferred tax assets.......................... 35,473,000 26,186,000
Valuation allowance for deferred tax assets........ -- --
------------ ------------
Net deferred tax assets............................ 35,473,000 26,186,000
------------ ------------
Net deferred tax liabilities (assets).............. $(26,240,000) $(25,420,000)
============ ============
For financial reporting purposes, income before income taxes includes the
following components:
<CAPTION>
FIVE MONTHS
YEAR ENDED ENDED
MAY 31, OCTOBER 31,
1995 1995
------------ ------------
<S> <C> <C>
Pretax income:
United States.................................... $ 56,193,000 $ 33,872,000
Foreign.......................................... 15,509,000 17,159,000
------------ ------------
$ 71,702,000 $ 51,031,000
============ ============
</TABLE>
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED FIVE MONTHS ENDED
MAY 31, OCTOBER 31,
1995 1995
------------ -----------------
<S> <C> <C>
Current:
Federal....................................... $ 47,213,000 $11,514,000
State......................................... 8,777,000 2,802,000
Foreign....................................... 1,539,000 489,000
------------ -----------
57,529,000 14,805,000
Deferred:
Federal....................................... $(25,776,000) $ (301,000)
State......................................... (4,726,000) (215,000)
Foreign....................................... -- --
------------ -----------
(30,502,000) (516,000)
------------ -----------
$ 27,027,000 $14,289,000
============ ===========
</TABLE>
F-54
<PAGE>
SABAN ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense is:
<TABLE>
<CAPTION>
YEAR ENDED FIVE MONTHS ENDED
MAY 31, 1995 OCTOBER 31, 1995
------------ -----------------
<S> <C> <C>
Tax at U.S. statutory rates.................... 35% 35%
State taxes, net of federal benefit............ 6 5
Foreign subsidiary's income not subject to
state or federal tax.......................... (7) (13)
Foreign taxes.................................. 2 1
Other.......................................... 2 0
--- ---
38% 28%
=== ===
</TABLE>
Undistributed earnings of Saban's foreign subsidiaries amounted to
approximately $61,000,000 at October 31, 1995. Those earnings are considered
to be indefinitely reinvested and, accordingly, no provision for U.S. federal
and state income taxes has been provided thereon. Upon distribution of those
earnings in the form of dividends or otherwise, Saban would be subject to both
U.S. income taxes (subject to an adjustment for foreign tax credits) and
withholding taxes payable to the various foreign countries. Determination of
the amount of unrecognized deferred U.S. income tax liability is not
practicable because of the complexities associated with its hypothetical
calculation; however, unrecognized foreign tax credit carryforwards would be
available to reduce some portion of the U.S. liability.
10. SIGNIFICANT CUSTOMERS AND PROPERTIES AND GEOGRAPHICAL INFORMATION
Saban operates in one business segment which is the acquisition, production
and worldwide distribution and leasing of entertainment properties. For the
year ended May 31, 1995, Saban earned revenues from one significant customer
of $26,308,000 (11%). For the five months ended October 31, 1995, Saban earned
revenues from one significant customer of approximately $33,332,000 (32%). For
the year ended May 31 1995, and for the five months ended October 31, 1995,
Saban earned revenues from one significant property (Power Rangers) of
$174,389,000 (72%) and $68,975,000 (66%), respectively.
Geographic information concerning Saban's operations is as follows:
<TABLE>
<CAPTION>
FIVE MONTHS
ENDED
YEAR ENDED OCTOBER 31,
MAY 31, 1995 1995
------------ ------------
<S> <C> <C>
Revenues:
Domestic........................................... $172,239,000 $ 61,671,000
International, principally Europe(/2/)............. 70,229,000 43,459,000
------------ ------------
Total................................................ 242,468,000 105,130,000
Operating profit:(/1/)
Domestic........................................... 97,433,000 42,128,000
International, principally Europe(/2/)............. 27,478,000 20,980,000
------------ ------------
Total................................................ 124,911,000 63,108,000
Selling, general and administrative expenses......... 51,894,000 11,538,000
Interest expense..................................... 1,315,000 539,000
------------ ------------
Income before provision for income taxes............. $ 71,702,000 $ 51,031,000
============ ============
Identifiable assets:
Domestic........................................... $ 89,772,000 $ 82,145,000
International, principally Europe(/2/)............. 128,425,000 125,334,000
------------ ------------
Total................................................ $218,197,000 $207,479,000
============ ============
</TABLE>
- --------
(1) For purposes of this presentation, operating profit is total revenues less
amortization of programming costs, residuals and profit participations.
(2) International amounts relate principally to Western Europe in connection
with the Company's subsidiary, SINV, a Netherlands Antilles company with
offices in Switzerland.
F-55
<PAGE>
SABAN ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. SUBSEQUENT EVENTS
On April 16, 1996, Saban acquired the stock of Creativite & Developpement SA
("C&D"), a leading Paris-based producer of family entertainment for
$2,869,000, payable $1,721,000 upon closing (April 16, 1996) and $1,148,000
payable on April 16, 1997 and is secured by a letter of credit. Saban
accounted for the acquisition as a purchase. No goodwill was recorded as the
purchase price was allocated to the respective assets and liabilities. The
acquisition included the international distribution rights to over 400 half-
hour episodes of children's programming.
In December 1995, Saban purchased from Vesical Limited ("Vesical") its
interest and rights to certain television programming and certain account
receivable balances for $12,000,000, payable $7,200,000 upon closing (April
18, 1996) and $4,800,000 payable on April 18, 1997 and is secured by a letter
of credit. Saban allocated the purchase price between the account receivable
balances and the television programming rights based upon the respective
assets fair market values using a discounted cash flow analysis.
THE REORGANIZATION
Fox Kids Worldwide, Inc. was incorporated in August 1996 to act as a holding
company of FCN Holding, Saban and the LLC. Between August 1996 and August
1997, it conducted no business or operations. On August 1, 1997, in connection
with Fox Kids Worldwide, Inc.'s acquisition of a controlling interest in
International Family Entertainment, Inc., (i) Fox Broadcasting Sub, Inc., a
wholly owned indirect subsidiary of Fox Broadcasting, exchanged its capital
stock in FCN Holding, which indirectly owned the Fox Children's Network, Inc.
("FCN"), for 7,920,000 shares of Class B Common Stock of Fox Kids Worldwide,
Inc., (ii) the other stockholder of FCN Holding exchanged its capital stock in
FCN Holding for an aggregate of 160,000 shares of Class A Common Stock of Fox
Kids Worldwide, Inc., (iii) Haim Saban and the other stockholders of Saban
exchanged their capital stock of Saban for an aggregate of 7,920,000 shares of
Class B Common Stock of Fox Kids Worldwide, Inc. and (iv) all outstanding
management options to purchase Saban capital stock became options to purchase
an aggregate of 646,548 shares of Class A Common Stock of Fox Kids Worldwide,
Inc. In addition, Fox Broadcasting exchanged its preferred, non-voting
interest in the LLC and its $50 million contingent note receivable from the
LLC for a new approximately $108.6 million subordinated note from Fox Kids
Worldwide, Inc. (which also included approximately $8.6 million of
intercompany indebtedness). As a result of these transactions, FCN Holding,
FCN, Saban and the LLC became direct or indirect wholly owned subsidiaries of
Fox Kids Worldwide, Inc.
OTHER RELATED PARTY TRANSACTIONS
From time to time, Saban has loaned and advanced funds to Haim Saban. In
connection with the formation of the LLC and as inducement to Haim Saban to
enter into certain documentation in connection with the formation of the LLC,
on December 22, 1995, Saban forgave in full the loan plus accrued interest
owing from Haim Saban in the amount of approximately $2,700,000. In connection
with Haim Saban's employment agreement, dated December 22, 1995, with the LLC,
the LLC agreed to reimburse Haim Saban for all out-of-pocket costs and
expenses for domestic and international travel, including private air charter
which may include aircraft owned directly or indirectly by Haim Saban.
F-56
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, 1996 JUNE 30, 1997
----------------- -------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.................... $ 4,997,000 $ 4,275,000
Investment in marketable securities.......... 9,053,000 5,554,000
Accounts receivable, net of allowances of
$4,662,000 and $4,579,000................... 121,359,000 127,465,000
Film rights, current portion................. 97,441,000 92,037,000
Prepaid expenses and other................... 7,005,000 13,692,000
------------ ------------
Total current assets....................... 239,855,000 243,023,000
Property and equipment, net of accumulated
depreciation and amortization of $29,860,000
and $34,398,000............................... 62,877,000 61,139,000
Film rights.................................... 144,680,000 121,660,000
Long-term accounts receivable, net of allow-
ances of $126,000 and $81,000................. 17,530,000 13,142,000
Investment in equity securities--related par-
ty............................................ 35,458,000 65,160,000
Other investments, net of deferred gain of
$2,616,000.................................... 14,889,000 14,729,000
Goodwill, net of accumulated amortization of
$8,830,000 and $9,970,000..................... 48,517,000 47,377,000
Deferred tax benefit........................... 1,076,000 1,076,000
Other assets................................... 3,801,000 4,076,000
------------ ------------
$568,683,000 $571,382,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable............................. $ 12,874,000 $ 8,980,000
Accrued liabilities.......................... 11,756,000 16,022,000
Accrued participations and residuals......... 15,613,000 12,303,000
Current portion of film rights payable....... 44,050,000 48,117,000
Current maturities of debt................... 1,205,000 2,110,000
Income taxes payable......................... 9,214,000 1,675,000
Current portion of deferred income taxes..... 6,544,000 8,582,000
Deferred income.............................. 7,927,000 9,443,000
------------ ------------
Total current liabilities.................. 109,183,000 107,232,000
Film rights payable............................ 50,643,000 34,794,000
Long-term debt................................. 171,251,000 155,739,000
Accrued interest--related party................ 273,000 246,000
Convertible Notes--related party............... 23,000,000 23,000,000
Other liabilities, including participations and
residuals..................................... 11,079,000 10,943,000
Deferred income taxes.......................... -- 12,326,000
Commitments and contingencies (Note E)
Minority interests............................. 2,062,000 1,254,000
Stockholders' equity
Class A Common Stock, $.01 par value,
convertible, 10,000,000 shares authorized,
5,000,000 shares issued and outstanding..... 143,000 143,000
Class B Common Stock, $.01 par value,
100,000,000 shares authorized, 32,786,538
and 32,781,545 shares issued and
outstanding................................. 101,456,000 101,368,000
Class C Common Stock, $.01 par value,
convertible, 20,000,000 shares authorized,
7,088,732 shares issued and outstanding..... 50,717,000 50,717,000
Unearned compensation--Stock Plan............ (562,000) (288,000)
Unrealized gain on marketable securities..... 351,000 17,376,000
Retained earnings............................ 49,087,000 56,532,000
------------ ------------
Total stockholders' equity................. 201,192,000 225,848,000
------------ ------------
$568,683,000 $571,382,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-57
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
--------------------------
1996 1997
------------ ------------
<S> <C> <C>
Operating revenues................................ $149,965,000 $196,397,000
------------ ------------
Operating expenses
Production and programming...................... 73,097,000 113,139,000
Selling and marketing........................... 31,589,000 33,805,000
New business development........................ 1,091,000 1,466,000
General and administrative...................... 14,806,000 15,737,000
Amortization of goodwill........................ 1,214,000 1,140,000
------------ ------------
Total operating expenses...................... 121,797,000 165,287,000
------------ ------------
Operating income.............................. 28,168,000 31,110,000
------------ ------------
Other income (expense)
Investment income............................... 2,246,000 874,000
Interest expense--related parties............... (934,000) (660,000)
Interest expense--other......................... (5,599,000) (5,767,000)
Minority interests in losses.................... 1,701,000 808,000
Gain on disposition of assets--related party.... 13,685,000 --
Share of losses of affiliates................... (192,000) (1,582,000)
Other expense, net.............................. (5,059,000) (11,409,000)
------------ ------------
Total other income (expense).................. 5,848,000 (17,736,000)
------------ ------------
Income before income taxes.................... 34,016,000 13,374,000
Provision for income taxes........................ (14,853,000) (5,929,000)
------------ ------------
Net income.................................... $ 19,163,000 $ 7,445,000
============ ============
Primary and fully diluted earnings per common
share............................................ $ 0.41 $ 0.16
============ ============
Primary and fully diluted average common and com-
mon equivalent shares............................ 47,990,954 48,457,984
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-58
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
--------------------------
1996 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net income....................................... $ 19,163,000 $ 7,445,000
------------ ------------
Adjustments to reconcile net income to net cash
provided by operating activities
Amortization of film rights.................... 55,526,000 99,420,000
Depreciation and amortization of property and
equipment, goodwill, and other assets......... 5,629,000 6,110,000
Allowances against investments................. 4,750,000 9,700,000
Share of losses of affiliates.................. 192,000 1,582,000
Minority interests in losses................... (1,701,000) (808,000)
Gain on sale of marketable securities.......... (1,630,000) (292,000)
Gain on disposition of assets--related party... (13,685,000) --
Compensation--Stock Plan....................... 345,000 260,000
Deferred income tax expense.................... 6,134,000 2,964,000
Changes in assets and liabilities, net of ef-
fect
of 1996 disposition............................ (10,868,000) (8,764,000)
------------ ------------
Total adjustments............................ 44,692,000 110,172,000
------------ ------------
Net cash provided by operating activities....... 63,855,000 117,617,000
------------ ------------
Cash flows from investing activities
Acquisitions of original programming............. (41,051,000) (64,301,000)
Other investments, including advances............ (12,102,000) (11,110,000)
Sales of marketable securities................... 4,865,000 3,584,000
Additions to property and equipment.............. (2,846,000) (3,266,000)
------------ ------------
Net cash used in investing activities........... (51,134,000) (75,093,000)
------------ ------------
Cash flows from financing activities
Payments on film rights.......................... (25,709,000) (28,565,000)
Proceeds from debt issuances..................... 10,650,000 17,000,000
Principal payments on debt....................... (22,088,000) (31,607,000)
Cash provided by minority partners............... 3,000,000 --
Repurchases of Common Stock...................... (2,815,000) (74,000)
------------ ------------
Net cash used in financing activities........... (36,962,000) (43,246,000)
------------ ------------
Effect of foreign currency rate changes............ (253,000) --
------------ ------------
Decrease in cash and cash equivalents.............. (24,494,000) (722,000)
Cash and cash equivalents at beginning of period... 32,865,000 4,997,000
------------ ------------
Cash and cash equivalents at end of period......... $ 8,371,000 $ 4,275,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-59
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
NOTE A--PRESENTATION OF INTERIM FINANCIAL STATEMENTS
In management's opinion, the accompanying unaudited consolidated financial
statements of International Family Entertainment, Inc. (together with its
consolidated subsidiaries "IFE" or the "Company") reflect all adjustments,
consisting of normal recurring accruals, necessary for a fair presentation of
the consolidated results of operations for the interim periods presented. The
consolidated results of operations for such interim periods are not
necessarily indicative of the results that may be expected for future interim
periods or for the year ended December 31, 1997. These interim consolidated
financial statements and the notes thereto should be read in conjunction with
the audited consolidated financial statements and the notes thereto for the
year ended December 31, 1996. Certain amounts have been reclassified for
comparability with the 1997 financial statement presentation.
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these interim consolidated
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
As discussed in Note G, the Company has entered into the Merger Agreement
with FKWW. The effects of the Merger, when consummated, on management's
estimates and assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities cannot be estimated
with any degree of certainty at this time, although such effects could be
substantial.
NOTE B--EARNINGS PER SHARE
The 6% Convertible Secured Notes due 2004 (the "Convertible Notes") are
considered to be common stock equivalents and, accordingly, the computations
of primary and fully diluted earnings per share assume conversion of the
Convertible Notes if the effect of such conversion is dilutive. Stock options
are also included in the computations of primary and fully diluted earnings
per share if their effect is dilutive.
For the six months ended June 30, 1996 and 1997, primary and fully diluted
earnings per common share were computed by increasing net income by the
interest on the Convertible Notes, net of related tax effect, and dividing the
result by the average number of common and common equivalent shares
outstanding during such periods.
NOTE C--MINORITY INTERESTS
THE FAMILY CHANNEL (UK)
Prior to April 22, 1996, minority interests were primarily attributable to a
minority partner's 39% interest in The Family Channel (UK) which was operated
as a joint venture. IFE and Flextech plc, the holder of the minority 39%
interest, funded the operations of The Family Channel (UK) through capital
investments and loans. On April 22, 1996, the Company consummated the sale of
its 61% interest in The Family Channel (UK) to Flextech, as described in Note
F.
The minority partner's share of the net loss resulting from the operations
of The Family Channel (UK), through the date of sale, amounted to $1,419,000
for the six month period ended June 30, 1996.
F-60
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FIT TV
On April 30, 1996, the Company, an affiliate of Liberty Media Corporation
("Liberty Media"), and an affiliate of Reebok International Limited ("Reebok")
entered into a definitive partnership agreement forming a partnership (the
"FiT TV Partnership"), effective January 1, 1996, to own and operate the FiT
TV cable network. FiT TV had previously been owned and operated by Cable
Health TV, Inc. ("CHTV"), a 90%-owned subsidiary of IFE. Prior to August 1,
1997, another affiliate of Liberty Media was the holder of the Convertible
Notes and all of the Company's outstanding Class C Common Stock. Liberty Media
is an affiliate of Tele-Communications, Inc. ("TCI"), one of the largest cable
television system operators in the United States and, as such, a major
provider of carriage for FiT TV.
The minority partners' combined 20% share of the net loss resulting from the
operations of the FiT TV Partnership, since its formation on April 30, 1996,
is reflected in the accompanying Consolidated Statements of Operations. The
minority partners' combined 20% share of the net loss of FiT TV amounted to
$280,000 and $808,000 for the six month periods ended June 30, 1996 and 1997,
respectively.
NOTE D--SUPPLEMENTAL CASH FLOW INFORMATION
Total interest costs paid were approximately $4,666,000 and $6,600,000
during the six months ended June 30, 1996 and 1997, respectively. Income taxes
paid during the six months ended June 30, 1996 and 1997 were approximately
$2,915,000 and $11,107,000, respectively.
Non-cash investing and financing activities included the acquisition of film
rights under license agreements, which aggregated approximately $26,937,000,
and $14,994,000 for the six months ended June 30, 1996 and 1997, respectively.
As described in Note F, on April 22, 1996, the Company consummated the sale
of its television production studio in Maidstone, England and its 61% interest
in The Family Channel (UK) to a related party. This sale was primarily a non-
cash transaction in which the Company received equity securities. Cash
received in the transaction amounting to approximately $4,600,000 was offset
by the cash balances of the businesses sold (which were transferred to the
buyer) and cash outlays for expenses of the sale.
NOTE E--COMMITMENTS AND CONTINGENCIES
The Company has commitments under program contracts for film rights related
to the production, exhibition, or distribution of programming, which was not
available as of June 30, 1997. The commitments under these program contracts
as well as commitments under program development agreements and employment
agreements totaled approximately $209,000,000 as of June 30, 1997. The unpaid
balance under program contracts for film rights (as well as the aggregate
future estimated payments of accrued participations and residuals) related to
the production, exhibition, or distribution of programming that was available
as of June 30, 1997 is reflected as a liability in the accompanying
consolidated financial statements.
The Company has guaranteed a $12,000,000 bank credit facility for a certain
sports marketing enterprise in which the Company holds convertible notes.
These notes will be convertible, beginning in 1998, at the option of the
Company, into a majority interest in such enterprise (which purchased the Ice
Capades from the Company in December 1995). The Company has a valuation
allowance in connection with its investment in the aforementioned convertible
notes. Increases in this valuation allowance, which amounted to $2,000,000 and
$9,700,000 for the six month periods ended June 30, 1996 and 1997,
respectively, are reflected in the determination of other expense in the
accompanying Consolidated Statements of Operations.
F-61
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company leases office facilities and certain other property and
equipment under non-cancelable operating leases.
In addition, the Company has contingent liabilities related to legal
proceedings and other matters arising from the normal course of operations.
Management does not expect that amounts, if any, which may be required to
satisfy such contingencies will be material in relation to the accompanying
consolidated financial statements.
NOTE F--GAIN ON DISPOSITION OF ASSETS--RELATED PARTY
On April 22, 1996, the Company consummated the sale of its television
production studio in Maidstone, England and its 61% interest in The Family
Channel (UK) to Flextech pursuant to agreements dated as of March 20, 1996.
Flextech previously owned a 39% interest in The Family Channel (UK).
Flextech's majority owner is Tele-Communications International, Inc., a
majority-owned subsidiary of TCI. Prior to August 1, 1997, another affiliate
of TCI was the holder of the Convertible Notes and all of the Company's
outstanding Class C Common Stock.
As consideration for this transaction, the Company received pound sterling
3,000,000 (approximately $4,600,000) in cash and 5,792,008 shares of
Flextech's convertible, redeemable, non-voting common stock. This common stock
was convertible, under certain circumstances, into Flextech's voting ordinary
shares which are listed on the London Stock Exchange. The underlying market
value of the voting ordinary shares as of the date of the agreement was
$46,100,000. The shares were recorded, for financial statement purposes, at
approximately pound sterling 23,000,000 ($35,458,000 based on the exchange
rate on the date of closing), which amount reflects a discount determined by
an independent valuation.
In April 1997, the aforementioned 5,792,008 shares of Flextech's
convertible, redeemable, non-voting common stock were converted on a share-
for-share basis into Flextech's voting ordinary common stock, which is listed
on the London Stock Exchange. As a result of this conversion, the Company's
investment in Flextech common stock is classified as "available-for-sale"
securities and, accordingly, the carrying value of such investment has been
adjusted to fair value (although the unrealized gain is excluded from the
determination of net income). The unrealized gain is reported, net of related
tax effect, as a separate component of stockholders' equity.
NOTE G--PROPOSED MERGER
On June 11, 1997, the Company entered into an Agreement and Plan of Merger
(the "Merger Agreement") with Fox Kids Worldwide, Inc., a Delaware corporation
("FKWW"), and Fox Kids Merger Corporation, a Delaware corporation and a
wholly-owned subsidiary of FKWW ("FKW Sub"), providing for the merger (the
"Merger") of FKW Sub into the Company, with the Company as the surviving
corporation, pursuant to which each share of Common Stock of the Company
issued and outstanding immediately prior to the effective time of the Merger
(other than shares owned by FKWW, FKW Sub or the Company, or any of their
respective subsidiaries, or by stockholders who have validly perfected their
appraisal rights under the Delaware General Corporation Law) will be converted
into the right to receive a cash payment equal to $35 per share (the "Merger
Consideration"), without interest. Stockholders of the Company who
collectively held a majority of the outstanding voting power of the Company's
Common Stock approved the Merger by written consent delivered to the Company
on June 11, 1997 following the execution of the Merger Agreement.
F-62
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Concurrently with the execution of the Merger Agreement, (i) certain
stockholders of the Company entered into stock purchase agreements
(collectively, the "Stock Purchase Agreements") with FKWW providing for the
sale to FKWW of an aggregate of 15,587,427 shares of Class B Common Stock,
including 5,000,000 shares of Class B Common Stock issuable upon conversion of
all of the Company's outstanding Class A Common Stock and 1,250,000 shares of
Class B Common Stock issuable upon the exercise of certain stock options, for
$35 per share in cash; and (ii) Liberty IFE, Inc. ("LIFE"), a Colorado
corporation and a wholly owned subsidiary of Liberty Media, which at the time
held 7,088,732 shares of Class C Common Stock and the Convertible Notes,
convertible into 2,587,500 shares of Class C Common Stock, entered into a
Contribution and Exchange Agreement (the "Contribution Agreement") with FKWW
pursuant to which LIFE agreed to contribute such shares of Class C Common
Stock and the Convertible Notes to FKWW in exchange for shares of a new series
of preferred stock of FKWW. This series of preferred stock has a liquidation
preference of $35 per share or share equivalent of Class C Common Stock, plus
$6.33 million designed to compensate LIFE for foregone interest on the
Convertible Notes and for certain tax consequences.
NOTE H--SUBSEQUENT EVENT
On August 1, 1997, the Stock Purchase Agreements and the Contribution
Agreement described in Note G were consummated. The Merger Agreement provides
that, upon the consummation of the Stock Purchase Agreements, FKWW shall be
entitled to designate, at its option upon notice to the Company, up to a
majority of the Company's Board of Directors. In this event, the Company will
either increase the size of the Board of Directors and/or obtain the
resignation of such number of its current directors as is necessary to enable
FKWW's designees to be elected.
The Merger will be consummated upon the expiration of twenty days from the
date a definitive information statement pursuant to Section 14(c) of the
Securities Exchange Act of 1934, as amended, is first sent or given to the
Company's stockholders.
F-63
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
International Family Entertainment, Inc.:
We have audited the accompanying consolidated balance sheets of
International Family Entertainment, Inc. and subsidiaries (the "Company") as
of December 31, 1995 and 1996, and the related consolidated statements of
operations, cash flows and stockholders' equity for each of the years in the
three-year period ended December 31, 1996. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
International Family Entertainment, Inc. and subsidiaries as of December 31,
1995 and 1996, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 1996, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Norfolk, Virginia
March 17, 1997
F-64
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents........................ $ 32,865,000 $ 4,997,000
Investment in marketable securities.............. 8,290,000 9,053,000
Accounts receivable, net of allowances of
$5,780,000 and $4,662,000....................... 95,699,000 121,359,000
Film rights, current portion..................... 56,355,000 97,441,000
Prepaid expenses and other....................... 11,511,000 4,401,000
------------ ------------
Total current assets........................... 204,720,000 237,251,000
Property and equipment, net........................ 73,028,000 62,877,000
Film rights........................................ 105,094,000 144,680,000
Long-term accounts receivable, net of allowances of
$520,000 and $126,000............................. 24,754,000 17,530,000
Investment in equity securities--related party..... -- 35,458,000
Other investments, net of deferred gain of
$2,616,000........................................ 16,575,000 14,889,000
Goodwill, net of accumulated amortization of
$6,552,000 and $8,830,000......................... 54,795,000 48,517,000
Deferred tax benefit............................... -- 1,076,000
Other assets....................................... 2,461,000 6,405,000
------------ ------------
$481,427,000 $568,683,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable................................. $ 14,598,000 $ 12,874,000
Accrued liabilities.............................. 13,121,000 11,756,000
Accrued participations and residuals............. 11,615,000 15,613,000
Current portion of film rights payable........... 38,161,000 44,050,000
Current maturities of debt....................... 181,000 1,205,000
Income taxes payable............................. -- 9,214,000
Current portion of deferred income taxes......... 611,000 6,544,000
Deferred income.................................. 5,891,000 7,927,000
------------ ------------
Total current liabilities...................... 84,178,000 109,183,000
Film rights payable................................ 32,714,000 50,643,000
Long-term debt..................................... 153,752,000 171,251,000
Accrued interest--related party.................... 327,000 273,000
Convertible Notes--related party................... 23,000,000 23,000,000
Other liabilities, including participations and
residuals......................................... 10,347,000 11,079,000
Deferred income taxes.............................. 2,676,000 --
Commitments and contingencies (Note N)
Minority interests................................. 3,130,000 2,062,000
Stockholders' equity
Class A Common Stock, $.01 par value,
convertible, 10,000,000 shares authorized,
5,000,000 shares issued and outstanding......... 143,000 143,000
Class B Common Stock, $.01 par value, 100,000,000
shares authorized, 33,039,831 and 32,786,538
shares issued and outstanding................... 104,886,000 101,456,000
Class C Common Stock, $.01 par value,
convertible, 20,000,000 shares authorized,
7,088,732 shares issued and outstanding......... 50,717,000 50,717,000
Unearned compensation--Stock Plan................ (1,697,000) (562,000)
Cumulative foreign currency translation adjust-
ment............................................ 665,000 --
Unrealized gain (loss) on marketable securities.. (373,000) 351,000
Retained earnings................................ 16,962,000 49,087,000
------------ ------------
Total stockholders' equity..................... 171,303,000 201,192,000
------------ ------------
$481,427,000 $568,683,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
F-65
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Operating revenues.................. $242,050,000 $294,858,000 $332,810,000
------------ ------------ ------------
Operating expenses
Production and programming........ 137,294,000 155,685,000 178,762,000
Selling and marketing............. 49,819,000 61,122,000 64,544,000
New business development.......... 4,991,000 9,908,000 2,317,000
General and administrative........ 21,967,000 27,088,000 28,745,000
Amortization of goodwill.......... 2,532,000 2,657,000 2,278,000
------------ ------------ ------------
Total operating expenses........ 216,603,000 256,460,000 276,646,000
------------ ------------ ------------
Operating income................ 25,447,000 38,398,000 56,164,000
------------ ------------ ------------
Other income (expense)
Investment income (loss).......... (2,522,000) 1,883,000 2,843,000
Interest expense--related par-
ties............................. (1,754,000) (2,134,000) (1,606,000)
Interest expense--other........... (9,280,000) (10,855,000) (10,945,000)
Minority interests in losses...... 5,277,000 4,916,000 2,359,000
Gain on disposition of assets--re-
lated party...................... -- -- 13,685,000
Other income (expense), net (Note
B)............................... 7,789,000 522,000 (5,640,000)
------------ ------------ ------------
Total other income (expense).... (490,000) (5,668,000) 696,000
------------ ------------ ------------
Income before income taxes...... 24,957,000 32,730,000 56,860,000
Provision for income taxes.......... (10,165,000) (14,066,000) (24,735,000)
------------ ------------ ------------
Net income...................... 14,792,000 18,664,000 32,125,000
Dividend requirement on Preferred
Stock.............................. (2,200,000) -- --
Distribution--exchange of Preferred
Stock.............................. -- (12,163,000) --
------------ ------------ ------------
Net income available for Common
Stock.......................... $ 12,592,000 $ 6,501,000 $ 32,125,000
============ ============ ============
Primary and fully diluted earnings
per common share................... $ 0.30 $ 0.16 $ 0.69
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
F-66
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1994 1995 1996
------------ ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activi-
ties
Net income........................ $ 14,792,000 $ 18,664,000 $ 32,125,000
------------ ------------- -------------
Adjustments to reconcile net
income to net cash provided by
operating activities
Amortization of film rights..... 103,231,000 120,277,000 145,047,000
Depreciation and amortization of
property and equipment,
goodwill, and other assets..... 9,611,000 10,840,000 11,270,000
Write-downs of marketable secu-
rities......................... 3,706,000 -- --
Allowances against investments.. -- -- 5,250,000
Share of losses of affiliates,
net............................ -- 1,345,000 514,000
Minority interests in losses.... (5,277,000) (4,916,000) (2,359,000)
Gain on marketable securities... -- -- (1,924,000)
Gain on disposition of assets--
related party.................. -- -- (13,685,000)
Compensation--Stock Plan........ 1,127,000 1,351,000 686,000
Deferred income tax expense..... 1,206,000 11,654,000 5,477,000
Changes in assets and
liabilities, net of effect of
acquisitions and dispositions
Accounts receivable, net of
allowances................... 1,093,000 (29,048,000) (23,257,000)
Marketable securities,
prepaids, and other.......... 9,020,000 (5,837,000) (14,264,000)
Accounts payable and accrued
liabilities.................. (15,211,000) (1,304,000) 1,440,000
Income taxes payable.......... 6,202,000 (10,428,000) 8,702,000
Deferred income............... 3,451,000 (6,278,000) 1,537,000
------------ ------------- -------------
Total adjustments............... 118,159,000 87,656,000 124,434,000
------------ ------------- -------------
Net cash provided by operating
activities................... 132,951,000 106,320,000 156,559,000
------------ ------------- -------------
Cash flows from investing activi-
ties
Acquisitions of original pro-
gramming....................... (82,806,000) (57,184,000) (133,527,000)
Acquisitions of original pro-
gramming--related parties...... (457,000) (2,747,000) (2,197,000)
Cash paid for acquisition....... -- (3,060,000) --
Other investments, including ad-
vances......................... -- (6,102,000) (21,506,000)
Repayment of advances........... -- -- 17,494,000
Purchases of marketable securi-
ties........................... (12,217,000) (858,000) --
Sales of marketable securities.. 3,689,000 1,089,000 4,954,000
Additions to property and equip-
ment........................... (9,443,000) (10,182,000) (9,775,000)
Proceeds from sales of property
and equipment.................. 2,504,000 -- --
------------ ------------- -------------
Net cash used in investing ac-
tivities..................... (98,730,000) (79,044,000) (144,557,000)
------------ ------------- -------------
Cash flows from financing activi-
ties
Payments on film rights......... (42,428,000) (46,167,000) (58,142,000)
Proceeds from debt issuances.... 5,000,000 313,250,000 59,150,000
Principal payments on debt...... (31,201,000) (285,417,000) (40,703,000)
Cash provided by minority part-
ners........................... 2,774,000 4,523,000 3,000,000
Payment of Preferred Stock divi-
dends.......................... (2,200,000) (1,109,000) --
Repurchases of Common Stock..... (2,661,000) (4,357,000) (2,981,000)
Repurchases of Common Stock--re-
lated parties.................. -- (13,819,000) --
------------ ------------- -------------
Net cash used in financing ac-
tivities..................... (70,716,000) (33,096,000) (39,676,000)
------------ ------------- -------------
Effect of foreign currency rate
changes.......................... 1,094,000 (31,000) (194,000)
------------ ------------- -------------
Decrease in cash and cash equiva-
lents............................ (35,401,000) (5,851,000) (27,868,000)
Cash and cash equivalents at be-
ginning of year.................. 74,117,000 38,716,000 32,865,000
------------ ------------- -------------
Cash and cash equivalents at end
of year.......................... $ 38,716,000 $ 32,865,000 $ 4,997,000
============ ============= =============
</TABLE>
See accompanying notes to consolidated financial statements
F-67
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
<TABLE>
<CAPTION>
10% CUMULATIVE UNREALIZED
CONVERTIBLE FOREIGN GAIN
CUMULATIVE CLASS A CLASS B CLASS C UNEARNED CURRENCY (LOSS) ON RETAINED
PREFERRED COMMON COMMON COMMON COMPENSATION TRANSLATION MARKETABLE EARNINGS
STOCK STOCK STOCK STOCK STOCK PLAN ADJUSTMENT SECURITIES (DEFICIT)
------------ -------- ------------ ----------- ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT
JANUARY 1,
1994........... $ 21,670,000 $150,000 $146,198,000 $ -- $(1,701,000) $ (11,000) $ -- $(13,089,000)
Conversion of
Class A Common
Stock, 500,000
shares......... -- (17,000) 17,000 -- -- -- -- --
Issuance of
Class B Common
Stock under the
Stock Plan,
140,482
shares......... -- -- 2,258,000 -- (2,257,000) -- -- --
Forfeiture of
Class B
Common Stock
under the Stock
Plan,
14,000 shares.. -- -- (148,000) -- 147,000 -- -- --
Compensation--
Stock Plan..... -- -- -- -- 1,127,000 -- -- --
Repurchase and
retirement of
Class B Common
Stock,
176,033
shares......... -- -- (2,661,000) -- -- -- -- --
Increase in
deferred tax
benefit
related to
initial basis
differences
(Note K)....... -- -- 6,000,000 -- -- -- -- --
Foreign currency
translation
adjustment..... -- -- -- -- -- 989,000 -- --
Unrealized loss
on
marketable
securities..... -- -- -- -- -- -- (156,000) --
Net income...... -- -- -- -- -- -- -- 14,792,000
Preferred Stock
dividends
paid........... -- -- -- -- -- -- -- (2,200,000)
------------ -------- ------------ ----------- ----------- --------- --------- ------------
BALANCES AT
DECEMBER 31,
1994........... 21,670,000 133,000 151,664,000 -- (2,684,000) 978,000 (156,000) (497,000)
Exchange of
Preferred Stock
for Class B
Common Stock,
4,000,000
shares......... (21,670,000) -- 21,670,000 -- -- -- -- --
Exchange of
Class B Common
Stock for Class
C Common
Stock,
5,670,986
shares (Note
H)............. -- -- (50,703,000) 50,703,000 -- -- -- --
Issuance of
Class B Common
Stock under the
Stock
Plan, 37,637
shares......... -- -- 578,000 -- (578,000) -- -- --
Forfeiture of
Class B Common
Stock under the
Stock
Plan, 15,280
shares......... -- -- (214,000) -- 214,000 -- -- --
Compensation--
Stock Plan..... -- -- -- -- 1,351,000 -- -- --
Repurchase and
retirement of
Class B Common
Stock,
1,357,456
shares......... -- -- (18,176,000) -- -- -- -- --
Five-for-four
stock split,
including
$5,000 paid for
fractional
shares (Note
I)............. -- 10,000 67,000 14,000 -- -- -- (96,000)
Foreign currency
translation
adjustments.... -- -- -- -- -- (313,000) -- --
Unrealized loss
on
marketable
securities..... -- -- -- -- -- -- (217,000) --
Net income...... -- -- -- -- -- -- -- 18,664,000
Preferred Stock
dividends
paid........... -- -- -- -- -- -- -- (1,109,000)
------------ -------- ------------ ----------- ----------- --------- --------- ------------
BALANCES AT
DECEMBER 31,
1995........... -- 143,000 104,886,000 50,717,000 (1,697,000) 665,000 (373,000) 16,962,000
Issuance of
Class B Common
Stock under the
Stock
Plan, 812
shares......... -- -- 11,000 -- (11,000) -- -- --
Forfeiture of
Class B Common
Stock under the
Stock
Plan, 31,936
shares......... -- -- (460,000) -- 460,000 -- -- --
Exercise of
options to
purchase
Class B Common
Stock under the
Stock Plan,
19,333 shares.. -- -- 266,000 -- -- -- -- --
Compensation--
Stock Plan..... -- -- -- -- 686,000 -- -- --
Repurchase and
retirement of
Class B Common
Stock,
241,502
shares......... -- -- (3,247,000) -- -- -- -- --
Foreign currency
translation
adjustment..... -- -- -- -- -- (665,000) -- --
Unrealized gain
on marketable
securities..... -- -- -- -- -- -- 724,000 --
Net income...... -- -- -- -- -- -- -- 32,125,000
------------ -------- ------------ ----------- ----------- --------- --------- ------------
BALANCES AT
DECEMBER 31,
1996........... $ -- $143,000 $101,456,000 $50,717,000 $ (562,000) $ -- $ 351,000 $ 49,087,000
============ ======== ============ =========== =========== ========= ========= ============
<CAPTION>
TOTAL
-------------
<S> <C>
BALANCES AT
JANUARY 1,
1994........... $153,217,000
Conversion of
Class A Common
Stock, 500,000
shares......... --
Issuance of
Class B Common
Stock under the
Stock Plan,
140,482
shares......... 1,000
Forfeiture of
Class B
Common Stock
under the Stock
Plan,
14,000 shares.. (1,000)
Compensation--
Stock Plan..... 1,127,000
Repurchase and
retirement of
Class B Common
Stock,
176,033
shares......... (2,661,000)
Increase in
deferred tax
benefit
related to
initial basis
differences
(Note K)....... 6,000,000
Foreign currency
translation
adjustment..... 989,000
Unrealized loss
on
marketable
securities..... (156,000)
Net income...... 14,792,000
Preferred Stock
dividends
paid........... (2,200,000)
-------------
BALANCES AT
DECEMBER 31,
1994........... 171,108,000
Exchange of
Preferred Stock
for Class B
Common Stock,
4,000,000
shares......... --
Exchange of
Class B Common
Stock for Class
C Common
Stock,
5,670,986
shares (Note
H)............. --
Issuance of
Class B Common
Stock under the
Stock
Plan, 37,637
shares......... --
Forfeiture of
Class B Common
Stock under the
Stock
Plan, 15,280
shares......... --
Compensation--
Stock Plan..... 1,351,000
Repurchase and
retirement of
Class B Common
Stock,
1,357,456
shares......... (18,176,000)
Five-for-four
stock split,
including
$5,000 paid for
fractional
shares (Note
I)............. (5,000)
Foreign currency
translation
adjustments.... (313,000)
Unrealized loss
on
marketable
securities..... (217,000)
Net income...... 18,664,000
Preferred Stock
dividends
paid........... (1,109,000)
-------------
BALANCES AT
DECEMBER 31,
1995........... 171,303,000
Issuance of
Class B Common
Stock under the
Stock
Plan, 812
shares......... --
Forfeiture of
Class B Common
Stock under the
Stock
Plan, 31,936
shares......... --
Exercise of
options to
purchase
Class B Common
Stock under the
Stock Plan,
19,333 shares.. 266,000
Compensation--
Stock Plan..... 686,000
Repurchase and
retirement of
Class B Common
Stock,
241,502
shares......... (3,247,000)
Foreign currency
translation
adjustment..... (665,000)
Unrealized gain
on marketable
securities..... 724,000
Net income...... 32,125,000
-------------
BALANCES AT
DECEMBER 31,
1996........... $201,192,000
=============
</TABLE>
See accompanying notes to consolidated financial statements
F-68
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Operations
International Family Entertainment, Inc. (together with its consolidated
subsidiaries, "IFE" or the "Company") produces, exhibits, and distributes
entertainment and informational programming as well as related products
targeted at families worldwide. IFE's principal business is The Family
Channel, an advertiser-supported cable television network that provides
family-oriented entertainment and informational programming in the United
States.
In addition, IFE owns MTM Entertainment, Inc. ("MTM"), a producer and
worldwide distributor of television series and made-for-television movies and
the owner of a significant library of television programming; FiT TV, an
advertiser-supported health and fitness cable network which operates
principally in the United States; and Calvin Gilmore Productions, Inc., a
producer of live musical variety shows. IFE also operated The Family Channel
(UK), an advertiser-supported network in the United Kingdom, through its
disposition on April 22, 1996, and The Family Channel De Las Americas, which
provided Spanish-language, family-oriented entertainment programming, as well
as fitness programming, to Mexico, Central America, and portions of South
America, through the discontinuance of its operations in November 1996.
Additionally, in 1995, IFE operated the Ice Capades, a touring ice show.
Basis of Presentation
The accompanying consolidated financial statements for the years ended
December 31, 1994, 1995, and 1996 include the accounts of the Company and all
majority-owned subsidiaries (including joint ventures). All significant
intercompany accounts and transactions have been eliminated in consolidation.
Cash Equivalents
All highly-liquid debt instruments purchased with original maturities of
three months or less are classified as cash equivalents.
Marketable Securities
Marketable securities consist of investments in U.S. Government bonds and
notes and other marketable debt or equity securities. Debt and equity
securities that are bought and held principally for the purpose of selling
them in the near term are classified as "trading" securities and reported at
fair value, with unrealized gains and losses included in the determination of
net income. Gains and losses on transactions involving futures contracts or
other derivative securities are also included in the determination of net
income. Debt and equity securities not classified as trading securities are
classified as "available-for-sale" securities and reported at fair value, with
unrealized gains and losses excluded from the determination of net income
(unless an other-than-temporary impairment shall have occurred) and reported,
net of related tax effect, as a separate component of stockholders' equity.
The cost of securities sold is determined using the specific identification
method.
Property and Equipment
Property and equipment is stated at cost. Buildings and equipment under
capital leases are stated at the present value of minimum lease payments.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the assets: buildings and building improvements--20 to 40 years;
satellite transponders--12 years; broadcasting and production equipment--3 to
5 years; and furniture and other equipment--3 to 10 years. Leasehold
improvements are amortized on a straight-line basis over the shorter of the
lease terms or estimated useful lives of the assets.
F-69
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Film Rights
Film rights include exhibition and exploitation rights acquired under
license agreements for the Company's own use on its cable networks and for
relicensing to others. Also included in film rights are costs of programming,
including films-in-progress, produced for exhibition by the Company on its
cable networks or produced for others. These costs, including allocated
overhead, are capitalized as incurred. Rights acquired under license
agreements, along with the related obligations, are recorded at the face
amount of the contract at the time the programming is made available.
Film rights, other than films-in-progress (which are stated at cost), are
stated at the lower of cost, less related amortization, or net realizable
value. Exhibition rights are amortized on a straight-line basis over the
estimated number of airings. Production and exploitation costs related to
programs produced for others are amortized based on the percentage that
current year revenues bear to estimated future revenues on a program-by-
program basis. Estimates of future airings and revenues are periodically
reviewed by management and revised when warranted by changing conditions, such
as changes in expected usage of a program on the Company's cable networks or
changes in the distribution marketplace.
The current portion of film rights is based upon the estimated portion of
these assets which is expected to be amortized over the next year.
Other Investments
Other investments in which the Company's voting interest is less than 20%
are carried at cost.
Investments in affiliates in which the Company's voting interest is 20% to
50% are accounted for under the equity method. Under this method, the
investment, originally recorded at cost, is adjusted to recognize the
Company's share of the net earnings or losses of the affiliates as they occur.
The excess of the cost of the stock of those affiliates over the Company's
share of net assets at the acquisition date is amortized on a straight-line
basis over the expected period to be benefited, generally 25 years.
Goodwill
Goodwill, which represents the excess of purchase price over the fair value
of net assets acquired, is amortized on a straight-line basis over the
expected period to be benefited, generally 25 years. At each balance sheet
date, the Company evaluates the realizability of goodwill based upon
expectations of nondiscounted future operating cash flows for each subsidiary
having a material goodwill balance. The evaluation of goodwill will be
impacted if estimated future operating cash flows are not achieved. Based upon
its most recent analysis, the Company believes that no material impairment of
goodwill existed at December 31, 1996.
Foreign Currency Translation
All balance sheet accounts of foreign investments were translated at the
current exchange rate as of the end of the accounting period. The resulting
translation adjustment was recorded as a separate component of stockholders'
equity. Income statement items are translated at average currency exchange
rates.
Revenue Recognition
Advertising revenue is recognized in the period in which the advertising
commercials or programs are telecast. Subscriber fees are recognized in the
period during which the network services are provided to a cable system
operator or other distributor.
F-70
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Production and distribution revenues are recognized in the period in which
programming becomes available for telecast by others. Long-term receivables
arising from distribution arrangements are recorded at their net present
values when revenue is recognized. Amounts received in advance of recognition
of revenue are recorded as deferred income. Costs of profit participations and
residual payments are accrued, based upon amounts expected to be payable, at
the time revenue is recognized.
Income Taxes
The Company utilizes the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to be applicable to
taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in the period that includes the
enactment date.
Stock Options
Prior to January 1, 1996, the Company accounted for stock options in
accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25. Accounting for Stock Issued to Employees, and related interpretations.
As such, compensation expense would be recorded on the date of grant only if
the current market price of the underlying stock exceeded the exercise price.
On January 1, 1996, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation, which
permits entities to recognize as expense over the vesting period the fair
value of all stock-based awards on the date of grant. Alternatively, SFAS No.
123 also allows entities to continue to apply the provisions of APB Opinion
No. 25 and provide pro forma net income and pro forma earnings per share
disclosures for employee stock option grants made in 1995 and future years as
if the fair-value-based method defined in SFAS No. 123 had been applied. The
Company has elected to continue to apply the provisions of APB Opinion No. 25
and provide the pro forma disclosure provisions of SFAS No. 123.
Earnings Per Share
The Convertible Notes, as described in Note F, are considered to be common
stock equivalents and, accordingly, the computations of primary and fully
diluted earnings per share assume conversion of the Convertible Notes if the
effect of such conversion is dilutive. Stock options are also included in the
computations of primary and fully diluted earnings per share if their effect
is dilutive.
For the years ended December 31, 1994 and 1995, primary and fully diluted
earnings per common share were computed by dividing net income available for
Common Stock by the average number of common shares (41,820,072 and
40,754,635, respectively) outstanding during such years. In 1995, the impact
of the Exchange Agreement, as described in Note H, on earnings per common
share was a reduction of $0.24 per common share.
For the year ended December 31, 1996, primary and fully diluted earnings per
common share were computed by increasing net income available for Common Stock
by the interest on the Convertible Notes, net of the related tax effect, and
dividing the result by the average number of common shares (48,022,327)
outstanding during 1996.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
F-71
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Reclassifications
Certain amounts have been reclassified for comparability with the 1996
financial statement presentation.
NOTE B--ACQUISITIONS AND OTHER INVESTMENTS
Body By Jake Enterprises
In July 1995, the Company acquired a 20% interest in Body By Jake
Enterprises, LLC ("BBJE"), a fitness licensing and television production
company, for $4,000,000 in cash.
China Entertainment Television Broadcast Limited
In June 1995, the Company acquired a 33 1/3% interest in an entity which
held convertible demand notes, which were convertible into an 80% equity
interest in China Entertainment Television Broadcast Limited. This entity
recorded a valuation allowance in 1995 of which the Company's share was
approximately $1,500,000, which is reflected in the determination of other
income and expense in the 1995 Consolidated Statement of Operations. In
November 1996, these convertible demand notes were sold to a third party for
approximately 77.5% of their face value.
Ice Capades
In February 1995, the Company acquired the assets of the Ice Capades for
consideration, consisting principally of assumed liabilities, amounting to
approximately $10,200,000. The liabilities assumed in the transaction included
$6,728,000 of cash advances by IFE prior to closing.
On December 31, 1995, the Company sold its interest in the Ice Capades to a
certain sports marketing enterprise in exchange for 7 1/2% convertible notes,
due in 2005, in the principal amount of $10,200,000 and the assumption of cash
advances due to the Company amounting to $4,090,000 at December 31, 1995.
These notes will be convertible, beginning in 1998, at the option of the
Company, into a majority interest in the acquiring entity. Accordingly, the
gain on this transaction amounting to $2,616,000 was deferred. In addition, on
this same date, the Company and the acquiring entity entered into a revolving
credit agreement whereby the Company agreed to advance the acquiring entity up
to $12,000,000 (including the aforementioned $4,090,000 in cash advances).
During 1996, this revolving credit agreement was replaced by a bank credit
facility which is guaranteed by IFE. In 1996, the Company recorded a valuation
allowance in connection with its investment in the aforementioned 7 1/2%
convertible notes. Such valuation allowance, which amounted to $5,300,000, is
reflected in the determination of other income and expense in the 1996
Consolidated Statement of Operations.
TVS ENTERTAINMENT PLC
During 1993, the Company acquired all of the outstanding capital stock of
TVS ENTERTAINMENT PLC ("TVS"), which was the parent company of MTM at that
time. Upon consummation of the acquisition of TVS, several contingencies
existed and the amounts related thereto were included in the allocation of the
purchase price, based upon management estimates utilizing the best available
information. Such estimates are periodically reviewed by management and
revised when warranted. Generally, after the first twelve months following an
acquisition, changes in estimates are included in the determination of net
income. Accordingly, the effects of the final resolution in 1994 and 1995 of
certain pre-acquisition contingencies recorded in the acquisition of TVS were
included in the determination of net income. Such effects, which amounted to
$7,291,000 and $2,521,000, were included in the determination of other income
and expense in the 1994 and 1995 Consolidated Statements of Operations,
respectively.
F-72
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
United Family Communications
In November 1996, the Company and a third party formed United Family
Communications, LLC ("UFC") to operate and distribute satellite-delivered
television programming services in Mexico, Central America, and South America.
The Company has agreed to make an initial cash contribution of $5,200,000 and
has contributed certain assets of The Family Channel De Las Americas (subject
to the joint venture's assumption of related liabilities) in exchange for a
50% interest in UFC. It is the current intent of UFC to launch one or more
advertiser-supported, satellite-delivered television programming services in
1997.
NOTE C--MARKETABLE SECURITIES
Marketable securities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1996
---------- ----------
<S> <C> <C>
Available-for-sale securities, at fair value..... $6,271,000 $4,072,000
Trading securities, at fair value................ 2,019,000 4,981,000
---------- ----------
$8,290,000 $9,053,000
========== ==========
</TABLE>
Available-for-sale securities, consisting primarily of equity securities,
had an amortized cost of $6,904,000 and $3,477,000 at December 31, 1995 and
1996, respectively. As of December 31, 1995, the unrealized loss related to
securities classified as available-for-sale amounted to $633,000 ($373,000
after related tax effect). As of December 31, 1996, the unrealized gain
related to securities classified as available-for-sale amounted to $595,000
($351,000 after related tax effect). For the years ended December 31, 1995 and
1996, proceeds from the disposition of available-for-sale securities amounted
to $1,089,000 and $4,954,000, respectively, and gross realized gains and
losses were $29,000 and $(119,000) in 1995 and $1,093,000 and $(22,000) in
1996.
As of December 31, 1996, the unrealized gain related to trading securities
(with a cost of $4,129,000) amounted to $852,000, which amount is included in
the determination of investment income. For the year ended December 31, 1996,
proceeds from the disposition of trading securities amounted to $952,000, and
gross realized gains and losses were $164,000 and $(49,000) in 1996.
The Company recognized a $3,691,000 loss in 1994 on the impairment of
certain equity securities classified as available-for-sale securities. This
loss for 1994 was accounted for as a realized loss in the determination of
investment income. Also included in the determination of investment income for
1994 were realized losses aggregating $2,338,000 on transactions which
involved futures contracts or other derivative securities.
NOTE D--PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1996
----------- -----------
<S> <C> <C>
Land and buildings............................... $21,010,000 $14,156,000
Satellite transponders........................... 36,415,000 36,415,000
Broadcasting and production equipment............ 16,857,000 12,248,000
Furniture and other equipment.................... 16,584,000 24,494,000
Leasehold and building improvements.............. 5,993,000 5,424,000
----------- -----------
96,859,000 92,737,000
Less accumulated depreciation and amortization... 23,831,000 29,860,000
----------- -----------
$73,028,000 $62,877,000
=========== ===========
</TABLE>
F-73
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE E--LONG-TERM DEBT
Long-term debt, other than the Convertible Notes described in Note F,
consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1996
------------ ------------
<S> <C> <C>
Revolving Credit Facility...................... $133,000,000 $150,500,000
Subsidiary Credit Agreement.................... 8,850,000 10,000,000
6% notes payable, subordinated................. 6,720,000 6,720,000
Capital lease obligations...................... 5,363,000 5,236,000
------------ ------------
153,933,000 172,456,000
Less current maturities........................ 181,000 1,205,000
------------ ------------
$153,752,000 $171,251,000
============ ============
</TABLE>
Revolving Credit Facility
The Company has a long-term bank credit facility (the "Revolving Credit
Facility") with a group of banks with a maximum loan commitment thereunder of
$250,000,000. The Revolving Credit Facility provides for semi-annual
reductions of one-tenth of the loan commitment, beginning in December 1997,
with a final expiration in June 2002. Interest on borrowings under the
Revolving Credit Facility is payable quarterly at the prime rate or, at the
option of the Company, at a Eurodollar-based interest rate (5 9/16% at
December 31, 1996), plus a margin of 7/8% to 1 3/8%, depending on the
Company's overall leverage. In addition, the Company pays a fee of 1/4% to
3/8% per annum, depending on leverage, on the average unborrowed portion of
the total amount available for borrowings. The Revolving Credit Facility
contains (i) a negative pledge of substantially all of the Company's assets
and (ii) various restrictive covenants which, among other things, obligate the
Company to maintain certain financial ratios and limit the ability of the
Company to incur additional indebtedness, liens, and guarantees. Under the
terms of the Revolving Credit Facility, the aggregate amount of future
dividends on, and future redemptions of, the Company's common stock cannot
exceed approximately $50,000,000 as of December 31, 1996.
Interest Rate Exchange Agreement
In August 1996, the Company entered into an interest rate exchange agreement
pursuant to which it will make payments based upon a fixed rate of interest (5
7/8% per annum) on a notional amount of $25,000,000 and, in exchange, receive
payments based upon a variable rate of interest using a Eurodollar-based
interest rate determined on a quarterly basis. The initial term of this
agreement is two years, with an additional term of one year at the option of
the counterparty. Although the Company does not anticipate nonperformance by
the counterparty, the Company is exposed to credit losses for the periodic
settlement of amounts due under this interest rate exchange agreement in the
event of such party's nonperformance.
Subsidiary Credit Agreement
In January 1995, a subsidiary of the Company entered into a $10,000,000
credit agreement with a certain bank (the "Subsidiary Credit Agreement"). The
terms of the Subsidiary Credit Agreement are substantially the same as those
of the Revolving Credit Facility.
F-74
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Future Minimum Payments
The December 31, 1996 balance of long-term debt, other than the Convertible
Notes, is payable as follows:
<TABLE>
<CAPTION>
REVOLVING SUBSIDIARY CAPITAL
CREDIT CREDIT 6% NOTES LEASE
YEARS ENDED DECEMBER 31 FACILITY AGREEMENT PAYABLE OBLIGATIONS TOTAL
- ----------------------- ------------ ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
1997.................... $ -- $ 1,000,000 $ -- $ 581,000 $ 1,581,000
1998.................... -- 2,000,000 -- 450,000 2,450,000
1999.................... 25,500,000 2,000,000 1,680,000 425,000 29,605,000
2000.................... 50,000,000 2,000,000 1,680,000 435,000 54,115,000
2001.................... 50,000,000 2,000,000 1,680,000 480,000 54,160,000
Thereafter.............. 25,000,000 1,000,000 1,680,000 8,283,000 35,963,000
Less amounts
representing interest
on capital lease
obligations............ -- -- -- (5,418,000) (5,418,000)
------------ ----------- ---------- ---------- ------------
$150,500,000 $10,000,000 $6,720,000 $5,236,000 $172,456,000
============ =========== ========== ========== ============
</TABLE>
NOTE F--CONVERTIBLE NOTES
The Company's 6% Convertible Secured Notes due 2004 (the "Convertible
Notes") were issued to a related party. The Convertible Notes provide for a
security interest in the Company's rights in two satellite transponders, and
contain restrictive covenants which, among other things, require the Company
to maintain certain financial ratios and limit the ability of the Company to
incur additional indebtedness. In addition, no dividends may be declared or
paid on any shares of the Company's capital stock (other than dividends
payable solely in shares of the capital stock of the Company) at any time when
payments of principal, interest or other amounts are past due under the
Convertible Notes or while any event of default is continuing under the
Convertible Notes or would result from such dividend.
The $23,000,000 in principal amount of the Convertible Notes is payable in
five equal annual installments beginning December 31, 2000. The Convertible
Notes are subordinated to borrowings under the Revolving Credit Facility
described in Note E. Each $1,000 in principal amount of the Convertible Notes
may be converted into 112 1/2 shares of Class C Common Stock. Each share of
Class C Common Stock is convertible, at the option of the holder, into one
share of Class B Common Stock. Accordingly, the Company has reserved 2,587,500
shares of Class C Common Stock for potential future conversion of the
Convertible Notes (and, in addition, 2,587,500 shares of Class B Common Stock
for potential future conversion of the resulting Class C Common Stock).
NOTE G--MINORITY INTERESTS
The Family Channel (UK)
Prior to April 22, 1996, minority interests were primarily attributable to a
minority partner's 39% interest in The Family Channel (UK) which was operated
as a joint venture. IFE and Flextech plc, the holder of the minority 39%
interest, funded the operations of The Family Channel (UK) through capital
investments and loans. On April 22, 1996, the Company consummated the sale of
its 61% interest in The Family Channel (UK) to Flextech, as described in Note
P.
F-75
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The minority partner's 39% share of the net loss resulting from the
operations of The Family Channel (UK) amounted to $5,107,000 and $4,954,000
for the years ended December 31, 1994 and 1995, respectively. The minority
partner's 39% share of the net loss of this joint venture, through the date of
sale, amounted to $1,419,000 for 1996.
FiT TV
On April 30, 1996, the Company, an affiliate of Liberty Media Corporation
("Liberty Media"), and an affiliate of Reebok International Limited ("Reebok")
entered into a definitive partnership agreement (the "FiT TV Partnership
Agreement") forming a partnership (the "FiT TV Partnership"), effective
January 1, 1996, to own and operate the FiT TV cable network. FiT TV had
previously been owned and operated by Cable Health TV, Inc. ("CHTV"), a 90%-
owned subsidiary of IFE. Another affiliate of Liberty Media is the holder of
the Convertible Notes and all of the Company's outstanding Class C Common
Stock. Liberty Media is an affiliate of Tele-Communications, Inc. ("TCI"), one
of the largest cable television system operators in the United States and, as
such, a major provider of carriage for FiT TV.
In accordance with the terms of the FiT TV Partnership Agreement, CHTV
contributed all of the assets and liabilities of FiT TV to the FiT TV
Partnership in exchange for an 80% partnership interest and functions as the
FiT TV Partnership's managing partner. Reebok contributed cash of $2,000,000
and other consideration agreed upon by the parties in exchange for a 10%
partnership interest. Liberty Media contributed cash of $1,000,000 and other
consideration agreed upon by the parties in exchange for a 10% partnership
interest.
In conjunction with this transaction, CHTV and Liberty Media entered into an
agreement whereby Liberty Media was granted a five-year option to purchase an
additional 10% partnership interest from CHTV. The exercise price for this
option varies (up to a maximum of $5,000,000) depending on the number of
domestic subscribers receiving FiT TV from delivery systems owned or managed
by Liberty Media or an affiliate of Liberty Media (including TCI) at the time
of exercise.
The minority partners' combined 20% share of the net loss resulting from the
operations of the FiT TV Partnership, since its formation on April 30, 1996,
is reflected in the 1996 Consolidated Statement of Operations. The minority
partners' combined 20% share of the net loss of FiT TV amounted to $938,000
for the year ended December 31, 1996.
NOTE H--EXCHANGE OF PREFERRED STOCK
On December 15, 1995, the Company and Liberty IFE, Inc., an affiliate of
Liberty Media, the then holder of the 10% Convertible Cumulative Preferred
Stock (the "Preferred Stock"), and holder of the Convertible Notes, entered
into an exchange agreement (the "Exchange Agreement") whereby Liberty IFE (i)
exchanged its holdings of all of the Preferred Stock for shares of Class B
Common Stock, (ii) exchanged all of its holdings of Class B Common Stock
(including the shares of Class B Common Stock received in exchange for the
Preferred Stock) for an equal number of shares of non-voting Class C Common
Stock, (iii) amended the terms of the Convertible Notes to provide, among
other things, for conversion of such notes into shares of non-voting Class C
Common Stock in lieu of shares of Class B Common Stock and for the elimination
of provisions which required the Company to issue Class C Common Stock in the
event of the occurrence of certain payment defaults, and (iv) amended the
terms of certain other agreements, including the shareholder agreement among
the Company and certain of its principal shareholders.
F-76
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Exchange Agreement had no impact on the determination of net income for
the year ended December 31, 1995. However, net income available for Common
Stock for the year ended December 31, 1995 has been reduced by a distribution
of $12,163,000 (or $0.30 per common share), which amount represents the excess
of (i) the fair value of the shares of Class B Common Stock which were
transferred in the transaction by the Company to the former holder of the
Preferred Stock over (ii) the fair value of the Class B Common Stock which was
issuable pursuant to the original conversion terms. The amount of this
distribution approximates the present value of the dividend payments for 1995
and future years that would have been required on the Preferred Stock.
Excluding the effect of the dividend which would have been required for 1995,
the impact of the Exchange Agreement on earnings per common share was a
reduction of $0.24 per common share for the year ended December 31, 1995.
NOTE I--CAPITAL STOCK
Preferred Stock
Prior to the consummation of the Exchange Agreement described in Note H, the
Preferred Stock was entitled to a dividend at an annual rate of 10% of the
$22,000,000 original liquidation preference, payable semiannually in January
and July. The liquidation preference was increased by cumulative dividends,
whether or not they were declared. At December 31, 1994, undeclared dividends
totaled $1,109,000, which was the amount of the dividend declared and paid in
January 1995.
Common Stock
The Company has two classes of voting common stock. The Class A Common Stock
has ten votes per share and the Class B Common Stock has one vote per share.
Each share of Class A Common Stock is convertible, at the option of the
holder, into one share of Class B Common Stock. Each share of Class C Common
Stock is non-voting and is convertible, at the option of the holder, into one
share of Class B Common Stock.
The Class A Common Stock and Class B Common Stock vote together as a single
class on all matters except that (i) so long as the outstanding Class A Common
Stock has more than 40% of the total outstanding voting power of all common
stock entitled to vote, the holders of Class A Common Stock, voting separately
as a class, are entitled to elect a majority of the Company's directors, with
the remainder of the directors being elected by the holders of the Class B
Common Stock, voting separately as a class, and (ii) the approval of a
majority of each of the Class A Common Stock and the Class B Common Stock is
required for certain extraordinary corporate actions.
Stock Split
On November 16, 1995, the Company's Board of Directors approved a five-for-
four stock split which was effected in the form of a 25% stock dividend and
payable on January 5, 1996 to the shareholders of record at the close of
business on December 15, 1995. In connection with the stock split, all classes
of common stock were credited and retained earnings was charged for the
aggregate par value of the shares that were issued. A total of 1,000,000
shares of Class A Common Stock, 6,607,657 shares of Class B Common Stock, and
1,417,746 shares of Class C Common Stock were issued in connection with the
stock split.
Shareholder Agreement
Pursuant to the amended shareholder agreement (the "Shareholder Agreement")
among the Company and certain of its principal stockholders, each of the
parties to the Shareholder Agreement will, in the event of any
F-77
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
future offering of capital stock by the Company, be entitled to purchase
additional shares of such capital stock in order to maintain its percentage
ownership of each class of capital stock. The Shareholder Agreement also
provides that, under certain circumstances, Liberty IFE has a right of first
refusal with respect to certain sales, conversions or transfers of Class A
Common Stock.
NOTE J--SUPPLEMENTAL CASH FLOW INFORMATION
Total interest costs paid during the years ended December 31, 1994, 1995,
and 1996 were $9,172,000, $12,087,000, and $12,045,000, respectively. Income
taxes paid during the years ended December 31, 1994, 1995, and 1996 amounted
to $2,757,000, $13,397,000, and $10,018,000, respectively.
Non-cash investing and financing activities included the acquisition of film
rights under license agreements which aggregated approximately $30,343,000,
$37,221,000, and $73,893,000 for the years ended December 31, 1994, 1995, and
1996, respectively.
As described in Note P, on April 22, 1996, the Company consummated the sale
of its television production studio in Maidstone, England and its 61% interest
in The Family Channel (UK) to a related party. This sale was primarily a non-
cash transaction in which the Company received equity securities. Cash
received in the transaction amounting to approximately $4,600,000 was offset
by the cash balances of the businesses sold (which were transferred to the
buyer) and cash outlays for expenses of the sale.
Non-cash investing and financing activities for the year ended December 31,
1995 included approximately $7,140,000 of liabilities assumed in the
acquisition of the Ice Capades. Non-cash purchases of property and equipment
under capital leases amounted to $5,380,000 and $76,000 for the years ended
December 31, 1995 and 1996, respectively. The exchange of Preferred Stock for
Common Stock with a related party during the year ended December 31, 1995 was
a non-cash transaction. Non-cash investing and financing activities also
included the sale of the Ice Capades in December 1995, in exchange for
$10,200,000 in notes receivable and other consideration, as described in Note
B.
NOTE K--INCOME TAXES
In January 1990, the Company acquired the assets of The Family Channel from
The Christian Broadcasting Network, Inc. ("CBN"). For income tax purposes, the
Company established the basis of the assets it acquired from CBN at the
respective fair market values of the assets as determined by the negotiated
sales price and an independent appraisal. IFE and CBN are considered to be
related parties for financial reporting purposes and, accordingly, the net
assets acquired were recorded at CBN's book value at the date of acquisition.
Therefore, the tax basis of the assets acquired exceeds the amount reflected
in the accompanying consolidated financial statements. This initial basis
difference reduces the amount of the Company's income subject to income taxes
to the extent that it is amortizable for income tax purposes.
The Company's income tax return for 1990, the year in which the Company
acquired the assets of The Family Channel from CBN, is currently under
examination by the Internal Revenue Service ("IRS"). As discussed in the
preceding paragraph, this acquisition gave rise to the initial difference
between the basis of the assets acquired from CBN for financial statement
purposes and the basis of those assets for tax purposes. In May 1994, the
Company and the IRS entered into a closing agreement (the "Closing Agreement")
settling all outstanding issues regarding the method and amounts of
amortization in respect of the assets acquired from CBN.
F-78
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
These amounts had previously been estimated by the Company. As a result of the
Closing Agreement, the amount of deferred tax benefit recorded by the Company
was increased in 1994 by $6,000,000 with a corresponding increase in
stockholders' equity. The Company's reported earnings were not affected by the
Closing Agreement.
Income before income taxes, as shown in the Consolidated Statements of
Operations, is summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Domestic........................... $20,120,000 $36,737,000 $63,882,000
Foreign............................ 4,837,000 (4,007,000) (7,022,000)
----------- ----------- -----------
$24,957,000 $32,730,000 $56,860,000
=========== =========== ===========
The provision for income taxes consists of the following:
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal........................... $ 4,593,000 $ 2,775,000 $14,969,000
State............................. 1,064,000 668,000 3,564,000
Foreign........................... 3,302,000 (752,000) 926,000
----------- ----------- -----------
8,959,000 2,691,000 19,459,000
----------- ----------- -----------
Deferred:
Federal........................... (410,000) 6,032,000 4,261,000
State............................. (70,000) 1,691,000 1,015,000
Foreign........................... 1,686,000 3,652,000 --
----------- ----------- -----------
1,206,000 11,375,000 5,276,000
----------- ----------- -----------
$10,165,000 $14,066,000 $24,735,000
=========== =========== ===========
</TABLE>
Domestic and foreign income before income taxes include all income derived
from operations in the respective U.S. and foreign geographic areas, whereas
provisions for taxes on income include all income taxes payable to U.S.,
foreign, and other governments, as applicable, regardless of the location in
which the taxable income is generated.
The actual provision for income taxes differs from the expected tax expense
(computed by applying the U.S. Federal corporate tax rate of 35% to income
before income taxes) as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Computed expected income tax
expense........................... $ 8,735,000 $11,456,000 $19,901,000
State income taxes, net of Federal
benefit........................... 646,000 1,637,000 2,967,000
Effect of amortization of
nondeductible goodwill............ 677,000 744,000 588,000
Effect of liquidation of foreign
subsidiary........................ 800,000 -- --
Other, net......................... (693,000) 229,000 1,279,000
----------- ----------- -----------
$10,165,000 $14,066,000 $24,735,000
=========== =========== ===========
</TABLE>
F-79
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1996
------------ ------------
<S> <C> <C>
Deferred tax assets
Initial basis differences..................... $ 9,821,000 $ 5,800,000
Accrued liabilities, participations, and
residuals.................................... 7,199,000 12,131,000
Film rights................................... 18,372,000 13,434,000
Other......................................... 7,527,000 7,006,000
------------ ------------
Total gross deferred tax assets.............. 42,919,000 38,371,000
Less valuation allowance...................... (9,599,000) (9,408,000)
------------ ------------
Net deferred tax assets...................... 33,320,000 28,963,000
------------ ------------
Deferred tax liabilities
Accounts receivable, principally due to
differences in revenue recognition........... (27,735,000) (24,779,000)
Property and equipment, principally due to
differences in
depreciation and capitalized interest........ (7,203,000) (7,991,000)
Other......................................... (1,669,000) (1,661,000)
------------ ------------
Total deferred tax liabilities............... (36,607,000) (34,431,000)
------------ ------------
Net deferred tax liability................... $ (3,287,000) $ (5,468,000)
============ ============
</TABLE>
Based on the Company's historical levels of income before income taxes and
its anticipated future levels of income before income taxes, management
considers it more likely than not that the Company will have sufficient
taxable income to realize the full amount of its net deferred tax assets at
December 31, 1996, although realization is not assured.
NOTE L--RELATED PARTY TRANSACTIONS
The Chairman of the Company is also the Chairman of the Board of CBN. During
the year ended December 31, 1995, the Company repurchased shares of Class B
Common Stock in transactions with CBN and an affiliate of CBN for an aggregate
consideration of $13,819,000. Also, in December 1995, the Company and Liberty
IFE entered into an exchange agreement whereby Liberty IFE exchanged its
holdings of all of the Preferred Stock for shares of Common Stock, as
described in Note H.
The Company provides specified program time to CBN at charges equal to the
Company's cost, pursuant to an agreement which extends through 2004 and
automatically renews at CBN's option. Also, the Company leases certain office
space and other operational facilities from CBN and, from time to time, enters
into various other transactions with CBN and its subsidiaries.
The Company holds a 20% interest in BBJE. BBJE provides certain services,
including television production, for FiT TV and pays an annual dividend to the
Company. Cash dividends received from BBJE amounted to $343,000 and $125,000
in 1995 and 1996, respectively.
The Company and TCI have entered into a cable affiliation agreement,
extending to 2006, with respect to The Family Channel. Under the terms of the
agreement, the Company has granted TCI and its affiliates the right
F-80
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
to carry The Family Channel on certain cable television systems in exchange
for subscriber fees. The Company has also entered into a long-term agreement
granting TCI and its affiliates the right to carry FiT TV.
The Company subleased a transponder for The Family Channel (UK), until its
disposition on April 22, 1996, from Flextech. On such date, the Company sold
its 61% interest in The Family Channel (UK) to Flextech, as described in Note
P.
Related party transactions and balances, not otherwise disclosed, are
summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Operating revenues..................... $15,662,000 $17,863,000 $23,176,000
=========== =========== ===========
Operating expenses..................... $ 6,402,000 $ 8,028,000 $ 5,191,000
=========== =========== ===========
Accounts receivable.................... $ 3,798,000 $ 4,632,000 $12,114,000
=========== =========== ===========
Accounts payable....................... $ 855,000 $ 588,000 $ 1,195,000
=========== =========== ===========
</TABLE>
NOTE M--EMPLOYEE BENEFIT PLANS
Stock Plan
The Company has a stock incentive plan (the "Stock Plan") covering 6,200,000
shares of Class B Common Stock. There were 142,226 shares and 569,100 shares
available for grant as of December 31, 1995 and 1996, respectively. Prior to
May 1996, awards could be made separately or in any combination of stock
options and restricted stock. Beginning May 1996, awards under the Stock Plan
may only be made in the form of stock options. The number of awards granted
under the Stock Plan to individual employees is determined by a committee of
the Company's Board of Directors.
Issuances and forfeitures of restricted stock under the Stock Plan are
reflected in the accompanying Consolidated Statements of Stockholders' Equity.
The shares of restricted stock issued during the years ended December 31,
1994, 1995, and 1996 were sold to the employees at the par value of $.01 per
share. The difference between the market value and the amount paid for
restricted stock is reflected as a reduction of stockholders' equity. This
unearned compensation is recognized as expense over a five-year vesting
period. At December 31, 1996, 126,794 shares of restricted stock were subject
to forfeiture under the Stock Plan.
Stock options may be granted for the purchase of Class B Common Stock at a
price not less than fair market value on the date of grant. The 1994 option
awards were granted at an exercise price higher than the fair market value on
the date of grant. The options are generally exercisable after one or more
years and expire no later than 10 years from the date of grant.
The Company has elected to continue to use the intrinsic value-based method
to account for all of its employee stock-based compensation plans. Under APB
Opinion No. 25, Accounting for Stock Issued to Employees, the Company has
recorded no compensation costs related to its stock option plans for the years
ended December 31, 1994, 1995, and 1996 because the exercise price of each
option equals or exceeds the fair value of the underlying common stock as of
the grant date for each stock option.
Pursuant to SFAS No. 123, Accounting for Stock-Based Compensation, the
Company is required to disclose the pro forma effects on net income and
earnings per share data as if the Company had elected to use the fair value
approach to account for all its employee stock-based compensation plans. If
compensation cost for the
F-81
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Company's plans had been determined consistent with the fair value approach
set forth in SFAS No. 123, the Company's pro forma net income and pro forma
earnings per share for the years ended December 31, 1995 and 1996 would have
been decreased as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1995 1996
------------ ------------
<S> <C> <C>
Net income
As reported.................................. $ 18,664,000 $ 32,125,000
============ ============
Pro forma.................................... $ 18,002,000 $ 30,486,000
============ ============
Primary and fully diluted earnings per common
share
As reported.................................. $ 0.16 $ 0.69
============ ============
Pro forma.................................... $ 0.14 $ 0.66
============ ============
</TABLE>
Pro forma net income reflects only options granted in 1995 and 1996.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net income amounts
presented above because compensation cost is reflected over the options'
vesting periods and compensation cost for options granted prior to January 1,
1995 is not considered.
The fair value of options granted was estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1995 and 1996, respectively: risk-free interest
rates of 6.23% and 5.96%; expected lives of 5.8 years and 4.6 years; expected
volatility of 31.0% and 34.5%; and no dividends.
A summary of stock options to purchase Class B Common Stock, as of December
31, 1994, 1995, and 1996, and changes during the years then ended, is
presented below:
<TABLE>
<CAPTION>
1994 1995 1996
----------------- --------------------- ---------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Options at beginning of
year................... 166,250 $16.70 350,000 $14.30 2,106,250 $12.44
Granted................. 183,750 $12.13 1,812,500 $12.14 298,000 $15.70
Exercised............... -- -- (19,333) $15.16
Forfeited............... -- (56,250) $14.30 (49,417) $15.50
------- ---------- ----------
Options at end of year.. 350,000 $14.30 2,106,250 $12.44 2,335,500 $12.81
======= ========== ==========
Options exercisable at
year-end............... 36,250 $16.70 114,250 $14.48 653,560 $12.61
======= ========== ==========
Weighted-average
estimated fair value of
options granted during
the year............... $ 5.11 $ 6.08
========== ==========
</TABLE>
F-82
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes information about stock options to purchase
Class B Common Stock which are outstanding at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ ----------------------
WEIGHTED- WEIGHTED-
WEIGHTED-AVE. AVE. AVE.
REMAINING EXERCISE EXERCISE
RANGE OF EXERCISE PRICES SHARES CONTRACTUAL LIFE PRICE SHARES PRICE
- ------------------------ --------- ---------------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
$12.00 to $13.10........ 1,918,750 8.9 years $12.11 582,810 $ 12.11
$15.00 to $17.75........ 416,750 9.2 years $15.99 70,750 $ 16.70
--------- ----------
$12.00 to $17.75........ 2,335,500 9.0 years $12.81 653,560 $ 12.61
========= ==========
</TABLE>
Subsidiary Stock Option Plan
The Company has adopted a separate stock option plan for a certain
subsidiary. This stock option plan was created as a means of attracting and
retaining employees and to stimulate the personal and active interest of such
individuals in the Company's (and such subsidiary's) development and financial
success.
During 1995, this subsidiary granted an employee an option to purchase
shares of its common stock. The effect of this option has been included in the
calculation of pro forma net income and pro forma primary and fully diluted
earnings per common share.
401(k) Plan
The Company has a 401(k) retirement savings plan (the "401(k) Plan") which
covers the majority of its employees. Subject to certain limitations,
employees may contribute up to 15% of their compensation to the 401(k) Plan.
The Company's contribution to the 401(k) Plan is discretionary as determined
annually by the Company's Board of Directors. The Company contributed
$405,000, $486,000, and $629,000 to the 401(k) Plan for the years ended
December 31, 1994, 1995, and 1996, respectively.
Employment Agreements
The Company has employment agreements with its Chairman, its President &
Chief Executive Officer, and most other members of its senior management.
NOTE N--COMMITMENTS AND CONTINGENCIES
The unpaid balance under program contracts for film rights related to the
production, exhibition, or distribution of programming that was available as
of the end of the year is reflected as a liability in the 1996 Consolidated
Balance Sheet. The balance due as of December 31, 1996 is payable as follows:
$44,050,000 in 1997; $32,692,000 in 1998; $13,721,000 in 1999; $2,551,000 in
2000; $265,000 in 2001; and $1,414,000 thereafter.
The Company has commitments under various program contracts for film rights
related to the production, exhibition, or distribution of programming which
was not available as of December 31, 1996. The commitments under these program
contracts as well as commitments under program development agreements and
employment agreements totaled approximately $93,000,000 as of December 31,
1996. Subsequent to December 31, 1996, the Company made additional commitments
under long-term program contracts, for the exhibition rights to certain
television series and movies, totaling approximately $75,000,000.
F-83
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Aggregate future estimated payments of accrued participations and residuals
as of December 31, 1996 are as follows: $15,613,000 in 1997; $6,731,000 in
1998; $1,704,000 in 1999; $499,000 in 2000; and $844,000 in 2001.
The Company leases office facilities and certain other property and
equipment under noncancelable operating leases with future minimum lease
payments as follows: $3,275,000 in 1997; $2,917,000 in 1998; $2,825,000 in
1999; $2,449,000 in 2000; $2,275,000 in 2001; and $22,765,000 thereafter.
Total rent expense under operating leases amounted to approximately
$7,770,000, $8,942,000, and $5,193,000 for the years ended December 31, 1994,
1995, and 1996, respectively.
The Company has guaranteed a $12,000,000 bank credit facility for the entity
that purchased the Ice Capades from the Company, as described in Note B. In
addition, the Company has contingent liabilities related to legal proceedings
and other matters arising from the normal course of operations. Management
does not expect that amounts, if any, which may be required to satisfy such
contingencies will be material in relation to the accompanying consolidated
financial statements.
NOTE O--DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
Investment in Equity Securities--Related Party
As described in Note P, on April 22, 1996, the Company received 5,792,008
shares of Flextech's convertible redeemable non-voting common stock. This
common stock is convertible, under certain circumstances, into Flextech's
voting common stock which is listed on the London Stock Exchange. Based upon
the market value of the underlying voting common stock (and the applicable
foreign currency exchange rate), as of December 31, 1996, and after applying
the same rate of discount as was determined by an independent valuation when
the shares were received, the estimated fair value of the Company's investment
in Flextech is $53,750,000.
Film Rights Payable
The amount reflected as film rights payable at December 31, 1996 represents
future payments to be made under program contract agreements. The fair value
of film rights payable is the present value of these future payments. At
December 31, 1996, the present value of these future payments is approximately
$85,000,000.
Revolving Credit Facility and Subsidiary Credit Agreement
The Company's borrowings under the Revolving Credit Facility and Subsidiary
Credit Agreement are at floating rates of interest. Since the cost of carrying
this indebtedness fluctuates with current market conditions, it is assumed
that the carrying values would approximate fair value.
Convertible Notes
The Company has $23,000,000 in principal amount of Convertible Notes
outstanding. These notes are convertible into 2,587,500 shares of non-voting
Class C Common Stock, which Class C Common Stock is convertible, at the option
of the holder, into Class B Common Stock, on a share-for-share basis, as
described in Note F. The Company estimates that the fair value of the
Convertible Notes approximates the trading value of the underlying shares.
Accordingly, based on the average closing price of the Class B Common Stock
for December 1996, the estimated fair value of the Convertible Notes is
$39,783,000.
Limitations
Fair value estimates are made at a specific point in time based on relevant
market information and information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and
F-84
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
matters of significant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect these estimates.
NOTE P--GAIN ON DISPOSITION OF ASSETS--RELATED PARTY
On April 22, 1996, the Company consummated the sale of its television
production studio in Maidstone, England and its 61% interest in The Family
Channel (UK) to Flextech pursuant to agreements dated as of March 20, 1996.
Flextech previously owned a 39% interest in The Family Channel (UK).
Flextech's majority owner is Tele-Communications International, Inc. ("TCI
International"), a majority-owned subsidiary of TCI. Another affiliate of TCI
is the holder of the Convertible Notes and all of the Company's outstanding
Class C Common Stock.
As consideration for this transaction, the Company received
(Pounds)3,000,000 (approximately $4,600,000) in cash and 5,792,008 shares of
Flextech's convertible redeemable non-voting common stock. This common stock
is convertible, under certain circumstances, into Flextech's voting common
stock which is listed on the London Stock Exchange. The market value of the
underlying voting common stock as of the date of the aforementioned agreements
was $46,100,000. The shares were recorded, for financial statement purposes,
at approximately (Pounds)23,000,000 ($35,458,000 based on the applicable
foreign currency exchange rate on the date of closing), which reflects a
discount determined by an independent valuation to allow for the lack of
marketability during the required holding period.
The Company received the right to "put" its holdings of Flextech's non-
voting stock to TCI International, beginning in June 1997 (if the shares do
not first become convertible). Upon exercise of the put, TCI International has
the option of redeeming the stock for cash at the then-market value of
Flextech's voting common stock. If the shares are not redeemed for cash, the
Company has the option of either (i) converting 50% of the shares on a share-
for-share basis into Flextech's voting common stock and 50% of the shares into
common stock of the same value of TCI International, or (ii) converting 100%
of the shares into common stock of the same value of TCI International.
NOTE Q--INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in three business segments: the operation of
advertiser-supported cable networks ("Cable Networks"), the production and
distribution of entertainment programming ("Production & Distribution"), and
the production of live entertainment shows ("Live Entertainment").
Within the Cable Networks business segment, the Company operates The Family
Channel, an advertiser-supported cable television network that provides
family-oriented entertainment and informational programming in the United
States and FiT TV, an advertiser-supported health and fitness cable network
which operates principally in the United States. IFE also operated The Family
Channel (UK), an advertiser-supported network in the United Kingdom, through
its disposition on April 22, 1996, and The Family Channel De Las Americas,
launched on July 1, 1995, which provided Spanish-language, family-oriented
entertainment programming, as well as fitness programming, to Mexico, Central
America, and portions of South America, through the discontinuance of its
operations in November 1996.
Within the Production & Distribution business segment, the Company produces
and distributes television programming in the United States and throughout
many other parts of the world ("MTM Operations"), co-
F-85
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
produced a motion picture through Family Channel Pictures, and operated a
television production studio in Maidstone, England (the "UK Studio") until its
disposition on April 22, 1996.
Within the Live Entertainment business segment, the Company produces live
musical variety shows and, in 1995, operated the Ice Capades, a touring ice
show.
The following table sets forth comparative information regarding operating
revenues, operating income or loss, total assets, depreciation and
amortization, and capital expenditures by business segment.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Operating Revenues
Cable Networks...................... $178,746,000 $213,775,000 $249,620,000
Production & Distribution........... 70,340,000 86,990,000 104,519,000
Live Entertainment.................. 8,951,000 10,481,000 7,751,000
Intersegment Eliminations........... (15,987,000) (16,388,000) (29,080,000)
------------ ------------ ------------
$242,050,000 $294,858,000 $332,810,000
============ ============ ============
Operating Income (Loss)
Cable Networks...................... $ 31,482,000 $ 42,899,000 $ 77,635,000
Production & Distribution........... (1,066,000) 1,155,000 (19,029,000)
Live Entertainment.................. (1,880,000) (5,012,000) (2,782,000)
Intersegment Eliminations........... (3,089,000) (644,000) 340,000
------------ ------------ ------------
$ 25,447,000 $ 38,398,000 $ 56,164,000
============ ============ ============
Total Assets
Cable Networks...................... $276,875,000 $286,738,000 $338,188,000
Production & Distribution........... 174,078,000 171,892,000 211,402,000
Live Entertainment.................. 22,305,000 27,783,000 26,392,000
Intersegment Eliminations........... (4,986,000) (4,986,000) (7,299,000)
------------ ------------ ------------
$468,272,000 $481,427,000 $568,683,000
============ ============ ============
Depreciation and Amortization
Cable Networks...................... $ 74,044,000 $ 79,313,000 $ 83,415,000
Production & Distribution........... 48,832,000 63,367,000 100,885,000
Live Entertainment.................. 1,035,000 1,772,000 1,488,000
Intersegment Eliminations........... (11,069,000) (13,335,000) (29,471,000)
------------ ------------ ------------
$112,842,000 $131,117,000 $156,317,000
============ ============ ============
Capital Expenditures
Cable Networks...................... $ 7,049,000 $ 7,418,000 $ 7,622,000
Production & Distribution........... 1,962,000 2,037,000 1,808,000
Live Entertainment.................. 432,000 6,107,000 421,000
------------ ------------ ------------
$ 9,443,000 $ 15,562,000 $ 9,851,000
============ ============ ============
</TABLE>
F-86
<PAGE>
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth comparative information regarding operating
revenues, operating income or loss, total assets, depreciation and
amortization, and capital expenditures by geographic area.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Operating Revenues
Domestic............................ $229,848,000 $281,143,000 $327,415,000
International....................... 13,771,000 16,285,000 6,070,000
Interarea Eliminations.............. (1,569,000) (2,570,000) (675,000)
------------ ------------ ------------
$242,050,000 $294,858,000 $332,810,000
============ ============ ============
Operating Income (Loss)
Domestic............................ $ 39,982,000 $ 53,045,000 $ 65,047,000
International....................... (14,495,000) (14,268,000) (9,042,000)
Interarea Eliminations.............. (40,000) (379,000) 159,000
------------ ------------ ------------
$ 25,447,000 $ 38,398,000 $ 56,164,000
============ ============ ============
Total Assets
Domestic............................ $419,051,000 $438,843,000 $532,305,000
International....................... 49,547,000 43,735,000 36,378,000
Interarea Eliminations.............. (326,000) (1,151,000) --
------------ ------------ ------------
$468,272,000 $481,427,000 $568,683,000
============ ============ ============
Depreciation and Amortization
Domestic............................ $109,350,000 $126,452,000 $152,312,000
International....................... 5,021,000 6,551,000 4,797,000
Interarea Eliminations.............. (1,529,000) (1,886,000) (792,000)
------------ ------------ ------------
$112,842,000 $131,117,000 $156,317,000
============ ============ ============
Capital Expenditures
Domestic............................ $ 7,883,000 $ 14,890,000 $ 9,810,000
International....................... 1,560,000 672,000 41,000
------------ ------------ ------------
$ 9,443,000 $ 15,562,000 $ 9,851,000
============ ============ ============
</TABLE>
Included in domestic operating revenues are export sales of $15,320,000,
$18,091,000, and $15,355,000 for the years ended December 31, 1994, 1995, and
1996, respectively.
F-87
<PAGE>
[INSIDE BACK COVER]
Fox Kids Worldwide logo.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER MADE
HEREBY TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS OR IN THE ACCOMPANYING LETTER OF TRANSMITTAL,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING
LETTER OF TRANSMITTAL NOR BOTH OF THEM TOGETHER CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
TO WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES BY ANY PERSON IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE
ACCOMPANYING LETTER OF TRANSMITTAL NOR BOTH OF THEM TOGETHER NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Forward-Looking Statements................................................. iv
Available Information...................................................... iv
Summary.................................................................... 1
Formation of Company....................................................... 12
Risk Factors............................................................... 13
The Exchange Offer......................................................... 22
Use of Proceeds............................................................ 30
Capitalization............................................................. 31
Unaudited Pro Forma Consolidated Financial Information..................... 32
Selected Historical Consolidated Financial
Data...................................................................... 35
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................................................ 40
Business................................................................... 49
Management................................................................. 69
Principal Stockholders..................................................... 74
Description of Equity Securities........................................... 76
Certain Transactions....................................................... 78
Description of Other Indebtedness.......................................... 84
Description of the Notes................................................... 85
Book-Entry; Delivery and Form.............................................. 114
Certain United States Federal Income Tax Considerations.................... 117
Plan of Distribution....................................................... 119
Legal Matters.............................................................. 119
Experts.................................................................... 119
Index to Financial Statements.............................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$1,093,670,000
[LOGO OF FOX KIDS WORLDWIDE, INC.]
FOX KIDS WORLDWIDE, INC.
$475,000,000
9 1/4% SENIOR NOTES DUE 2007
$618,670,000
10 1/4% SENIOR DISCOUNT NOTES
DUE 2007
---------------
PROSPECTUS
---------------
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table itemizes the expenses incurred by the Registrant in
connection with the issuance and distribution of the Notes being registered.
All the amounts shown are estimates except the Securities and Exchange
Commission registration fee.
<TABLE>
<S> <C>
Registration fee--Securities and Exchange Commission ............ $250,750
Accounting fees and expenses ....................................
Legal fees and expenses (other than blue sky) ...................
Printing ........................................................
Trustee's, exchange agent fees ..................................
Miscellaneous ...................................................
--------
Total ......................................................... $
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
With respect to the Company, Section 145 of the General Corporation Law of
the State of Delaware empowers a Delaware corporation to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that such person is or was a director,
officer, employee or agent of such corporation or is or was serving at the
request of such corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise.
The indemnity may include expenses (including attorney's fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding, provided that such
person acted in good faith and in a manner such person reasonably believed to
be in or not opposed to the best interests of the corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe such person's conduct was unlawful. A Delaware corporation may
indemnify directors, officers, employees and other agents of such corporation
in an action by or in the right of the corporation under the same conditions,
except that no indemnification is permitted without judicial approval if the
person to be indemnified has been adjudged to be liable to the corporation.
Where a director, officer, employee or agent of the corporation is successful
on the merits or otherwise in the defense of any action, suit or proceeding
referred to above or in defense of any claim, issue or matter therein, the
corporation must indemnify such person against the expenses (including
attorney's fees) which he or she actually and reasonably incurred in
connection therewith.
The Company's Bylaws contain provisions that provide for indemnification of
officers and directors to the fullest extent permitted by, and in the manner
permissible under, the General Corporation Law of the State of Delaware.
As permitted by Section 102(b)(7) of the General Corporation Law of the
State of Delaware, the Company's Corrected and Restated Certificate of
Incorporation contains a provision eliminating the personal liability of a
director to the Company's or its stockholders for monetary damages for breach
of fiduciary duty as a director, subject to certain exceptions.
The Company maintains policies insuring its respective officers, directors
or members and managers, as the case may be, against certain civil
liabilities, including liabilities under the Securities Act.
Pursuant to the Registration Rights Agreement, the Company has agreed to
indemnify the holders of the registrable Notes against certain liabilities.
Also pursuant to the Registration Rights Agreement, the Company and certain
broker-dealers, including certain persons associated with such broker-dealers,
have agreed to indemnify each other against certain liabilities.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(a) Since November 1, 1994, the Registrant and its predecessors have issued
and sold the following unregistered securities:
(1) On September 26, 1996, FCN Holding issued and sold to Allen and
Company Incorporated ("Allen") and its affiliates including Stanley Shuman
("Shuman"), an employee of Allen, effective as of April 3, 1996, 16 16/99
shares of the common stock of FCN Holding valued at $10 million, in
consideration for financial advisory services and other investment banking
services rendered by Allen and Shuman to FCN Holding in connection with the
formation of the LLC.
(2) On August 1, 1997, in connection with the Company's acquisition of a
controlling interest in IFE, (i) Fox Broadcasting Sub exchanged its capital
stock in FCN Holding for 7,920,000 shares of Class B Common Stock of the
Company, (ii) the other stockholder of FCN Holding exchanged its capital
stock in FCN Holding for an aggregate of 160,000 shares of Class A Common
Stock of the Company, (iii) Haim Saban and the Saban Stockholders (none of
whom is affiliated with News Corp.) exchanged their capital stock of Saban
for an aggregate of 7,920,000 shares of Class B Common Stock of the Company
and (iv) all outstanding management options to purchase Saban capital stock
became options to purchase an aggregate of 646,548 shares of Class A Common
Stock of the Company.
(3) On October 28, 1997, the Company sold the Old Notes to the Initial
Purchasers, which subsequently placed the Old Notes with qualified
institutional buyers in reliance upon Rule 144A promulgated under the
Securities Act and with a limited number of accredited investors.
(b) There were no underwritten offerings employed or commissions paid to any
person in connection with any of the transactions set forth in Item 15(a).
The issuances of the securities set forth in Item 15(a) were deemed to be
exempt from registration under the Securities Act of 1933, as amended (the
"Act") in reliance on Section 4(2) of such Act as transactions by an issuer
not involving any public offering. The recipients of securities in each such
transaction represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the securities
issued in such transactions. All recipients of these securities had adequate
access, through their relationships with the Registrant and its subsidiaries,
to information about the Registrant and each affiliated issuer of securities
involved in the transactions.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1 Purchase Agreement dated October 22, 1997 among Fox Kids
Worldwide, Inc., as issuer, and Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Citicorp Securities,
Inc., Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette
Securities Corporation, and Morgan Stanley & Co. Incorporated, as
initial purchasers.
2.1 Share Transfer Agreement dated as of April 15, 1996 by and among
Saban International Paris, as Purchaser and certain parties as
Sellers relating to Creativite & Developpement.(1)
2.2 Agreement for the Purchase of Film Assets dated as of December 31,
1995 by and between Vesical Limited and Saban International
N.V.(1)
2.3 Agreement and Plan of Merger dated as of June 11, 1997 by and
among Fox Kids Worldwide, Inc., Fox Kids Merger Corporation and
International Family Entertainment, Inc.
2.4 Stock Purchase Agreement dated as of June 11, 1997 by and between
Fox Kids Worldwide, Inc., M.G. "Pat" Robertson, individually and
as trustee of certain trusts named therein, Lisa N. Robertson and
Timothy B. Robertson, as joint tenants, and Tim Robertson,
individually, as trustee of certain trusts named therein, and as
custodian to and for each of Abigail H. Robertson, Laura N.
Robertson, Elizabeth C. Robertson, Willis H. Robertson and
Caroline S. Robertson.
2.5 Stock Purchase Agreement dated as of June 11, 1997 by and between
Fox Kids Worldwide, Inc. and The Christian Broadcasting Network,
Inc.
2.6 Stock Purchase Agreement dated as of June 11, 1997 by and between
Fox Kids Worldwide, Inc. and Regent University.
2.7 Amended and Restated Agreement dated as of August 1, 1997 by and
among Fox Kids Worldwide, Inc., Saban Entertainment, Inc., Fox
Broadcasting Sub, Inc., Allen & Company Incorporated, Haim Saban
and certain entities listed on Schedule A thereto.
3.1 Corrected Restated Certificate of Incorporation of the Registrant.
3.2 Amended and Restated Bylaws of the Registrant.
4.1 Senior Notes Indenture dated as of October 28, 1997 (the "Senior
Notes Indenture") between Fox Kids Worldwide, Inc., as obligor,
and The Bank of New York, as trustee, and form of Notes.
4.2 Senior Discount Notes Indenture dated as of October 28, 1997 (the
"Senior Discount Notes Indenture") between Fox Kids Worldwide,
Inc., as obligor, and The Bank of New York, as trustee, and form
of Notes.
4.3 Senior Notes Registration Rights Agreement dated as of October 28,
1997 between Fox Kids Worldwide, Inc., as issuer, and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Citicorp Securities,
Inc., Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette
Securities Corporation, and Morgan Stanley & Co. as initial
purchasers.
4.4 Senior Discount Notes Registration Rights Agreement dated as of
October 28, 1997 between Fox Kids Worldwide, Inc., as issuer, and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citicorp
Securities, Inc., Bear, Stearns & Co. Inc., Donaldson, Lufkin &
Jenrette Securities Corporation, and Morgan Stanley & Co., as
initial purchasers.
4.5 Senior Notes Liquidated Damages Agreement dated as of October 28,
1997 between Fox Kids Worldwide, Inc., as issuer, and Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Citicorp Securities, Inc., Bear, Stearns & Co. Inc., Donaldson,
Lufkin & Jenrette Securities Corporation, and Morgan Stanley &
Co., as initial purchasers.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
4.6 Senior Discount Notes Liquidated Damages Agreement dated as of
October 28, 1997 between Fox Kids Worldwide, Inc., as issuer, and
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Citicorp Securities, Inc., Bear, Stearns & Co. Inc.,
Donaldson, Lufkin & Jenrette Securities Corporation, and Morgan
Stanley & Co., as initial purchasers.
*5.1 Opinion of Squadron, Ellenoff, Plesent & Sheinfeld, LLP regarding
the validity of the Notes.
10.1 Amended and Restated Strategic Stockholders Agreement dated as of
August 1, 1997 by and among Haim Saban, certain entities listed on
Schedule A thereto, Fox Broadcasting Company, Fox Broadcasting
Sub, Inc., and Allen & Company Incorporated.
10.2 Employment Assumption Agreement dated as of July 31, 1997 by and
among Saban Entertainment, Inc., Fox Kids Worldwide, Inc. and Mel
Woods.
10.3 Employment Assumption Agreement dated as of July 31, 1997 by and
among Fox Kids Worldwide, L.L.C., Fox Kids Worldwide, Inc. and
Haim Saban.
10.4 Reserved.
10.5 Form of Indemnification Agreement and Schedule of Indemnified
Parties.
10.6 Employment Agreement dated as of April 1, 1997 between Saban
Entertainment, Inc. and William Josey.
**10.7 Employment Agreement dated as of December 22, 1995 between Fox
Kids Worldwide, L.L.C. and Haim Saban.
10.8 Employment Agreement dated as of September 1, 1996 between Fox
Kids Worldwide, Inc. and Shuki Levy; Stock Option Agreement dated
as of June 1, 1994 between Saban Entertainment, Inc. and Shuki
Levy, as amended by Amendment No. 1.
10.9 Employment Agreement dated as of June 1, 1994 between Saban
Entertainment, Inc. and Mel Woods, as amended by Amendment No. 1
to Employment Agreement dated as of September 26, 1996.
10.10 Reserved.
**10.11 LLC Formation Agreement dated as of November 1, 1995 among Saban
Entertainment, Inc., FCN Holding Company and Fox Broadcasting
Company, Inc.
10.12 Operating Agreement for Fox Kids Worldwide, L.L.C. dated as of
December 22, 1995 by and among Saban Entertainment, Inc., FCN
Holding, Inc. and Fox Broadcasting Company.
**10.13 Amendment No. 1 to Operating Agreement dated as of September 26,
1996, by and among Saban Entertainment, Inc., FCN Holding, Inc.
and Fox Broadcasting Company.
10.14 Amendment No. 2 to Operating Agreement dated as of July 31, 1997
by and among Saban Entertainment, Inc., FCN Holding, Inc., Fox
Broadcasting Company and Fox Kids Worldwide, Inc.
**10.15 Asset Assignment Agreement dated as of December 22, 1995 by and
between Fox Kids Worldwide, L.L.C., on the one hand, and Fox,
Inc., Fox Broadcasting Company, Twentieth Century Fox Film
Corporation, Fox Television Stations, Inc., and FCN Holding, Inc.,
on the other hand.+
**10.16 Management Agreement dated as of December 22, 1995 by and among
Fox Kids Worldwide, L.L.C., Saban Entertainment, Inc. and FCNH
Sub, Inc.
10.17 Stock Ownership Agreement dated as of December 22, 1995 by and
among Haim Saban, certain entities listed on Schedule 1.1(a)
thereto and Fox Kids Worldwide, L.L.C.
10.18 Amendment No. 1 to Stock Ownership Agreement dated as of September
26, 1996 by and among Haim Saban, certain entities listed on
Schedule "A" thereto, Fox Broadcasting Sub, Inc., and Fox
Broadcasting Company.
*10.19 Home Video Rights Acquisition Agreement dated as of August 8, 1996
among Saban Entertainment, Inc., Ventura Film Distributors, B.V.
and Twentieth Century Fox Home Entertainment, Inc.
10.20 Form of Fox Broadcasting Company Station Affiliate Agreement.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.21 Merchandising Rights Acquisition Agreement dated as of July 1,
1990 between Twentieth Century Fox Licensing and Merchandising, a
unit of Ffox Inc. and Fox Children's Network, Inc.+
10.22 Indemnification Agreement dated as of December 22, 1995 between
Fox Broadcasting Company and Fox Children's Network, Inc.
10.23 Distribution Rights Acquisition Agreement dated as of September 1,
1990 between Twentieth Century Fox Film Corporation and Fox
Children's Network, Inc.+
10.24 Administration Agreement dated as of February 7, 1990 between Fox
Broadcasting Company and Fox Children's Network, Inc.
10.25 Registration Agreement (the "Saban/Fox Registration Agreement")
dated as of December 22, 1995 among Saban Entertainment, Inc.,
Haim Saban, certain entities listed on Schedule A thereto, Fox
Broadcasting Company, Inc., and FCN Holding, Inc.
10.26 Amendment No. 1 to Saban/Fox Registration Agreement dated as of
September 27, 1996.
10.27 Contribution and Exchange Agreement dated June 11, 1997 by and
among Liberty Media Corporation, Liberty IFE, Inc. and Fox Kids
Worldwide, Inc.
10.28 Guarantee dated as of December 22, 1995 by The News Corporation
Limited.
10.29 First Amendment to 10960 Wilshire Boulevard Lease dated as of
August 1, 1997.
10.30 Guaranty of Lease by The News Corporation Limited and News
Publishing Australia Limited in favor of Beacon Properties, L.P.,
dated as of August 1, 1997.
*10.31 Second Amended and Restated Credit Agreement dated as of October
28, 1997 among FCN Holding, Inc., International Family
Entertainment, Inc. and Saban Entertainment, Inc., as Borrowers,
and Fox Kids Holdings, LLC, as Guarantor, and the initial lenders
named therein, as Initial Lenders, and Citicorp U.S.A., Inc., as
Administrative Agent, and Citicorp Securities, Inc. and Bank
Boston, N.A., as Co-Arrangers.
*10.32 Letter Amendment No. 1 to the Second Amended and Restated Credit
Agreement dated as of November 18, 1997.
10.33 Funding Agreement dated as of June 11, 1997 by and among The News
Corporation Limited, News Publishing Australia Limited and Fox
Kids Worldwide, Inc.
10.34 Guaranty dated as of June 11, 1997 by The News Corporation Limited
in favor of International Family Entertainment, Inc.
10.35 Distribution Agreement dated as of August 21, 1992, as amended,
between Saban International N.V. and Saban International Services,
Inc. on the one hand and Toei Company Ltd.+
10.36 Memorandum of Agreement dated as of January 19, 1996 between Saban
Merchandising, Inc. and Ventura Film Distributors, B.V. on the one
hand and Bandai America Incorporated, on the other hand.+
10.37 Reserved.
10.38 10960 Wilshire Boulevard Office Lease dated as of July 17, 1995
between 10960 Property Corporation and Saban Entertainment, Inc.
10.39 Production Facility Agreements dated as of June 7, 1994 and
January 5, 1994 between Magic Movie Studios of Valencia, Ltd. and
Saban Entertainment, Inc.
10.40 Letter Agreement dated as of January 1, 1995 between Saban
International, N.V. and Duveen Trading Ltd.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.41 Barter Syndication Agreement dated as of January 5, 1996 between
Saban Entertainment, Inc. and Fox Broadcasting Company, Inc.
10.42 Letter Agreement dated as of September 26, 1996 but effective as
of April 3, 1996 by and among Stanley S. Shuman, FCN Holding,
Inc., and Allen & Company Incorporated, as amended by that certain
Side Letter Agreement dated as of September 26, 1996 but effective
as of April 3, 1996.
10.43 First Amendment to the Contribution and Exchange Agreement dated
as of August 1, 1997 by and among Liberty Media Corporation,
Liberty IFE, Inc. and Fox Kids Worldwide, Inc.
10.44 Agreement Re Registration Rights dated as of August 1, 1997 by and
among Saban Entertainment, Inc., Haim Saban, certain entities
listed on Schedule A to the Saban/Fox Registration Agreement, Fox
Broadcasting Company, FCN Holding, Inc., Fox Kids Worldwide, Inc.,
Liberty Media Corporation and Liberty IFE, Inc.
*10.45 Exchange Agreement dated August 1, 1997 among News Publishing
Australia Limited, Liberty Media Corporation and Liberty IFE, Inc.
10.46 Agreement Re Transfer of LLC Interests dated as of July 31, 1997
by and among Fox Kids Worldwide, Inc., Fox Kids Worldwide, L.L.C.
and Fox Broadcasting Company.
*10.47 Subordinated Note Agreement dated July 31, 1997 by and among Fox
Broadcasting Company, as lender, Fox Kids Worldwide, Inc., as
borrower, and Citicorp USA, Inc.; Subordinated Promissory
Note dated July 31, 1997 made by Fox Kids Worldwide, Inc., as
borrower, in favor of Fox Broadcasting Company, as lender; First
Amendment to Subordinated Note Agreement dated September 4, 1997;
Second Amendment to Subordinated Note Agreement dated October 28,
1997 and Subordinated Promissory Note dated October 28, 1997 made
by Fox Kids Worldwide Inc., as borrower in favor of Fox
Broadcasting Company, as lender.
10.48 Subordinated Note dated August 29, 1997 between Fox Kids
Worldwide, Inc., as borrower, and News America Holdings
Incorporated, as lender, and Subordinated Note Agreement dated
August 29, 1997 between Fox Kids Worldwide, Inc., as borrower,
News America Holdings Incorporated, as lender, and Citicorp USA,
Inc. and First Amendment to Subordinated Note Agreement dated
October 28, 1997.
*10.49 Amendment to Affiliation Agreement dated June 11, 1997, between
International Family Entertainment, Inc. and Satellite Services,
Inc.
*10.50 Letter Agreement, dated as of May 16, 1996, amending the
International Family Entertainment, Inc. Family Channel
Affiliation Agreement, dated as of December 28, 1989, between
Satellite Services, Inc. and International Family Entertainment,
Inc.
*10.51 Program Time Agreement, dated as of January 5, 1990, between The
Christian Broadcasting Network, Inc. and International Family
Entertainment, Inc. and Amendment No. 1 to Program Time Agreement
dated as of June 11, 1997.
*10.52 International Family Entertainment, Inc. Family Channel
Affiliation Agreement, dated as of December 28, 1989, between
Satellite Services, Inc. and International Family Entertainment,
Inc.
*10.53 Uplink Facilities Lease and Transponder Sublease, dated as of
January 5, 1990, between The Christian Broadcasting Network, Inc.
and International Family Entertainment, Inc.
10.54 Registration Rights Agreement dated August 1, 1997 by and among
Fox Kids Worldwide, Inc., Liberty Media Corporation and Liberty
IFE, Inc.
12.1 Ratio of Earnings to Fixed Charges.
21.1 Subsidiaries of the Registrant.
*23.1 Consent of Squadron, Ellenoff, Plesent & Sheinfeld, LLP (included
in Exhibit 5.1 hereto).
23.2 Consent of Ernst & Young LLP regarding Saban Entertainment, Inc.,
regarding FCN Holding, Inc., and regarding FCN Holding, Inc.,
Saban Entertainment, Inc., and Fox Kids Worldwide, L.L.C.
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
23.3 Consent of KPMG Peat Marwick LLP regarding International Family
Entertainment, Inc.
**24.1 Power of Attorney.
24.2 Power of Attorney of Lawrence Jacobson dated January 22, 1998.
25.1 Statement of Eligibility of The Bank of New York, as Trustee.
27.1 Financial Data Schedule.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Note of Guaranteed Delivery.
*99.3 Form of Exchange Agent Agreement.
</TABLE>
- --------
* To be supplied by amendment.
** Previously filed as an exhibit to the Registrant's Form S-1 on
September 27, 1996
+ Portions of exhibits deleted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidentiality.
(1) Upon request, the Registrant will furnish supplementally to the Securities
and Exchange Commission a copy of omitted schedules.
(b) Financial Statement Schedules.
FCN Holding, Inc., Saban Entertainment, Inc., and Fox Kids Worldwide,
L.L.C. (from and after the date of the Reorganization, Fox Kids Worldwide,
Inc.)
Schedule II-- Valuation and Qualifying Accounts
FCN Holding, Inc.
Schedule II--Valuation and Qualifying Accounts
Saban Entertainment, Inc.
Schedule II--Valuation and Qualifying Accounts
All other schedules for which provisions is made in the applicable
accounting regulations of the Commission are either not required under the
related instructions or are inapplicable, and therefore have been omitted.
ITEM 17 UNDERTAKINGS
1. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, members, officers and controlling
persons, as the case may be, of the registrant pursuant to the foregoing
provisions or otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person, as the case may be, of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person, as the case may be, in connection
with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjustment of such issue.
2. The undersigned registrant hereby undertakes that:
(1) For the purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, State of California, on the 26th day of January, 1998.
Fox Kids Worldwide, Inc.
By: /s/ Mel Woods
____________________________________
MEL WOODS
PRESIDENT, CHIEF OPERATING OFFICER
AND
CHIEF FINANCIAL OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates stated:
SIGNATURE TITLE DATE
/s/ Haim Saban Chairman of the Board January 26, 1998
____________________________________ and Chief Executive
HAIM SABAN Officer (Principal
Executive Officer)
/s/ Mel Woods President, Chief January 26, 1998
____________________________________ Operating Officer,
MEL WOODS Chief Financial
Officer and Director
(Principal Financial
Officer)
/s/ Mark Ittner Chief Accounting January 26, 1998
____________________________________ Officer (Principal
MARK ITTNER Accounting Officer)
/s/ Shuki Levy* Director January 26, 1998
____________________________________
SHUKI LEVY
/s/ K. Rupert Murdoch* Director January 26, 1998
____________________________________
K. RUPERT MURDOCH
/s/ Chase Carey* Director January 26, 1998
____________________________________
CHASE CAREY
/s/ Lawrence Jacobson** Director January 26, 1998
____________________________________
LAWRENCE JACOBSON
- --------
* Executed by Mel Woods as attorney-in-fact pursuant to a power of attorney
included in the Registration Statement as originally filed on September 26,
1996.
** Executed by Mel Woods as attorney-in-fact pursuant to a power of attorney
included as Exhibit 24.2 in this Amendment No. 1 to Registration Statement.
II-8
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
------------------
BALANCE CHARGED
AT TO COSTS CHARGED BALANCE
BEGINNING AND TO OTHER AT END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- --------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
SABAN ENTERTAINMENT, INC.
FY ended May 1994
Allowance for doubtful
accounts.................. 385,000 0 0 0 385,000
FY ended May 1995
Allowance for doubtful
accounts.................. 385,000 1,000,000 0 0 1,385,000
Five months ended October
1995
Allowance for doubtful
accounts.................. 1,385,000 0 0 0 1,385,000
</TABLE>
S-1
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
-------------------
BALANCE AT CHARGED TO CHARGED BALANCE AT
BEGINNING COSTS AND TO OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- ---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
FCN HOLDING, INC.
FY ended July 3, 1994
Allowance for doubtful
accounts............... 0 0 0 0 0
FY ended July 2, 1995
Allowance for doubtful
accounts............... 0 480,000 0 0 480,000
Four months ended October
29, 1995
Allowance for doubtful
accounts............... 480,000 0 0 0 480,000
</TABLE>
S-2
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
BALANCE -------------------
AT CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER AT END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- --------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
FCN HOLDING, INC., SABAN
ENTERTAINMENT, INC. AND
FOX KIDS WORLDWIDE, L.L.C.
(FROM AND AFTER THE DATE
OF THE REORGANIZATION, FOX
KIDS WORLDWIDE, INC.)
Eight months ended June 30,
1996
Allowance for doubtful
accounts................ 1,865,000 0 0 (175,000) 1,690,000
FY ended June 30, 1997
Allowance for doubtful
accounts................ 1,690,000 200,000 0 (480,000) 1,410,000
Three months ended
September 30, 1997........ 1,410,000 0 0 0 1,410,000
</TABLE>
S-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1 Purchase Agreement dated October 22, 1997 among Fox Kids
Worldwide, Inc., as issuer, and Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Citicorp Securities,
Inc., Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette
Securities Corporation, and Morgan Stanley & Co. Incorporated, as
initial purchasers.
2.1 Share Transfer Agreement dated as of April 15, 1996 by and among
Saban International Paris, as Purchaser and certain parties as
Sellers relating to Creativite & Developpement.(1)
2.2 Agreement for the Purchase of Film Assets dated as of December 31,
1995 by and between Vesical Limited and Saban International
N.V.(1)
2.3 Agreement and Plan of Merger dated as of June 11, 1997 by and
among Fox Kids Worldwide, Inc., Fox Kids Merger Corporation and
International Family Entertainment, Inc.
2.4 Stock Purchase Agreement dated as of June 11, 1997 by and between
Fox Kids Worldwide, Inc., M.G. "Pat" Robertson, individually and
as trustee of certain trusts named therein, Lisa N. Robertson and
Timothy B. Robertson, as joint tenants, and Tim Robertson,
individually, as trustee of certain trusts named therein, and as
custodian to and for each of Abigail H. Robertson, Laura N.
Robertson, Elizabeth C. Robertson, Willis H. Robertson and
Caroline S. Robertson.
2.5 Stock Purchase Agreement dated as of June 11, 1997 by and between
Fox Kids Worldwide, Inc. and The Christian Broadcasting Network,
Inc.
2.6 Stock Purchase Agreement dated as of June 11, 1997 by and between
Fox Kids Worldwide, Inc. and Regent University.
2.7 Amended and Restated Agreement dated as of August 1, 1997 by and
among Fox Kids Worldwide, Inc., Saban Entertainment, Inc., Fox
Broadcasting Sub, Inc., Allen & Company Incorporated, Haim Saban
and certain entities listed on Schedule A thereto.
3.1 Corrected Restated Certificate of Incorporation of the Registrant.
3.2 Amended and Restated Bylaws of the Registrant.
4.1 Senior Notes Indenture dated as of October 28, 1997 (the "Senior
Notes Indenture") between Fox Kids Worldwide, Inc., as obligor,
and The Bank of New York, as trustee, and form of Notes.
4.2 Senior Discount Notes Indenture dated as of October 28, 1997 (the
"Senior Discount Notes Indenture") between Fox Kids Worldwide,
Inc., as obligor, and The Bank of New York, as trustee, and form
of Notes.
4.3 Senior Notes Registration Rights Agreement dated as of October 28,
1997 between Fox Kids Worldwide, Inc., as issuer, and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Citicorp Securities,
Inc., Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette
Securities Corporation, and Morgan Stanley & Co. as initial
purchasers.
4.4 Senior Discount Notes Registration Rights Agreement dated as of
October 28, 1997 between Fox Kids Worldwide, Inc., as issuer, and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citicorp
Securities, Inc., Bear, Stearns & Co. Inc., Donaldson, Lufkin &
Jenrette Securities Corporation, and Morgan Stanley & Co., as
initial purchasers.
4.5 Senior Notes Liquidated Damages Agreement dated as of October 28,
1997 between Fox Kids Worldwide, Inc., as issuer, and Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Citicorp Securities, Inc., Bear, Stearns & Co. Inc., Donaldson,
Lufkin & Jenrette Securities Corporation, and Morgan Stanley &
Co., as initial purchasers.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
4.6 Senior Discount Notes Liquidated Damages Agreement dated as of
October 28, 1997 between Fox Kids Worldwide, Inc., as issuer, and
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Citicorp Securities, Inc., Bear, Stearns & Co. Inc.,
Donaldson, Lufkin & Jenrette Securities Corporation, and Morgan
Stanley & Co., as initial purchasers.
*5.1 Opinion of Squadron, Ellenoff, Plesent & Sheinfeld, LLP regarding
the validity of the Notes.
10.1 Amended and Restated Strategic Stockholders Agreement dated as of
August 1, 1997 by and among Haim Saban, certain entities listed on
Schedule A thereto, Fox Broadcasting Company, Fox Broadcasting
Sub, Inc., and Allen & Company Incorporated.
10.2 Employment Assumption Agreement dated as of July 31, 1997 by and
among Saban Entertainment, Inc., Fox Kids Worldwide, Inc. and Mel
Woods.
10.3 Employment Assumption Agreement dated as of July 31, 1997 by and
among Fox Kids Worldwide, L.L.C., Fox Kids Worldwide, Inc. and
Haim Saban.
10.4 Reserved.
10.5 Form of Indemnification Agreement and Schedule of Indemnified
Parties.
10.6 Employment Agreement dated as of April 1, 1997 between Saban
Entertainment, Inc. and William Josey.
**10.7 Employment Agreement dated as of December 22, 1995 between Fox
Kids Worldwide, L.L.C. and Haim Saban.
10.8 Employment Agreement dated as of September 1, 1996 between Fox
Kids Worldwide, Inc. and Shuki Levy; Stock Option Agreement dated
as of June 1, 1994 between Saban Entertainment, Inc. and Shuki
Levy, as amended by Amendment No. 1.
10.9 Employment Agreement dated as of June 1, 1994 between Saban
Entertainment, Inc. and Mel Woods, as amended by Amendment No. 1
to Employment Agreement dated as of September 26, 1996.
10.10 Reserved.
**10.11 LLC Formation Agreement dated as of November 1, 1995 among Saban
Entertainment, Inc., FCN Holding Company and Fox Broadcasting
Company, Inc.
10.12 Operating Agreement for Fox Kids Worldwide, L.L.C. dated as of
December 22, 1995 by and among Saban Entertainment, Inc., FCN
Holding, Inc. and Fox Broadcasting Company.
**10.13 Amendment No. 1 to Operating Agreement dated as of September 26,
1996, by and among Saban Entertainment, Inc., FCN Holding, Inc.
and Fox Broadcasting Company.
10.14 Amendment No. 2 to Operating Agreement dated as of July 31, 1997
by and among Saban Entertainment, Inc., FCN Holding, Inc., Fox
Broadcasting Company and Fox Kids Worldwide, Inc.
**10.15 Asset Assignment Agreement dated as of December 22, 1995 by and
between Fox Kids Worldwide, L.L.C., on the one hand, and Fox,
Inc., Fox Broadcasting Company, Twentieth Century Fox Film
Corporation, Fox Television Stations, Inc., and FCN Holding, Inc.,
on the other hand.+
**10.16 Management Agreement dated as of December 22, 1995 by and among
Fox Kids Worldwide, L.L.C., Saban Entertainment, Inc. and FCNH
Sub, Inc.
10.17 Stock Ownership Agreement dated as of December 22, 1995 by and
among Haim Saban, certain entities listed on Schedule 1.1(a)
thereto and Fox Kids Worldwide, L.L.C.
10.18 Amendment No. 1 to Stock Ownership Agreement dated as of September
26, 1996 by and among Haim Saban, certain entities listed on
Schedule "A" thereto, Fox Broadcasting Sub, Inc., and Fox
Broadcasting Company.
*10.19 Home Video Rights Acquisition Agreement dated as of August 8, 1996
among Saban Entertainment, Inc., Ventura Film Distributors, B.V.
and Twentieth Century Fox Home Entertainment, Inc.
10.20 Form of Fox Broadcasting Company Station Affiliate Agreement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.21 Merchandising Rights Acquisition Agreement dated as of July 1,
1990 between Twentieth Century Fox Licensing and Merchandising, a
unit of Ffox Inc. and Fox Children's Network, Inc.+
10.22 Indemnification Agreement dated as of December 22, 1995 between
Fox Broadcasting Company and Fox Children's Network, Inc.
10.23 Distribution Rights Acquisition Agreement dated as of September 1,
1990 between Twentieth Century Fox Film Corporation and Fox
Children's Network, Inc.+
10.24 Administration Agreement dated as of February 7, 1990 between Fox
Broadcasting Company and Fox Children's Network, Inc.
10.25 Registration Agreement (the "Saban/Fox Registration Agreement")
dated as of December 22, 1995 among Saban Entertainment, Inc.,
Haim Saban, certain entities listed on Schedule A thereto, Fox
Broadcasting Company, Inc., and FCN Holding, Inc.
10.26 Amendment No. 1 to Saban/Fox Registration Agreement dated as of
September 27, 1996.
10.27 Contribution and Exchange Agreement dated June 11, 1997 by and
among Liberty Media Corporation, Liberty IFE, Inc. and Fox Kids
Worldwide, Inc.
10.28 Guarantee dated as of December 22, 1995 by The News Corporation
Limited.
10.29 First Amendment to 10960 Wilshire Boulevard Lease dated as of
August 1, 1997.
10.30 Guaranty of Lease by The News Corporation Limited and News
Publishing Australia Limited in favor of Beacon Properties, L.P.,
dated as of August 1, 1997.
*10.31 Second Amended and Restated Credit Agreement dated as of October
28, 1997 among FCN Holding, Inc., International Family
Entertainment, Inc. and Saban Entertainment, Inc., as Borrowers,
and Fox Kids Holdings, LLC, as Guarantor, and the initial lenders
named therein, as Initial Lenders, and Citicorp U.S.A., Inc., as
Administrative Agent, and Citicorp Securities, Inc. and Bank
Boston, N.A., as Co-Arrangers.
*10.32 Letter Amendment No. 1 to the Second Amended and Restated Credit
Agreement dated as of November 18, 1997.
10.33 Funding Agreement dated as of June 11, 1997 by and among The News
Corporation Limited, News Publishing Australia Limited and Fox
Kids Worldwide, Inc.
10.34 Guaranty dated as of June 11, 1997 by The News Corporation Limited
in favor of International Family Entertainment, Inc.
10.35 Distribution Agreement dated as of August 21, 1992, as amended,
between Saban International N.V. and Saban International Services,
Inc. on the one hand and Toei Company Ltd.+
10.36 Memorandum of Agreement dated as of January 19, 1996 between Saban
Merchandising, Inc. and Ventura Film Distributors, B.V. on the one
hand and Bandai America Incorporated, on the other hand.+
10.37 Reserved.
10.38 10960 Wilshire Boulevard Office Lease dated as of July 17, 1995
between 10960 Property Corporation and Saban Entertainment, Inc.
10.39 Production Facility Agreements dated as of June 7, 1994 and
January 5, 1994 between Magic Movie Studios of Valencia, Ltd. and
Saban Entertainment, Inc.
10.40 Letter Agreement dated as of January 1, 1995 between Saban
International, N.V. and Duveen Trading Ltd.
</TABLE>
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<TABLE>
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<C> <S>
10.41 Barter Syndication Agreement dated as of January 5, 1996 between
Saban Entertainment, Inc. and Fox Broadcasting Company, Inc.
10.42 Letter Agreement dated as of September 26, 1996 but effective as
of April 3, 1996 by and among Stanley S. Shuman, FCN Holding,
Inc., and Allen & Company Incorporated, as amended by that certain
Side Letter Agreement dated as of September 26, 1996 but effective
as of April 3, 1996.
10.43 First Amendment to the Contribution and Exchange Agreement dated
as of August 1, 1997 by and among Liberty Media Corporation,
Liberty IFE, Inc. and Fox Kids Worldwide, Inc.
10.44 Agreement Re Registration Rights dated as of August 1, 1997 by and
among Saban Entertainment, Inc., Haim Saban, certain entities
listed on Schedule A to the Saban/Fox Registration Agreement, Fox
Broadcasting Company, FCN Holding, Inc., Fox Kids Worldwide, Inc.,
Liberty Media Corporation and Liberty IFE, Inc.
*10.45 Exchange Agreement dated August 1, 1997 among News Publishing
Australia Limited, Liberty Media Corporation and Liberty IFE, Inc.
10.46 Agreement Re Transfer of LLC Interests dated as of July 31, 1997
by and among Fox Kids Worldwide, Inc., Fox Kids Worldwide, L.L.C.
and Fox Broadcasting Company.
*10.47 Subordinated Note Agreement dated July 31, 1997 by and among Fox
Broadcasting Company, as lender, Fox Kids Worldwide, Inc., as
borrower, and Citicorp USA, Inc.; Subordinated Promissory
Note dated July 31, 1997 made by Fox Kids Worldwide, Inc., as
borrower, in favor of Fox Broadcasting Company, as lender; First
Amendment to Subordinated Note Agreement dated September 4, 1997;
Second Amendment to Subordinated Note Agreement dated October 28,
1997 and Subordinated Promissory Note dated October 28, 1997 made
by Fox Kids Worldwide Inc., as borrower in favor of Fox
Broadcasting Company, as lender.
10.48 Subordinated Note dated August 29, 1997 between Fox Kids
Worldwide, Inc., as borrower, and News America Holdings
Incorporated, as lender, and Subordinated Note Agreement dated
August 29, 1997 between Fox Kids Worldwide, Inc., as borrower,
News America Holdings Incorporated, as lender, and Citicorp USA,
Inc., and First Amendment to Subordinated Note Agreement dated
October 28, 1997.
*10.49 Amendment to Affiliation Agreement dated June 11, 1997, between
International Family Entertainment, Inc. and Satellite Services,
Inc.
*10.50 Letter Agreement, dated as of May 16, 1996, amending the
International Family Entertainment, Inc. Family Channel
Affiliation Agreement, dated as of December 28, 1989, between
Satellite Services, Inc. and International Family Entertainment,
Inc.
*10.51 Program Time Agreement, dated as of January 5, 1990, between The
Christian Broadcasting Network, Inc. and International Family
Entertainment, Inc. and Amendment No. 1 to Program Time Agreement
dated as of June 11, 1997.
*10.52 International Family Entertainment, Inc. Family Channel
Affiliation Agreement, dated as of December 28, 1989, between
Satellite Services, Inc. and International Family Entertainment,
Inc.
*10.53 Uplink Facilities Lease and Transponder Sublease, dated as of
January 5, 1990, between The Christian Broadcasting Network, Inc.
and International Family Entertainment, Inc.
10.54 Registration Rights Agreement dated August 1, 1997 by and among
Fox Kids Worldwide, Inc., Liberty Media Corporation and Liberty
IFE, Inc.
12.1 Ratio of Earnings to Fixed Charges.
21.1 Subsidiaries of the Registrant.
*23.1 Consent of Squadron, Ellenoff, Plesent & Sheinfeld, LLP (included
in Exhibit 5.1 hereto).
23.2 Consent of Ernst & Young LLP regarding Saban Entertainment, Inc.,
regarding FCN Holding, Inc., and regarding FCN Holding, Inc.,
Saban Entertainment, Inc., and Fox Kids Worldwide, L.L.C.
</TABLE>
<PAGE>
<TABLE>
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<C> <S>
23.3 Consent of KPMG Peat Marwick LLP regarding International Family
Entertainment, Inc.
**24.1 Power of Attorney.
24.2 Power of Attorney of Lawrence Jacobson dated January 22, 1998.
25.1 Statement of Eligibility of The Bank of New York, as Trustee.
27.1 Financial Data Schedule.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Note of Guaranteed Delivery.
*99.3 Form of Exchange Agent Agreement.
</TABLE>
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* To be supplied by amendment.
** Previously filed as an exhibit to the Registrant's Form S-1 on September 27,
1996
+ Portions of exhibits deleted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidentiality.
(1) Upon request, the Registrant will furnish supplementally to the Securities
and Exchange Commission a copy of omitted schedules.
<PAGE>
EXHIBIT 1.1
================================================================================
FOX KIDS WORLDWIDE, INC.
9 1/4% Senior Notes due 2007
10 1/4% Senior Discount Notes due 2007
PURCHASE AGREEMENT
Dated: October 22, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PURCHASE AGREEMENT.................................................................. 1
SECTION 1. Representations and Warranties...................................... 3
(a) Representations and Warranties by the Company....................... 3
(i) Similar Offerings.......................................... 3
(ii) Offering Memorandum........................................ 3
(iii) Independent Accountants.................................... 3
(iv) Financial Statements....................................... 3
(v) No Material Adverse Change in Business..................... 4
(vi) Good Standing of the Company............................... 4
(vii) Good Standing of Subsidiaries.............................. 4
(viii) Authorization of Agreement................................. 5
(ix) Authorization of the Indentures............................ 5
(x) Authorization of the Securities............................ 5
(xi) Authorization of the Registration Rights Agreements........ 6
(xii) Description of the Securities, the Indentures and the
Registration Rights Agreements............................. 6
(xiii) Absence of Defaults and Conflicts.......................... 6
(xiv) Absence of Proceedings..................................... 7
(xv) Possession of Intellectual Property........................ 7
(xvi) Possession of Licenses and Permits......................... 7
(xvii) Title to Property.......................................... 8
(xviii) Tax Returns................................................ 8
(xix) Environmental Laws......................................... 8
(xx) Investment Company Act..................................... 9
(xxi) No General Solicitation.................................... 9
(xxii) No Registration Required................................... 9
(xxiii) No Directed Selling Efforts................................10
(xxiv) No Stabilization or Manipulation...........................10
(xxv) Solvency...................................................10
(xxvi) Compliance with Cuba Act...................................10
(b) Officer's Certificates..............................................10
SECTION 2. Sale and Delivery to Initial Purchasers, Closing....................11
(a) Securities..........................................................11
(b) Payment.............................................................11
(c) Qualified Institutional Buyer.......................................11
(d) Denominations, Registration.........................................11
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SECTION 3. Covenants of the Company............................................12
(a) Offering Memorandum.................................................12
(b) Notice and Effect of Material Events................................12
(c) Amendment to Offering Memorandum and Supplements....................12
(d) Qualification of Securities for Offer and Sale......................12
(e) Rating of Securities................................................13
(f) DTC.................................................................13
(g) Use of Proceeds.....................................................13
(h) Restriction on Sale of Securities...................................13
(i) Termination of Obligations..........................................13
SECTION 4. Payment of Expenses.................................................14
(a) Expenses............................................................14
(b) Termination of Agreement............................................14
SECTION 5. Conditions of Initial Purchasers' Obligations.......................14
(a) Opinion of Counsel for the Company..................................14
(b) Opinion of Special Counsel for the Company..........................15
(c) Opinion of Regulatory Counsel for the Company.......................15
(d) Opinion of Counsel for Initial Purchasers...........................15
(e) Officers' Certificate...............................................16
(f) Accountants' Comfort Letter.........................................16
(g) Bring-down Comfort Letter...........................................16
(h) Maintenance of Rating...............................................16
(i) PORTAL..............................................................17
(j) Registration Rights Agreements......................................17
(k) Subordination of Notes..............................................17
(l) Credit Facility.....................................................17
(m) Additional Documents................................................17
(n) Termination of Agreement............................................17
SECTION 6. Subsequent Offers and Resales of the Securities.....................18
(a) Offer and Sale Procedures...........................................18
(i) Offers and Sales only to Qualified Institutional Buyers......18
(ii) No General Solicitation......................................18
(iii) Purchases by Non-Bank Fiduciaries............................18
(iv) Subsequent Purchaser Notification............................18
(v) Restrictions on Transfer.....................................18
(vi) Delivery of Offering Memorandum..............................19
(b) Covenants of the Company............................................19
(i) Due Diligence................................................19
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(ii) Rule 144A Information......................................19
(iii) Restriction on Repurchases.................................19
(c) Resale Pursuant to Rule 903 of Regulation S or Rule 144A..........19
SECTION 7. Indemnification...................................................20
(a) Indemnification of Initial Purchasers.............................20
(b) Indemnification of Company, Directors and Officers................21
(c) Actions against Parties; Notification.............................22
(d) Settlement without Consent if Failure to Reimburse................23
SECTION 8. Contribution......................................................23
SECTION 9. Representations, Warranties and Agreements to Survive Delivery....24
SECTION 10. Termination of Agreement..........................................25
(a) Termination; General..............................................25
(b) Liabilities.......................................................25
SECTION 11. Default by One or More of the Initial Purchasers..................25
SECTION 12. Notices...........................................................26
SECTION 13. Parties...........................................................26
SECTION 14. GOVERNING LAW AND TIME............................................27
SECTION 15. Effect of Headings................................................27
</TABLE>
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<PAGE>
FOX KIDS WORLDWIDE, INC.
$475,000,000 9 1/4% SENIOR NOTES DUE 2007
$618,670,000 10 1/4% SENIOR DISCOUNT NOTES DUE 2007
PURCHASE AGREEMENT
------------------
October 22, 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
CITICORP SECURITIES, INC.
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION
MORGAN STANLEY & CO. INCORPORATED
as Initial Purchasers
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
FOX KIDS WORLDWIDE, INC., a Delaware corporation (the "Company"),
confirms its agreement with MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED, CITICORP SECURITIES, INC., BEAR, STEARNS & CO. INC.,
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION AND MORGAN STANLEY & CO.
INCORPORATED (collectively, the "Initial Purchasers", which term shall also
include any initial purchaser substituted as hereinafter provided in Section 11
hereof), with respect to the issue and sale by the Company and the purchase by
the Initial Purchasers, acting severally and not jointly, of the respective
principal amounts set forth in said Schedule A of $475,000,000 aggregate
principal amount of the Company's Senior Notes due 2007 (the "Senior Notes") and
$618,670,000 aggregate principal amount at maturity of the Company's Senior
Discount Notes due 2007 (the "Senior Discount Notes" and, together with the
Senior Notes, the "Securities"). The Senior Notes are to be issued
<PAGE>
pursuant to an indenture dated as of October 28, 1997 (the "Senior Notes
Indenture") between the Company and The Bank of New York, as trustee (the
"Trustee"). The Senior Discount Notes are to be issued pursuant to an indenture
dated as of October 28, 1997 (the "Senior Discount Notes Indenture" and,
together with the Senior Notes Indenture, the "Indentures") between the Company
and the Trustee. Securities issued in book-entry form will be issued to Cede &
Co. as nominee of The Depository Trust Company ("DTC.") pursuant to a letter
agreement, to be dated as of the Closing Time (as defined in Section 2(b)) (the
"DTC Agreement"), among the Company, the Trustee and DTC.
The Company understands that the Initial Purchasers propose to make an
offering of the Securities on the terms and in the manner set forth in the
Offering Memorandum (as defined hereafter) and herein and agrees that the
Initial Purchasers may resell, subject to the conditions set forth herein, all
or a portion of the Securities to purchasers ("Subsequent Purchasers") at any
time after the date of this Agreement. The Securities are to be offered and
sold through the Initial Purchasers without being registered under the
Securities Act of 1933, as amended (the " 1933 Act"), in reliance upon
exemptions therefrom. Investors that acquire Securities may only resell or
otherwise transfer such Securities if such Securities are hereafter registered
under the 1933 Act or if an exemption from the registration requirements of the
1933 Act is available (including the exemption afforded by Rule 144A ("Rule
144A") or Regulation S ("Regulation S") of the rules and regulations promulgated
under the 1933 Act by the Securities and Exchange Commission (the "Commission").
The Company has prepared and delivered to each Initial Purchaser
copies of a preliminary offering memorandum dated October 9, 1997 (the
"Preliminary Offering Memorandum") and has prepared and will deliver to each
Initial Purchaser, on the date hereof or the next succeeding day, copies of a
final offering memorandum dated October 22, 1997 (the "Final Offering
Memorandum"), each for use by such Initial Purchaser in connection with the
offer or resale of the Securities. "Offering Memorandum" means, with respect to
any date or time referred to in this Agreement, the most recent offering
memorandum (whether the Preliminary Offering Memorandum or the Final Offering
Memorandum, or any amendment or supplement to either such document), including
exhibits thereto and any documents incorporated therein by reference, that has
been prepared and delivered by the Company to the Initial Purchasers in
connection with their solicitation of purchases of, or offering of, the
Securities.
All references in this Agreement to financial statements and schedules
and other information that is "contained," "included" or "stated" in the
Offering Memorandum (or other references of like import) shall be deemed to mean
and include all such financial statements and schedules and other information
that are incorporated by reference in the Offering Memorandum.
The Initial Purchasers and other holders of the Senior Notes and
Senior Discount Notes will be entitled to the benefits of Registration Rights
Agreements, dated
-2-
<PAGE>
October 28, 1997, between the Company and the Initial Purchasers (the
"Registration Rights Agreements"). Pursuant to the Registration Rights
Agreements, the Company will agree to file with the Commission under the
circumstances set forth therein, (i) a registration statement under the 1933 Act
(the "Exchange Offer Registration Statement") registering an issue of debt
securities identical in all material respects to the Securities (the "Exchange
Securities") to be offered in exchange for the Securities (the "Exchange Offer")
and (ii) under certain circumstances, a registration statement pursuant to Rule
415 under the 1933 Act (the "Shelf Registration Statement").
SECTION 1. Representations and Warranties.
------------------------------
(a) Representations and Warranties by the Company. The Company
represents and warrants to each Initial Purchaser as of the date hereof and as
of the Closing Time referred to in Section 2(b) hereof and agrees with each
Initial Purchaser as follows:
(i) Similar Offerings. The Company has not, directly or indirectly,
-----------------
solicited any offer to buy or offered to sell, and will not, directly or
indirectly, solicit any offer to buy or offer to sell, in the United States
or to any United States citizen or resident, any security that is or would
be integrated with the sale of the Securities in a manner that would
require the Securities to be registered under the 1933 Act.
(ii) Offering Memorandum. The Offering Memorandum as of its date did
-------------------
not, as of the date hereof does not, and at the Closing Time will not,
include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that
this representation, warranty and agreement shall not apply to statements
in or omissions from the Offering Memorandum made in reliance upon and in
conformity with information furnished to the Company in writing by any
Initial Purchaser expressly for use in the Offering Memorandum.
(iii) Independent Accountants. The accountants who certified the
-----------------------
financial statements and supporting schedules included in the Offering
Memorandum are independent certified public accountants with respect to the
Company and its subsidiaries within the meaning of Regulation S-X under the
1933 Act.
(iv) Financial Statements. The financial statements, together with
--------------------
the related schedules and notes, included in the Offering Memorandum
present fairly the financial position of the Company, its consolidated
subsidiaries and the predecessor entities to the Company at the dates
indicated and the statement of operations, stockholders' equity and cash
flows of the Company, its consolidated subsidiaries and the predecessor
entities to the Company for the periods specified; said financial
statements have been prepared in conformity with generally accepted
accounting principles ("GAAP")
-3-
<PAGE>
applied on a consistent basis throughout the periods involved. The
supporting schedules, if any, included in the Offering Memorandum present
fairly in accordance with GAAP the information required to be stated
therein. The pro forma financial statements of the Company and its
subsidiaries and the related notes thereto included in the Offering
Memorandum have been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements and have been
properly compiled on the bases described therein, and the adjustments used
therein are appropriate to give effect to the transactions and
circumstances referred to therein.
(v) No Material Adverse Change in Business. Since the respective
--------------------------------------
dates as of which information is given in the Offering Memorandum, except
as otherwise stated therein, (A) there has been no material adverse change
in the condition, financial or otherwise, or in the earnings or business
affairs of the Company and its subsidiaries (each a "Subsidiary" and,
collectively, the "Subsidiaries") considered as one enterprise, whether or
not arising in the ordinary course of business (a "Material Adverse
Effect"), (B) there have been no transactions entered into by the Company,
any of its Subsidiaries or any of its affiliates which are material with
respect to the Company and its Subsidiaries considered as one enterprise
and (C) there has been no dividend or distribution of any kind declared,
paid or made by the Company on any class of its capital stock.
(vi) Good Standing of the Company. The Company has been duly
----------------------------
organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware and has the corporate power and authority
to own, lease and operate its properties and to conduct its business as
described in the Offering Memorandum and to enter into and perform its
obligations under this Agreement; and the Company is duly qualified as a
foreign corporation to transact business and is in good standing in each
other jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect; all of the issued and outstanding
capital stock of the Company has been duly authorized and validly issued
and is fully paid and nonassessable; none of the outstanding shares of
capital stock of the Company was issued in violation of any preemptive or
similar right arising by operation of law, or under the charter or by-laws
of the Company or under any agreement to which the Company is a party.
(vii) Good Standing of Subsidiaries. Each of the Subsidiaries has
-----------------------------
been duly organized and is validly existing as a limited liability company,
corporation, limited partnership or general partnership in good standing
under the laws of the jurisdiction of its organization, has the requisite
power and authority to own, lease and operate its properties and to conduct
its business as described in the Offering Memorandum and
-4-
<PAGE>
is duly qualified as a foreign limited liability company, corporation,
limited partnership or general partnership to transact business and is in
good standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good standing
would not result in a Material Adverse Effect; except as otherwise
disclosed in the Offering Memorandum, all of the issued and outstanding
capital stock of each Subsidiary that is a corporation has been duly
authorized and validly issued, is fully paid and non-assessable and is
owned by the Company, directly or through Subsidiaries; none of the
outstanding shares of capital stock, limited liability company interests or
partnership interests of any of the Subsidiaries was issued in violation of
any preemptive or similar rights arising by operation of law, or under the
charter, by-laws, certificate of formation, limited liability company
agreement, partnership agreement, or other organizational documents of any
Subsidiary or under any agreement to which the Company or any Subsidiary is
a party.
(viii) Authorization of Agreement. This Agreement has been duly
--------------------------
authorized, executed and delivered by the Company.
(ix) Authorization of the Indentures. The Indentures have been duly
-------------------------------
authorized by the Company and, at the Closing Time, will have been duly
executed and delivered by the Company and will constitute valid and binding
agreements of the Company (assuming due execution and delivery of the
Indentures by the Trustee), enforceable against the Company in accordance
with their terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or other similar laws
relating to or affecting enforcement of creditors' rights generally, or by
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(x) Authorization of the Securities. The Securities and the Exchange
-------------------------------
Securities have been duly authorized by the Company and, at the Closing
Time, the Securities will have been duly executed by the Company and, when
authenticated in the manner provided for in the Indentures and delivered
against payment of the purchase price therefor will constitute valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers) reorganization, moratorium or other
similar laws relating to or affecting enforcement of creditors' rights
generally, or by general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law), and will be
in the form contemplated by, and entitled to the benefits of, the
Indentures.
-5-
<PAGE>
(xi) Authorization of the Registration Rights Agreements. The
---------------------------------------------------
Registration Rights Agreements have been duly authorized by the Company
and, at the Closing Time, will have been duly executed and delivered by the
Company and will constitute valid and binding agreements of the Company
(assuming due execution and delivery by the Initial Purchasers),
enforceable against the Company in accordance with their terms, except as
the enforcement thereof may be limited by (i) bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or other similar laws relating to or affecting
enforcement of creditors' rights generally, or by general principles of
equity (regardless of whether enforcement is considered in a proceeding in
equity or at law) or (ii) as to any indemnification or contribution
provision thereof, by any applicable state or federal securities laws,
rules or regulations or by public policy.
(xii) Description of the Securities, the Indentures and the
-----------------------------------------------------
Registration Rights Agreements. The Securities, the Indentures and the
------------------------------
Registration Rights Agreements conform in all material respects to the
respective statements relating thereto contained in the Offering Memorandum
and are in substantially the respective forms previously delivered to the
Initial Purchasers.
(xiii) Absence of Defaults and Conflicts. Neither the Company nor
---------------------------------
any of the Subsidiaries is in violation of its certificate of formation,
limited liability company agreement, charter, by-laws, partnership
agreement or other organizational documents or in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or other agreement or instrument to
which the Company or any of the Subsidiaries is a party or by which it or
any of them may be bound, or to which any of the property or assets of the
Company or any of the Subsidiaries is subject (collectively, "Agreements
and Instruments") except for such defaults that would not result in a
Material Adverse Effect; and the execution, delivery and performance of
this Agreement, the Indentures, the Registration Rights Agreements and the
Securities and any other agreement or instrument entered into or issued or
to be entered into or issued by the Company in connection with the
transactions contemplated hereby or thereby or in the Offering Memorandum
and the consummation of the transactions contemplated herein, therein or in
the Offering Memorandum (including the issuance and sale of the Securities
and the use of the proceeds from the sale of the Securities as described in
the Offering Memorandum under the caption "Use of Proceeds") and compliance
by the Company with its obligations hereunder do not and will not, whether
with or without the giving of notice or passage of time or both, conflict
with or constitute a breach of, or default or a Repayment Event (as defined
below) under, or result in the creation or imposition of any lien, charge
or encumbrance upon any property or assets of the Company or any of the
Subsidiaries pursuant to, the Agreements
-6-
<PAGE>
and Instruments except for such conflicts, breaches or defaults or liens,
charges or encumbrances that, singly or in the aggregate, would not result
in a Material Adverse Effect, nor will such action result in any violation
of the provisions of the certificate of formation, limited liability
company agreement, charter, by-laws, partnership agreement, or other
organizational documents of the Company or any of the Subsidiaries or any
applicable law, statute, rule, regulation, judgment, order, writ or decree
of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any of the Subsidiaries or
any of their assets or properties, except for such violations that would
not result in a Material Adverse Effect. As used herein, a "Repayment
Event" means any event or condition that gives the holder of any note,
debenture or other evidence of indebtedness (or any person acting on such
holder's behalf) the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness by the Company or any of
the Subsidiaries.
(xiv) Absence of Proceedings. Except as disclosed in the Offering
----------------------
Memorandum, there is no action, suit, proceeding, inquiry or investigation
before or by any court or governmental agency or body, foreign or domestic
(including, but not limited to the Federal Communications Commission), now
pending, or, to the knowledge of the Company, threatened, against or
affecting the Company or any Subsidiary that would reasonably be expected
to result in a Material Adverse Effect, or that would reasonably be
expected to materially and adversely affect the consummation of this
Agreement or the performance by the Company of its obligations hereunder.
(xv) Possession of Intellectual Property. The Company and the
-----------------------------------
Subsidiaries own or possess adequate patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property") necessary to
carry on the business now operated by them, and, to the Company's best
knowledge, neither the Company nor any of the Subsidiaries has received any
notice or is otherwise aware of any infringement of or conflict with
asserted rights of others with respect to any Intellectual Property or of
any facts or circumstances that would render any Intellectual Property
invalid or inadequate to protect the interest of the Company or any of the
Subsidiaries therein, and which infringement or conflict (if the subject of
any unfavorable decision, ruling or finding) or invalidity or inadequacy,
singly or in the aggregate, would result in a Material Adverse Effect.
(xvi) Possession of Licenses and Permits. The Company and its
----------------------------------
Subsidiaries possess such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies
necessary to conduct the business now
-7-
<PAGE>
operated by them; the Company and its Subsidiaries are in compliance with
the terms and conditions of all such Governmental Licenses, except where
the failure so to comply would not, singly or in the aggregate, have a
Material Adverse Effect; all of the Governmental Licenses are valid and in
full force and effect, except when the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full force
and effect would not have a Material Adverse Effect; and neither the
Company nor any of the Subsidiaries has received any notice of proceedings
relating to the revocation or modification of any such Governmental
Licenses which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in a Material Adverse
Effect.
(xvii) Title to Property. The Company and its Subsidiaries have good
-----------------
and marketable title to all real property owned by the Company and its
Subsidiaries and good title to all other properties owned by them, in each
case, free and clear of all mortgages, pledges, liens, security interests,
claims, restrictions or encumbrances of any kind except such as (a) are
described in the Offering Memorandum or (b) do not, singly or in the
aggregate, materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company or any of its Subsidiaries; and all of the leases and subleases
material to the business of the Company and its Subsidiaries, considered as
one enterprise, and under which the Company or any of its Subsidiaries
holds properties described in the Offering Memorandum, are in full force
and effect, and neither the Company nor any of its Subsidiaries has any
notice of any material claim of any sort that has been asserted by anyone
adverse to the rights of the Company or any of its Subsidiaries under any
of the leases or subleases mentioned above, or affecting or questioning the
rights of such the Company or any Subsidiary thereof to the continued
possession of the leased or subleased premises under any such lease or
sublease.
(xviii) Tax Returns. The Company has filed all federal, state, local
-----------
and foreign tax returns and its Subsidiaries have filed all material
federal, state, local and foreign tax returns, in each case, that are
required to be filed or have duly requested extensions thereof and have
paid all material taxes required to be paid by any of them and any related
assessments, fines or penalties, except for any such tax, assessment, fine
or penalty that is being contested in good faith and by appropriate
proceedings; or as to which adequate charges, accruals and reserves have
been provided for in the financial statements referred to in Section
1(a)(iv) above.
(xix) Environmental Laws. Except as described in the Offering
------------------
Memorandum and except such matters as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company nor
any of its Subsidiaries is in violation of any federal, state, local or
foreign statute, law, rule, regulation, ordinance, code,
-8-
<PAGE>
policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent, decree or judgment, relating to pollution or protection of human
health, the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata) or wildlife,
including, without limitation, laws and regulations relating to the release
or threatened release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials (collectively, "Environmental Laws"), (B) the Company
and its Subsidiaries have all permits, authorizations and approvals
required under any applicable Environmental Laws and are each in compliance
with their requirements, (C) there are no pending or, to the Company's best
knowledge, threatened administrative, regulatory or judicial actions,
suits, demands, demand letters, claims, liens, notices of noncompliance or
violation, investigation or proceedings relating to any Environmental Law
against the Company or any of its Subsidiaries and (D) to the Company's
best knowledge, there are no events or circumstances that would reasonably
be expected to form the basis of an order for clean-up or remediation, or
an action, suit or proceeding by any private party or governmental body or
agency, against or affecting the Company or any of its Subsidiaries
relating to Hazardous Materials or Environmental Laws.
(xx) Investment Company Act. The Company is not, and upon the
----------------------
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Offering
Memorandum will not be, an "investment company" or an entity "controlled"
by an "investment company" as such terms are defined in the Investment
Company Act of 1940, as amended (the "1940 Act").
(xxi) No General Solicitation. None of the Company, its affiliates,
-----------------------
as such term is defined in Rule 501(b) under the 1933 Act ("Affiliates"),
or any person acting on any of their behalf (other than the Initial
Purchasers or any person acting on their behalf, as to whom the Company
makes no representation) has engaged or will engage, in connection with the
offering of the Securities, in any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the 1933 Act.
(xxii) No Registration Required. Subject to compliance by the
------------------------
Initial Purchasers with the representations and warranties set forth in
Section 2 and the procedures set forth in Section 6 hereof, except in
connection with the filing of a registration statement to effect the
Exchange Offer or the filing of the Shelf Registration Statement as
contemplated by the Registration Rights Agreement, it is not necessary in
connection with the offer, sale and delivery of the Securities to the
Initial Purchasers and to each Subsequent Purchaser in the manner
contemplated by this Agreement and the
-9-
<PAGE>
Offering Memorandum to register the Securities under the 1933 Act or to
qualify the Indentures under the Trust Indenture Act of 1939, as amended
(the "1939 Act").
(xxiii) No Directed Selling Efforts. With respect to those
---------------------------
Securities, if any, sold in reliance on Regulation S, (A) none of the
Company, their Affiliates or any person acting on their behalf (other than
the Initial Purchasers or any person acting on their behalf, as to whom the
Company makes no representation) has engaged or will engage in any directed
selling efforts within the meaning of Regulation S and (B) the Company and
its Affiliates and any person acting on their behalf (other than the
Initial Purchasers or any person acting on their behalf, as to whom the
Company makes no representation) have complied and will comply with the
offering restrictions requirement of Regulation S.
(xxiv) No Stabilization or Manipulation. The Company has not taken
--------------------------------
and will not take, directly or indirectly, any action designed to, or that
might be reasonably expected to, cause or result in stabilization or
manipulation of the price of the Securities or the Exchange Securities.
(xxv) Solvency. The Company does not intend to, nor does it believe
--------
that it will, incur debts beyond its ability to pay such debts as they
mature. After giving effect to the transactions contemplated by the
Offering Memorandum, the fair saleable value of the assets of the Company
on a consolidated basis will exceed the amount that will be required to be
paid on or in respect of the existing debts and other liabilities
(including contingent liabilities) of the Company on a consolidated basis
as they become absolute and mature. The assets of the Company on a
consolidated basis do not constitute unreasonably small capital to carry
out the business of the Company and its Subsidiaries, taken as a whole, as
conducted or as proposed to be conducted.
(xxvi) Compliance with Cuba Act. The Company and the Subsidiaries
------------------------
have complied with, and are and will be in compliance with, the provisions
of that certain Florida act relating to disclosure of doing business with
Cuba, codified as Section 517.075 of the Florida statutes, and the rules
and regulations thereunder (collectively, the "Cuba Act") or are exempt
therefrom.
(b) Officer's Certificates. Any certificate signed by any officer of
the Company or any of the Subsidiaries delivered to the Initial Purchasers or to
counsel for the Initial Purchasers shall be deemed a representation and warranty
by the Company to each Initial Purchaser as to the matters covered thereby;
provided, however, that any such officer shall not be liable with respect
- -------- -------
thereto in any respect.
-10-
<PAGE>
SECTION 2. Sale and Delivery to Initial Purchasers, Closing.
------------------------------------------------
(a) Securities. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company agrees to sell to each Initial Purchaser, severally and not jointly, and
each Initial Purchaser, severally and not jointly, agrees to purchase from the
Company, for the aggregate price set forth in Schedule B, the aggregate
principal amount at maturity of Securities set forth in Schedule A opposite the
name of such Initial Purchaser, plus any additional principal amount of
Securities which such Initial Purchaser may become obligated to purchase
pursuant to the provisions of Section 11 hereof.
(b) Payment. Payment of the purchase price for, and delivery of
certificates for, the Securities shall be made at the office of Cahill Gordon &
Reindel, 80 Pine Street, New York, New York, or at such other place as shall be
agreed upon by the Initial Purchasers and the Company, at 10:00 A.M. on the
third business day after the date hereof (unless postponed in accordance with
the provisions of Section 11), or such other time not later than ten business
days after such date as shall be agreed upon by the Initial Purchasers and the
Company (such time and date of payment and delivery being herein called the
"Closing Time").
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the Initial Purchasers for the respective accounts of the Initial Purchasers of
certificates for the Securities to be purchased by them. Merrill Lynch,
individually and not as representative of the Initial Purchasers, may (but shall
not be obligated to) make payment of the purchase price for the Securities to be
purchased by any Initial Purchaser whose funds have not been received by the
Closing Time, but such payment shall not relieve such Initial Purchaser from its
obligations hereunder. The certificates representing the Securities shall be
registered in the name of Cede & Co. pursuant to the DTC Agreement and shall be
made available for examination and packaging by the Initial Purchasers in The
City of New York not later than 10:00 A.M. on the last business day prior to the
Closing Time.
(c) Qualified Institutional Buyer. Each Initial Purchaser severally
and not jointly represents and warrants to the Company that it is a "qualified
institutional buyer" within the meaning of Rule 144A (a "Qualified Institutional
Buyer") and an "accredited investor" within the meaning of Rule 501(a) under the
1933 Act (an "Accredited Investor").
(d) Denominations, Registration. Certificates for the Securities shall
be in such denominations ($1,000 or integral multiples thereof) and registered
in such names as the Initial Purchasers may request in writing at least one full
business day before the Closing Time.
-11-
<PAGE>
SECTION 3. Covenants of the Company. The Company covenants with each
------------------------
Initial Purchaser as follows:
(a) Offering Memorandum. The Company, as promptly as possible, will
furnish to each Initial Purchaser, without charge, such number of copies of the
Preliminary Offering Memorandum, the Final Offering Memorandum and any
amendments and supplements thereto and documents incorporated by reference
therein as such Initial Purchaser may reasonably request.
(b) Notice and Effect of Material Events. The Company will immediately
notify each Initial Purchaser, and confirm such notice in writing, of (x) any
filing made by the Company of information relating to the offering of the
Securities with any securities exchange or any other regulatory body in the
United States or any other jurisdiction, and (y) prior to the completion of the
distribution of the Securities by the Initial Purchasers as evidenced by a
notice in writing from the Initial Purchasers to the Company, any material
changes in or affecting the condition, financial or otherwise, earnings,
business affairs or business prospects of the Company and its Subsidiaries
which, in the reasonable opinion of counsel to the Company or counsel to the
Initial Purchasers, (i) make any statement in the Offering Memorandum false or
misleading in light of the circumstances then existing or (ii) should be
disclosed in the Offering Memorandum. In such event or if during such time any
event shall occur as a result of which it is necessary, in the reasonable
opinion of the Company, its counsel, the Initial Purchasers or counsel for the
Initial Purchasers, to amend or supplement the Final Offering Memorandum in
order that the Final Offering Memorandum not include any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein not misleading in the light of the circumstances then
existing, the Company will forthwith amend or supplement the Final Offering
Memorandum by preparing and furnishing to each Initial Purchaser an amendment or
amendments of, or a supplement or supplements to, the Final Offering Memorandum
(in form and substance satisfactory in the reasonable opinion of counsel for the
Initial Purchasers) so that, as so amended or supplemented, the Final Offering
Memorandum will not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances existing at the time it is delivered to a Subsequent
Purchaser, not misleading.
(c) Amendment to Offering Memorandum and Supplements. The Company will
advise each Initial Purchaser promptly of any proposal to amend or supplement
the Offering Memorandum and will not effect such amendment or supplement without
the consent of the Initial Purchasers, which consent shall not be unreasonably
withheld. Neither the consent of the Initial Purchasers, nor the Initial
Purchasers' delivery of any such amendment or supplement, shall constitute a
waiver of any of the conditions set forth in Section 5 hereof.
(d) Qualification of Securities for Offer and Sale. The Company will
use its best efforts, in cooperation with the Initial Purchasers, to qualify the
Securities for offering
-12-
<PAGE>
and sale under the applicable state securities laws of such jurisdictions as the
Initial Purchasers may designate and will maintain such qualifications in effect
as long as required for the sale of the Securities; provided, however, that the
Company shall not be obligated to file any general consent to service of process
or to qualify as a foreign corporation or foreign limited liability company or
as a dealer in securities in any jurisdiction in which it is not so qualified or
to subject itself to taxation in respect of doing business in any jurisdiction
in which it is not otherwise so subject.
(e) Rating of Securities. The Company shall take all reasonable action
necessary to enable Standard & Poors Ratings Group, a division of McGraw Hill,
Inc. ("S&P"), and Moody's Investors Service, Inc. ("Moody's") to provide their
respective credit ratings of the Securities.
(f) DTC. The Company will cooperate with the Initial Purchasers and
use its best efforts to permit the Securities to be eligible for clearance and
settlement through the facilities of DTC.
(g) Use of Proceeds. The Company will use the net proceeds received by
it from the sale of the Securities in the manner specified in the Offering
Memorandum under "Use of Proceeds."
(h) Restriction on Sale of Securities. During a period of 180 days
from the date of the Offering Memorandum, the Company will not, without the
prior written consent of the Initial Purchasers, (i) directly or indirectly,
issue, sell, offer or agree to sell, grant any option for the sale of, or
otherwise dispose of, any other debt securities of the Company or securities of
the Company that are convertible into, or exchangeable for, the Securities or
such other debt securities, except pursuant hereto or pursuant to the Exchange
Offer or (ii) enter into any swap or any other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, the economic
consequences of ownership of the Securities, whether any such transaction
described in clause (i) or (ii) is to be settled by delivery of Securities or
such other securities, in cash, or otherwise.
(i) Termination of Obligations. Notwithstanding any provisions of
paragraphs (a), (b) or (c) of this Section 3 to the contrary, the Company's
obligations under paragraphs (a), (b) and (c) shall terminate on the earliest to
occur of (i) the effective date of a registration statement with respect to the
Securities and (ii) the date upon which the Initial Purchasers cease to hold
Securities acquired as part of their initial distribution, but in any event not
later than nine months from the Closing Time.
-13-
<PAGE>
SECTION 4. Payment of Expenses.
-------------------
(a) Expenses. The Company will pay all reasonable expenses incident to
the performance of its obligations under this Agreement, including (i) the
preparation and printing of the Offering Memorandum (including financial
statements and any schedules or exhibits and any document incorporated therein
by reference) and of each amendment or supplement thereto, (ii) the preparation,
printing and delivery to the Initial Purchasers of this Agreement, the
Registration Rights Agreement, the Indenture and such other documents as may be
required in connection with the offering, purchase, sale and delivery of the
Securities, (iii) the preparation, printing, issuance and delivery of the
certificates for the Securities to the Initial Purchasers, including any charges
of DTC in connection therewith, (iv) the fees and disbursements of the Company's
counsel, accountants and other advisors, (v) the qualification of the Securities
under state securities laws in accordance with the provisions of Section 3(d)
hereof, including filing fees and the reasonable fees and disbursements of
counsel for the Initial Purchasers in connection therewith and in connection
with the preparation of the Blue Sky Survey, any supplement thereto and any
Legal Investment Survey, (vi) the fees and expenses of the Trustee, including
the fees and disbursements of counsel for the Trustee in connection with the
Indenture and the Securities, (vii) any fees payable in connection with the
rating of the Securities and (viii) any fees payable to the review by the
National Association of Securities Dealers, Inc. (the "NASD") in connection with
the initial and continued designation of the Securities as PORTAL securities
under the PORTAL Market Rules pursuant to NASD Rule 5322. It is understood, that
except as specified in clauses (iii), (v) and (vii) above, each Initial
Purchaser will pay all of its own costs and expenses including without
limitation the fees and expenses of its counsel.
(b) Termination of Agreement. If this Agreement is terminated by the
Initial Purchasers in accordance with the provisions of Section 5 or Section
10(a)(i) hereof, the Company shall reimburse the Initial Purchasers for all of
their reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the Initial Purchasers.
SECTION 5. Conditions of Initial Purchasers' Obligations. The
---------------------------------------------
obligations of the several Initial Purchasers hereunder are subject to the
accuracy of the representations and warranties of the Company contained in
Section 1 hereof or in certificates of any officer of the Company or any of the
Subsidiaries delivered pursuant to the provisions hereof, to the performance by
the Company of its covenants and other obligations hereunder, and to the
following further conditions:
(a) Opinion of Counsel for the Company. At the Closing Time, the
Initial Purchasers shall have received the favorable opinion, dated as of the
Closing Time, of Troop Meisinger Steuber & Pasich, LLP, counsel for the Company,
in form and substance satisfactory to counsel for the Initial Purchasers,
together with signed or reproduced copies of such
-14-
<PAGE>
letter for each of the other Initial Purchasers to the effect set forth in
Exhibit A hereto and to such further effect as counsel to the Initial Purchasers
may reasonably request.
(b) Opinion of Special Counsel for the Company. At the Closing Time,
the Initial Purchasers shall have received the favorable opinion, dated as of
the Closing Time, of Squadron, Ellenoff, Plesent & Sheinfeld, LLP, special
counsel for the Company, in form and substance satisfactory to counsel for the
Initial Purchasers, together with signed or reproduced copies of such letter for
each of the other Initial Purchasers to the effect set forth in Exhibit B hereto
and to such further effect as counsel to the Initial Purchasers may reasonably
request.
(c) Opinion of Regulatory Counsel for the Company. At the Closing
Time, the Initial Purchasers shall have received the favorable opinion, dated as
of the Closing Time, of Hogan & Hartson, L.L.P., special counsel for the
Company, in form and substance satisfactory to counsel for the Initial
Purchasers, together with signed or reproduced copies of such letter for each of
the other Initial Purchasers to the effect set forth in Exhibit C hereto and to
such further effect as counsel to the Initial Purchasers may reasonably request.
(d) Opinion of Counsel for Initial Purchasers. At the Closing Time,
the Initial Purchasers shall have received the favorable opinion, dated as of
the Closing Time, of Cahill Gordon & Reindel, counsel for the Initial
Purchasers, together with signed or reproduced copies of such letter for each of
the other Initial Purchasers with respect to the matters set forth in (i), (ii),
(v) through (x), inclusive, (xiii) (solely as to the information in the Offering
Memorandum under "Description of the Notes").
In rendering such opinions, counsel for the Initial Purchasers (A)
need not express any opinion with regard to the application of laws of any
jurisdiction other than the Federal laws of the United States, the General
Corporation Law of the State of Delaware and the laws of the State of New York
and (B) may rely, as to matters of fact, to the extent they deem proper, on
representations or certificates of responsible officers of the Company and
certificates of public officials.
In addition, such counsel shall additionally state that such counsel
has participated in conferences with officers and other representatives of the
Company and representatives of the independent accountants for the Company at
which conferences the contents of the Offering Memorandum and related matters
were discussed and, although given the limitations inherent in the role of
outside counsel and the character of determinations involved in the preparation
of the Offering Memorandum, such counsel is not passing upon and does not assume
any responsibility for the accuracy, completeness or fairness of the statements
contained in the Offering Memorandum and has made no independent check or
verification thereof, on the basis of the foregoing, no facts have come to the
attention of such counsel that would lead such counsel to believe that the
Offering Memorandum, at the date thereof or as of the Closing Time, contained an
untrue statement of a material fact or omitted to state a material
-15-
<PAGE>
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (it being understood that such
counsel need express no belief with respect to the financial statements,
including the notes thereto, or any other financial or statistical found in or
derived from the internal accounting and other records of the Company and its
Subsidiaries set forth or referred to in the Offering Memorandum).
(e) Officers' Certificate. At the Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Offering Memorandum, any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its Subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and the
Initial Purchasers shall have received a certificate of the President or a Vice
President of the Company and of the chief financial or chief accounting officer
of the Company, dated as of the Closing Time, to the effect that (i) there has
been no such material adverse change, (ii) the representations and warranties in
Section 1 hereof are true and correct with the same force and effect as though
expressly made at and as of the Closing Time and (iii) the Company has complied
with all agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to the Closing Time in all material respects.
(f) Accountants' Comfort Letter. At the time of the execution of this
Agreement, the Initial Purchasers shall have received from Ernst & Young and
KPMG Peat Marwick LLP letters, dated such date, in form and substance
satisfactory to the Initial Purchasers, together with signed or reproduced
copies of such letter for each of the other Initial Purchasers containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to Initial Purchasers with respect to the financial statements
and certain financial information contained in the Offering Memorandum.
(g) Bring-down Comfort Letter. At the Closing Time, the Initial
Purchasers shall have received from Ernst & Young and KPMG Peat Marwick LLP
letters, dated as of the Closing Time, to the effect that they reaffirm the
statements made in the letter furnished pursuant to subsection (f) of this
Section, except that the specified date referred to shall be a date not more
than three business days prior to the Closing Time.
(h) Maintenance of Rating. At the Closing Time, the Securities shall
be rated at least B1 by Moody's and B by S&P, and the Company shall have
delivered to the Initial Purchasers a letter dated the Closing Time, from each
such rating agency, or other evidence satisfactory to the Initial Purchasers,
confirming that the Securities have such ratings; and since the date of this
Agreement, there shall not have occurred a downgrading in the rating assigned to
the Securities or any of the Company's other debt securities by any nationally
recognized securities rating agency, and no such securities rating agency shall
have publicly announced that it has under surveillance or review, with possible
negative implications, its rating of the Securities or any of the Company's
other debt securities.
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<PAGE>
(i) PORTAL. At the Closing Time, the Securities shall have been
designated for trading on PORTAL.
(j) Registration Rights Agreements. The Company and the Initial
Purchasers shall have entered into the Registration Rights Agreements,
substantially in form and substance as described in the Offering Memorandum
under the heading "Exchange Offer; Registration Rights."
(k) Subordination of Note. At the Closing Time, the NAHI Bridge Note
and the Fox Subordinated Note (each as defined in the Final Offering Memorandum)
shall have been amended in form and substance reasonably satisfactory to the
Initial Purchasers and their counsel to provide for the subordination of such
notes to the Securities.
(l) Credit Facility. At the Closing Time, the Company shall have
received, and the Initial Purchasers shall have been furnished a copy of, either
(i) an amendment to, or consent under, the Existing Credit Facility (as defined
in the Final Offering Memorandum) in form and substance reasonably satisfactory
to the Initial Purchasers and their counsel, permitting, among other things, the
execution, delivery and performance of the Indentures and the issuance of the
Securities thereunder all in accordance with the terms contained in the Final
Offering Memorandum or (ii) the Amended Credit Facility (as defined in the Final
Offering Memorandum) in form and substance reasonably satisfactory to the
Initial Purchasers and their counsel and with substantially the same terms as
those disclosed in the Final Offering Memorandum.
(m) Additional Documents. At the Closing Time, counsel for the Initial
Purchasers shall have been furnished with such documents and opinions as they
may reasonably require for the purpose of enabling them to pass upon the
issuance and sale of the Securities as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the Securities
as herein contemplated shall be reasonably satisfactory in form and substance to
the Initial Purchasers and counsel for the Initial Purchasers.
(n) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled or waived when and as required to be
fulfilled, this Agreement may be terminated by the Initial Purchasers by notice
to the Company at any time at or prior to the Closing Time, and such termination
shall be without liability of any party to any other party except as provided in
Section 4 and except that Sections 1, 7 and 8 shall survive any such termination
and remain in full force and effect.
-17-
<PAGE>
SECTION 6. Subsequent Offers and Resales of the Securities.
-----------------------------------------------
(a) Offer and Sale Procedures. Each of the Initial Purchasers and the
Company hereby represents and warrants, and agrees that it will observe the
following procedures in connection with the offer and sale of the Securities:
(i) Offers and Sales only to Qualified Institutional Buyers. Offers
-------------------------------------------------------
or sales shall only be made to (A) persons whom the offeror or seller
reasonably believes to be Qualified Institutional Buyers (as defined in
Rule 144A under the 1933 Act) or (B) non-U.S. persons outside the United
States to whom the offeror or seller reasonably believes offers and sales
of Securities may be made in reliance upon Regulation S.
(ii) No General Solicitation. No general solicitation or general
-----------------------
advertising (within the meaning of Rule 502(c) under the 1933 Act) will be
used in the United States in connection with the offering of the Securities
or by means of any directed selling efforts within the meaning of Section
903 of the 1933 Act.
(iii) Purchases by Non-Bank Fiduciaries. In the case of a non-bank
---------------------------------
Subsequent Purchaser of a Security acting as a fiduciary for one or more
third parties, in connection with an offer and sale to such purchaser
pursuant to clause (i)(A) above, each third party shall, in the judgment of
the applicable Initial Purchaser, be a Qualified Institutional Buyer or a
non-U.S. person outside the United States.
(iv) Subsequent Purchaser Notification. Each Initial Purchaser will
---------------------------------
take reasonable steps to inform, and cause each of its Affiliates to take
reasonable steps to inform, persons acquiring Securities from such Initial
Purchaser or affiliate, as the case may be, in the United States that the
Securities (A) have not been registered under the 1933 Act, (B) are being
sold to them without registration under the 1933 Act in reliance on Rule
144A or in accordance with another exemption from registration under the
1933 Act, as the case may be, and (C) may not be offered, sold or otherwise
transferred except (1) to the Company, (2) outside the United States in
accordance with Rule 904 of Regulation S or (3) inside the United States in
accordance with (x) Rule 144A to a person whom the seller reasonably
believes is a Qualified Institutional Buyer that is purchasing such
Securities for its own account or for the account of a Qualified
Institutional Buyer to whom notice is given that the offer, sale or
transfer is being made in reliance on Rule 144A or (y) pursuant to another
available exemption from registration under the 1933 Act.
(v) Restrictions on Transfer. The transfer restrictions and the
------------------------
other provisions set forth in Section 3.14 of the Indentures, including the
legend required thereby, shall apply to the Securities except as otherwise
agreed by the Company and the Initial Purchasers. Following the sale of the
Securities by the Initial Purchasers to Subsequent
-18-
<PAGE>
Purchasers pursuant to the terms hereof, the Initial Purchasers shall not
be liable or responsible to the Company for any losses, damages or
liabilities suffered or incurred by the Company, including any losses,
damages or liabilities under the 1933 Act, arising from or relating to any
resale or transfer of any Security.
(vi) Delivery of Offering Memorandum. Each Initial Purchaser will
-------------------------------
deliver to each purchaser of the Securities from such Initial Purchaser, in
connection with its original distribution of the Securities, a copy of the
Offering Memorandum, as amended and supplemented at the date of such
delivery.
(b) Covenants of the Company. The Company covenants with each Initial
Purchaser as follows:
(i) Due Diligence. The Company agrees to provide answers to each
-------------
prospective Subsequent Purchaser of Securities who so requests concerning
the Company and the Subsidiaries (to the extent that such information is
available or can be acquired and made available to prospective Subsequent
Purchasers without unreasonable effort or expense and to the extent the
provision thereof is not prohibited by applicable law) and the terms and
conditions of the offering of the Securities, as provided in the Offering
Memorandum.
(ii) Rule 144A Information. The Company agrees that, in order to
---------------------
render the Securities eligible for resale pursuant to Rule 144A, while any
of the Securities are "restricted securities" within the meaning of Section
144(a)(3) of the 1933 Act, it will make available, upon request, to any
holder of Securities or prospective purchasers of Securities the
information specified in Rule 144A(d)(4), unless the Company furnishes
information to the Commission pursuant to Section 13 or 15(d) of the 1934
Act (such information, whether made available to holders or prospective
purchasers or furnished to the Commission, is herein referred to as
"Additional Information").
(iii) Restriction on Repurchases. Until the expiration of two years
--------------------------
after the original issuance of the Securities, the Company will not, and
will cause their Affiliates not to, purchase or agree to purchase or
otherwise acquire any Securities which are "restricted securities" (as such
term is defined under Rule 144(a)(3) under the 1933 Act), whether as
beneficial owner or otherwise (except as agent acting as a securities
broker on behalf of and for the account of customers in the ordinary course
of business in unsolicited broker's transactions) unless, immediately upon
any such purchase, the Company or any Affiliate shall submit such
Securities to the Trustee for cancellation.
(c) Resale Pursuant to Rule 903 of Regulation S or Rule 144A. Each
Initial Purchaser understands that the Securities have not been and will not be
registered under the 1933 Act and may not be offered or sold within the United
States or to, or for the account or
-19-
<PAGE>
benefit of, U.S. persons except in accordance with Regulation S or pursuant to
another exemption from the registration requirements of the 1933 Act. Each
Initial Purchaser severally represents and agrees, that, except as permitted by
Section 6(a) above, it has offered and sold Securities and will offer and sell
Securities (i) as part of their distribution at any time and (ii) otherwise
until forty days after the later of the date upon which the offering of the
Securities commences and the Closing Time, only in accordance with Rule 903 of
Regulation S, Rule 144A under the 1933 Act or pursuant to another available
exemption from registration under the 1933 Act. Accordingly, neither the Initial
Purchasers, their affiliates nor any persons acting on their behalf have engaged
or will engage in any directed selling efforts with respect to Securities, and
the Initial Purchasers, their Affiliates and any person acting on their behalf
have complied and will comply with the offering restriction requirements of
Regulation S. Each Initial Purchaser agrees that, at or prior to confirmation of
a sale of Securities (other than a sale of Securities pursuant to Rule 144A), it
will have sent to each distributor, dealer or person receiving a selling
concession, fee or other remuneration that purchases Securities from it or
through it during the restricted period a confirmation or notice to
substantially the following effect:
"THE SECURITIES COVERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED
OR SOLD WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT OR BENEFIT OF
U.S. PERSONS (I) AS PART OF THEIR DISTRIBUTION AT ANY TIME AND (II)
OTHERWISE UNTIL FORTY DAYS AFTER THE LATER OF THE DATE UPON WHICH THE
OFFERING OF THE SECURITIES COMMENCED AND THE DATE OF CLOSING, EXCEPT IN
EITHER CASE IN ACCORDANCE WITH REGULATION S OR RULE 144A UNDER THE
SECURITIES ACT. TERMS USED ABOVE HAVE THE MEANING GIVEN TO THEM BY
REGULATION S."
Terms used in the above paragraph have the meanings given to them by Regulation
S.
Each Initial Purchaser severally represents and agrees that it has not entered
and will not enter into any contractual arrangements with respect to the
distribution of the Securities, except with its affiliates or with the prior
written consent of the Company.
SECTION 7. Indemnification.
---------------
(a) Indemnification of Initial Purchasers. The Company agrees to
indemnify and hold harmless each Initial Purchaser and each person, if any, who
controls any Initial Purchaser within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act as follows:
-20-
<PAGE>
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Offering
Memorandum or the Final Offering Memorandum (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or, to the Company's best knowledge,
threatened, or of any claim whatsoever based upon any such untrue statement
or omission, or any such alleged untrue statement or omission; provided
that (subject to Section 7(d) below) any such settlement is effected with
the written consent of the Company; and
(iii) against any and all expense whatsoever (including, subject to
Section 7(c) below, the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense
is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
- -------- -------
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Initial Purchaser through Merrill Lynch and Citicorp Securities, Inc. expressly
for use in the Offering Memorandum (or any amendment thereto); and provided,
--------
further that the foregoing indemnification with respect to the preliminary
- -------
offering memorandum shall not inure to the benefit of the Initial Purchasers (or
any person controlling the Initial Purchasers) from whom the person asserting
any such losses, claims, damages or liabilities purchased any of the Securities
if a copy of the Offering Memorandum (as then amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) was not sent
or given by or on behalf of such Initial Purchasers on the initial resale to
such person, if such is required by law, at or prior to the written confirmation
of the sale of such Securities to such person and if the Offering Memorandum (as
so amended or supplemented) would have cured the defect giving rise to such
loss, claim, damage or liability.
(b) Indemnification of Company, Directors and Officers. Each Initial
Purchaser severally agrees to indemnify and hold harmless the Company, its
officers and directors and each person, if any, who controls the Company within
the meaning of Section 15 of
-21-
<PAGE>
the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
of this Section 7, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Offering
Memorandum in reliance upon and in conformity with written information furnished
to the Company by such Initial Purchaser expressly for use in the Offering
Memorandum, it being understood and agreed that the only such information
furnished by any Initial Purchaser consists of the following information in the
Offering Memorandum furnished on behalf of each Initial Purchaser: the last
paragraph at the bottom of the outside front cover page concerning the terms of
the offering by the Initial Purchasers; the legend concerning over-allotments
and stabilization at the bottom of page 5 and the information concerning the
intention of the Initial Purchasers to make a market in the Notes as discussed
in the fifth paragraph under the caption "Plan of Distribution."
(c) Actions against Parties; Notification. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it is
not materially prejudiced as a result thereof and in any event shall not relieve
it from any liability which it may have otherwise than on account of this
indemnity agreement. In the case of parties indemnified pursuant to Section 7(a)
above, counsel to the indemnified parties shall be selected by Merrill Lynch,
and, in the case of parties indemnified pursuant to Section 7(b) above, counsel
to the indemnified parties shall be selected by the Company. An indemnifying
party may participate at its own expense in the defense of any such action;
provided, however, that counsel to the indemnifying party shall not (except with
the consent of the indemnified party) also be counsel to the indemnified party.
If it so elects within a reasonable time after receipt of such notice, an
indemnifying party, jointly with any other indemnifying parties receiving such
notice, may assume the defense of such action with counsel chosen by it and
approved by the indemnified parties defendant in such action, unless such
indemnified parties reasonably object to such assumption on the ground that
there may be legal defenses available to them which are different from or in
addition to those available to such indemnifying party. If an indemnifying party
assumes the defense of such action, the indemnifying parties shall not be liable
for any fees and expenses of counsel for the indemnified parties incurred
thereafter in connection with such action. In no event shall the indemnifying
parties be liable for fees and expenses of more than one counsel (in addition to
any local counsel) separate from their own counsel for all indemnified parties
in connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances. No indemnifying party shall, without the prior written consent of
the indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 7 or Section 8
-22-
<PAGE>
hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 7(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement. Notwithstanding the immediately preceding sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
shall not be liable for any settlement of the nature contemplated by Section
7(a)(ii) effected without its prior written consent if such indemnifying party
(i) reimburses such indemnified party in accordance with such request to the
extent it considers such request to be reasonable and (ii) provides written
notice to the indemnified party substantiating the unpaid balance as
unreasonable, in each case prior to the date of such settlement.
SECTION 8. Contribution. If the indemnification provided for in
------------
Section 7 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Initial Purchasers on the other hand from the
offering of the Securities pursuant to this Agreement or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and of the
Initial Purchasers on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Initial Purchasers on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses)
-23-
<PAGE>
received by the Company and the total underwriting discount received by the
Initial Purchasers, bear to the aggregate initial offering price of the
Securities.
The relative fault of the Company on the one hand and the Initial
Purchasers on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Initial Purchasers and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Initial Purchasers agree that it would not be just
and equitable if contribution pursuant to this Section 8 were determined by pro
rata allocation (even if the Initial Purchasers were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section 8. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 8 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 8, no Initial Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
Initial Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 8, each person, if any, who controls an
Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall have the same rights to contribution as such Initial
Purchaser, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same
rights to contribution as the Company. The Initial Purchasers' respective
obligations to contribute pursuant to this Section 8 are several in proportion
to the principal amount of Securities set forth opposite their respective names
in Schedule A hereto and not joint.
SECTION 9. Representations, Warranties and Agreements to Survive
-----------------------------------------------------
Delivery. All representations, warranties and agreements contained in this
- --------
Agreement or in certificates
-24-
<PAGE>
of officers of the Company or any of the Subsidiaries submitted pursuant hereto,
shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any Initial Purchaser or controlling
person, or by or on behalf of the Company, and shall survive delivery of the
Securities to the Initial Purchasers.
SECTION 10. Termination of Agreement.
------------------------
(a) Termination; General. The Initial Purchasers may terminate this
Agreement, by written notice to the Company, at any time at or prior to the
Closing Time (i) if there has been, since the time of execution of this
Agreement or since the respective dates as of which information is given in the
Offering Memorandum, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its Subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
material adverse change in the financial markets in the United States, any
outbreak of hostilities or escalation thereof or other calamity or crisis or any
change or development involving a prospective change in national or
international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the Initial
Purchasers, impracticable to market the Securities or to enforce contracts for
the sale of the Securities, or (iii) if trading generally on the New York Stock
Exchange, the American Stock Exchange or in the Nasdaq National Market System
has been suspended or limited, or minimum or maximum prices for trading have
been fixed, or maximum ranges for prices have been required, by any of said
exchanges or by such system or by order of the Commission, the National
Association of Securities Dealers, Inc. or any other governmental authority or
(iv) if a banking moratorium has been declared by either Federal or New York
authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 7 and 8 shall survive such termination and remain in full force and effect.
SECTION 11. Default by One or More of the Initial Purchasers. If one
------------------------------------------------
or more of the Initial Purchasers shall fail at the Closing Time to purchase the
Securities which it or they are obligated to purchase under this Agreement (the
"Defaulted Securities"), the non-defaulting Initial Purchasers shall have the
right, within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Initial Purchasers, or any other Initial Purchasers, to purchase
all, but not less than all, of the Defaulted Securities in such amounts as may
be agreed upon and upon the terms herein set forth; if, however, the non-
defaulting Initial Purchasers shall not have completed such arrangements within
such 24 hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
aggregate principal amount of the Securities to be purchased hereunder, each of
the non-defaulting Initial
-25-
<PAGE>
Purchasers shall be obligated, severally and not jointly, to purchase the full
amount thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting Initial
Purchasers, or
(b) if the number of Defaulted Securities exceeds 10% of the
aggregate principal amount of the Securities to be purchased hereunder, this
Agreement shall terminate without liability on the part of any non-defaulting
Initial Purchaser.
No action taken pursuant to this Section shall relieve any defaulting
Initial Purchaser from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, either the Initial Purchasers or the Company
shall have the right to postpone the Closing Time for a period not exceeding
seven days in order to effect any required changes in the Offering Memorandum or
in any other documents or arrangements. As used herein, the term "Initial
Purchaser" includes any person substituted for an Initial Purchaser under this
Section 11.
SECTION 12. Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the Initial
Purchasers shall be directed to the Initial Purchasers c/o Merrill Lynch,
Pierce, Fenner & Smith Incorporated at North Tower, World Financial Center, New
York, New York 10281-1201, facsimile (212) 449-1642, attention of Gregg Seibert;
notices to the Company shall be directed to it at Fox Kids Worldwide, Inc.,
10960 Wilshire Boulevard, Los Angeles, CA 90024, facsimile (310) 235-5552,
attention of Mel Woods, with a copy to The News Corporation Limited, 1211 Avenue
of the Americas, New York, NY 10036, facsimile (212) 768-2029, attention of
Arthur M. Siskind, Esq.
SECTION 13. Parties. This Agreement shall each inure to the benefit of
-------
and be binding upon the Initial Purchasers and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Initial Purchasers and the Company and their respective successors and the
controlling persons and officers and directors referred to in Sections 7 and 8
and their heirs and legal Initial Purchasers, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the Initial Purchasers and the
Company and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities from
any Initial Purchaser shall be deemed to be a successor by reason merely of such
purchase.
-26-
<PAGE>
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED
----------------------
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 15. Effect of Headings. The Article and Section headings
------------------
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.
-27-
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Initial Purchasers and the Company in accordance with its terms.
Very truly yours,
FOX KIDS WORLDWIDE, INC.
By /s/ Mel Woods
---------------------
Title: President
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
CITICORP SECURITIES, INC.
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION
MORGAN STANLEY & CO. INCORPORATED
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By /s/ David Weil
--------------------------------
Authorized Signatory
For themselves and as Initial Purchasers of the other
Initial Purchasers named in Schedule A hereto.
-28-
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Principal Amount
at Maturity
Principal Amount of Senior
Name of Initial Purchaser of Senior Notes Discount Notes
- ------------------------------------------------ ---------------- ----------------
<S> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................. $190,010,000 $248,087,000
Citicorp Securities, Inc........................ $190,010,000 $248,087,000
Bear, Stearns & Co. Inc......................... $31,667,000 $41,245,000
Donaldson, Lufkin & Jenrette
Securities Corporation........................ $31,667,000 $41,245,000
Morgan Stanley & Co. Incorporated............... $31,666,000 $41,244,000
Total........................................... $475,000,000 $618,670,000
============ ============
</TABLE>
Sch A - 1
<PAGE>
SCHEDULE B
FOX KIDS WORLDWIDE, INC.
$475,000,000 9 1/4% Senior Notes due 2007
$618,670,000 10 1/4% Senior Discount Notes due 2007
1. The initial public offering price of the Senior Notes shall be
100% of the principal amount at maturity, plus accrued and unpaid interest, if
any, from October 28, 1997.
2. The initial public offering price of the Senior Discount Notes
shall be 60.614% of the principal amount at maturity, plus accretion, if any,
from October 28, 1997.
3. The purchase price to be paid by the Initial Purchasers for the
Senior Notes shall be 98% of the principal amount thereof at maturity.
4. The purchase price to be paid by the Initial Purchasers for the
Senior Discount Notes shall be 59.09865% of the principal amount thereof at
maturity.
5. The interest on the Senior Notes shall be 9 1/4% per annum and
will be payable semiannually in arrears on May 1 and November 1 of each year,
commencing May 1, 1998.
6. Cash interest will not accrue or be payable on the Senior Discount
Notes prior to November 1, 2002 except under certain circumstances. Thereafter,
cash interest on the Senior Discount Notes will accrue at a rate of 10 1/4% per
annum and will be payable semiannually in arrears on May 1 and November 1 of
each year commencing May 1, 2003.
7. The Securities will mature on November 1, 2007.
8. The Senior Notes will be redeemable at the option of the Company,
in whole or in part, at any time on or after November 1, 2002, at the redemption
prices (expressed as percentages of principal amount) set forth below, plus
accrued and unpaid interest, if any, to the redemption date, if redeemed during
the 12-month period beginning on November 1, of the years indicated below:
Sch B - 1
<PAGE>
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2002.................................................. 104.625%
2003.................................................. 103.083%
2004.................................................. 101.542%
2005 and thereafter................................... 100%
</TABLE>
The Senior Discount Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after November 1, 2002, at the
redemption prices (expressed as a percentage of principal amount at maturity)
set forth below, plus accrued and unpaid interest therein, if any, to the
redemption date, if redeemed during the 12-month period beginning on November 1
of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2002.................................................. 105.125%
2003.................................................. 103.417%
2004.................................................. 101.708%
2005 and thereafter................................... 100%
</TABLE>
In addition, on or prior to November 1, 2000, the Company may redeem
up to an aggregate of 35% of the principal amount of the Senior Notes originally
issued at a redemption price of 109.25% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of redemption, and may redeem
up to 35% of the originally issued principal amount at maturity of the Senior
Discount Notes at a redemption price equal to 110.25% of the Accreted Value of
the Senior Discount Notes so redeemed at the redemption date (or, if a Cash
Interest Election has been made, 110.25% of the principal amount at maturity of
the Senior Discount Notes so redeemed, plus accrued and unpaid interest, if any
to the redemption date), in each case with the net cash proceeds of one or more
Public Equity Offerings or sales of Qualified Equity Interests of the Company to
one or more Strategic Equity Investors resulting in gross cash proceeds to the
Company of at least $1,000,000 in the aggregate; provided, however, that not
less than 65% of the originally issued aggregate principal amount of Senior
Notes and not less than 65% of the originally issued principal amount at
maturity of Senior Discount Notes is outstanding immediately after giving effect
to such redemption.
Sch B - 2
<PAGE>
Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(a)
(i) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(ii) The Company has the requisite power and authority to own, lease
and operate its properties and to conduct its business as described in the
Offering Memorandum and to enter into and perform its obligations under the
Purchase Agreement.
(iii) To the best knowledge of such counsel, the Company is duly
qualified as a corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a Material
Adverse Effect.
(iv) Each Subsidiary (as hereinafter defined)* has been duly
organized and is validly existing as a limited liability company or corporation,
as the case may be, in good standing under the laws of the jurisdiction of its
organization, has the corporate or otherwise requisite power, as the case may
be, and authority to own, lease and operate its properties and to conduct its
business as described in the Offering Memorandum and is duly qualified as a
foreign limited liability company or corporation, as the case may be, to
transact business and to the best knowledge of such counsel is in good standing
in each jurisdiction in which such qualification is required, whether by reason
of the ownership or leasing of property or the conduct of business, except where
the failure so to qualify or to be in good standing would not result in a
Material Adverse Effect.
(v) To the best knowledge of such counsel, there is not pending, any
action, suit, proceeding, inquiry or investigation, to which the Company or any
Subsidiary is a party, or to which the property of the Company or any Subsidiary
is subject, before or brought by any court or governmental agency or body, which
might reasonably be expected to result in a Material Adverse Effect, or which
might reasonably be expected to materially and adversely affect the properties
or assets thereof or the consummation of the transactions
- ----------
* Non-IFE Subsidiaries.
A-1
<PAGE>
contemplated in the Purchase Agreement or the performance by the Company of its
obligations thereunder or the transactions contemplated by the Offering
Memorandum.
(vi) All descriptions in the Offering Memorandum of contracts and
other documents to which the Company or any of the Subsidiaries is a party are
accurate in all material respects.
(vii) To the best knowledge of such counsel, neither the Company nor
any of the Subsidiaries is in violation of its certificate of formation, limited
liability company agreement, charter, by-laws or other organizational documents.
(viii) Except as previously made or obtained, as the case may be, no
Governmental Approval is necessary or required in connection with the execution
or delivery by the Company of this Agreement, the Registration Rights Agreements
or the Securities, as applicable, or the performance by the Company of the
transactions contemplated thereby, except such as may be required under state
securities or "Blue Sky" laws, the rules and regulations of the Commission and
the rules and regulations of the National Association of Securities Dealers in
connection with the registration obligations under the Registration Rights
Agreements. The term "Governmental Approval" means any filing with, or
authorization, approval, consent, license, order, registration, qualification or
decree of any Governmental Authority (as defined below) pursuant to Applicable
Laws (as defined below). The term "Applicable Laws" means only those laws,
rules and regulations of the State of Delaware, State of California and of the
United States of America that, in such counsel's experience, are ordinarily
applicable to transactions of the type contemplated by this Agreement. The term
"Governmental Authority" means any Delaware, California or federal legislative,
judicial, administrative or regulatory body under Applicable Laws.
(ix) To the best knowledge of such counsel, the execution, delivery
and performance of the Purchase Agreement, the Indentures, the Registration
Rights Agreements and the Securities and the consummation of the transactions
contemplated in the Purchase Agreement and in the Offering Memorandum (including
the use of the proceeds from the sale of the Securities as described in the
Offering Memorandum under the caption "Use Of Proceeds") and compliance by the
Company with its obligations under the Purchase Agreement, the Indentures, the
Registration Rights Agreements and the Securities will not, whether with or
without the giving of notice or lapse of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined in Section
l(a)(xvi) of the Purchase Agreement) under or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company or any Subsidiary pursuant to any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, lease or any other agreement or
instrument, known to such counsel, to which the Company or any of its
Subsidiaries is a party or by which it or any of them may be bound, or to which
any of the property or assets of the Company or any Subsidiary thereof is
subject (except for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not have a Material Adverse Effect), nor will such
A-2
<PAGE>
action result in any violation of the provisions of the certificate of
formation, limited liability company agreement, charter, by-laws or other
organizational document of the Company or any of the Subsidiaries, or any
applicable law, statute, rule, regulation, judgment, order, writ or decree,
known to such counsel, of any government, government instrumentality or court,
domestic or foreign, having jurisdiction over the Company or any of the
Subsidiaries or any of their respective properties, assets or operations.
(x) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the 1940
Act.
In addition such counsel shall state that such counsel has
participated in conferences with representatives of the Initial Purchasers,
officers and other representatives of the Company and representatives of the
independent certified accountants of the Company, at which conferences the
contents of the Offering Memorandum and the business and affairs of the Company
and the Subsidiaries were discussed, and although such counsel has not verified
and does not pass upon or assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Offering Memorandum
(except and only to the extent set forth in subclause (vi) above), on the basis
of the foregoing, no facts have come to the attention of such counsel that lead
such counsel to believe that the Offering Memorandum at the date thereof or as
of the Closing Time, contained or contains an untrue statement of a material
fact or omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (it being understood that such counsel need not express any
comment with respect to the financial statements, including the notes thereto
and supporting schedules, or any other financial data set forth or referred to
in the Offering Memorandum).
In rendering such opinions, such counsel (A) need not express any
opinion with regard to the application of laws of any jurisdiction other than
the Federal law of the United States, the General Corporation Law of the State
of Delaware and the laws of the State of California and (B) may rely, as to
matters of fact, to the extent they deem proper on representations or
certificates of responsible officers of the Company and certificates of public
officials.
References to the Offering Memorandum in this subsection include any
supplements thereto at or prior to the Closing Time.
A-3
<PAGE>
Exhibit B
FORM OF OPINION OF COMPANY'S SPECIAL COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(i) This Purchase Agreement has been duly authorized, executed and
delivered by the Company.
(ii) The Indentures have been duly authorized, executed and delivered
by the Company and (assuming the due authorization, execution and delivery
thereof by the Trustee) constitutes valid and binding agreements of the Company,
enforceable against each of the Company in accordance with their terms, except
as the enforcement thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or other similar laws relating to or affecting enforcement of
creditors' rights generally, or by general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law).
(iii) The Securities are in the form contemplated by the Indentures,
the Securities and Exchange Securities have been duly authorized by the Company
and, when executed by the Company and authenticated by the Trustee in the
manner provided in the Indentures (assuming the due authorization, execution and
delivery of the Indentures by the Trustee) and delivered against payment of the
purchase price therefor in the manner provided for in the Offering Memorandum,
the Securities will constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium (including, without limitation, all laws relating to fraudulent
transfers), or other similar laws relating to or affecting enforcement of
creditor's rights generally, or by general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law), and will
be entitled to the benefits of the Indenture.
(iv) The Registration Rights Agreements have been duly authorized,
executed and delivered by the Company and (assuming the due authorization,
execution and delivery thereof by the Initial Purchasers) constitute valid and
binding agreements of the Company, enforceable against the Company in accordance
with their terms, except as the enforcement thereof may be limited by (i)
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or other similar laws relating
to or affecting enforcement of creditors' rights generally, or by general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) or (ii) as
B-1
<PAGE>
to any indemnification or contribution provision thereof, by any applicable
state or federal securities laws, rules or regulations or by public policy.
(v) The Securities, the Indentures and the Registration Rights
Agreements conform in all material respects to the descriptions thereof
contained in the Offering Memorandum.
(vi) The issuance of the Securities is not subject to preemptive or
other similar rights arising by operation of law, or under the certificate of
incorporation or by-laws of the Company.
(vii) The information in the Offering Memorandum under "Description
of the Notes and United States Income Tax Considerations," to the extent that
such information purports to summarize legal matters, or legal conclusions, has
been reviewed by them and is accurate in all material respects.
(viii) Assuming (A) the accuracy of the representations and
warranties of the Company set forth in Section 1 of the Purchase Agreement and
of the Initial Purchasers in Section 2 of the Purchase Agreement, (B) the due
performance by the Company of the covenants and agreements set forth in Section
3(d) and 6(b) of the Purchase Agreement and the due performance by the Initial
Purchasers of the covenants and agreements set forth in Section 6(a) of the
Purchase Agreement, (C) compliance by the Initial Purchasers with the offering
and transfer procedures and restrictions described in the Offering Memorandum,
(D) the accuracy of the representations and warranties made by purchasers to
whom the Initial Purchaser initially resells the Securities pursuant to Rule
144A and (E) that purchasers to whom the Initial Purchaser initially resells the
Securities receive a copy of the Offering Memorandum or other notice that such
resales are made pursuant to Rule 144A under the Securities Act prior to such
sale, it is not necessary in connection with the offer, sale and delivery of the
Securities by the Company and the Initial Purchaser to register the Securities
under the 1933 Act, or to qualify the Indenture under the 1939 Act; it being
understood that such counsel need express no opinion as to any subsequent resale
of the Securities.
(ix) To the best knowledge of such counsel, the execution, delivery
and performance of the Purchase Agreement, the Indentures, the Registration
Rights Agreements and the Securities and the consummation of the transactions
contemplated in the Purchase Agreement and in the Offering Memorandum (including
the use of the proceeds from the sale of the Securities as described in the
Offering Memorandum under the caption "Use Of Proceeds") and compliance by the
Company with its obligations under the Purchase Agreement, the Indentures, the
Registration Rights Agreements and the Securities will not, whether with or
without the giving of notice or lapse of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined in Section
l(a)(xvi) of the Purchase Agreement) under or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company or any Subsidiary pursuant to any contract, indenture, mortgage,
B-2
<PAGE>
deed of trust, loan or credit agreement, note, lease or any other agreement or
instrument, known to such counsel, to which the Company or any of its
Subsidiaries is a party or by which it or any of them may be bound, or to which
any of the property or assets of the Company or any Subsidiary thereof is
subject (except for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not have a Material Adverse Effect), nor will such
action result in any violation of the provisions of the certificate of
incorporation or by-laws of the Company or any of the Subsidiaries, or any
applicable law, statute, rule, regulation, judgment, order, writ or decree,
known to such counsel, of any government, government instrumentality or court,
domestic or foreign, having jurisdiction over the Company or any of the
Subsidiaries or any of their respective properties, assets or operations.
In addition such counsel shall state that such counsel has
participated in conferences with representatives of the Initial Purchasers,
officers and other representatives of the Company and representatives of the
independent certified accountants of the Company, at which conferences the
contents of the Offering Memorandum and the business and affairs of the Company
and the Subsidiaries were discussed, and although such counsel has not verified
and does not pass upon or assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Offering Memorandum
(except and only to the extent set forth in subclause (vi) above), on the basis
of the foregoing, no facts have come to the attention of such counsel that lead
such counsel to believe that the Offering Memorandum at the date thereof or as
of the Closing Time, contained or contains an untrue statement of a material
fact or omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (it being understood that such counsel need not express any
comment with respect to the financial statements, including the notes thereto
and supporting schedules, or any other financial data set forth or referred to
in the Offering Memorandum).
In rendering such opinions, such counsel (A) need not express any
opinion with regard to the application of laws of any jurisdiction other than
the Federal law of the United States, the General Corporation Law of the State
of Delaware and the laws of the State of New York and (B) may rely, as to
matters of fact, to the extent they deem proper on representations or
certificates of responsible officers of the Company and certificates of public
officials.
References to the Offering Memorandum in this subsection include any
supplements thereto at or prior to the Closing Time.
B-3
<PAGE>
Exhibit C
FORM OF OPINION OF COMPANY'S REGULATORY COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(C)
(i) The information in the Offering Memorandum under "Risk Factors --
Potential Adverse Impact of Regulation" and "Business -- Government Regulation
and Legislation" to the extent that such information constitutes a summary of
federal communications law and the rules, regulations and administrative orders
promulgated or proposed in pending notices of proposed rulemaking for
promulgation thereunder, has been reviewed by such counsel and is correct in all
material respects.
(ii) Except as previously made or obtained, as the case may be, no
filing with, or authorization, approval, consent, license, order, registration,
qualification or decree of any court or administrative agency or authority is
necessary or required under the Communications Act of 1934, as amended, the
Cable Communications Policy Act of 1984, the Cable Television Consumer
Protection and Competition Act of 1992 and the Telecommunications Act of 1996
and the published rules and regulations of the Federal Communications Commission
in connection with the execution or delivery by the Company of the Purchase
Agreement, the Registration Rights Agreements or the Securities, as applicable,
or the performance by the Company of the transactions contemplated thereby.
C-1
<PAGE>
EXHIBIT 2.1
================================================================================
SHARE TRANSFER AGREEMENT
================================================================================
Draft No. 8 of 15/04/96
BETWEEN THE UNDERSIGNED
Mr. Jean Chalopin, born on 31 May 1950 in Sannois (95), of French nationality,
residing at Chateau de Farcheville, Bouville (91880);
Archimedia
59 Rue de Chateaudun, 75009 Paris
represented by its President, Mr. J.F. Moral
World Entertainment Group Luxembourg SA
58 Rue Glesener L 1630, Luxembourg
represented by its President, Mr. James Wadham
Apax CR II (A)
43/45 Avenue Kleber, 75784 Paris Cedex 16
represented by Apax Partners et Cie Gestion, itself represented by Mr. P. de
Giovanni
Apax CR II (c)
43/45 Avenue Kleber, 75784 Paris Cedex 16
represented by Apax Partners et Cie Gestion, itself represented by Mr. P. de
Giovanni
Apax Partners et Co. Ventures SA
43/45 Avenue Kleber, 75784 Paris Cedex 16
represented by Apax Partners et Cie Gestion, itself represented by Mr. P. de
Giovanni
Olivier Spiner
born on 28 November 1957 in Paris, 75010
of French nationality
residing at 220 Avenue du Maine, Paris (75014)
Ethel Sau Yee Chalopin, nee Fong Sau Yee
born on 30 July 1963 in Singapore
of French nationality
residing at Chateau de Farcheville, Bouville (91880)
Hereinafter collectively referred to as the "Sellers",
OF THE FIRST PART
- --------------------------------------------------------------------------------
1
<PAGE>
AND
Saban International Paris, a French SARL (limited liability company) with a
capital of FRF 740.000, whose registered office is at 1 Rond-Point de l'Europe,
La Garenne Colombes (92250), registered with the Registry of Trade and Companies
of Nanterre under number B 312 161 516 represented by Mrs. Jacqueline Tordjman,
duly empowered;
Hereinafter referred to as the "Purchaser"
OF THE SECOND PART
WHEREAS
Creativite & Developpement is a societe anonyme (corporation) with a capital of
---------------
FRF 5,000,000, having its registered office at 1 rue Rene Anjolvy, 94250
Gentilly, registered with the Registry of Trade and Companies of Creteil under
number B 714 800 687;
Its capital is divided into 4,000 shares of FRF 1,250 each, fully paid up.
Hereinafter referred to as "C & D".
The "Sellers" represent that they are fully entitled to sell the shares
(hereinafter "the Shares") of which they have full ownership. On the Transfer
Date (as defined in Article 2 below) the Shares shall be free and clear of all
pledges, usufructs, liens or security interests, commitments to sell or
preemptive rights and there are no pending lawsuits or claims that could
interfere or prevent their negotiability and transfer to the Purchaser.
The Sellers represent moreover that they have obtained all necessary
authorizations for the transfer of the Shares and that such transfer does not
violate any French legal or regulatory prescriptions nor any provision of the
Memorandum and Articles of Association nor any contract to which the Sellers or
C & D are parties.
The Purchaser represents that it is fully entitled to acquire the Shares, that
it has obtained all necessary authorizations for this purpose and that said
acquisition does not violate any French legal or regulatory prescriptions.
The parties acknowledge that as of 26 October 1995 the Purchaser completed its
due diligence investigation of C & D including its financial statements as of 30
June 1995 and that the result of its investigation is satisfactory and that the
carrying out of the Transfer is not conditioned upon the approval of any
subsequent investigations.
The parties agree that such preamble is an integral part of this agreement.
- --------------------------------------------------------------------------------
2
<PAGE>
IT HAS NOW THEREFORE BEEN AGREED AS FOLLOWS:
ARTICLE 1 - TRANSFER
- --------------------
The Sellers hereby transfer and the Purchaser hereby acquires the Shares free
from all liens, pledges or charges in favor of any third party, subject to the
terms and conditions set forth below.
ARTICLE 2 - COMPLETION OF THE TRANSFER
- --------------------------------------
The transfer is hereby completed at the date hereof (hereinafter the "Transfer
Date"), the parties hereby acknowledging that the following conditions have been
fulfilled at the date hereof.
(a) The divestment by C & D of the following operating subsidiaries and/or
affiliates and/or operating divisions thereof, including all assets,
liabilities and obligations of every kind related thereto:
(i) Planete Magique, a societe anonyme, with a capital of FRF 250,000,
---------------
whose registered office is at 1, Rue Rene Anjolvy, 94250 Gentilly,
registered with the Registry of Trade and Companies of Creteil under
number B 344 886 395, this divestment occurring at the date hereof,
by payment by the Purchaser for the shares of this company to C & D
of the price of one franc;
(ii) Societe d'Exploitation de la Gaite Lyrique, a societe anonyme with a
---------------
capital of FRF 52,623,800, whose registered office is at 3 bis, Rue
Papin, 75003 Paris, registered with the Registry of Trade and
Companies of Paris, under number B 338 070 915, this divestment
occurring at the date hereof, by means of payment by the Purchaser
for the shares of this company to C & D of the price of one franc;
and
(iii) The lamp business, as described in and according to the terms of the
draft sale agreement attached hereto in Annex 1 (hereafter the "Lamp
Business") the divestment thereof occurring concurrently with the
transfer herein. The payment of the price of the transfer of the
fonds (business) shall not take place until after a maximum time
-----
period of 10 days after the signature of the corresponding document.
The purchaser of the Lamp Business may use "C & D Lamps" as a trade
name.
(iv) KK C & D, a company organized under Japanese law, with a capital of
Yen 10,000,000 whose registered office is at Yamaichi, NK Building,
4-4-11 Nakano, Nakano-Ku. This divestment occurred on 28 December by
means of payment by the purchaser of the Shares of the company to C
& D of the price of one US dollar; and.
By means of an extraordinary general resolution of the shareholders
of KK C & D of 21 March 1996, the corporate name was changed to KK
Asianimation. As a result thereof, all of the rights to the name C &
D revert
- --------------------------------------------------------------------------------
3
<PAGE>
to C & D except with respect to the purchaser of the Lamp Business
who shall have the right to use the trade name "C & D Lamps".
(b) Signature by the Purchaser and Mr. Jean Chalopin of a Representation and
Warranty Agreement in the form of the draft attached hereto in Annex (Annex
2).
(c) Signature by Mr. Jean Chalopin of the personal guarantees relating to the
Lamp Business referred to at sub-paragraph (a)(iii) above, and to the
divestment of KK C & D referred to at sub-paragraph (a)(iv) above, attached
hereto in Annexes 3 and 4.
ARTICLE 3 - DETERMINING AND PAYMENT OF THE PRICE
- ------------------------------------------------
3.1 The price of the transfer of the Shares shall represent a global amount of
two million eight hundred and sixty-eight thousand seven hundred and fifty
US dollars (USD 2,868,750), hereinafter referred to as the "Purchase
Price".
This transfer price has been determined on the basis of the accounts as at
31 December 1994 certified by the Statutory Auditor, as well as the
financial statements as at 30 June 1995 (as attached in Annex 5), of which
the Purchaser has express knowledge, as well as all legal and accounting
documents provided during the Purchaser's due diligence investigation.
Furthermore, the transfer price is conditioned upon C & D not mortgaging,
pledging, selling or otherwise encumbering or disposing of any of its
tangible or intangible assets as from 26 October 1995 except as permitted
herein or carried out within the framework of the ordinary running of the
business.
This global transfer price includes ABC's stake in the assets of C & D and
the buyout of all of Mr. Jean Chalopin's future rights and entitlements, of
any nature whatsoever, as an author of audiovisual works owned or
controlled by C & D to the extent any such rights or entitlements shall
create an obligation for C & D, or any of its successors, to make a payment
directly to Mr. Jean Chalopin.
However, Mr. Jean Chalopin shall remain the owner of the rights whose
payment to him is assured by SACD and SACEM and any other collective
management bodies.
The parties expressly and irrevocably agree that only Mr. Jean Chalopin,
and not Archimedia or Apax whether as shareholders and for directors of
C&D, shall subscribe to the representations and warranties given to Buyer
on C&D financial statements, and the interim statements used for the
determination of the Purchase Price and the assets and liabilities of C&D
and ABC.
All representations and warranties made and guarantees given in connection
with the transfer of shares, object of the present agreement, with the sole
exception of those concerning the fact that the C&D shares transferred by
Apax and Archimedia are freely transferable and free of any liens, are
contained in the Representation and Warranties Agreement attached hereto as
Annex 2.
- --------------------------------------------------------------------------------
4
<PAGE>
3.2 The part of the abovementioned price to be paid to Mr. Jean Chalopin shall
be increased (or, as the case may be, decreased in the event that the
amount defined hereinafter is negative) by an amount equal to the algebraic
sum of the following:
a) The amount received by C & D for the transfer of the tangibles and
intangibles as set forth in the sale of the fonds de commerce (business
-----------------
assets) annexed hereto, i.e. FRF 560,000, decreased, as the case may be, by
any and all fiscal charges paid by C & D on this price;
b) The amount, exclusive of tax, received by C & D by virtue of the
transfer of the stock of the Lamp Business, i.e. the sum of FRF ;
c) The net cash provided or used by the Lamp Business since 1 January
1995 until the date of the transfer of the fonds de commerce, it being
-----------------
understood that a provided amount shall be positive for the algebraic sum
hereunder and a used amount shall be negative for said algebraic sum.
The net cash provided or used for the period shall be calculated as
follows:
+ The results of the Lamp Business for the period between 1/1/95 up
until the date of the transfer of the fonds de commerce (including all
-----------------
personnel costs related to the three full-time employees and that part
of the activity allocated to Lamps for the employee shared between the
Lamp Business and the general services of C & D, i.e. 50% of the
personnel costs corresponding to this employee);
- The share of C & D's overhead attributable to the Lamp Business for
the same period determined by mutual agreement;
+/- The variation of the Lamps receivables for the same period (it
being understood that an increase in the receivables shall correspond
to net cash used and that a decrease in receivables corresponds to net
cash provided);
+/- The variation in the inventory account for the same period (it
being understood that an increase in the inventory shall correspond to
net cash used and that a decrease in the inventory shall correspond to
net cash provided);
+/- The variation in the Lamps payables for the same period (it being
understood that an increase in the payables shall correspond to net
cash provided and that a decrease in the payables shall correspond to
net cash used);
+/- The variation in the part of the fiscal and social charges related
to the personnel employed by the Lamp Business, including, as the case
may be, salaries, reimbursements of expenses and compensation of any
nature related to the personnel of the Lamp Business, i.e. three full-
time employees and an employee shared with the general services of C &
D for that part of the activity of said person within the Lamp
Business, i.e. 50% of his activity (it being understood that an
increase in these charges shall represent net cash provided and that a
decrease in these charges shall represent net cash used);
- --------------------------------------------------------------------------------
5
<PAGE>
+/- The variation in the collected VAT corresponding to the Lamp
Business for the same period (it being understood that an increase in
the collected VAT shall correspond to net cash provided and that a
decrease in the collected VAT shall correspond to net cash used);
+/- The variation in the deductible VAT corresponding to the Lamp
Business for the same period (it being understood that an increase in
the deductible VAT shall correspond to net cash used and that a
decrease in the deductible VAT shall correspond to net cash provided).
The determination of the total amount and the payment of this amount by the
affected party (Saban International Paris if the algebraic sum defined
hereinabove is positive and Mr. Jean Chalopin if this sum is negative)
shall take place within 45 days from the transfer of the Lamp Business.
Any dispute that might arise with respect to the determination of the total
amount as defined hereinabove shall be submitted to arbitration by KPMG
Fiduciaire de France, a conciliator chosen by mutual agreement by the
parties and such conciliator shall decide as an amicable compounder.
3.3 On the date hereof, the Purchaser hereby pays 60% of the Purchase Price to
the Sellers, i.e. the sum of one million seven hundred and twenty-one
thousand two hundred and fifty US dollars (USD 1,721,250) by the handing
over of a cashier's check made to the order of each seller according to the
apportionment set forth in Annex 6.
RECEIPT OF WHICH IS
HEREBY ACKNOWLEDGED
The balance of the Purchase Price, i.e. the sum of one million one hundred
and forty-seven thousand five hundred US dollars (USD 1,147,500) shall be
paid one year following the Transfer Date according to the apportionment
set forth in Annex 6 and shall be secured by the letter of credit attached
hereto in Annex 7.
This notwithstanding, WORLD ENTERTAINMENT GROUP LUXEMBOURG, Madame Ethel
CHALOPIN and Monsieur Olivier SPINER accept, without any reserve, that the
amount withheld by SABAN INTERNATIONAL PARIS on the balance due to them as
the sale price of their shares shall be part of the security set forth in
Article 28 of the representation and warranties agreement entered into by
Monsieur CHALOPIN. They declare they will make their own arrangements with
Monsieur CHALOPIN in case part or all of the balance owed to them should be
acquired by Buyer pursuant to said Representation and Warranties Agreement
and acknowledge they will have no recourse against Buyer or Saban
Entertainment Inc.
ARTICLE 4 - DELIVERY OF DOCUMENTS
- ---------------------------------
On the Transfer Date, i.e. the date hereof:
4.1 The Sellers hereby hand over to the Purchaser:
- --------------------------------------------------------------------------------
6
<PAGE>
(i) the share transfer forms (ordres de mouvement) for all the Shares,
-------------------
duly completed and signed;
(ii) Mr. Jean Chalopin and Mr. Olivier Spiner hereby hand over to C & D,
against payment to each of them the sum of one (1) franc, RECEIPT OF
WHICH IS HEREBY ACKNOWLEDGED: the share transfer forms for the
shares they hold in their individual capacities in ABC SA, duly
completed and signed, it being understood that the transfer of Mr.
Chalopin's share shall not take effect until after the expiration of
his office as President of ABC, i.e. twelve months after the
Transfer Date;
(iii) the register of share transfers of C & D, the individual accounts of
the shareholders of C & D, a certified copy of the Memorandum and
Articles of Association of C & D, as well as the attendance
registers and minutes of the meetings of the Board of Directors,
including the register of the minutes of the general meetings of C &
D;
(iv) the original executed copies of Mr. Chalopin's Guarantees;
(v) the resignation letters from all the directors of C & D;
(vi) minutes of a meeting of the Board of Directors of C & D, held at
least 15 days prior to the Transfer Date, approving the transfer of
the Shares to the Purchaser and duly calling an ordinary general
meeting to appoint as directors persons whose names the Purchaser
has provided to the Sellers.
It is understood that the resignation of the directors presently in
office and the holding of an ordinary general meeting to replace
said directors shall take effect subject to the condition precedent
of the carrying out of the transfer anticipated herein.
4.2 In return, the Purchaser hereby hands over to the Sellers:
(i) A cashier's check to the order of each of the Sellers for a total
amount of USD 1,721,250) provided for under paragraph 3.3 above.
(ii) The letter of credit referred to in paragraph 3.3 above.
(iii) A certified copy of a letter from the Treasury Department of the
French Ministry of Economy and Finance confirming that the sale
hereunder is unrestricted with regard to the regulations concerning
foreign investments in France.
(iv) A certified, true copy of the minutes of the general meeting of
Saban International Paris authorizing the acquisition of the Shares
by the Purchaser.
(v) Confirmation by each new shareholder of C & D that it gives:
- --------------------------------------------------------------------------------
7
<PAGE>
- full and final release to the departing directors for the
execution of their mandates prior to the Transfer Date and
shall consequently waive its right to any individual action in
liability against them subject to the relevant mandates and
missions having been performed in compliance with applicable
regulations;
- full and final release to the executives, lawyers and agents of
C & D for the execution of their missions prior to the Transfer
Date, waiving consequently its right to any action of any
nature whatsoever against them, it being understood that such
release is given to them by the shareholders in their personal
names as well as in the name of and on behalf of C & D and to
the extent that their missions and mandates were performed in
compliance with applicable regulations.
Prior to the Transfer Date, each former shareholder of C & D gave
full and final release to the directors, executives, lawyers and
agents for the performance of their missions or mandates prior to
such Date.
It is, however, understood that the above clauses shall not in any
way prevent the Purchaser to act for the implementation of the
guarantees contained in the Representations and Warranties Agreement
and Mr. Chalopin's guarantees (Lamps, KK C & D and "GF" litigation),
in accordance with the attached annexes (Annexes 3, 4 and 8). The
Purchaser expressly acknowledges that said agreements contain all of
the guarantees that are granted to it within the framework of this
transfer to the exclusion of any other.
(vi) The Sellers hereby acknowledge to already be in possession of the
guarantee given by Saban Entertainment Inc. in order to ensure
compliance with its obligations by the Purchaser.
ARTICLE 5 - MANAGEMENT OF ABC
- -----------------------------
Mr. Jean Chalopin shall remain President of ABC SA for twelve months after the
Transfer Date, but shall act according to the instructions of the Purchaser.
Any other director or permanent representative of company directors of ABC who
is a seller hereunder shall vote on resolutions in accordance with the
instructions of C & D after the Transfer Date.
Mr. Jean Chalopin and any other director of ABC as defined hereinabove shall be
entitled to full indemnity by the Purchaser for any loss or damages suffered by
them as a result of their complying with the instructions of the Purchaser in
accordance with the guarantee contained in Annex 8 hereto.
ARTICLE 6 - CONFIDENTIALITY AND ANNOUNCEMENT
- --------------------------------------------
- --------------------------------------------------------------------------------
8
<PAGE>
Neither party shall disclose any information whether technical, commercial,
financial or other relating to the contemplated transfer herein, except to their
advisors or in order to compel the other party to fulfill its obligations as a
result of its refusal to do so. The terms of this agreement shall remain
confidential between the parties.
Aside from the aforementioned exceptions, the party who shall make any
disclosures or render such disclosure necessary shall alone assume all of the
consequences whatsoever resulting therefrom.
The parties shall not make any public announcement concerning the acquisition of
the Shares without the prior and express consent of the other party, except as
required by law.
It is expressly understood that the announcement of the transfer vis-a-vis third
parties shall be the subject of prior consultation between the parties and that
a written communique shall be jointly drafted by the parties.
- --------------------------------------------------------------------------------
9
<PAGE>
ARTICLE 7 - APPLICABLE LAW AND JURISDICTION
- -------------------------------------------
This agreement and its annexes shall be governed by French law.
All disputes which may arise with respect to the validity, interpretation or
execution of this agreement shall first be submitted to a sole conciliator
appointed by mutual agreement of the parties or falling this by the President of
the Tribunal de Commerce (Commerce Court) deciding upon the request of the most
--------------------
diligent party.
Failing conciliation within 60 days as from the appointment of the conciliator,
the dispute shall fall within the jurisdiction of the Tribunal de Commerce of
--------------------
Paris.
ARTICLE 8 - LANGUAGE OF THE AGREEMENT
- -------------------------------------
This agreement is entered into and signed in the French language.
ARTICLE 9 - ENTIRETY OF AGREEMENT
- ---------------------------------
This document constitutes the final and complete expression of the wishes of the
parties to the agreement and therefore annuls any prior agreement with respect
to the same purpose. It contains all of the agreements between the parties and
may not be completed or interpreted by words or writings whether prior to,
simultaneously with or subsequent to this document.
The prior practices between the parties and the manner in which they have
performed the contract may not be taken into consideration for the
interpretation thereof.
ARTICLE 10 - AMENDMENTS - WAIVERS
- ---------------------------------
This agreement may only be amended by a written rider duly signed by the Sellers
and the Purchaser.
No allowance of failure to act by one of the parties shall be interpreted as a
waiver of the rights and terms contained herein.
ARTICLE 11 - HEADINGS
- ---------------------
The parties expressly agree that the annexes to this agreement form an integral
part of the agreement.
The headings of the clauses of this agreement are only descriptive and shall not
in any way restrict the scope of the obligations that the parties have agreed
to.
- --------------------------------------------------------------------------------
10
<PAGE>
ARTICLE 12 - PARTIAL INVALIDITY
- -------------------------------
The invalidity of any of the articles or paragraphs of this agreement shall not
render invalid the remaining articles and paragraphs or the validity of this
agreement as a whole.
ARTICLE 13 - NOTICES
- --------------------
Any notice between the parties relating to this agreement will be in writing,
sent by registered mail return receipt requested addressed to the other party at
the address indicated hereinbelow or at any other address which may be notified
to the other party:
- - For the Sellers:
Mr. Jean Chalopin at Chateau de Farcheville, Bouville (91880);
Archimedia at 59 Rue de Chateaudun, Paris (75009);
World Entertainment Group Luxembourg SA at 58, Rue Glesener, Luxembourg (1630);
Apax CR II (A) at 43/45 Avenue Kleber, Paris (75784 Cedex 16);
Apax CR II (C) at 43/45 Avenue Kleber, Paris (75784 Cedex 16);
Apax Partners et Co. Ventures SA at 43/45 Avenue Kleber, Paris (75784 Cedex 16);
Olivier Spiner at 220 Avenue du Maine, Paris (75014);
Ethel Fong Chalopin at Chateau de Farcheville, Bouville (91880);
- - For the Purchaser:
Saban International Paris, at 1 Rond-Point de l'Europe, La Garenne Colombes
(92250);
The date of notice shall be the date of the receipt of the writing and the
return receipt shall attest to this.
Failing actual receipt, the date of the presentation of the writing shall
substitute therefor.
ARTICLE 14 - COSTS
- ------------------
Each party shall bear its own costs in respect of the preparation and
negotiation of this agreement, except for costs incurred and paid by C & D prior
to 1 January 1995, which shall be borne by the Company. No costs incurred in
connection with the transactions contemplated herein or prior costs incurred by
the Seller after December 31, 1994, in connection with the earlier solicitation
of similar transactions shall be borne by or, otherwise, charged to C & D.
- --------------------------------------------------------------------------------
11
<PAGE>
Done in [....]
On [....]
In nine original copies with one original for each party.
Mr. Jean Chalopin
Archimedia
World Entertainment Group Luxembourg SA
Apax CR II (A)
Apax CR II (C)
Apax Partners et Co. Ventures
Mr. Olivier Spiner
Mrs. Ethel Chalopin
Saban International Paris
- --------------------------------------------------------------------------------
12
<PAGE>
EXHIBIT 2.2
AGREEMENT FOR THE PURCHASE OF FILM ASSETS
-----------------------------------------
This agreement (the "Agreement") is made as of December 31, 1995 by
and between VESICAL LIMITED, a corporation organized under the laws of The
Commonwealth of the Bahamas, (the "Seller") and SABAN INTERNATIONAL N.V., a
corporation organized under the laws of the Netherlands Antilles ("Buyer").
Seller is the owner of certain rights in and to the library of DIC
television programming as Vesical Company N.V., Seller's predecessor in
interest, acquired from Lamalo N.V. in 1988, subject to existing liabilities and
as more fully described in Exhibit "A" and the disclosure statements contained
in Exhibit "B" attached hereto, which by this reference are incorporated herein
(the "DIC Library"). Seller desires to sell all of Seller's right, title, and
interest in the DIC Library.
Buyer desires to purchase from the Seller all of Seller's right,
title, and interest in the DIC Library, subject to the terms and conditions
hereinafter set forth.
In consideration of the mutual terms, conditions and covenants
hereinafter set forth Seller and Buyer agree as follows:
1. Purchase and Sale of DIC Library. Seller shall sell to Buyer,
--------------------------------
and Buyer shall buy from Seller, the following: (a) the DIC Library, (b) all
physical materials in Seller's possession or control of each of the programs
comprising the DIC Library, as set forth in Exhibit "C", (c) originals of,
copies of, or rights of access to, all records pertaining to Seller's, and
Seller's assigns', sublicensees', and designees' exploitation thereof, (d) the
Post 1994 Receivables, as defined below, and (e) all contracts between Seller
and third parties in connection therewith or related thereto, (collectively, the
"DIC Library Assets").
2. Receivables.
-----------
(a) Post 1994 Receivables. This sale includes all monies due to
---------------------
Seller at the Closing Date, as hereinafter defined, and those that accrue after
the Closing Date, in either case which are attributable to licenses, leases, and
other agreements for the exploitation of the DIC Library, each of which was
entered into on or after January 1, 1995 ("Post 1994 Receivables").
(b) Collection and Disbursement of Post 1994 Receivables. Seller
----------------------------------------------------
represents and warrants that as of October 26, 1995 Seller directed its
sublicensees Now Entertainment, B.V. ("Now") and Creativite et Development
("C&D") (collectively, "Subdistributors") to hold in reserve Vesical's share of
all monies received by Subdistributors on or after such date for income received
on account of Post 1994 Receivables.
(c) Excluded Receivables. This sale does not include any monies
--------------------
due to Seller which are attributable to licenses, leases, and other agreements
for the exploitation of the DIC Library, each of which was entered into before
January 1, 1995 ("Excluded Receivables").
<PAGE>
(d) Collection and Disbursement of Excluded Receivables. All
---------------------------------------------------
amounts collected by Buyer or C&D, as the case may be, with respect to the
Excluded Receivables shall be accounted for and remitted to Now on a quarterly
basis, or as otherwise provided in that certain Distribution Agreement dated as
of April 1, 1988 by and between Now and C&D, as modified by that certain
Protocole d'Accord dated November 14, 1994 between Now and C&D as recognized by
the Tribunal de Commerce de Paris in a judgement dated January 19, 1995. On
October 26, 1995, Seller directed C&D to offset against any amounts payable to
Now or Seller with respect to the Excluded Receivables against the amounts paid
to them with respect to Post 1994 Receivables, and to hold such funds in
reserve. Such offsets, at the Closing, equal amounts paid to the Subdistributors
with respect to Post 1994 Receivables. A reconciliation of the payments to the
Subdistributors and offsets is attached as Exhibit "D" hereto.
(e) Amounts Due Now as of January 1, 1995. Any amounts due Now
-------------------------------------
as of January 1, 1995, as indicated in Exhibit "E", shall be paid to Now to the
extent not paid prior to the Closing. Saban Entertainment, Inc., a Delaware
corporation ("SEI") guarantees that its affiliates SIP (as defined below) and
C&D shall make full and prompt payment of the foregoing amounts.
(f) Release of Funds Following Closing. On the first business day
----------------------------------
following the Closing, Seller shall irrevocably direct Subdistributors to pay to
SINV Vesical's share of all monies held in reserve by Subdistributors under
paragraph 2(b) or as an offset under paragraph 2(d). If the transactions
contemplated by this Agreement do not close, or if this Agreement is terminated
in accordance with its terms, Buyer shall have no interest in the monies held in
reserve by Subdistributors and such funds shall be distributed as directed by
Seller.
3. Liabilities. For the avoidance of doubt, Buyer is purchasing
-----------
only the DIC Library Assets, subject to existing liabilities and as more fully
described in Exhibit "A" and the disclosure statements contained in Exhibit "B"
attached hereto, or as specifically provided in this Agreement. All accounts
payable, liabilities, and obligations of Seller arising in connection with the
DIC Library Assets prior to the Closing Date shall be assumed by Buyer, and
Buyer shall hold Seller harmless against such amounts and third party claims
therefor. All accounts payable, liabilities, and obligations arising in
connection with the DIC Library Assets after the Closing shall be paid by Buyer,
and Buyer shall hold Seller harmless against such amounts and third party claims
therefor. Except as expressly set forth herein, Buyer is not acquiring,
directly, any of Seller's liabilities that are unrelated to the DIC Library
Assets, by operation of law or otherwise.
4. Purchase Price. In full and complete consideration for the
--------------
transfer of the DIC Library Assets pursuant to this Agreement, Buyer shall pay
Seller the sum of Twelve Million United States Dollars (US$12,000,000) (the
"Purchase Price"). Payment of the Purchase Price shall be made in two
installments, the first installment in the amount of Seven Million Two Hundred
Thousand United States Dollars (US$7,200,000) shall be paid on the Closing, and
the second installment in the amount of Four Million Eight Hundred Thousand
United States Dollars (US$4,800,000) shall be paid on the date which is one (1)
year after the Closing. Payment of such second installment shall be secured by
an unconditional, irrevocable letter of credit in the form set
2
<PAGE>
forth in Exhibit "F" attached hereto, Payment of each installment of the
purchase price shall be made by telegraphic wire transfer to Seller's account at
a bank designated by Seller.
5. Seller's Representations and Warranties. Seller represents and
---------------------------------------
warrants to Buyer as follows:
(a) Seller has the authority to execute and deliver this
Agreement, and to perform its obligations hereunder.
(b) This Agreement has been duly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, or similar laws relating to creditors rights generally,
and by other principles of law of general applicability limiting a party's
remedies.
(c) Seller has not hypothecated, sold, leased, mortgaged or
otherwise disposed of or encumbered any rights which it acquired from Lamalo
N.V. in 1988 in the DIC Library, except in the normal course of licensing
exploitation rights therein directly or indirectly through C&D or as disclosed
in Exhibits "A" and "B" hereto, or as otherwise permitted herein. All rights in
and to the DIC Library Assets transferred pursuant to this Agreement are free in
all material respects of any and all liens, security interests, claims and
encumbrances, except as otherwise noted in Exhibits "A" and "B", and except for
claims and encumbrances created pursuant to agreements for the exploitation of
the DIC Library Assets entered into in and arising under the ordinary course of
business.
(d) With respect to the period of time following the date of
acquisition of the DIC Library from Lamalo N.V., except as set forth in Exhibits
"A" and "B," Seller is not in material breach or default of any license, lease,
or other agreement exploiting the DIC Library for which accounts receivable are
to be assigned pursuant to this Agreement, which breach has not been disclosed
in writing to Buyer, and will not commit a breach or act of default prior to the
Closing.
(e) There are no outstanding agreements with or commitments or
promises to third parties that were created in the period of time following the
date of acquisition of the DIC Library from Lamalo N. V. with respect to the DIC
Library other than those set forth in Exhibits "A" and "B" and other than
agreements for the exploitation of the DIC Library Assets entered into in the
ordinary course of business.
(f) Other than an agreement which is the sole responsibility of
Seller, Seller has not engaged a broker for the sale represented by this
Agreement. Seller agrees to indemnify and hold Buyer harmless from any broker's
or finder's fee or alleged broker's or finder's fee incurred by Seller, or any
claim by any party that Seller entered into an agreement calling for a broker's
or finder's fee.
3
<PAGE>
(g) Except as set forth in Exhibits "A" and "B," and the
contracts referred to therein, no special consents are required to be obtained
by Seller to enable it to carry out the transactions contemplated by this
Agreement.
(h) Seller makes no representation or warranty as to any matter
relating to the chain of title to the DIC Library of Lamalo N.V. or its
predecessors-in-interest.
(i) The records and documents supplied to Buyer's representatives
pertaining to Seller's, and Seller's assigns', sublicensees', and designees'
exploitation of the DIC Library, are complete in all material respects, and, to
the extent prepared by Seller or C&D, are accurate in all material respects.
(j) Except for one contract for the exploitation of the DIC
Library in the Bahamas made directly by Now, all contracts for the exploitation
of the DIC Library were made by or through C&D.
(k) With respect to the second sentence of Section 3, Seller is
not aware of any liabilities which have not been disclosed in writing to Buyer,
other than liabilities related to delivery problems and obligations pursuant to
written license agreements with exhibitors, broadcasters, agents, subagents, and
home video distributors of programs in the DIC Library that have been made
available to Buyer's representatives for their review and inspection. Written
disclosures made to SIP, as defined below, pursuant to the C&D Acquisition, as
defined below, shall be deemed to be written disclosures to SINV hereunder.
The above representations and warranties shall survive the Closing.
6. Buyer's Representations and Warranties. Buyer represents and
--------------------------------------
warrants to Seller as follows:
(a) Buyer has the authority to execute and deliver this
Agreement, and to perform its obligations hereunder.
(b) This Agreement has been duly executed and delivered by Buyer
and constitutes a valid and binding obligation of Buyer enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, or similar laws relating to creditors rights, and by
other principles of law of general applicability limiting a party's remedies.
(c) Buyer agrees to indemnify and hold Seller harmless from any
broker's or finder's fee or alleged broker's or finder's fee incurred by Buyer,
or any claim by any party that Buyer entered into an agreement calling for a
broker's or finder's fee.
(d) Buyer has reviewed Exhibits "A" and "B," and the other
disclosure materials provided to it, and it is satisfied with them. Buyer has
had, during the course of this transaction, the opportunity to ask questions of,
and receive answers from, management concerning the DIC Library Assets, and
Seller's business, assets and prospects related thereto, and
4
<PAGE>
to review all relevant contracts. Buyer has exercised its own judgement and
analysis in entering into this Agreement. Buyer acknowledges that the ultimates,
projections and other forward looking information are rough estimates of
potential future performance, and are not a guarantee of future performance, and
that Buyer has not relied upon such information in entering into this Agreement.
(e) Buyer is a sophisticated buyer, with experience and knowledge
of the industry and markets in which the DIC Library Assets are exploited.
(f) No special consents are required to be obtained by Buyer to
enable it to carry out the transactions contemplated by this Agreement.
The above representations and warranties shall survive the Closing.
7. Indemnification of Seller. Buyer agrees to indemnify and hold
-------------------------
Seller harmless from any liability arising out of or related to the DIC Library
after the Closing Date, except to the extent that such liability arises as a
result of a breach of a representation or warranty by Seller.
7A. Physical Materials. If, during the one year period beginning on
------------------
the Closing, SINV is unable to service a licensee of the DIC Library by reason
of a lack of customary exploitation materials which either (i) conform to
broadcast norms in existence on the Closing Date, or (ii) conform to production
norms customarily used at the date of production for comparable programs, or
(iii) are reasonably acceptable for the servicing of such licensee; and, in
addition, SINV is unable to obtain such materials (e.g., tapes for broadcast)
from sources at its disposal or from third parties, Vesical shall reimburse SINV
for the direct loss it suffers due to SINV's inability to provide such delivery
materials. Notwithstanding the foregoing, Vesical shall not reimburse SINV for
any loss with respect to a series of programs licensed in a territory if such
series of programs had been licensed in that territory during the five (5) years
preceding the Closing.
8. Negotiation and Documentation Costs. Buyer and Seller each shall
-----------------------------------
assume full responsibility for its costs incurred directly or indirectly in
connection with the negotiation, documentation, and consummation of the
transactions contemplated by this Agreement.
9. Closing. The closing of the transactions contemplated hereby
-------
shall take place on April 18, 1996, or as soon thereafter as is practical (the
"Closing"). Notwithstanding the foregoing, the closing shall take place
concurrently with closing of a transaction contemplated between Saban
International Paris SARL ("SIP"), a company organized under the laws of France
and which is affiliated with SINV, and the shareholders of C&D, pursuant to
which SIP shall purchase 100% of the shares of stock of C&D (the "C&D
Acquisition"). The Closing shall take place in the Netherlands Antilles at a
location mutually agreed by the parties.
(a) Buyer's Closing Documents. At the closing, Buyer shall
-------------------------
deliver to Seller, the following:
5
<PAGE>
(i) The first installment of the Purchase Price;
(ii) The irrevocable letter of credit issued by Imperial
Bank, securing payment of the second installment of the Purchase Price;
(iii) Certified copies (or the local equivalent thereof) of
the resolutions of the managing directors of Buyer authorizing the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby; and
(iv) The letter of instructions regarding the disbursement
of collections with respect to the Excluded Receivables described in Section
2(d), in the form attached hereto as Exhibit "G."
(v) The guarantee of SEI with respect to the obligations of
SIP and C&D described in Section 2(e), in the form attached hereto as Exhibit
"L."
(b) Seller's Closing Documents. At the Closing, Seller shall
--------------------------
deliver to Buyer, the following:
(i) An instrument of assignment of the DIC Library Assets in
the form attached hereto as Exhibit "H".
(ii) The letter of instructions regarding the release of the
reserves described in Section 2(e), in the form attached hereto as Exhibit "I".
(iii) Certified copies of the resolutions of the managing
directors of Seller authorizing the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby.
(iv) Access letters covering all physical materials in
Seller's possession and control, of each of the programs comprising the DIC
Library, executed by Seller, and addressed to Now, and a similar letter executed
by Now and addressed to C & D, in the form attached hereto as Exhibit "J."
10. Notices. Notices and other communication hereunder shall be in
-------
writing and shall be deemed given if delivered personally, facsimile (receipt of
which is confirmed by the party to whom sent), mailed, or air couriered to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice).
If to SINV, to:
Plaza JoJo Correa 1-5
Curacao, Netherlands Antilles
Facsimile number: 599-961-26-47
6
<PAGE>
If to Vesical, to:
Windemere House
404 East Bay Street
P.O. Box SS-5539
Nassau, Bahamas
Facsimile number: (809) 393-0582
11. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of, and be subject to the exclusive jurisdiction of
the courts of, the Netherlands Antilles applicable to contracts to be performed
wholly within such jurisdiction.
12. Attorneys Fees. In the event that any action, suit, or other
--------------
proceeding is instituted concerning or arising out of this Agreement, the
prevailing party shall recover all of such party's reasonable attorneys' fees
and costs incurred in such action, suit and proceeding.
13. Confidentiality. Except as required by applicable law, the terms
---------------
of this Agreement and the terms of the acquisition of the DIC Library Assets
will be kept strictly confidential. Each party may disclose otherwise
confidential information to its accountants, attorneys, and other professional
advisors, provided that each agrees to maintain such disclosure in confidence.
To the extent that any other disclosure becomes legally required, the non-
disclosing party shall be notified promptly and before disclosure is made. In
the event the transactions contemplated hereby fail to close, each party shall
promptly return any materials it has received from the other. No party shall
make any public announcement or statement with respect to this Agreement or the
purchase and sale of the DIC Library Assets without the prior written approval
of the other party to this Agreement except for the public announcement attached
hereto as Exhibit "K" and any other announcement or statement containing
substantially the same information.
14. Termination. The parties' obligations hereunder may be
-----------
terminated and the transactions contemplated herein abandoned as follows:
(a) By mutual agreement of the parties;
(b) By Buyer, at Buyer's election, if Seller refuses or is unable
to close the transactions contemplated by this Agreement;
(c) By Seller, at Seller's election, if Buyer refuses or is
unable to close the transactions contemplated by this Agreement;
(d) By Buyer, at Buyer's election, if the C&D shareholders refuse
or are unable to close the transactions contemplated by the C&D Acquisition; or
(e) By Seller, at Seller's election, if SIP refuses or is unable
to close the transactions contemplated by the C&D Acquisition.
7
<PAGE>
15. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same document.
16. Limitation on Remedies. The parties agree that neither of them
----------------------
shall have available the remedy of rescission in the event of a breach of this
Agreement.
17. Integration. This Agreement and the attached exhibits contain
-----------
the entire agreement between the parties, and there are no further or other
agreements or understandings, written or oral, in effect between them relating
to the subject matter of this Agreement. This Agreement constitutes the "Long
Form Agreement" to which reference is made in that certain letter agreement
between the parties dated as of October 26, 1995 (the "Letter Agreement"), and,
when executed by the parties, shall supersede the Letter Agreement which shall
be of no further force and effect.
18. Exhibits. The exhibits to this Agreement constitute an integral
--------
part hereof, and are incorporated into this Agreement. The disclosure of any
contract which constitutes a DIC Library Asset shall be considered to be a
disclosure of all of the terms and conditions of such contract.
19. Severability. Should any provision of this Agreement be
------------
determined to be void, invalid or unenforceable for any reason, such defect
shall not render void, invalid or unenforceable any other provision of this
Agreement.
20. Amendments and Waivers. This Agreement may be amended, or any
----------------------
provision waived, only by a writing signed by the parties hereto.
8
<PAGE>
21. Time of the Essence. Time is of the essence of each provision of
-------------------
this Agreement in which time is an element.
IN WITNESS WHEREOF, the parties have executed this Agreement, as of
December 31, 1995.
SABAN INTERNATIONAL N.V.
By /s/ R.A. de Meza
------------------------
Its Managing Director
Date ________________________
VESICAL LIMITED
By /s/
------------------------
Its Vice-President
Date ________________________
9
<PAGE>
EXHIBIT 2.3
AGREEMENT AND PLAN OF MERGER
----------------------------
This AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of June 11,
---------
1997, is by and among FOX KIDS WORLDWIDE, INC., a Delaware corporation ("FKWW"),
----
FOX KIDS MERGER CORPORATION, a Delaware corporation and wholly-owned subsidiary
of FKWW ("FKW Sub"), and INTERNATIONAL FAMILY ENTERTAINMENT, INC., a Delaware
-------
corporation (the "Company").
-------
RECITALS
--------
WHEREAS, it is the intention of the parties that FKW Sub merge with and
into the Company, upon the terms and subject to the conditions set forth herein
(the "Merger"), with the Company surviving as a wholly owned subsidiary of FKWW;
------
WHEREAS,
(a) M.G. "Pat" Robertson, individually and as trustee of each of the
Robertson Charitable Remainder Unitrust, u/t/a dated January 22, 1990
(the "PR Charitable Trust"), the Gordon P. Robertson Irrevocable
-------------------
Trust, u/t/a dated December 18, 1996, the Elizabeth F. Robinson
Irrevocable Trust, u/t/a dated December 18, 1996, and the Ann R.
Lablanc Irrevocable Trust, u/t/a dated December 18, 1996 (the Gordon
P. Robertson Irrevocable Trust, the Elizabeth F. Robinson Irrevocable
Trust and the Ann R. Lablanc Irrevocable Trust, together, the
"Irrevocable Trusts"), Lisa N. Robertson and Timothy B. Robertson
------------------
("Tim Robertson") as joint tenants, and Tim Robertson, individually,
---------------
as trustee of each of the Timothy and Lisa Robertson Children's Trust,
u/t/a dated September 18, 1995 (the "TR Family Trust") and the Timothy
---------------
B. Robertson Charitable Trust, u/t/a dated December 30, 1996 (the "TR
--
Charitable Trust"), and as custodian to and for each of Abigail H.
----------------
Robertson, Laura N. Robertson, Elizabeth C. Robertson, Willis H.
Robertson and Caroline S. Robertson under the Virginia Uniform
Transfers to Minors Act (Pat Robertson, the PR Charitable Trust, the
Irrevocable Trusts, Lisa N. Robertson, Tim Robertson, the TR Family
Trust and the TR Charitable Trust being sometimes collectively
referred to herein as the "Robertson Sellers"), have agreed to sell to
-----------------
FKWW, all of the outstanding shares of Class A Common Stock, par value
$0.01 per share, of the Company (the "Class A Stock"), in the form of
-------------
Class B Common Stock, par value $0.01 per share, of the Company (the
"Class B Stock") issuable upon conversion thereof, and the shares of
-------------
Class B Stock owned by them or issuable to them upon exercise of
outstanding stock options, pursuant to that certain Stock Purchase
Agreement, dated of even date herewith, by and among FKWW, on the one
<PAGE>
hand, and each of the Robertson Sellers, on the other hand (as amended
from time to time in accordance with its terms, the "Robertson
---------
Purchase Agreement");
------------------
(b) The Christian Broadcasting Network, Inc., a Virginia corporation
("CBN"), has agreed to sell to FKWW, all of the Class B Stock owned by
---
it, pursuant to the terms of that certain Stock Purchase Agreement,
dated of even date herewith, by and between FKWW and CBN (as amended
from time to time in accordance with its terms, the "CBN Purchase
------------
Agreement");
---------
(c) Regent University, a Virginia corporation ("Regent"), has agreed to
------
sell to FKWW all of the Class B Stock owned by it, pursuant to the
terms of that certain Stock Purchase Agreement, dated of even date
herewith, by and between FKWW and Regent (as amended from time to time
in accordance with its terms, the "Regent Purchase Agreement," and,
-------------------------
collectively with the Robertson Purchase Agreement and the CBN
Purchase Agreement, the "Stock Purchase Agreements");
-------------------------
(d) Liberty IFE, Inc., a Colorado corporation ("LIFE"), has agreed to
----
contribute to FKWW all of the shares of Class C Common Stock, par
value $0.01 per share, of the Company (the "Class C Stock," and
-------------
together with the Class A Stock and the Class B Stock, the "Company
-------
Stock"), and $23 million principal amount of 6% Convertible Secured
-----
Notes due 2004 of the Company (the "Convertible Notes"), in exchange
-----------------
for shares of Series A Preferred Stock, par value $0.01 per share, of
FKWW pursuant to that certain Contribution and Exchange Agreement,
dated of even date herewith, by and among LIFE, Liberty Media
Corporation, a Delaware corporation, and FKWW (as amended from time to
time in accordance with its terms, the "Contribution Agreement," and
----------------------
together with the Stock Purchase Agreements, the "Other Transaction
-----------------
Agreements"); and
----------
WHEREAS, the respective Boards of Directors of FKWW, FKW Sub and the
Company have each unanimously approved the Merger, in accordance with the
General Corporation Law of the State of Delaware (the "DGCL"), and the Board of
----
Directors of the Company has recommended the Merger to the Company's
stockholders;
WHEREAS, this Agreement and the Merger shall be approved by the
stockholders of the Company for purposes of the DGCL at such time as the Company
is in receipt of written consents approving this Agreement and the Merger
executed by the holders of that number of shares of Class A Stock and Class B
Stock (voting as a single class) representing the right to cast a majority of
the votes entitled to be cast at a meeting to consider the Agreement and the
Merger;
2
<PAGE>
WHEREAS, immediately following execution of this Agreement by the Company
and concurrently with the execution of this Agreement by FKWW and FKW Sub, the
Robertson Sellers, CBN and Regent (which holders hold of record a number of
shares of Class A Stock and Class B Stock representing a majority of the votes
entitled to be cast at a meeting to consider the Agreement and the Merger) are
delivering their written consent (the "Consent") approving this Agreement and
---------
the Merger (a copy of which is being provided to FKWW and FKW Sub), which
consent constitutes the only action necessary by stockholders of the Company
required in order to authorize this Agreement and the Merger under the Company's
Amended and Restated Certificate of Incorporation and the DGCL; and
WHEREAS, The News Corporation Limited ("Guarantor") has guaranteed the
---------
obligations of FKWW and FKW Sub under each of this Agreement and the Stock
Purchase Agreements by separate Guaranty Agreements (the Guaranty Agreement
delivered in connection with this Agreement, being referred to herein as the
"Guaranty") delivered to the Company, the Robertson Sellers, CBN and Regent.
- ---------
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties and covenants herein contained, and for other good
and valuable consideration the receipt and adequacy of which is hereby
acknowledged, FKWW, FKW Sub and the Company hereby agree as set forth below. An
index of defined terms used throughout this Agreement appears at Section 9.16
hereof.
ARTICLE I
------- -
THE MERGER
----------
1.1 The Merger. Upon the terms and subject to the conditions of this
----------
Agreement, at the Effective Time (as defined in Section 1.3 hereof), in
accordance with this Agreement and the DGCL, FKW Sub shall be merged with and
into the Company, the separate existence of FKW Sub shall cease, and the Company
shall continue as the surviving corporation (the "Surviving Corporation"). The
---------------------
Company and FKW Sub are sometimes referred to herein as the "Constituent
-----------
Corporations."
- ------------
1.2 Effect of the Merger. The Merger shall have the effects set
--------------------
forth in the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all of the properties, rights,
privileges, powers and franchises of the Company and FKW Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of the Company and
FKW Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.3 Consummation of the Merger. On the later of (i) two business
--------------------------
days after the satisfaction or waiver of the conditions set forth in Article VII
hereof or (ii) the 20th calendar day after the Information Statement is first
sent or given to the Company's stockholders, the parties hereto shall cause the
Merger to be consummated by filing with the Secretary of State of the State of
Delaware a certificate of merger in such form as required by, and executed in
accordance with, the relevant provisions of the DGCL and take all such further
actions as may
3
<PAGE>
be required by law to make the Merger effective (the "Merger Filing"). The
-------------
Merger shall become effective at the time of day on the date that the
certificate of merger is filed with the Secretary of State of the State of
Delaware or such later time as may be mutually agreed to by the parties hereto
and specified in the Merger Filing (the "Effective Time").
--------------
1.4 Certificate of Incorporation and Bylaws. The Amended and
---------------------------------------
Restated Certificate of Incorporation of the Company in effect immediately prior
to the Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation. The By-Laws of FKW Sub in effect immediately prior to the
Effective Time shall be the By-Laws of the Surviving Corporation.
1.5 Directors and Officers. The directors of the Company immediately
----------------------
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, and the officers of the Company immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation, in each case
until their successors are duly elected and qualified.
1.6 Conversion of Securities. At the Effective Time, by virtue of
------------------------
the Merger and without any action on the part of FKW Sub, the Company, the
Surviving Corporation or the holder of any outstanding share of the Class A
Stock, Class B Stock or Class C Stock (each, a "Share" and collectively, the
-----
"Shares"):
------
(a) Each Share which is issued and outstanding immediately prior to
the Effective Time (other than Shares held by FKWW, FKW Sub or the Company or by
any Subsidiary of FKWW, FKW Sub or the Company) shall be canceled and
extinguished and be converted into and become a right to receive (i) in the case
of all such Shares other than Dissenting Shares, a cash payment equal to $35.00
per Share (subject to adjustment as provided for in Section 1.6(d) below),
without interest (the "Merger Consideration"), and (ii) in the case of
--------------------
Dissenting Shares, the consideration set forth in Section 1.7 hereof;
(b) Each Share which is issued and outstanding immediately prior to
the Effective Time and held by FKWW, FKW Sub, or the Company or by any
Subsidiary of FKWW, FKW Sub, or the Company shall be canceled and extinguished
and no consideration shall be paid therefor;
(c) Each share of capital stock of FKW Sub, par value $0.001 per
share, outstanding immediately prior to the Effective Time shall be converted
into and become one share of Class B Common Stock, par value $0.001 per share,
of the Surviving Corporation; and
(d) The Merger Consideration shall be increased to an amount which
equals (if greater than the Merger Consideration provided for herein) the per
share amount actually paid, directly or indirectly, by FKWW or any of its
Affiliates, with respect to the purchase of, or agreement to purchase, Company
Stock, or securities convertible into Company Stock, which purchase is effected
or agreement is entered into after the date hereof and through the Effective
Time (x) from (i) any of the Robertson Sellers, (ii) LIFE, (iii) CBN, (iv)
Regent, (v) any holder or "group" (within the meaning of Rule 13d-5(b)(1) under
the Exchange Act) that owns, or has the right to dispose of, or to direct the
disposition of, 2-1/2% or more of any class of common stock of the Company, (vi)
any of the Affiliates of the entities referred to in clauses
4
<PAGE>
(i), (ii), (iii), (iv) or (v) above, or (y) in any transaction, or series of
related or unrelated transactions (excluding for purposes of this clause (y),
any transaction referred to in clauses (x)(i), (ii), (iii), (iv) and (vi)),
after the date hereof and through the Effective Time, involving, in the
aggregate, 5% or more of the outstanding shares of any class of common stock of
the Company. For these purposes, it is acknowledged and agreed that (x) the $3.5
million to be paid to LIFE under the Contribution Agreement with respect to
forfeited interest income on the Convertible Notes, and (y) amounts to be paid
with respect to any "tax gross up" with respect to the Exchange Rights under the
Contribution Agreement, shall not constitute an amount paid, directly or
indirectly, with respect to the purchase of Company Stock. Further, the Merger
Consideration shall not be adjusted as a result of the provisions of the
preceding sentence with respect to any purchase effected under any of the
Contribution Agreement, the Robertson Purchase Agreement, CBN Purchase Agreement
or the Regent Purchase Agreement unless the applicable agreement has been
amended after the date hereof so as to increase the consideration to be paid by
FKWW or any of its Affiliates, directly or indirectly, with respect to the
Company Stock or securities convertible into Company Stock. FKWW shall promptly
provide notice to the Company of any agreement or amendment to an existing
agreement entered into by FKWW or any of its Affiliates with a Robertson Seller,
CBN or Regent, or any amendment to an Other Transaction Agreement to which LIFE
or any of its Affiliates is a party, from and after the date hereof and through
the Effective Time.
1.7 Dissenting Shares.
-----------------
(a) Notwithstanding anything in this Agreement to the contrary, Shares
which are issued and outstanding immediately prior to the Effective Time and
which are held by stockholders who have not voted such Shares in favor of the
Merger or consented thereto in writing, who shall have delivered a written
demand for appraisal of such Shares in the manner provided in the DGCL and who,
as of the Effective Time, shall not have effectively withdrawn or lost such
right to appraisal ("Dissenting Shares") shall not be converted into or
-----------------
represent a right to receive the Merger Consideration pursuant to Section 1.6
hereof, but the holders thereof shall be entitled only to such rights as are
granted by Section 262 of the DGCL. Each holder of Dissenting Shares who
becomes entitled to payment for such Shares pursuant to Section 262 of the DGCL
shall receive payment therefor from the Surviving Corporation in accordance with
the DGCL; provided, however, that (i) if any such holder of Dissenting Shares
-------- -------
shall have failed to establish his entitlement to appraisal rights as provided
in Section 262 of the DGCL, or (ii) if any such holder of Dissenting Shares
shall have effectively withdrawn his demand for appraisal of such Shares or lost
his right to appraisal and payment of his Shares under Section 262 of the DGCL,
or (iii) if neither any holder of Dissenting Shares nor the Surviving
Corporation shall have filed a petition demanding a determination of the value
of all Dissenting Shares within the time provided in Section 262 of the DGCL,
such holder or holders (as the case may be) shall forfeit the right to appraisal
of such Shares, and each such Share shall thereupon be deemed to have been
converted, as of the Effective Time, into and represent the right to receive
payment from the Surviving Corporation of the Merger Consideration, without
interest thereon, as provided in Section 1.6 hereof.
(b) Prior to the Effective Time, the Company shall give FKW Sub (i)
prompt notice of any written demands for appraisal, withdrawals of demands for
appraisal and any
5
<PAGE>
petitions served pursuant to Section 262 of the DGCL received by the Company,
and (ii) the opportunity to direct all negotiations and proceedings with respect
to demands for appraisal under Section 262 of the DGCL. The Company shall not,
except with the prior written consent of FKW Sub, voluntarily make any payment
with respect to any demands for appraisal or offers to settle or settle any such
demands.
1.8 Stock Options and Other Plans.
-----------------------------
(a) Prior to the Effective Time, the Board of Directors of the Company
(or, if appropriate, any committee thereof) shall adopt appropriate resolutions
and use its reasonable good faith efforts to take all other actions necessary to
provide for the cancellation, effective at the Effective Time, subject to the
payment provided for in the next sentence being made, of all the outstanding
stock options, warrants or rights to purchase Shares heretofore granted
(collectively, the "Options") under any outstanding stock option plan or
-------
pursuant to any outstanding warrant agreement or any other outstanding plan,
program or arrangement of the Company providing for the issuance or grant of any
other interest in respect of the capital stock of the Company or any Subsidiary
of the Company (collectively, the "Stock Plans") such that, immediately prior to
-----------
the Effective Time, (i) each Option, whether or not then vested or exercisable,
shall no longer be exercisable for the purchase of Shares, but shall entitle
each holder thereof, in cancellation and settlement therefor, to payments in
cash (subject to any applicable withholding taxes, the "Cash Payment"), at the
------------
Effective Time, equal to the product of (x) the total number of Shares subject
to such Option, whether or not then vested or exercisable, and (y) the excess of
the Merger Consideration over the exercise price per Share subject to such
Option, each such Cash Payment to be paid to each holder of an outstanding
Option at the Effective Time; provided, however, that with respect to any Person
-------- -------
subject to Section 16 of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder (the "Exchange Act"), any such amount shall
------------
be paid, without interest, as soon as practicable after the first date payment
can be made without liability to such Person under Section 16(b) of the Exchange
Act, and (ii) each Share previously issued in the form of grants of restricted
stock or grants of contingent shares shall fully vest in accordance with their
respective terms. Any then outstanding stock appreciation rights or limited
stock appreciation rights shall be canceled immediately prior to the Effective
Time without any payment therefor. The Company will use its reasonable good
faith efforts to ensure that, at the Effective Time, neither the Company nor any
of its Subsidiaries is or will be bound by any Options or Stock Plans which
would entitle any Person to acquire or hold any capital stock of the Surviving
Corporation or any of its Subsidiaries or to receive any payment in respect
thereof other than as set forth in this Agreement or the MTM Stock Plan,
providing for the issuance to employees of MTM Entertainment, Inc., a Delaware
corporation ("MTM"), a wholly owned Subsidiary of the Company, of shares of
---
common stock of MTM, all as, and other than as, disclosed in the Company
Disclosure Letter, including using its reasonable good faith efforts to obtain
all necessary consents and releases to ensure that after the Effective Time, the
only rights of the holders of Options will be to receive the Cash Payment in
cancellation and settlement thereof. Notwithstanding any other provision of
this Section 1.8 to the contrary, the Cash Payment may be withheld with respect
to any Option until necessary consents and releases are obtained.
6
<PAGE>
(b) All provisions in any Stock Plan providing for the future issuance
or grant of any capital stock of the Company or any interest in respect of any
capital stock of the Company shall terminate or be amended as of the Effective
Time to provide no continuing rights to acquire or be issued or granted any
capital stock or any interest in any capital stock (including, but not limited
to Options) of the Company or the Surviving Corporation (other than in respect
of capital stock or interests in capital stock (including, but not limited to,
Options) granted prior to the Effective Time, which are governed by the
provisions of Section 1.8(a) above).
1.9 Exchange of Certificates.
------------------------
(a) From and after the Effective Time, a bank or trust company to be
designated by FKW Sub and reasonably acceptable to the Company (the "Exchange
--------
Agent") shall act as exchange agent in effecting the exchange of the Merger
- -----
Consideration for certificates representing Shares entitled to payment pursuant
to Section 1.6 (the "Certificates"). At or prior to the Effective Time, FKW Sub
------------
shall deposit with the Exchange Agent the amount necessary to enable the
Exchange Agent to exchange the Merger Consideration for Certificates received by
the Exchange Agent.
(b) Promptly after the Effective Time, the Exchange Agent shall mail
to each record holder of Certificates a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent) and instructions for use in surrendering Certificates and
receiving the Merger Consideration therefor. Upon the surrender of each
Certificate, together with such letter of transmittal duly executed and
completed in accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive in exchange therefor an amount equal to
the Merger Consideration multiplied by the number of Shares represented by such
Certificate, and such Certificate shall be canceled. Until so surrendered and
exchanged, each such Certificate shall represent solely the right to receive an
amount equal to the Merger Consideration multiplied by the number of Shares
represented by such Certificate. No interest shall be paid or accrue on the
Merger Consideration payable upon the surrender of the Certificates. If any
Merger Consideration is to be paid to a Person other than the Person in whose
name the Certificate surrendered in exchange therefor is registered, such
Certificate shall be accompanied by all documents required to evidence and
effect such transfer, and it shall be a condition to such exchange that the
Person requesting such exchange shall pay to the Exchange Agent any transfer or
other taxes required by reason of the payment of such Merger Consideration to a
Person other than the registered holder of the Certificate surrendered, or such
Person shall establish to the satisfaction of the Exchange Agent that such tax
has been paid or is not applicable. Notwithstanding the foregoing, neither the
Exchange Agent nor any party hereto shall be liable to a holder of Shares for
any Merger Consideration delivered to a public official pursuant to applicable
abandoned property, escheat and similar laws.
(c) Promptly following the date which is 180 days after the Effective
Time, the Exchange Agent's duties shall terminate, and any funds deposited with
the Exchange Agent that remain unclaimed by holders of Certificates shall be
paid to the Surviving Corporation upon demand. Thereafter, each holder of a
Certificate may surrender such Certificate to the Surviving Corporation along
with the applicable letter of transmittal and (subject to applicable
7
<PAGE>
abandoned property, escheat and similar laws) receive in exchange therefor an
amount equal to the Merger Consideration multiplied by the number of Shares
represented by such Certificate, without any interest thereon, but shall have no
greater rights against the Surviving Corporation than may be accorded to general
creditors of the Surviving Corporation.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any Shares. If, after the
Effective Time, Certificates are presented to the Surviving Corporation or the
Exchange Agent, they shall be canceled and exchanged for the applicable Merger
Consideration, as provided in this Article I, subject to applicable law in the
case of Dissenting Shares.
1.10 Taking of Necessary Action; Further Action. If, at any time
------------------------------------------
after the Effective Time, any reasonable and lawful further action is necessary
or desirable to carry out the purposes of this Agreement and to vest the
Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of either of the Constituent
Corporations, the officers and directors of such corporations are fully
authorized in the name of their corporation or otherwise to take, and shall
take, all such lawful and necessary action.
ARTICLE II
----------
REPRESENTATIONS AND WARRANTIES OF FKWW
--------------------------------------
As an inducement to the Company to enter into this Agreement, FKWW
hereby makes the following representations and warranties:
2.1 Organization, Etc. of FKWW. FKWW 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 authority to own and operate
its properties and assets and to carry on its business as now conducted. FKWW is
duly qualified and in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the businesses conducted by it
makes such qualification necessary and where the failure to be so qualified
would be reasonably expected to have a material adverse effect on the business,
results of operations or financial condition of FKWW and its Subsidiaries taken
as a whole. FKWW has obtained from appropriate governmental regulatory
authorities, domestic or foreign (each a "Governmental Entity") all approvals,
-------------------
permits and licenses necessary for the conduct of its business and operations as
currently conducted, which approvals, permits and licenses are valid and in
full force and effect, except where the failure to have obtained such approvals,
permits or licenses or the failure of such approvals, permits or licenses to be
valid and in full force and effect would not be reasonably expected to have a
material adverse effect on the business, results of operations or financial
condition of FKWW and its Subsidiaries taken as a whole. Other than FKW Sub,
FKWW has no Subsidiaries. As used in this Agreement, "Subsidiary" of a
----------
specified Person means (i) any corporation of which equity securities possessing
a majority of the ordinary voting power in electing the board of directors are,
at the time as of which such determination is being made, owned or controlled by
such specified Person either directly or indirectly or in combination with one
or more Subsidiaries of such specified Person, or (ii) any Person (other than a
corporation)
8
<PAGE>
in which such specified Person either directly or indirectly through or in
combination with one or more Subsidiaries, at the time as of which such
determination is being made, (x) is a general partner, or (y) owns or controls
more than a 50% ownership interest and has the right to elect a majority of the
members of the governing authority of such specified Person.
2.2 Organization, Etc. of the Guarantor. The Guarantor is a
-----------------------------------
corporation organized and existing under the laws of South Australia, Australia,
with adequate corporate power and authority to own its properties and carry on
its business as presently conducted. The Guarantor has the corporate power and
authority to enter into, execute and deliver the Guaranty and to guarantee the
obligations of FKWW hereunder pursuant to such Guaranty.
2.3 Authorization. This Agreement and the consummation of the
-------------
transactions contemplated hereby have been unanimously approved by the Board of
Directors of FKWW and have been duly authorized by all other necessary corporate
action on the part of FKWW. This Agreement has been duly executed and delivered
by a duly authorized officer of FKWW and (assuming the same to be valid and
binding obligations of the other parties hereto) constitutes the valid and
binding agreement of FKWW, enforceable against FKWW in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general application which
may affect the enforcement of creditors' rights generally and by general
equitable principles. FKWW has delivered to the Company true and correct copies
of resolutions adopted by the Board of Directors of FKWW approving this
Agreement.
2.4 Execution, Delivery and Performance by the Guarantor. The
----------------------------------------------------
execution, delivery and performance of the Guaranty and the consummation of the
transactions contemplated thereby have been duly authorized by the Board of
Directors of the Guarantor, and the Guarantor has taken all other actions
required by law and its organizational documents in order to consummate the
transactions contemplated by the Guaranty. The Guaranty constitutes the valid
and binding obligations of the Guarantor and is enforceable in accordance with
its terms, except as enforceability may be subject to or limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally.
2.5 No Consents. The execution and delivery of this Agreement by
-----------
FKWW or by the Guarantor of the Guaranty, do not, and the performance of FKWW's
obligations under this Agreement and the Guarantor of its obligations under the
Guaranty, and the consummation of the transactions contemplated hereby or
thereby by FKWW and the Guarantor, respectively, will not require any consent,
approval, authorization or permit of, or filing with or notification to any
Governmental Entity, except (i) for (A) applicable requirements of the Exchange
Act, the Securities Act of 1933, as amended and the rules and regulations
thereunder (the "Securities Act"), and state securities or "blue sky" laws or
--------------
state anti-takeover laws ("Blue Sky Laws"), (B) the pre-merger notification
-------------
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended and the rules and regulations thereunder (the "HSR Act"), and (C) the
-------
Merger Filing, and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, (x) would
not, individually or in the aggregate, reasonably be expected to prevent
consummation of the Merger, or otherwise prevent FKWW or the Guarantor from
performing their respective obligations under this Agreement or the Guaranty in
9
<PAGE>
any material respect, and (y) would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the business,
results of operations or financial condition of FKWW and its Subsidiaries taken
as a whole.
2.6 Brokers and Finders. FKWW has not employed any investment
-------------------
banker, broker, finder, consultant or intermediary in connection with the
transactions contemplated by this Agreement which would be entitled to any
investment banking, brokerage, finder's or similar fee or commission payable
after the date hereof in connection with this Agreement or the Merger.
2.7 Compliance with Other Instruments, Etc. As of the date hereof,
---------------------------------------
FKWW is not in violation of any term of (a) its charter, by-laws or other
organizational documents, (b) any material agreement or instrument including any
such related to Indebtedness, (c) any applicable law, ordinance, rule or
regulation of any Governmental Entity, or (d) any applicable order, judgement or
decree of any court, arbitrator or Governmental Entity, the consequences of
which violation, whether individually or in the aggregate, would be reasonably
expected to have a material adverse effect on (i) the business, results of
operations or financial condition of FKWW or (ii) the ability of FKWW to perform
its obligations under this Agreement. The execution, delivery and performance
of this Agreement by FKWW will not result in any violation of or conflict with,
constitute a default under, or require any consent under any term of the
charter, bylaws or other organizational document of FKWW or any such agreement,
instrument, law, ordinance, rule, regulation, order, judgement or decree or
result in the creation of (or impose any obligation on FKWW to create) any Lien
upon any of the properties or assets of FKWW pursuant to any such term, except
where such violation, conflict or default, or the failure to obtain such
consent, individually or in the aggregate, would not be reasonably expected to
have a material adverse effect on (i) the business, results of operations or
financial condition of FKWW and its Subsidiaries taken as a whole or (ii) the
ability of FKWW to perform its obligations under this Agreement. For purposes
of this Agreement, "Lien" means any mortgage. pledge, lien, security interest or
----
other encumbrance of any kind or nature.
2.8 Litigation. As of the date hereof, there are no actions, suits,
----------
investigations or proceedings (adjudicatory or rulemaking) pending or, to the
knowledge of FKWW, threatened against FKWW or any of its respective properties
in any court or before any arbitrator of any kind or before or by any
Governmental Entity, except actions, suits, investigations or proceedings which,
in the aggregate, would not be reasonably expected to have a material adverse
effect on the ability of FKWW to perform its obligations under this Agreement.
2.9 Information True and Correct. None of the information supplied
----------------------------
or to be supplied by FKWW for inclusion in the Information Statement will, at
the date the definitive Information Statement is first sent or given to the
stockholders of the Company, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. No representation is made by FKWW with respect
to any information supplied by the Company or any of its Affiliates for
inclusion in the Information Statement.
10
<PAGE>
2.10 Transaction Agreements. This Agreement, the Other Transaction
----------------------
Agreements and the other agreements listed in the recitals above, are the only
agreements existing as of the date hereof between FKWW, on the one hand, and the
respective counterparties to such agreements and any Affiliates of such parties,
on the other hand, with respect to the acquisition of Class A Stock, Class B
Stock, Class C Stock or Convertible Notes.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF FKW SUB
-----------------------------------------
As an inducement to the Company to enter into this Agreement, FKW Sub
hereby makes the following representations and warranties:
3.1 Organization, Etc. FKW Sub 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 authority to own and operate its
properties and assets and to carry on its business as now conducted. FKW Sub is
duly qualified and in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the businesses conducted by it
makes such qualification necessary and where the failure to be so qualified
would be reasonably expected to have a material adverse effect on the business,
results of operations or financial condition of FKW Sub and its Subsidiaries
taken as a whole. FKW Sub has obtained from the appropriate Government Entities
all approvals, permits and licenses necessary for the conduct of its business
and operations as currently conducted, which approvals, permits and licenses
are valid and in full force and effect, except where the failure to have
obtained such approvals, permits or licenses or the failure of such approvals,
permits or licenses to be valid and in full force and effect would not be
reasonably expected to have a material adverse effect on the business, results
of operations or financial condition of FKW Sub and its Subsidiaries taken as a
whole. At the date of this Agreement, FKW Sub has no Subsidiaries.
3.2 Authorization. This Agreement and the consummation of the
-------------
transactions contemplated hereby have been unanimously approved by the Board of
Directors of FKW Sub and have been duly authorized by all other necessary
corporate action on the part of FKW Sub. This Agreement has been duly executed
and delivered by a duly authorized officer of FKW Sub and (assuming the same to
be valid and binding obligations of the other parties hereto) constitutes the
valid and binding agreement of FKW Sub, enforceable against FKW Sub in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws of general
application which may affect the enforcement of creditors' rights generally and
by general equitable principles.
3.3 No Consents. The execution and delivery of this Agreement by FKW
-----------
Sub do not, and the performance of its obligations under this Agreement and the
consummation of the transactions contemplated hereby by FKW Sub will not,
require any consent, approval, authorization or permit of, or filing with or
notification to any Governmental Entity, except (i) for (A) applicable
requirements of the Exchange Act, the Securities Act, and the Blue Sky Laws, (B)
the pre-merger notification requirements of the HSR Act, and (C) the Merger
Filing, and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such
11
<PAGE>
filings or notifications, (x) would
not, individually or in the aggregate, be reasonably expected to prevent
consummation of the Merger, or otherwise prevent FKW Sub from performing its
obligations under this Agreement in any material respect, and (y) would not,
individually or in the aggregate, be reasonably expected to have a material
adverse effect on the business, results of operations or financial condition of
FKWW and its Subsidiaries taken as a whole.
3.4 Brokers and Finders. FKW Sub has not employed any investment
-------------------
banker, broker, finder, consultant or intermediary in connection with the
transactions contemplated by this Agreement which would be entitled to any
investment banking, brokerage, finder's or similar fee or commission payable
after the date hereof in connection with the Merger.
3.5 Compliance with Other Instruments, Etc. As of the date hereof,
---------------------------------------
FKW Sub is not in violation of any term of (a) its charter, by-laws or other
organizational documents, (b) any material agreement or instrument including any
such related to Indebtedness, (c) any applicable law, ordinance, rule or
regulation of any Governmental Entity, or (d) any applicable order, judgement or
decree of any court, arbitrator or Governmental Entity, the consequences of
which violation, whether individually or in the aggregate, would be reasonably
expected to have a material adverse effect on (i) the business, results of
operations or financial condition of FKWW and its Subsidiaries taken as a whole,
or (ii) the ability of FKW Sub to perform its obligations under this Agreement.
The execution, delivery and performance of this Agreement by FKW Sub will not
result in any violation of or conflict with, constitute a default under, or
require any consent under any term of the charter, bylaws or other
organizational document of FKW Sub or any such agreement, instrument, law,
ordinance, rule, regulation, order, judgement or decree or result in the
creation of (or impose any obligation on FKW Sub to create) any Lien upon any of
the properties or assets of FKW Sub pursuant to any such term, except where such
violation, conflict or default, or the failure to obtain such consent,
individually or in the aggregate, would not be reasonably expected to have a
material adverse effect on (i) the business, results of operations or financial
condition of FKWW and its Subsidiaries taken as a whole, or (ii) the ability of
FKW Sub to perform its obligations under this Agreement.
3.6 Litigation. As of the date hereof, there are no actions, suits,
----------
investigations or proceedings (adjudicatory or rulemaking) pending or, to the
knowledge of FKW Sub, threatened against FKW Sub or any of its respective
properties in any court or before any arbitrator of any kind or before or by any
Governmental Entity, except actions, suits, investigations or proceedings which,
in the aggregate, would not be reasonably expected to have a material adverse
effect on the ability of FKW Sub to perform its obligations under this
Agreement.
3.7 Information True and Correct. None of the information supplied or
----------------------------
to be supplied by FKW Sub for inclusion in the Information Statement will, at
the date the definitive Information Statement is first sent or given to the
stockholders of the Company, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. No representation is made by FKW Sub with
respect to any information supplied by the Company or any of its Affiliates for
inclusion in the Information Statement.
12
<PAGE>
3.8 Fraudulent Transfer Laws. Assuming the Company is not Insolvent
------------------------
immediately prior to the Effective Time, and further assuming the
representations and warranties of the Company contained in this Agreement are
true and accurate in all material respects immediately prior to the Effective
Time, the Surviving Corporation will not be Insolvent immediately after the
Effective Time (taking into account changes in assets and liabilities of the
Surviving Corporation as a result of the Merger). For purposes hereof, an
entity will be deemed to be Insolvent if (i) such entity's financial condition
is such that either the sum of its debts is greater than the fair value of its
assets or the fair saleable value of its assets is less than the amount required
to pay its probable liability on existing debts as they mature, (ii) such entity
has unreasonably small capital with which to engage in its business or (iii)
such entity has incurred liabilities beyond its ability to pay as they become
due.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
As an inducement to FKWW and FKW Sub to enter into this Agreement, the
Company hereby makes the following representations and warranties. Whether or
not specifically referred to therein, such representations and warranties
contain exceptions set forth in a written disclosure letter (the "Company
-------
Disclosure Letter") delivered to FKWW and FKW Sub concurrently with the
- -----------------
execution hereof, which is numbered to correspond to the various sections of
this Agreement and which also sets forth certain other information called for by
this Agreement.
4.1 Organization, Etc., of the Company. 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 authority to own and
operate its properties and assets and to carry on its business as now conducted.
The Company is duly qualified and in good standing in each jurisdiction in which
the property owned, leased or operated by it or the nature of the businesses
conducted by it makes such qualification necessary and where the failure to be
so qualified would be reasonably expected to have a material adverse effect on
the business, results of operations or financial condition of the Company and
its Subsidiaries taken as a whole. As of the date hereof, the Company has
obtained from the appropriate Government Entities all approvals, permits and
licenses necessary for the conduct of its business and operations as currently
conducted, which approvals, permits and licenses are, as of the date hereof,
valid and in full force and effect, except where the failure to have obtained
such approvals, permits or licenses or the failure of such approvals, permits or
licenses to be valid and in full force and effect would not be reasonably
expected to have a material adverse effect on the business, results of
operations or financial condition of the Company and its Subsidiaries taken as a
whole.
4.2 Operations of Subsidiaries. Each Subsidiary of the Company (a)
--------------------------
is a corporation or other legal entity duly organized, validly existing and (if
applicable) in good standing under the laws of the jurisdiction of its
organization and has the requisite corporate or other organizational power and
authority to own its properties and assets and conduct its business and
operations as currently conducted, except where the failure to be duly
organized, validly existing and in good standing would not be reasonably
expected to have a material adverse effect
13
<PAGE>
on the business, results of operations or financial condition of the Company and
its Subsidiaries taken as a whole, (b) is duly qualified and in good standing in
each jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified or in good standing would not
reasonably be expected to have a material adverse effect on the business,
results of operations or financial condition of the Company and its Subsidiaries
taken as a whole, and (c) has, as of the date hereof, obtained from the
appropriate Government Entities all approvals, permits and licenses necessary
for the conduct of its business and operations, as currently conducted, which
approvals, permits and licenses are, as of the date hereof, valid and remain in
full force and effect, except where the failure to have obtained such approvals,
permits and licenses or the failure of such approvals, permits or licenses to be
valid and in full force and effect would not be reasonably expected to have a
material adverse effect on the business, results of operations or financial
condition of the Company and its Subsidiaries taken as a whole. The Company
Disclosure Letter sets forth a true and correct list of each Subsidiary of the
Company as of the date hereof. All of the outstanding capital stock of each such
Subsidiary is owned entirely by the Company or by a Subsidiary of the Company,
as the case may be, as of the date hereof, free and clear of all Liens and
Restrictions, except for such restrictions on transfer as are imposed by state
and federal securities laws and except for Liens and Restriction as will not
reasonably be expected to have a material adverse effect on the business,
results of operations or financial condition of the Company and its Subsidiaries
taken as a whole. For purposes of this Agreement, "Restriction," means, when
-----------
used with respect to any specified security, any shareholders or other trust
agreement, option, warrant, escrow, proxy, buy-sell agreement, power of attorney
or other contract, agreement or arrangement which (i) grants to any Person the
right to purchase or otherwise acquire, or obligates any Person to sell or
otherwise dispose of, such specified security or any interest therein, or (ii)
restricts the transfer of, or the exercise of any rights or the enjoyment of any
benefits arising by reason of, the ownership of such specified security. All
such shares of capital stock have been duly authorized and validly issued and
are fully paid and nonassessable. There are no agreements, understandings or
undertakings governing the rights and duties of the Company or any Subsidiary of
the Company as a stockholder of any Subsidiary (other than a Subsidiary wholly
owned by the Company or by a direct or indirect wholly owned Subsidiary of the
Company) under which the Company or any Subsidiary is or may become obligated,
directly or indirectly, to acquire or dispose of any equity interest in, make
any capital contribution or extend credit to, or act as guarantor, surety or
indemnitor for any liability of any Subsidiary (other than a Subsidiary wholly
owned by the Company or by a direct or indirect wholly owned Subsidiary of the
Company). Other than Subsidiaries of the Company, the Company has no interest in
any corporation, joint venture, limited liability company, limited liability
partnership, or other business enterprise of any nature, other than investments
in marketable securities acquired in the ordinary course of business.
4.3 Authorization. This Agreement and the consummation of the
-------------
transactions contemplated hereby have been approved by the Board of Directors of
the Company and upon execution of the Consent, this Agreement and the Merger
shall have been duly authorized by all other necessary corporate action on the
part of the Company, including any required stockholder action. This Agreement,
upon execution and delivery thereof, will be duly executed and delivered by a
duly authorized officer of the Company and (assuming the same to be valid and
binding obligations of the other parties hereto) this Agreement constitutes the
valid and binding agreement
14
<PAGE>
of the Company, enforceable against the Company in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws of general application which may affect the
enforcement of creditors' rights generally and by general equitable principles.
The Company has delivered to FKWW and FKW Sub true and correct copies of
resolutions adopted by the Board of Directors.
4.4 Fairness Opinion; Approval by Board of Directors. On or prior to
------------------------------------------------
the date hereof, the Board of Directors of the Company (i) approved the terms of
this Agreement and the Merger, (ii) determined that the Merger is fair to and in
the best interests of the holders of the Shares (other than FKWW, FKW Sub, the
Company, and their respective Affiliates), and (iii) has recommended this
Agreement and the Merger to the Company's stockholders. The Board of Directors
of the Company has received an oral opinion, as of the date hereof, of (x) Bear,
Stearns & Co. Inc. to the effect that the consideration to be received by the
holders of the Shares (other than FKWW, FKW Sub, the Company, and their
respective Affiliates) pursuant to this Agreement is fair to such holders from a
financial point of view, and (y) Goldman Sachs & Co. to the effect that the
consideration to be received by the holders of the Shares (other than FKWW, FKW
Sub, the Company and their respective Affiliates) pursuant to this Agreement is
fair to such holders. At the date hereof, such opinions (which, when confirmed
in writing, will be provided to FKWW and FKW Sub) have not been withdrawn,
revoked or modified. It is agreed and understood that such opinions are for the
use of the Board of Directors of the Company in considering this Agreement and
the Merger and may not be relied upon by FKWW or FKW Sub. Based on such
opinions, and such other factors as it deemed relevant, the Board of Directors
of the Company has taken all of the actions set forth in clauses (i) and (ii)
above and has directed that this Agreement be submitted to the stockholders of
the Company for their approval.
4.5 Capital Stock.
-------------
(a) The authorized capital stock of the Company consists of (i)
10,000,000 shares of Class A Stock, of which 5,000,000 shares are outstanding as
of the date hereof, (ii) 100,000,000 shares of Class B Stock, of which
32,781,795 shares are outstanding as of the date hereof, (iii) 20,000,000 shares
of Class C Stock, of which 7,088,732 shares are outstanding as of the date
hereof, and (iv) 400,000 shares of 10% Convertible Cumulative Preferred Stock,
par value $0.001 per share, of which none are issued and outstanding as of the
date hereof. All outstanding Shares are duly authorized, validly issued, fully
paid and nonassessable.
(b) As of the date hereof, there are (i) no options, warrants, calls,
subscriptions, convertible securities or other rights (including preemptive
rights), agreements, understandings, arrangements or commitments of any
character obligating the Company now or at any time in the future to issue or
sell any of its capital stock or other equity interests in the Company or any of
its Subsidiaries, (ii) there are no obligations, contingent or otherwise, of the
Company or any of its Subsidiaries, to repurchase, redeem or otherwise acquire
any shares of capital stock or other equity interests of the Company or any of
its Subsidiaries, (iii) there are no outstanding bonds, debentures, notes or
other obligations of the Company or any of its Subsidiaries, the holders of
which have the right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the holders of the Class A Stock and
the
15
<PAGE>
Class B Stock on any matter, (iv) there are no obligations, contingent or
otherwise, guaranteeing the value of any of the Shares or the capital stock of
any of its Subsidiaries either now or at any time in the future, and (v) there
are no voting trusts, proxies or other agreements or understandings to which the
Company is a party or is bound with respect to the voting of any capital stock
or other equity interests of the Company or any of its Subsidiaries. None of
the Shares or any other equity interest of the Company or any other securities
convertible into or exchangeable for Shares or any other equity interests of the
Company, or options to acquire Shares or securities convertible into Shares or
equity interests of the Company are held by any of the Company's Subsidiaries.
4.6 Consents. The execution and delivery of this Agreement by the
--------
Company do not, and the performance of its obligations under this Agreement and
the consummation of the Merger by the Company will not, require any consent,
approval, authorization or permit of, or filing with or notification to any
Governmental Entity, except (i) for (A) applicable requirements of the Exchange
Act, the Securities Act, and the Blue Sky Laws, (B) the pre-merger notification
requirements of the HSR Act, and (C) the Merger Filing, and (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, (x) would not, individually or in the
aggregate, be reasonably expected to prevent the consummation of the Merger, or
otherwise prevent the Company from performing its obligations under this
Agreement in any material respect, and (y) with respect to any such requirement
in effect on the date hereof, would not, individually or in the aggregate, be
reasonably expected to have a material adverse effect on the business, results
of operations or financial condition of the Company and its Subsidiaries taken
as a whole.
4.7 SEC Reports and Financial Statements. Since January 1, 1994 up
------------------------------------
to and including the date hereof, the Company has filed with the SEC all forms,
reports, schedules, registration statements, proxy statements and other
documents (collectively, "Company SEC Reports") required to be filed by the
-------------------
Company with the Securities and Exchange Commission (the "SEC") under the
---
Securities Act, Exchange Act, and the rules and regulations thereunder. As of
their respective dates, or in the case of registration statements, as of their
respective effective dates, all of the Company SEC Reports, including all
exhibits and schedules thereto and all documents incorporated by reference
therein, (i) complied as to form in all material respects with the applicable
requirements of the Securities Act and the Exchange Act applicable thereto, and
(ii) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except for such statements, if any, as have been modified or
superseded by subsequent filings prior to the date hereof. The consolidated
financial statements of the Company and its Subsidiaries included in such
reports complied as of the respective dates thereof as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, were prepared in accordance
with United States generally accepted accounting principles ("GAAP") as in
----
effect on their respective dates applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited interim financial statements, as permitted by Form 10-Q of
the SEC) and fairly presented (subject, in the case of the unaudited interim
financial statements, to normal, year-end audit adjustments) the consolidated
financial position of the Company and its Subsidiaries as at the dates thereof
and the consolidated results
16
<PAGE>
of their operations and cash flows for the periods then ended. Since December
31, 1996, and up to and including the date hereof, neither the Company nor any
of its Subsidiaries has incurred any liabilities or obligations (whether
absolute, accrued, fixed, contingent, liquidated, unliquidated or otherwise and
whether due or to become due) of any nature, which would be required by GAAP, as
of the date hereof, to be set forth on a consolidated balance sheet of the
Company and its Subsidiaries or in the notes thereto except liabilities,
obligations or contingencies (a) which are disclosed, reflected or reserved for
on the unaudited balance sheets of the Company and its Subsidiaries as of March
31, 1997 (including the notes thereto) or in this Agreement or the Company
Disclosure Letter or (b) which (i) were incurred in the ordinary course of
business after December 31, 1996, and consistent with past practices, or (ii)
are disclosed or reflected or reserved for in the Company SEC Reports filed
after December 31, 1996, or (iii) would not reasonably be expected to,
individually or in the aggregate, have a material adverse effect on the
business, results of operations or financial condition of the Company and its
Subsidiaries taken as a whole, or (c) which were incurred as a result of actions
taken or refrained from being taken (i) in furtherance of the transactions
contemplated by this Agreement, or (ii) at the request of FKWW and FKW Sub.
Since December 31, 1996, there has been no change in any of the significant
accounting (including tax accounting) policies, practices or procedures of the
Company or any of its Subsidiaries except as required by GAAP or applicable law.
4.8 Absence of Certain Changes or Events. Since December 31, 1996
------------------------------------
and up to and including the date hereof, except as disclosed in the Company
Disclosure Letter or the Company SEC Reports, (A) the Company has not declared
or paid any dividend or made any distribution on or with respect to its capital
stock; redeemed, purchased or otherwise acquired any of its capital stock;
granted any options, warrants or other rights to purchase shares of, or any
other securities which may be convertible into or exchangeable for, its capital
stock; or issued any shares of its capital stock; (B) there has been no increase
in the compensation or benefits (including but not limited to any bonus,
severance or option plan, program, arrangements or understanding) payable or to
become payable to any officer or director of the Company or any of the 25 most
highly compensated (based on cash compensation paid in or with respect to
services rendered in calendar 1996) employees of the Company and its
Subsidiaries (including officers and directors of the Company, as applicable)
(collectively, including officers and directors of the Company, "Highly
------
Compensated Persons"), other than increases in the ordinary course of business
- -------------------
and consistent with past practice; (C) there has been no pledge, disposition,
encumbrance, hypothecation, sale or other transfer of any material portion of
the properties or assets of the Company and its Subsidiaries taken as a whole
(whether tangible or intangible), except in the ordinary course of business and
consistent with past practice; and (D) there has been no agreement binding upon
the Company or any of its Subsidiaries to do any of the foregoing. Since
December 31, 1996 and up to and including the date of this Agreement, other than
as disclosed in the Company Disclosure Letter or the Company SEC Reports or as
contemplated by this Agreement, the Company and each of its Subsidiaries have
conducted their respective businesses in the ordinary course and there has been
no change in the condition (financial or otherwise), business, properties,
assets or liabilities of the Company and its Subsidiaries taken as a whole,
except such failures to so conduct their businesses and such changes, which,
when considered as a whole, have not had a material adverse effect on the
business, results of operations or financial condition of the Company and its
Subsidiaries taken as a whole.
17
<PAGE>
4.9 Service Mark. The Company and its Subsidiaries own or have
------------
adequate rights, including the underlying intellectual property rights, with
respect to the mark, "The Family Channel," in the United States.
------------------
4.10 DGCL Section 203. The Company is not subject to the provisions
----------------
of Section 203 of the DGCL.
4.11 Material Contracts and Commitments. None of M.G. "Pat"
----------------------------------
Robertson, Timothy B. Robertson, Anthony D. Thomopoulos, Richard L. Sirvaitis,
K.J. "Gus" Lucas, Stephen D. Lentz, or Louis A. Isakoff (collectively, the
"Responsible Officers") has, as of the date hereof, Actual Knowledge that the
--------------------
Company or any other party to any of the Company's contracts or agreements is in
breach of any of their respective obligations under such contracts or agreements
other than breaches which, individually or in the aggregate, would not
reasonably be expected to have a material adverse affect on the business,
results of operations or financial condition of the Company and its Subsidiaries
taken as a whole.
4.12 Agreements with Related Parties. Other than as set forth in the
-------------------------------
Company SEC Reports or the Company Disclosure Letter, as of the date hereof,
none of Pat Robertson, Tim Robertson, the officers and directors of the Company,
LIFE, CBN, Regent or their respective Affiliates (except Affiliates controlled
by the Company) (collectively, "Related Parties") is a party to any agreement
---------------
with the Company or any of its Subsidiaries providing for the payment of an
amount or amounts in excess of $250,000 in the aggregate, or has any interest in
any property (real, personal or mixed, tangible or intangible) used in or
pertaining to the business of the Company or any of its Subsidiaries which is
material to the Company and its Subsidiaries taken as a whole, except this
Agreement (the "Related Party Agreements"). No Person shall be deemed to have
------------------------
any agreement or interest referred to in this Section 4.12 solely because such
Person holds an equity interest in a Person (who is not an Affiliate of such
Person) which is party to such agreement or has such interest. None of the
Related Party Agreements, in the form previously delivered to FKWW, has been
modified or amended in any material respect through the date hereof except as
contemplated by this Agreement, the Stock Purchase Agreements or the
Contribution Agreement.
4.13 Affiliation Agreements. The Company Disclosure Letter includes a
----------------------
true and complete list as of the date hereof of the contracts between the
Company and the top 25 cable carriers relating to carriage of The Family Channel
(determined by reference to subscriber count as of the most recent practicable
dates) (the "Affiliation Agreements"). At the date hereof, to the Actual
----------------------
Knowledge of the Responsible Officers, the Company has not received any notice
(written or oral) that any such cable carrier (a) has canceled or terminated, or
has a specific intention to cancel or terminate, any Affiliation Agreement,
which cancellations or terminations would involve, in the aggregate, the loss of
more than 1,000,000 subscribers, or (b) has a specific intention to effect a
planned reduction in the number of subscribers covered by such Affiliation
Agreement other than reductions which would not reasonably be expected to have a
material adverse effect on the business, results of operations or financial
condition of the Company and its Subsidiaries taken as a whole.
18
<PAGE>
4.14 Brokers and Finders. Except for the fees and expenses payable to
-------------------
Goldman, Sachs & Co. and Bear, Stearns & Co. Inc., which fees shall be paid by
the Surviving Corporation, the Company has not employed any investment banker,
broker, finder, consultant or intermediary in connection with the transactions
contemplated by this Agreement which would be entitled to any investment
banking, brokerage, finder's or similar fee or commission payable after the date
hereof in connection with this Agreement or the Merger contemplated hereby.
4.15 Information Statement. None of the information supplied or to be
---------------------
supplied by the Company for inclusion in the definitive Information Statement to
be filed with the SEC relating to the Merger as required by the Exchange Act
(the "Information Statement"), will, at the date such Information Statement is
---------------------
first sent or given to stockholders of the Company, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Information
Statement will, when first sent or given to stockholders of the Company, comply
as to form in all material respects with the requirements of the Exchange Act.
No representation is made by Company with respect to any information supplied by
FKWW or FKW Sub expressly for inclusion in the Information Statement.
ARTICLE V
---------
CONDUCT OF BUSINESS
-------------------
5.1 Conduct of Business of the Company. Prior to the earlier of the
----------------------------------
Effective Time of the Merger or the termination of this Agreement pursuant to
its terms, unless FKWW and FKW Sub shall otherwise consent in writing or unless
otherwise set forth in the Company Disclosure Letter:
(i) except as otherwise contemplated by this Agreement, the
Company shall, and shall cause its Subsidiaries to, carry on their
respective businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted;
(ii) except as required or permitted by this Agreement and except
as required by any existing agreement of the Company or any of its
Subsidiaries or in order to comply with the legal requirements of the
jurisdiction of incorporation of any Subsidiary, the Company shall not and
shall not propose to, nor shall it permit any of its Subsidiaries to or
propose to (A) sell or pledge or agree to sell or pledge any capital stock
owned by it (or any of its Subsidiaries) in any of its Subsidiaries, (B)
amend its Certificate of Incorporation or By-Laws, (C) split, combine,
reclassify or amend the terms of its outstanding capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in
lieu of, or in substitution for, shares of capital stock of the Company, or
declare, set aside or make any dividend or other distribution payable in
cash, stock or property, or (D) directly or indirectly redeem, purchase or
otherwise acquire or agree to redeem, purchase or otherwise acquire any
shares of the capital stock of the Company or any options or rights to
purchase any shares of capital stock except as required by this Agreement;
19
<PAGE>
(iii) except as required by any existing agreement of the Company
or any Subsidiary or in order to comply with the legal requirements of the
jurisdiction of incorporation of any Subsidiary, the Company shall not, nor
shall it permit any of its Subsidiaries to, except as required by this
Agreement, authorize, issue, deliver, pledge, encumber or sell or agree to
authorize, issue, deliver, pledge, encumber or sell any additional shares
of, or rights of any kind to acquire any shares of, its capital stock of
any class, or any option, rights or warrants to acquire, or securities
convertible into, shares of capital stock;
(iv) except as otherwise contemplated by this Agreement, the
Company shall not, and shall cause its Subsidiaries not to: (A) adopt any
material employee benefit plan or (B) amend any material employee benefit
plan in a manner that significantly increases the benefits thereunder or
(C) adopt, extend or amend any employment agreement (including any
severance agreement) for senior management employees of the Company or (D)
make any increase in the compensation of any Highly Compensated Person,
whether now or hereafter payable, other than in the ordinary course of
business consistent with past practice (except that no such increase shall
be effected pursuant to any option, stock purchase, or other plan,
arrangement, contract or commitment providing for the issuance of capital
stock of the Company or any option or other right to acquire capital stock
of the Company), or (E) hire any new employee of the Company or any
Subsidiary at a cash compensation (including salary and anticipated bonus)
in excess of $100,000 per annum other than any replacement for a departing
employee pursuant to substantially equivalent compensation arrangements,
which replacements shall be made, if at all, only after consulting with
FKWW;
(v) the Company shall not and shall cause its Subsidiaries to
not, take or agree to take any action with the intent and knowledge that
such action would cause a breach of any of the representations or
warranties of the Company contained in this Agreement in any material
respect or prevent the Company from performing or cause the Company not to
perform any of its covenants hereunder in any material respect;
(vi) the Company shall not submit any matters to the stockholders
of the Company for a vote prior to the Effective Date other than the
Merger;
(vii) the Company shall not, and shall cause its Subsidiaries to
not, sell, pledge, dispose of, encumber or hypothecate any material portion
of the assets of the Company and its Subsidiaries taken as a whole, except
in the ordinary course of business and consistent with past practice;
(viii) the Company shall not, and shall cause its Subsidiaries to
not, acquire (by merger, consolidation or acquisition of stock or assets)
any corporation, partnership or any other business organization or division
thereof, or any material interest therein other than marketable securities
purchased in the ordinary course of business consistent with past practice;
20
<PAGE>
(ix) the Company shall not, and shall cause its Subsidiaries to
not, incur any liability in respect of (i) borrowed money, (ii) capitalized
lease obligations, (iii) the deferred purchase price of property or
services (other than trade payables in the ordinary course of business),
(iv) reimbursement obligations in respect of letters of credit and (v)
guarantees of any of the foregoing incurred by any Person other than the
Company and its direct or indirect wholly owned Subsidiaries (collectively,
"Indebtedness") except (x) to the extent of such liabilities as of the date
hereof, including any replacements, refinancings or renewals thereof on
terms not materially more onerous to the Company, or (y) under revolving
credit facilities existing on the date hereof or (z) other obligations
which do not exceed $1 million individually or in the aggregate;
(x) the Company shall not, and shall cause its Subsidiaries to
not, authorize any capital expenditures or the purchase of any fixed assets
other than (i) expenditures or purchases which are included in the capital
budget of the Company previously delivered by the Company to FKWW and FKW
Sub or, if not included in such capital budget, do not exceed $10 million
individually or in the aggregate, or (ii) expenditures necessary to
continue to operate the technical facility of the Company following the
occurrence of any emergency in order to continue to telecast the Family
Channel (subject in the case of (ii) above, to the receipt of approval of
FKWW, which approval shall not be unreasonably withheld and shall be deemed
given, if not previously given or reasonably withheld, upon the expiration
of 24 hours following confirmed, actual delivery of notice, however
delivered, to any of Chase Carey, Jay Itzkowitz, Larry Jacobson, Haim
Saban, Margaret Loesch or Mel Woods, which notice identifies the emergency,
provides an estimate of the expenditures to be incurred and expressly
refers to the requirement that notice of approval or the withholding of
approval be delivered to the Company within 24 hours. The provisions of
Section 9.2 hereof expressly do not apply to this Section 5.1(x);
(xi) the Company shall not, and shall cause its Subsidiaries to
not, authorize any expenditure for television or motion picture productions
or programming other than expenditures or purchases which are included in
the programming budget of the Company previously delivered by the Company
to FKWW and FKW Sub or, if not included in such capital budget, do not
exceed $10 million individually or in the aggregate;
(xii) the Company shall not, and shall cause its Subsidiaries to
not, enter into any transaction or incur or make any payment to any Related
Party of the Company except for goods or services provided in the ordinary
course of business consistent with past practice and except for payments
incurred or made or other transactions effected pursuant to any agreements
existing on the date hereof;
(xiii) the Company shall not, and shall cause its Subsidiaries to
not, take any action to change any of the significant accounting (including
tax accounting) policies, practices or procedures of the Company or any of
its Subsidiaries other than as required in order to comply with GAAP or
applicable law;
21
<PAGE>
(xiv) the Company shall not, and shall cause its Subsidiaries to
not, enter into any agreement with any Person other than FKWW or FKW Sub
granting such other Person the right to program any block of time on The
Family Channel other than arrangements which (i) terminate on or prior to
September 1, 1998, or (ii) which are terminable by the Company on not more
than 30 days notice without any payment with respect thereto other than
reimbursement of any advance payments;
(xv) the Company shall not, and shall cause its Subsidiaries to
not, to launch a new cable channel without first consulting with FKWW;
(xvi) the Company shall not and shall cause its Subsidiaries to
not, cancel, revoke or fail to renew any of the Affiliation Agreements or
take any action with the intent and knowledge that such action would cause
a material breach or violation of any Affiliation Agreement; and
(xvii) the Company shall not, and shall cause its Subsidiaries to
not enter into any contract, agreement, commitment or arrangement with
respect to any of the foregoing subsections.
5.2 Conduct of Business of FKW Sub. Prior to the earlier of the
------------------------------
Effective Time of the Merger or the termination of this Agreement pursuant to
its terms, FKW Sub shall not engage in any activities of any nature except as
provided in or contemplated by this Agreement.
ARTICLE VI
----------
ADDITIONAL AGREEMENTS
---------------------
6.1 Preparation of Information Statement. The Company shall, as
------------------------------------
promptly as practicable, prepare and file a preliminary Information Statement
with the SEC and shall use its reasonable good faith efforts to respond to any
comments of the SEC and to cause the Information Statement to be mailed to the
Company's stockholders at the earliest practicable time. Each of the parties
hereto shall supply such information reasonably requested by the Company (or in
the case of the Company, as is necessary) in its possession for inclusion in the
Information Statement. The Company will notify FKWW and FKW Sub promptly of the
receipt of any comments from the SEC or its staff and of any request by the SEC
or its staff for amendments or supplements to the Information Statement or for
additional information and will supply FKWW and FKW Sub with copies of all
correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the
Information Statement or the Merger.
6.2 Filings and Other Actions. As promptly as practicable after the
-------------------------
execution of this Agreement, but in any event within 5 business days, FKWW, FKW
Sub and the Company shall file notification reports under the HSR Act and shall
request early termination of the waiting period under the HSR Act and use their
reasonable good faith efforts to obtain clearance or authorization under the HSR
Act of the Merger and the other transactions contemplated by this Agreement at
the earliest practicable time.
22
<PAGE>
6.3 Fees and Expenses. Except as set forth in Section 9.11, whether
-----------------
or not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expenses.
6.4 Further Assurances.
------------------
(a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use all reasonable good faith efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement, and to cooperate with each
other in connection with the foregoing, including, but not limited to, using
reasonable good faith efforts (a) to obtain all necessary waivers, consents and
approvals from other parties to material loan agreements, leases and other
contracts; (b) to obtain all necessary consents, approvals and authorizations as
are required to be obtained under any federal, state or foreign law or
regulation; (c) to defend all lawsuits or other legal proceedings challenging
this Agreement or the transactions contemplated hereby; (d) to lift or rescind
any injunction or restraining order or other order adversely affecting the
ability of the parties to consummate the transactions contemplated hereby; (e)
to effect all necessary filings with respect to the transactions contemplated
hereby, including, but not limited to, filings under the HSR Act and submissions
of information requested by Government Entities; and (f) to fulfill all
conditions to this Agreement. Notwithstanding the foregoing, nothing contained
herein shall require any party to waive any of the conditions to the Merger or
other transactions contemplated by this Agreement.
(b) FKWW and FKW Sub hereby agree, while this Agreement is in effect,
and except as contemplated hereby, not to take any action with the intention and
knowledge that such action would make any of their representations or warranties
contained herein untrue or incorrect in any material respect or have the effect
of preventing or disabling them from performing their obligations under this
Agreement. FKWW and FKW Sub shall not enter into, permit or give any consent
to, any amendment, supplement or other modification of, or give any consent or
waiver or otherwise take any action (including agreeing to a delayed closing
date) under, any of the Other Transaction Agreements (or any of the agreements
related thereto) (collectively, a "Modification") which could reasonably be
------------
expected to delay the Effective Time, and shall not in any event waive, amend,
modify or terminate the condition set forth in Section 8.6 of the Contribution
Agreement, or terminate any of the Other Transaction Agreements (or any of the
agreements related thereto), without the prior written consent of the Company
(subject to Section 6.8, if applicable). Notwithstanding the foregoing, FKWW
and FKW Sub may effect any Modification to the Other Transaction Agreements (or
any of the agreements related thereto) which they determine in good faith to be
reasonably necessary to effect the transactions contemplated thereby, provided
they use their reasonable good faith efforts to cause the closing thereunder to
occur as soon as practicable and provided further that such Modification will
not delay the Effective Time beyond November 30, 1997.
6.5 Notification of Certain Matters. The Company shall use
-------------------------------
reasonable good faith efforts to promptly give written notice to FKWW and FKW
Sub, and FKWW and FKW Sub shall use reasonable good faith efforts to promptly
give written notice to the Company, upon becoming aware of the occurrence or, to
its knowledge, impending or threatened occurrence, of
23
<PAGE>
any event which would cause or constitute a breach of any of its
representations, warranties or covenants contained or referenced in this
Agreement and use its reasonable good faith efforts to prevent or promptly
remedy the same.
6.6 Access and Information. From the date hereof to the Effective
----------------------
Time, the Company shall, and shall cause its Subsidiaries and its and their
respective officers, directors, employees and agents to, afford the officers,
employees and agents of FKWW and FKW Sub and their respective affiliates
reasonable access during normal business hours (or at such other times as FKWW
or FKW Sub and the Company may mutually agree) to its properties, books,
contracts, commitments and records and shall furnish FKWW and FKW Sub and their
respective affiliates all financial, operating and other data and information as
FKWW or FKW Sub or any of their respective affiliates, through their respective
officers, employees or agents, may reasonably request. All information
disclosed pursuant to this Section 6.6, shall be subject to those certain
Confidentiality Agreements entered into by and between FKWW and the Company as
of May 2, 1996, December 17, 1996, and December 31, 1996 (the "Confidentiality
---------------
Agreements").
- ----------
6.7 Acquisition Proposals. Prior to the Effective Time, the Company
---------------------
agrees (a) that neither it nor any of its Subsidiaries shall authorize or permit
any of its officers, directors, employees, agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) to initiate, solicit or encourage,
directly or indirectly, any inquiries or the making or implementation of any
proposal or offer (including, without limitation, any proposal or offer to its
stockholders) with respect to a merger, acquisition, consolidation or similar
transaction involving, or any purchase of all or any significant portion of the
assets or any equity securities of, the Company or any of its Subsidiaries (any
such proposal or offer being hereinafter referred to as an "Acquisition
-----------
Proposal") or engage in any negotiations concerning, or provide any confidential
- --------
information or data to, or have any discussions with, any Person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal; (b) that it will immediately cease and cause
to be terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing and will take
the necessary steps to inform the individuals or entities referred to above of
the obligations undertaken in this Section 6.7; and (c) that it will notify FKWW
and FKW Sub immediately if any such inquiries or proposals are received by, any
such information is received from, or any such negotiations or discussions are
sought to be initiated or continued with, it; provided, however, that nothing
-------- -------
contained in this Section 6.7 shall prohibit the Board of Directors of the
Company from (i) furnishing information to or entering into discussions or
negotiations with, any Person or entity that makes an unsolicited bona fide
proposal to acquire the Company pursuant to a merger, consolidation, share
exchange, purchase of a substantial portion of the assets, business combination
or other similar transaction, if, and only to the extent that (A) the Board of
Directors determines in good faith, based as to legal matters on advice of
outside legal counsel, that the failure to take such action would involve a
substantial risk of breach of fiduciary duty to the Company's shareholders
imposed by applicable law, (B) prior to furnishing such information to, or
entering into discussions or negotiations with, such Person or entity, the
Company provides notice to FKWW and FKW Sub to the effect that it is furnishing
information to, or entering into discussions or negotiations with, such Person
or entity, and (C) subject to any confidentiality agreement with such Person or
entity (which the Company executed after determining in good
24
<PAGE>
faith, based as to legal matters on advice of outside counsel, that the failure
to take such action would involve a substantial risk of breach of the Board of
Directors' fiduciary duty to stockholders imposed by applicable law), the
Company keeps FKWW and FKW Sub informed of the status (not the terms) of any
such discussions or negotiations; and (ii) to the extent applicable, complying
with Rule 14d-9 and 14e-2 promulgated under the Exchange Act with regard to an
Acquisition Proposal. Nothing in this Section 6.7 shall (x) permit any party to
terminate this Agreement (except as specifically provided in Section 8.1
hereof), (y) permit any party to enter into any agreement with respect to an
Acquisition Proposal during the term of this Agreement (it being agreed that
during the term of this Agreement, no party shall enter into any agreement with
any Person that provides for, or in any way facilitates, an Acquisition Proposal
(other than a confidentiality agreement in customary form)), or (z) affect any
other obligation of any party under this Agreement.
6.8 Board of Directors. In the event FKWW and the other parties
------------------
thereto consummate the purchase of the Company Stock from the Robertson Sellers
pursuant to the Robertson Purchase Agreement prior to the Closing of the Merger,
FKWW shall, from and after such closing, be entitled to designate, at its
option, upon notice to the Company, up to that number of directors, rounded to
the nearest whole number, of the Company's Board of Directors, subject to
compliance with Section 14(f) of the Exchange Act, as will make the percentage
of the Company's directors designated by FKWW equal to the aggregate voting
power of the Shares of Company Stock held by FKWW or any of its Subsidiaries
(after giving effect to the conversion of the Class A Stock to Class B Stock and
the conversion of any Class C Stock and any Convertible Notes then held by FKWW
or its Subsidiaries into Class B Stock); provided, however, that the Company
-------- -------
shall not be obligated and need not appoint any designee or designees to the
Board of Directors of the Company who, in the Board's good faith judgment, are
not fit to be Directors of the Company; and provided, further, that in the event
-------- -------
that FKWW designees are elected to the Board of Directors of the Company, such
Board of Directors shall have, until the Effective Time, at least two directors
who are Class B Directors on the date of this Agreement (the "Continuing
----------
Directors"), and provided, further that, in such event, if the number of
- --------- -------- -------
Continuing Directors shall be reduced below two for any reason whatsoever, the
remaining Continuing Directors shall be permitted to designate an individual to
fill such vacancy who would be an "independent director" under the rules of the
New York Stock Exchange (such designee to be deemed to be a Continuing Director
for purposes of this Agreement) or, if no Continuing Directors then remain, the
other directors shall designate two individuals to fill such vacancies who shall
not be officers, directors, employees or Affiliates of FKWW or any of its
Affiliates and shall otherwise be "independent directors" under the rules of the
New York Stock Exchange (each designee to be deemed to be a Continuing Director
for purposes of this Agreement). To the fullest extent permitted by applicable
law, the Company shall take all actions requested by FKWW which are reasonably
necessary to effect the election of any such designee or designees, including
the inclusion in the Information Statement, or a separate mailing, of the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder, and the making of such mailing as part of the
Information Statement or otherwise, as requested by FKWW (provided that FKWW
shall have provided to the Company on a timely basis all information required to
be included with respect to FKWW designees). In connection with the foregoing,
the Company will promptly either increase the size of the Company's Board of
Directors and/or obtain the resignation of such number of its current directors
as is necessary to enable FKWW designees to
25
<PAGE>
be elected or appointed to the Company's Board of Directors as provided above.
Following the election or appointment of FKWW's designees pursuant to this
Section 6.8 and prior to the Effective Time, any amendment, or waiver of any
term or condition, of this Agreement or the Amended and Restated Certificate of
Incorporation or Restated By-Laws of the Company, any termination of this
Agreement by the Company, any extension by the Company of the time for the
performance of any of the obligations or other acts of FKWW or FKW Sub or waiver
or assertion of any of the Company's rights hereunder, or any other consents or
actions by the Board of Directors with respect to this Agreement or the
Guaranty, will require, and will require only, the concurrence of a majority of
the Continuing Directors, except to the extent that applicable law requires that
such action be acted upon by the full Board of Directors, in which case such
action will require the concurrence of a majority of the Directors, which
majority shall include each of the Continuing Directors, and no other action by
the Company shall be required for purposes of this Agreement. After the date of
this Agreement, until the earlier of (i) the Effective Time, and (ii) the
termination of this Agreement, FKWW will not exercise any rights it may have as
a stockholder of the Company to effect a change in the composition of the Board
of Directors of the Company, except as provided for in this Section 6.8.
6.9 Indemnification and Insurance. FKWW shall cause all rights to
-----------------------------
indemnification or exculpation now existing in favor of the past and present
directors or officers of the Company as provided in the Company's Amended and
Restated Certificate of Incorporation or Restated By-Laws with respect to claims
arising from service as officers or directors prior to the Effective Time to
survive the merger and continue in full force and effect for a period of not
less than six years from the Effective Time (or with respect to claims arising
from service as officers or directors prior to the Effective Time which have not
been resolved prior to such sixth anniversary, until the time such matters are
finally resolved). FKWW shall cause the Surviving Corporation to maintain in
effect for not less than six years from the Effective Time the current policies
of the directors' and officers' liability insurance maintained by the Company as
of the date hereof (provided that the Surviving Corporation may substitute
therefor policies of at least the same amount of coverage (covering known or
unknown claims as of the Effective Time) containing terms and conditions which
are not less advantageous), copies of which has been previously made available
to FKWW, with respect to matters occurring prior to the Effective Time, to the
extent available; provided, however, that the Surviving Corporation shall not be
-------- -------
required to maintain such insurance to the extent the annual premium therefor
exceeds 200% of the annual premiums currently paid by the Company in respect of
the current policy or policies (the "Maximum Amount") but in such case shall
--------------
purchase as much comparable coverage as available for the Maximum Amount.
6.10 Officer's Certificate. The Company, at the request of FKWW,
---------------------
shall deliver a certificate to FKWW executed by an executive officer of the
Company in the form and with respect to the matters referred to in the attached
Exhibit A, dated as of the date of the closing of the purchase of the Control
- ---------
Stock (as defined in the Robertson Purchase Agreement) by FKWW pursuant to terms
of the Robertson Purchase Agreement, or, alternatively, inform FKWW that it is
unable to give such certificate because of the inaccuracy of any of the matters
referred to therein.
26
<PAGE>
ARTICLE VII
-----------
CONDITIONS
----------
7.1 Conditions to Obligation of Each Party to Effect the Merger. The
-----------------------------------------------------------
respective obligations of each party to effect the Merger shall be subject to
the fulfillment or waiver at or prior to the Effective Time of the following
conditions:
(a) no temporary or permanent order, injunction or decree shall be
entered or enforced by or before any court, arbitrator or Governmental Entity
that would prohibit the consummation of the Merger;
(b) there shall not have occurred and be continuing any declaration
of any banking moratorium or suspension of payments by banks in the United
States or any general limitation on the extension of credit by lending
institutions in the United States;
(c) all required waiting periods under the HSR Act applicable to the
transactions contemplated hereunder shall have expired or terminated;
(d) the Company shall have obtained all consents and approvals of
Governmental Entities which are legally required to be obtained by the Company
prior to consummation of the Merger, which if not obtained would have a material
adverse effect on the business, results of operations or financial condition of
the Company and its Subsidiaries taken as a whole; and
(e) there shall not have been any statute, rule, regulation or order
promulgated, enacted, issued or deemed applicable to the Merger by any
Governmental Entity or court of competent jurisdiction which would make the
consummation of the Merger illegal;
provided, however, that upon the closing of the purchase of the Control Stock
- -------- -------
pursuant to the Robertson Purchase Agreement, the conditions in subparagraphs
(c) and (d) of this Section 7.1 above shall, to the extent then applicable, no
longer be applicable.
7.2 Additional Conditions to the Company's Obligation to Effect the
---------------------------------------------------------------
Merger. The obligation of the Company to effect the Merger is also subject to
- ------
the satisfaction or waiver at or prior to the Effective Time of the following
conditions: (a) the representations and warranties of FKWW and FKW Sub contained
in this Agreement shall be true and correct in all material respects on and as
of the Effective Time as though made on and as of such time (except for those
made as of a specified date (including "as of the date hereof") which shall be
true and correct as of such date), and (b) FKWW and FKW Sub shall have performed
in all material respects their respective obligations hereunder required to be
performed on or before the Effective Time; provided, however, upon the closing
-------- -------
of the purchase of the Control Stock pursuant to the terms of the Robertson
Purchase Agreement, the conditions set forth in clause (a) of this Section 7.2
shall no longer be applicable.
27
<PAGE>
7.3 Additional Conditions to FKW Sub's Obligation to Effect the
-----------------------------------------------------------
Merger. The obligation of FKW Sub to effect the Merger is also subject to the
- ------
satisfaction or waiver at or prior to the Effective Time of the following
conditions: (a) the representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects on and as of
the Effective Time as though made on and as of such time (except for those made
as of a specified date (including "as of the date hereof"), which shall be true
and correct as of such date), except (i) for changes in circumstances expressly
permitted or contemplated by this Agreement or (ii) where the failure would not
be reasonably expected to have a material adverse effect on the business,
results of operations or financial condition of the Company and its Subsidiaries
taken as a whole, (b) the Company shall have performed in all material respects
its obligations hereunder required to be performed on or before the Effective
Time, and (c) except as set forth in the Company Disclosure Letter or as
expressly provided for herein, (x) immediately prior to the Effective Time, the
representation and warranty contained in Section 4.5 (a) hereof shall be true
and correct (other than such changes resulting from the exercise of Options or
the conversions of convertible securities which are outstanding as of the date
hereof and disclosed in the Company Disclosure Letter), and (y) immediately
following the Effective Time, other than as provided for in the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries is or will be
bound by any options, warrants, rights or agreements which would entitle any
Person, other than FKWW or its Subsidiaries, to own any capital stock of the
Surviving Corporation or to receive any payment in respect thereof; provided,
--------
however, upon the closing of the purchase of the Control Stock pursuant to the
- -------
provisions of the Robertson Purchase Agreement, the conditions set forth in
clauses (a) and (b) of this Section 7.3 shall no longer be applicable.
ARTICLE VII
-----------
TERMINATION, AMENDMENT, WAIVER AND LIABILITY
--------------------------------------------
8.1 Termination. This Agreement may be terminated at any time prior
-----------
to the Effective Time, whether prior to or after approval of the Merger by the
stockholders of the Company:
(a) by mutual written consent of FKW Sub, FKWW and the Company, or
(b) by FKW Sub or FKWW, if the Effective Time shall not have occurred
on or prior to November 30, 1997, due to a failure of any of the conditions to
the obligations of FKW Sub to effect the Merger, to the extent then applicable,
set forth in Sections 7.1 or 7.3, or
(c) by the Company, if the Effective Time shall not have occurred on
or prior to November 30, 1997, due to a failure of any of the conditions to the
obligations of the Company to effect the Merger, to the extent then applicable,
set forth in Sections 7.1 or 7.2, or
28
<PAGE>
(d) by the Company, if after the date hereof and before the Effective
Time, the Guarantor attempts or purports to revoke or withdraw the Guaranty or a
court of competent jurisdiction finally determines that the Guaranty is
unenforceable or invalid;
provided that any action by the Company shall be subject to Section 6.8 if then
applicable; and provided, further, that the November 30, 1997 date shall be
-------- -------
extended for (i) any period that a party is subject to a non-final order,
injunction or decree prohibiting consummation of the Merger and (ii) the
continuation of any event set forth in Section 7.1(b).
8.2 Effect of Termination. In the event of the termination of this
---------------------
Agreement as provided in Section 8.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of the Company or FKW
Sub or FKWW or any of their Affiliates except as set forth in Sections 6.3 and
9.11 (with respect to fees and expenses) or Section 6.6 (with respect to
confidentiality). In the event of a termination of this Agreement as provided
in Section 8.1, the parties will not be excused for any liability owing the
others for a prior breach of this Agreement, subject to the provisions of
Sections 8.5 and 9.3.
8.3 Amendment. This Agreement may not be amended except by action of
---------
the Board of Directors of each of the parties hereto (and subject, in the case
of the Company, to Section 6.8), which Amendment is set forth in an instrument
in writing signed on behalf of each of the parties hereto. No amendment
following approval of the stockholders shall require the approval of the
stockholders unless specifically required by the DGCL.
8.4 Waiver. At any time prior to the Effective Time, whether before
------
or after the stockholder approval, any party hereto, by action taken by its
Board of Directors (and subject, in the case of the Company, to Section 6.8),
may (i) extend the time for the performance of any of the obligations or other
acts of any other party hereto or (ii) subject to the second sentence of Section
8.3, waive compliance with any of the agreements of any other party or with any
conditions to its own obligations. Any agreement on the part of a party hereto
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party by a duly authorized
officer.
8.5 Limitation on Liability. The liability of the Company for any
-----------------------
breach by the Company of this Agreement shall be limited to the actual damages
suffered by FKWW and FKW Sub under this Agreement and the Company shall not be
liable for any consequential or other damages of FKWW or FKW Sub, including any
damages arising in connection with any Other Transaction Agreement.
ARTICLE IX
----------
GENERAL PROVISIONS
------------------
9.1 Publicity. The initial press release relating to this Agreement
---------
shall be a joint press release in the form attached hereto as Exhibit B, and
---------
FKWW and the Company shall, subject to their respective legal obligations of
public companies, use reasonable good faith efforts to agree upon the text of
any other press release before issuing any such press release or otherwise
29
<PAGE>
making public statements with respect to the transactions contemplated hereby
and in making any filings with any federal or state governmental or regulatory
agency or with any national securities exchange with respect thereto.
9.2 Notices. All notices and other communications required or
-------
permitted hereunder shall be in writing and shall be delivered personally,
mailed by certified or registered mail, return receipt requested and postage
prepaid, or transmitted by facsimile to the parties at the following addresses
or at such other addresses as shall be specified by the parties by like notice:
(a) If to FKWW or FKW Sub:
---------------------
Fox Kids Worldwide, Inc. or
Fox Kids Merger Corporation
10960 Wilshire Boulevard
Los Angeles, California 90024
Attn: Mel Woods
Fax: 310-235-5552
with a copy to:
--------------
Fox, Inc.
10201 West Pico Boulevard
Los Angeles, California 90035
Attn: President
Fax: 310-369-1203
and a copy to:
-------------
The News Corporation Limited
c/o News America Publishing Incorporated
1211 Avenue of the Americas
New York, New York 10036
Attn: Arthur M. Siskind, Esq.
Fax: 212-768-2029
and a copy to:
-------------
Troop Meisinger Steuber & Pasich, LLP
10940 Wilshire Boulevard
Los Angeles, California 90024
Attn: C.N. Franklin Reddick, III, Esq.
Fax: 310-443-8512
and a copy to:
-------------
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
30
<PAGE>
551 Fifth Avenue
New York, New York 10176
Attn: Jeffrey W. Rubin, Esq.
Fax: 212-697-6686
(b) If to the Company:
-----------------
International Family Entertainment, Inc.
2877 Guardian Lane
Virginia Beach, Virginia 23450
Attn: Tim Robertson
Fax: 757-459-6422
with a copy to:
--------------
International Family Entertainment, Inc.
2877 Guardian Lane
Virginia Beach, Virginia 23450
Attn: Louis A. Isakoff, Esq.
Fax: 757-459-6422
and a copy to:
-------------
Latham & Watkins
53rd at Third, Suite 1000
885 Third Avenue
New York, New York 10022-4802
Attn: Erica H. Steinberger, Esq.
Fax: 212-751-4864
and a copy to:
-------------
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attn: James M. Dubin, Esq.
Fax: 212-757-3990
and shall for all purposes of this Agreement be treated as being effective or
having been given when delivered if delivered personally, or, if sent by mail or
facsimile, upon receipt.
9.3 Representations and Warranties. The respective representations
------------------------------
and warranties of the Company, FKWW and FKW Sub contained herein shall expire
with, and be terminated and extinguished at the Effective Time. Neither the
Company, FKWW nor FKW Sub shall be under any monetary or other liability
whatsoever with respect to any breach of a
31
<PAGE>
representation or warranty contained herein or in or with respect to any
certificate or other document delivered pursuant hereto, and the sole
consequence of any such breach shall be limited to the failure to satisfy a
condition set forth in Section 7.2 or 7.3 hereof, as applicable, and the
termination right provided for in Section 8.1 hereof, in each case to the extent
applicable according to such Section's express terms.
9.4 Titles and Gender. The titles of the Sections and subsections of
-----------------
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement. Whenever used herein, the singular
member includes the plural, the plural includes the singular, and the use of
either gender shall include both genders.
9.5 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided, however, that no party hereto shall
-------- -------
assign any of its rights, interests or obligations hereunder without the prior
written consent of the other parties.
9.6 Third Party Beneficiaries. Nothing in this Agreement, expressed
-------------------------
or implied, is intended to confer on any Person other than the parties hereto or
their respective successors and permitted assigns, and other than as expressly
provided for in Section 6.8 and 6.9 hereof, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
9.7 Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
9.8 Severability. Should any Section or any part of a Section of
------------
this Agreement be rendered void, invalid or unenforceable by any court of law
for any reason, such invalidity or unenforceability shall not void or render
invalid or unenforceable any other Section or part of a Section of this
Agreement.
9.9 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
BOTH AS TO VALIDITY AND PERFORMANCE AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES
THEREOF.
9.10 No Adverse Construction. The rule that a contract is to be
-----------------------
construed against the party drafting the contract is hereby waived, and shall
have no applicability in construing this Agreement or any provisions hereof.
9.11 Costs and Attorneys' Fees. In the event that any action, suit,
-------------------------
or other proceeding is brought or instituted, to enforce or to seek damages for
breach of this Agreement, the prevailing party shall recover all of such party's
costs, and reasonable attorneys' fees incurred in each and every such action,
suit, or other proceeding, including any and all appeals or petitions therefrom.
9.12 Entire Agreement. This Agreement, the attached Exhibits and
----------------
Company Disclosure Letter, the Confidentiality Agreements and the Guaranty
contain the entire
32
<PAGE>
understanding of the parties and there are no further or other agreements or
understandings, written or oral, in effect between the parties relating to the
subject matter hereof unless expressly referred to herein.
9.13 Jurisdiction; Consent to Service of Process; No Jury Trial. (a)
----------------------------------------------------------
Except as provided in the next paragraph, the parties hereto agree that any
dispute between or among them arising out of, connected with, related to, or
incidental to the relationship established among them pursuant to this
Agreement, and whether arising in contract, tort, equity, or otherwise, may be
resolved by state or federal courts located in Delaware. Each of the parties
hereto waives in any such dispute any objection that it may have to such
Delaware courts considering the dispute including, without limitation, any
objection to the laying of venue or based on the ground of forum non conveniens.
(b) Each of the parties hereto agrees that the other parties to this
Agreement shall have the right, to the extent permitted by applicable law, to
proceed against it or its property in a court in any location reasonably
selected in good faith to enable such other parties to realize on such property,
or to enforce a judgment or other court order entered in favor of any such other
party. Each of the parties hereto waives any objection that it may have to the
location of the court in which any other party to this Agreement has commenced a
proceeding described in this paragraph including, without limitation, any
objection to the laying of venue or based on the ground of forum non conveniens.
(c) The parties hereto each waives any right to have a jury
participate in resolving any dispute whether sounding in contract, tort, or
otherwise arising out of, connected with, related to or incidental to the
relationship established between them pursuant to this Agreement. Instead, any
disputes resolved in court will be resolved in a bench trial without a jury.
(d) Each party hereto hereby irrevocably designates CT Corporation
System as its designee, appointee and agent to receive, for and on behalf of it,
service of process in such respective jurisdictions in any legal action or
proceeding with respect to this Agreement or any document related thereto. It
is understood that a copy of such process serviced on such agent will be
promptly forwarded by mail to it at its address set forth in Section 9.2 hereof,
but the failure to receive such copy shall not affect in any way the service of
such process. Each of the parties hereto further irrevocably consents to the
service of process of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to it at its said address, such service to become effective
upon confirmed delivery.
(e) Nothing herein shall affect the right of any party to this
Agreement to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against any other party in any other
jurisdiction.
9.14 Affiliate; Control, Controlled By and Under Common Control With;
----------------------------------------------------------------
Person; Actual Knowledge. For purposes of this Agreement:
- ------------------------
33
<PAGE>
(a) "Affiliate" shall mean, when used with reference to a specified
---------
Person, any Person that directly or indirectly through one or more
intermediaries controls or is controlled by, or is under common control with,
such specified Person and, in the case of individuals, a Person's spouse,
parents, children, siblings, mothers and fathers in law, sons and daughters in
law, and brothers and sisters in law. For purposes of this definition, control
(including controlled by and under common control with), as used with respect to
any Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise.
For purposes of this Agreement, (i) neither the Company nor any of its
Subsidiaries shall be deemed to be an Affiliate of FKWW, FKW Sub or any of their
respective Affiliates, (ii) each of the holders of the Class A Stock, Liberty,
CBN, Regent and their respective Affiliates shall be deemed to be an Affiliate
of the Company, and (iii) the Guarantor, Fox, Inc. and Saban Entertainment,
Inc., and their respective Affiliates, shall each be deemed to be an Affiliate
of FKWW and FKW Sub.
(b) "Person" means any individual, corporation, general or limited
------
partnership, limited liability company, limited liability partnership, trust,
joint venture, association or unincorporated entity of any kind.
(c) "Actual Knowledge" of a specified Person means the actual
----------------
knowledge of such Person without independent investigation or inquiry.
9.15 Specific Performance. Each of the parties hereto recognizes and
--------------------
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other parties to sustain damages for which they
would not have an adequate remedy at law for money damages, and therefore each
of the parties hereto agrees that in the event of any such breach the aggrieved
party or parties shall, without the posting of bond or other security, be
entitled to the remedy of specific performance of such covenants and agreements
and injunctive and other equitable relief, in addition to any other remedy to
which it or they may be entitled, at law or in equity.
9.16 Definitions. The following terms are defined on the page numbers
-----------
indicated below:
<TABLE>
<CAPTION>
DEFINITION SECTION
- ---------- -------
<S> <C>
Acquisition Proposal.................................................. 6.7
Actual Knowledge...................................................... 9.14
Affiliate............................................................. 9.14
Affiliation Agreements................................................ 4.13
Agreement............................................................. Preamble
Blue Sky Laws......................................................... 2.3
Cash Payment.......................................................... 1.8
CBN................................................................... Recitals
CBN Purchase Agreement................................................ Recitals
Certificates.......................................................... 1.9
</TABLE>
34
<PAGE>
<TABLE>
<S> <C>
Class A Stock......................................................... Recitals
Class B Stock......................................................... Recitals
Class C Stock......................................................... Recitals
Company............................................................... Recitals
Company Disclosure Letter.............................................Article IV
Company SEC Reports................................................... 4.7
Company Stock......................................................... Recitals
Confidentiality Agreements............................................ 6.6
Consent............................................................... Recitals
Constituent Corporations.............................................. 1.1
Continuing Directors.................................................. 6.8
Contribution Agreement................................................ Recitals
Convertible Notes..................................................... Recitals
DGCL.................................................................. Recitals
Dissenting Shares..................................................... 1.7
Effective Time........................................................ 1.3
Exchange Act.......................................................... 1.8
Exchange Agent........................................................ 1.9
FKW Sub............................................................... Recitals
FKWW.................................................................. Recitals
GAAP.................................................................. 4.7
Governmental Entity................................................... 2.1
Guarantor............................................................. Recitals
Guaranty.............................................................. Recitals
Highly Compensated Persons............................................ 4.8
HSR ACT............................................................... 2.3
Information Statement................................................. 4.15
Irrevocable Trusts.................................................... Recitals
Lien.................................................................. 2.5
LIFE.................................................................. Recitals
Maximum Amount........................................................ 6.9
Merger................................................................ Recitals
Merger Consideration.................................................. 1.6
Merger Filing......................................................... 1.3
Modification.......................................................... 6.4
MTM................................................................... 1.8
Options............................................................... 1.8
Other Transaction Agreements.......................................... Recitals
Person................................................................ 9.14
PR Charitable Trust................................................... Recitals
Regent................................................................ Recitals
Regent Purchase Agreement............................................. Recitals
Related Parties....................................................... 4.12
Related Party Agreements.............................................. 4.12
Responsible Officers.................................................. 4.11
Restriction........................................................... 4.2
</TABLE>
35
<PAGE>
<TABLE>
<S> <C>
Robertson Purchase Agreement.......................................... Recitals
The Robertson Sellers................................................. Recitals
SEC................................................................... 4.7
Securities Act........................................................ 2.3
Share................................................................. 1.6
Stock Plans........................................................... 1.8
Stock Purchase Agreements............................................. Recitals
Subsidiary............................................................ 2.1
Surviving Corporation................................................. 1.11
The Family Channel.................................................... 4.9
Tim Robertson......................................................... Recitals
TR Charitable Trust................................................... Recitals
TR Family Trust....................................................... Recitals
</TABLE>
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
36
<PAGE>
IN WITNESS WHEREOF, FKWW, FKW Sub and the Company have caused this
Agreement to be executed as of the date first written above by their duly
authorized respective officers.
FOX KIDS WORLDWIDE, INC.
By: /s/ Mel Woods
______________________________________
Name: Mel Woods
Title: President
FOX KIDS MERGER CORPORATION
By: /s/ Mel Woods
_____________________________________
Name: Mel Woods
Title: President
INTERNATIONAL FAMILY ENTERTAINMENT, INC.
By: /s/ M.G. Robertson
_____________________________________
Name: M.G. Robertson
Title: Chairman of the Board
<PAGE>
EXHIBITS
Exhibit A --- Officer's Certificate
Exhibit B --- Press Release
<PAGE>
CERTIFICATE
This Certificate is issued to Fox Kids Worldwide, Inc., a Delaware
corporation ("FKWW") pursuant to Section 6.10 of that certain Agreement and Plan
of Merger (the "Merger Agreement"), dated as of June 11, 1997, by and among
FKWW, Fox Kids Merger Corporation, a Delaware corporation and a wholly owned
subsidiary of FKWW, and International Family Entertainment, a Delaware
corporation, (the "Company"). Capitalized terms, unless otherwise defined
herein, shall have the meanings ascribed to them in the Merger Agreement.
In connection therewith, the Company hereby certifies, to the Actual
Knowledge of the Responsible Officers, as of the date hereof:
1. No temporary or permanent order, injunction, or decree has been entered or
enforced by or before any court, arbitrator or Governmental Entity against the
Company that would prohibit the consummation of the Merger by the Company; and
2. The Company has obtained all consents and approvals of any Governmental
Entity which are legally required to be obtained by the Company prior to the
consummation of the Merger, and which if not obtained would have a material
adverse effect on the business, results of operations or financial condition of
the Company and its Subsidiaries taken as a whole.
This certificate is being delivered by the undersigned in his capacity as
an officer of the Company and the undersigned shall have no personal liability
with respect to the matters set forth above. This certificate is for
informational purposes only and the accuracy of the information included herein
is not, and shall not be deemed to be, a condition to the Merger. Sections 7.1,
7.2 and 7.3 of the Merger Agreement include a complete list of the conditions to
the Merger. Further, this Certificate shall not form the basis of any claim or
assertion of liability on the part of the Company or any other Person
irrespective of whether the Merger occurs.
IN WITNESS WHEREOF, the undersigned has executed this certificate and
caused it to be delivered this ______________, day of _______________, 1997.
International Family Entertainment, Inc.
By:____________________________________
Its:___________________________________
<PAGE>
Acknowledged and (as to
the penultimate paragraph) agreed,
Fox Kids Worldwide, Inc.
By: ______________________________
Its: _____________________________
Fox Kids Merger Corporation
By: ______________________________
Its: _____________________________
<PAGE>
EXHIBIT 2.4
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement"), dated as of June 11,
---------
1997, is entered into by and between Fox Kids Worldwide, Inc., a Delaware
corporation (the "Purchaser"), on the one hand, and M.G. "Pat" Robertson,
---------
individually and as trustee of each of the Robertson Charitable Remainder
Unitrust, u/t/a dated January 22, 1990 (the "PR Charitable Trust"), the Gordon
-------------------
P. Robertson Irrevocable Trust, u/t/a dated December 18, 1996, the Elizabeth F.
Robinson Irrevocable Trust, u/t/a dated December 18, 1996, and the Ann R.
Lablanc Irrevocable Trust, u/t/a dated December 18, 1996 (the Gordon P.
Robertson Irrevocable Trust, the Elizabeth F. Robinson Irrevocable Trust and the
Ann R. Lablanc Irrevocable Trust, together, the "Irrevocable Trusts"), Lisa N.
------------------
Robertson and Timothy B. Robertson ("Tim Robertson"), as joint tenants, and Tim
-------------
Robertson, individually, as trustee of each of the Timothy and Lisa Robertson
Children's Trust, u/t/a dated September 18, 1995 (the "TR Family Trust") and the
---------------
Timothy B. Robertson Charitable Trust, u/t/a dated December 30, 1996 (the "TR
--
Charitable Trust"), and as custodian to and for each of Abigail H. Robertson,
- ----------------
Laura N. Robertson, Elizabeth C. Robertson, Willis H. Robertson and Caroline S.
Robertson under the Virginia Uniform Transfers to Minors Act (Pat Robertson, the
PR Charitable Trust, the Irrevocable Trusts, Lisa N. Robertson, Tim Robertson,
the TR Family Trust and the TR Charitable Trust, collectively, the "Sellers",
-------
and each individually, a "Seller") on the following terms and conditions:
------
R E C I T A L S
---------------
WHEREAS, as of the date hereof, the PR Charitable Trust beneficially owns
3,125,000 shares of Class A Common Stock, par value $0.01 per share, of
International Family Entertainment, Inc. (the "Company") (the "Class A Stock")
------- -------------
(as used herein, the term "Control Stock" shall refer to the shares of Class A
-------------
Stock of the Company or the shares of Class B Common Stock, par value $0.01 per
share, of the Company (the "Class B Stock") into which the Class A Stock shall
-------------
have converted, if the conversion of the Class A Stock into shares of Class B
Stock shall have occurred prior to or upon the Closing, it being understood that
pursuant to the Company's Amended and Restated Certificate of Incorporation (the
"Charter") the Class A Stock will so convert upon the Closing, and as used
-------
herein, the term "Company Stock" shall refer to the total shares of Class A
-------------
Stock and Class B Stock combined);
WHEREAS, as of the date hereof, Tim Robertson beneficially owns 1,837,500
shares of Control Stock and the TR Family Trust beneficially owns 37,500 shares
of Control Stock;
WHEREAS, as of the date hereof, the Sellers beneficially own an aggregate
of 1,231,981 shares of Class B Stock (excluding options to acquire shares of
Class B Stock and excluding shares ("401(k) Shares") held under the Company's
-------------
401(k) plan) (the Control Stock and the
<PAGE>
Class B Stock owned by the Sellers (other than the 401(k) Shares, which shall
not be subject to this Agreement), together, the "Shares");
------
WHEREAS, the Purchaser desires to purchase the Shares from the Sellers and
the Sellers desire to sell the Shares to the Purchaser, all on the terms and
subject to the conditions contained herein;
WHEREAS, concurrently herewith, the Purchaser, Fox Kids Merger Corporation,
a Delaware corporation ("FKW Sub"), and the Company are entering into that
-------
certain Agreement and Plan of Merger (as the same may be amended from time to
time in accordance with its terms, the "Merger Agreement"), providing for the
----------------
merger of FKW Sub into the Company (the "Merger"), which shall be the surviving
------
corporation, pursuant to which each share of Company Stock and Non Voting Class
C Common Stock, par value $0.01 per share, of the Company (the "Class C Stock",
-------------
and together with all of the Class B Stock, the Class C Stock and any other
shares of any other class of common stock of the Company, the "Common Stock")
------------
which is issued and outstanding immediately prior to the effective time (the
"Effective Time") of the Merger (other than shares held by the Company, the
Purchaser or FKW Sub, or any direct or indirect subsidiary of the Company, the
Purchaser or FKW Sub) shall be canceled and extinguished and be converted into
and become a right to receive a cash payment equal to $35.00 per share (subject
to adjustment), without interest (except that any Dissenting Shares (as defined
in the Merger Agreement) shall be converted into and become a right to receive
the payment provided for under the Delaware General Corporation Law);
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, the Purchaser has required that the Sellers enter into this Agreement
and as a condition to their willingness to enter into this Agreement, the
Sellers have required that the Purchaser and FKW Sub enter into the Merger
Agreement;
WHEREAS, the Purchaser, Liberty Media Corporation, a Delaware corporation
("Liberty"), and Liberty IFE, Inc., a Colorado corporation ("LIFE"), have
------- ----
entered into that certain Contribution and Exchange Agreement, dated as of the
date hereof (as the same may be amended from time to time in accordance with its
terms, the "Contribution Agreement"), pursuant to which LIFE has agreed, on the
----------------------
terms and subject to the conditions therein, to contribute its shares of Class C
Stock and its $23 million principal amount of 6% Convertible Secured Notes due
2004 of the Company (the "Convertible Notes"), to the Purchaser in exchange for
-----------------
shares of a newly issued class of preferred stock of the Purchaser;
WHEREAS, in connection with the execution of the Contribution Agreement,
LIFE has waived all rights of first refusal, co-sale and other rights which it
has with respect to the sale of Shares contemplated hereby under that certain
Amended and Restated Shareholder Agreement, dated as of September 1, 1995, by
and among the Company, Pat Robertson, the PR Charitable
2
<PAGE>
Trust, Tim Robertson, the TR Family Trust, LIFE and The Christian Broadcasting
Network, Inc., a Virginia corporation ("CBN") (the "Shareholder Agreement");
--- ---------------------
WHEREAS, in connection with sale of the Shares to the Purchaser hereunder,
the Company, Pat Robertson, the PR Charitable Trust, Tim Robertson, the TR
Family Trust, LIFE and CBN have entered into that certain Termination Agreement,
dated as of even date herewith (the "Termination Agreement"), terminating the
---------------------
Shareholder Agreement, on the terms and conditions set forth therein;
WHEREAS, in connection with the Contribution Agreement, Satellite Services,
Inc., a Delaware corporation and an affiliate of Liberty, has entered into an
amendment to its Affiliation Agreement with the Company (the "Amended
-------
Affiliation Agreement");
- ---------------------
WHEREAS, concurrently herewith, the Purchaser and CBN are entering into
that certain Stock Purchase Agreement with respect to the purchase by the
Purchaser of the shares of Class B Stock owned by CBN (as the same may be
amended from time to time in accordance with its terms, the "CBN Stock Purchase
------------------
Agreement");
- ---------
WHEREAS, in connection with the execution of the CBN Purchase Agreement,
CBN is waiving all rights of co-sale and other rights which it has with respect
to the sale of Shares contemplated hereby under the Shareholder Agreement;
WHEREAS, concurrently herewith, the Purchaser and Regent University, a
Virginia corporation ("Regent") are entering into that certain Stock Purchase
------
Agreement with respect to the purchase by the Purchaser of the shares of Class B
Stock owned by Regent (as the same may be amended from time to time in
accordance with its terms, the "Regent Stock Purchase Agreement");
-------------------------------
WHEREAS, concurrently herewith, the Purchaser and Pat Robertson have
entered into a letter agreement providing for certain services to be rendered by
Pat Robertson to the Company (the "PR Agreement"); and
------------
WHEREAS, as a condition to their willingness to enter into this Agreement,
the Sellers have required that, in connection with the transactions to be
effected pursuant to this Agreement, The News Corporation Limited, a corporation
organized and existing under the laws of South Australia, Australia (the
"Guarantor") guarantee the obligations of the Purchaser to the Sellers hereunder
---------
and the Guarantor has given a guaranty (the "Guaranty") in accordance with such
--------
determination.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration given to each party hereto, the receipt of which is
hereby acknowledged, the parties agree as follows.
3
<PAGE>
1. PURCHASE AND SALE OF THE SHARES. On the terms and subject to the
conditions set forth in this Agreement, the Sellers agree to sell and deliver
the Shares to the Purchaser, free and clear of any mortgage, pledge, lien,
security interest or other encumbrance (each, a "Lien") or Restriction created
----
by or binding upon the Sellers or the Shares, and the Purchaser agrees to
purchase and acquire the Shares from the Sellers. For purposes of this
Agreement, "Restriction" means, when used with respect to any specified
security, any stockholders or other trust agreement, option, warrant, escrow,
proxy, buy-sell agreement, power of attorney or other contract, agreement or
arrangement which (i) grants to any Person the right to sell or otherwise
dispose of such specified security or any interest therein, or (ii) restricts
the transfer of, or the exercise of any rights or the enjoyment of any benefits
arising by reason of, the ownership of such specified security. For purposes of
this Agreement, "Person" means any individual, corporation, general or limited
partnership, limited liability company, trust, joint venture, association or
unincorporated entity of any kind.
2. PURCHASE PRICE. The Shares shall be purchased by the Purchaser from
the Sellers thereof for a purchase price (the "Purchase Price") equal to $35.00
--------------
per share. Notwithstanding the foregoing, the Purchase Price shall be increased
to an amount which equals (if greater than the Purchase Price provided for
herein) the per share amount actually paid, directly or indirectly, by the
Purchaser or any of its Affiliates, with respect to the purchase of, or
agreement to purchase, Company Stock, or securities convertible into Company
Stock, which purchase is effected or agreement is entered into after the date
hereof and through the earlier to occur of (a) the Effective Time (as defined in
the Merger Agreement) or (b) the termination of the Merger Agreement, (x) in the
Merger, (y) from (i) LIFE, (ii) CBN, (iii) Regent, (iv) any holder or "group"
(within the meaning of Rule 13d-5(b)(1) under the Exchange Act) that owns, or
has the right to dispose of, or to direct the disposition of, 2-1/2% or more of
any class of common stock of the Company, or (v) any of the Affiliates of the
entities referred to in clauses (i), (ii), (iii), or (iv) above, or (z) in any
transaction, or series of related or unrelated transactions (excluding for
purposes of this clause (z), any transaction referred to in clauses (y)(i),
(ii), (iii) or (v)), after the date hereof and through the Effective Time,
involving, in the aggregate, 5% or more of the outstanding shares of any class
of common stock of the Company. For these purposes, it is acknowledged and
agreed that (x) the $3.5 million to be paid to LIFE under the Contribution
Agreement with respect to forfeited interest income on the Convertible Notes,
and (y) amounts to be paid with respect to any "tax gross up" with respect to
the Exchange Rights under the Contribution Agreement, shall not constitute an
amount paid, directly or indirectly, with respect to the purchase of Company
Stock. Further, the Purchase Price shall not be adjusted as a result of the
provisions of the preceding sentence with respect to any purchase effected under
any of the Contribution Agreement, the Merger Agreement, the CBN Agreement or
the Regent Agreement unless the applicable agreement has been amended after the
date hereof so as to increase the consideration to be paid by the Purchaser or
any of its Affiliates, directly or indirectly, with respect to the Company Stock
or securities convertible into Company Stock. The Purchaser shall promptly
provide notice to the Sellers of any agreement or amendment to an existing
agreement entered into by the Purchaser or any of its Affiliates with the
Company, CBN or Regent, or any amendment to an Other Transaction Agreement (as
defined
4
<PAGE>
herein) to which LIFE or any of its Affiliates is a party, from and
after the date hereof and through the Closing Date. If the Purchase Price is
adjusted pursuant to the foregoing, following the closing under such other
agreement (or the Effective Time, if applicable), the Purchaser shall promptly
pay to the Sellers the amount of any increase in the Purchase Price resulting
from such agreement. For purposes of this Agreement, "Affiliate" means, when
---------
used with reference to a specified Person, any Person that directly or
indirectly through one or more intermediaries controls or is controlled by, or
is under common control with, such specified Person and, in the case of an
individual, such Person's spouse, parents, children, siblings, mothers- and
fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law.
For the purposes of this definition, "control" (including the terms controlled
by and under common control with), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise. For the purposes of
this Agreement, the Purchaser shall be deemed to be an Affiliate of Fox, Inc., a
Delaware corporation, and of Saban Entertainment, Inc., a Delaware corporation,
but shall not be deemed to be an Affiliate of any of the Sellers, the Company,
LIFE, CBN, Regent nor any of their respective Affiliates.
3. THE CLOSING. The closing (the "Closing") of the purchase and sale of
-------
the Shares shall take place on the third business day following satisfaction or
waiver of each and every one of the conditions set forth in Section 6 and 7
hereof, or such other date and time as the parties shall otherwise agree to. The
date of the Closing is referred to herein as the "Closing Date." At the Closing,
each Seller shall deliver to the Purchaser certificates representing the Shares
(accompanied by signature guarantees in customary form) against delivery by the
Purchaser of payment of the Purchase Price therefor, allocated among the Sellers
based on their respective percentage ownerships of the Shares, by wire transfer
or by immediately available funds, to such accounts as Seller may specify.
4. REPRESENTATIONS AND WARRANTIES. Each Seller, severally with respect to
itself and the Shares which it has agreed to sell pursuant to this Agreement,
makes the following representations and warranties as of the date hereof. The
representations and warranties contain exceptions set forth in a written
disclosure letter (the "Sellers Disclosure Letter") delivered to the Purchaser
-------------------------
concurrently with the execution hereof, which is numbered to correspond to the
various Sections of this Agreement and which also sets forth certain other
information called for by this Agreement.
4.1 Formation, Validity, Powers and Actions of Trusts. If a trust,
-------------------------------------------------
(i) such Seller is a trust duly and validly formed and validly existing under
the laws of the Commonwealth of Virginia, with adequate trust power and
authority to own its properties and carry on its actions as currently conducted;
(ii) Pat Robertson, as trustee of each of the PR Charitable Trust and the
Irrevocable Trusts, has all requisite power and authority to enter into, execute
and deliver this Agreement on behalf of such trusts and to consummate on behalf
of such trusts the transactions contemplated hereby; and (iii) Tim Robertson, as
trustee of each of the TR Family Trust and the
5
<PAGE>
TR Charitable Trust, has all requisite power and authority to enter into,
execute and deliver this Agreement on behalf of such trusts and to consummate on
behalf of such trusts the transactions contemplated hereby.
4.2 Execution, Delivery and Performance. This Agreement constitutes
-----------------------------------
the valid and binding obligations of such Seller, including the trusts, and is
enforceable in accordance with its terms, except as enforceability may be
subject to or limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally.
4.3 No Consents. Other than filings required under the Hart-Scott-
-----------
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the
-------
filing of Forms 4 and Schedules 13D under the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder (the "Exchange Act"), no
------------
consent, authorization, order or approval of, or filing with or registration
with, any governmental authority, commission, board or other regulatory body of
the United States or any state or political subdivision thereof (each, a
"Governmental Entity"), is required to be made or obtained by the Sellers for or
in connection with the sale by the Sellers of the Shares to the Purchaser as
contemplated hereby.
4.4 Title. Each Seller has, and at the Closing will have, good and
-----
valid title to the Shares it is selling pursuant to this Agreement, free and
clear of any Liens or Restrictions (other than those restrictions set forth in
the Shareholder Agreement or in the Charter) and (subject to such restrictions)
it has the full legal right, power and authority to sell, assign, transfer and
deliver such Shares to the Purchaser and to make the representations,
warranties, covenants and agreements made by such Seller herein; upon the
delivery of and payment for such Shares as contemplated hereby the Purchaser
will acquire good and valid title thereto, free and clear of all Liens or
Restrictions created by or binding upon such Seller. Each Seller has sole voting
power, and sole power of disposition, with respect to all of its respective
Shares (other than those Restrictions set forth in the Shareholder Agreement or
in the Charter) subject to applicable federal and state securities laws, on such
Seller's rights of disposition pertaining thereto. The Shares, in the amounts
set forth in the recitals to this Agreement, constitute all equity or debt
securities issued by the Company held by the Sellers (other than the 401(k)
Shares) and none of the Sellers has any right, title or interest in or to any
other equity or debt securities of the Company or any option or right to acquire
such equity or debt securities (other than the 401(k) Shares), other than those
options (the "Subject Options") to acquire shares of Class B Stock under the
---------------
International Family Entertainment, Inc. Stock Incentive Plan which are
described in the Sellers Disclosure Letter and other than under the Shareholder
Agreement.
4.5 No Conflicts. The execution, delivery and performance by the
------------
Sellers of this Agreement will not violate any other agreement to which any of
the Sellers is a party, including, without limitation, any voting agreement,
stockholders agreement or voting trust, or otherwise contravene, conflict with
or result in a violation of, any federal, state, local, municipal,
6
<PAGE>
foreign, international, multi-national or other administrative order,
constitution, law, ordinance, regulation, statute or treaty, or give any
individual, corporation, partnership, governmental authority or regulatory body
or any other person the right to prevent the consummation of the sale of the
Shares contemplated hereby.
4.6 No Broker. The Sellers have not employed any investment banker,
---------
broker, finder, consultant or intermediary in connection with the transactions
contemplated by this Agreement which would be entitled to any investment
banking, brokerage, finder's or similar fee or commission in connection with
this Agreement or the transactions contemplated hereby.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
represents and warrants to the Sellers as follows:
5.1 Organization, Standing and Corporate Power of the Purchaser. The
-----------------------------------------------------------
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, with adequate corporate power and
authority to own its properties and carry on its business as presently
conducted. The Purchaser has the corporate power and authority to enter into,
execute and deliver this Agreement and to consummate the transactions
contemplated hereby.
5.2 Organization, Standing and Corporate Power of the Guarantor. The
-----------------------------------------------------------
Guarantor is a corporation organized and existing under the laws of South
Australia, Australia, with adequate corporate power and authority to own its
properties and carry on its business as presently conducted. The Guarantor has
the corporate power and authority to enter into, execute and deliver the
Guaranty and to guarantee the obligations of the Purchaser hereunder pursuant to
such Guaranty.
5.3 Execution, Delivery and Performance by the Purchaser. The
----------------------------------------------------
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of the Purchaser, and the Purchaser has taken all other actions
required by law, its Certificate of Incorporation and its Bylaws in order to
consummate the transactions contemplated by this Agreement. This Agreement
constitutes the valid and binding obligations of the Purchaser and is
enforceable in accordance with its terms, except as enforceability may be
subject to or limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally.
5.4 Execution, Delivery and Performance by the Guarantor. The
----------------------------------------------------
execution, delivery and performance of the Guaranty and the consummation of the
transactions thereby have been duly authorized by the Board of Directors of the
Guarantor, and the Guarantor has taken all other actions required by law and its
organizational documents in order to consummate the transac tions contemplated
by the Guaranty. The Guaranty constitutes the valid and binding obligations
7
<PAGE>
of the Guarantor and is enforceable in accordance with its terms, except as
enforceability may be subject to or limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally.
5.5 Consents. Other than filings required under the HSR Act and the
--------
filing of a Form 4 and Schedule 13D under the Exchange Act, no consent,
authorization, order or approval of, or filing with or registration with, any
Governmental Entity is required to be made or obtained by the Purchaser for the
purchase by the Purchaser of the Shares from the Sellers as contemplated hereby
or by the Guarantor for the execution, delivery and performance of the
Guaranty.
5.6 No Conflicts. The execution, delivery and performance by the
------------
Purchaser of this Agreement or by the Guarantor of the Guaranty will not violate
any other agreement to which the Purchaser or the Guarantor is a party, or
otherwise contravene, conflict with or result in a violation of, any federal,
state, local, municipal, foreign, international, multi-national or other
administrative order, constitution, law, ordinance, regulation, statute or
treaty, or give any individual, corporation, partnership, governmental authority
or regulatory body or any other person the right to prevent the consummation of
the sale of the Shares contemplated hereby or the enforcement by any of the
Sellers of the Guaranty.
5.7 Purchase For Investment. The Purchaser is acquiring the Shares
------------------------
for its own account, for investment purposes only, and not with a view to or for
the resale or distribution thereof, in whole or in part. The Purchaser
acknowledges and represents: (i) that it is aware that the Shares are not
registered under the Securities Act and are subject to the restrictions thereof,
including pursuant to Rule 144 promulgated thereunder; (ii) that no federal or
state agency has passed upon the Shares or made any finding or determination as
to the fairness of the Purchaser's investment in the Shares; (iii) that there
are risks of loss associated with the Purchaser's purchase of the Shares; (iv)
that the investment in the Shares is an illiquid investment and the Purchaser
may bear the risk of its investment for an indefinite period of time; and (v)
that it is a sophisticated investor, able to evaluate the risks and merits of
its investment and to bear such financial risk.
5.8 Nature of Control Stock. The Purchaser understands that, at the
-----------------------
time of transfer of the Control Stock to the Purchaser as contemplated hereby,
such Control Stock will consist (or, by operation of the Charter, be
automatically converted into and deemed to consist) solely of Class B Stock of
the Company.
5.9 No Broker. The Purchaser has not employed any investment banker,
---------
broker, finder, consultant or intermediary in connection with the transactions
contemplated by this Agreement which would be entitled to any investment
banking, brokerage, finder's or similar fee or commission in connection with
this Agreement or the transactions contemplated hereby.
5.10 Transaction Agreements. This Agreement, the Merger Agreement,
----------------------
the Other Transaction Agreements (as defined herein), and the other agreements
listed in the recitals
8
<PAGE>
above, are the only agreements existing as of the date hereof between the
Purchaser, on the one hand, and the respective counterparties to such agreements
and any Affiliates of such parties, on the other hand, with respect to the
acquisition of Class A Stock, Class B Stock, Class C Stock or Convertible Notes
of the Company.
6. CONDITIONS TO OBLIGATIONS OF THE PURCHASER. Unless waived (it being
agreed that no such waiver shall be given or effective prior to the tender by
the Purchaser of the Purchase Price and the consummation of the Closing), in
whole or in part, in writing by the Purchaser, the obligations of the Purchaser
to purchase the Shares and to perform any and all of its post-closing
obligations shall be subject to the satisfaction at or prior to the Closing Date
of each of the following conditions:
6.1 Accuracy of Representations and Warranties. All representations
------------------------------------------
and warranties of the Sellers contained herein 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, except for changes permitted or
contemplated by this Agreement.
6.2 Performance of Agreements. The Sellers shall have performed in
-------------------------
all material respects all obligations and agreements contained in this Agreement
to be performed or complied with by them prior to or at the Closing Date.
6.3 The Shares. The Sellers shall be prepared to deliver
----------
certificates for all the Shares to the Purchaser upon the Closing.
6.4 Merger Agreement Conditions. All conditions set forth in
---------------------------
Sections 7.1, 7.2 and 7.3 of the Merger Agreement to the consummation of the
Merger (other than the preparation and mailing of the Information Statement (as
defined in the Merger Agreement) and the expiration of the 20 calendar day
waiting period with respect thereto) not waived by the applicable party shall
have been satisfied as of the Closing Date.
6.5 Company Certificate. The Purchaser shall have received a
-------------------
certificate executed by the Company in the form of Exhibit A attached to the
---------
Merger Agreement.
6.6 No Injunctions. None of the parties hereto shall be subject to
--------------
any order or injunction of a court of competent jurisdiction which prohibits the
consummation of the sale of the Shares to the Purchaser contemplated by this
Agreement. In the event any such order or injunction shall have been issued,
each party agrees to use its reasonable efforts to have any such injunction
lifted.
6.7 No Adverse Enactments. There shall not have been any statute,
---------------------
rule, regulation or order promulgated, enacted or issued by any Government
Entity or court of
9
<PAGE>
competent jurisdiction which would make the consummation of the sale of the
Shares hereunder or the Merger illegal.
6.8 Banking Moratorium. There shall not have occurred and be
------------------
continuing any declaration of any banking moratorium or suspension of payments
by banks in the United States or any general limitation on the extension of
credit by lending institutions in the United States.
6.9 Consummation of Other Transactions. All conditions to the
----------------------------------
consummation of the transactions (the "Other Transactions") to be effected
------------------
pursuant to the Contribution Agreement, the CBN Stock Purchase Agreement and the
Regent Stock Purchase Agreement (collectively, the "Other Transaction
-----------------
Agreements") shall have been satisfied or waived by the applicable party, and
- ----------
the parties to such Other Transaction Agreements shall have consummated such
Other Transactions simultaneously with or prior to the sale of the Shares to the
Purchaser as contemplated hereby.
6.10 Amended Affiliation Agreement. The Amended Affiliation
-----------------------------
Agreement, in the form of Exhibit "A" hereto, shall be in full force and effect.
-----------
6.11 Hart-Scott-Rodino Notification. The waiting period (and any
------------------------------
extension thereof) under the HSR Act applicable to (i) the purchase of the
Shares pursuant to this Agreement and the consummation of the Other
Transactions, (ii) the conversion by the Purchaser of the Class C Stock and the
Convertible Notes acquired pursuant to the Contribution Agreement into shares of
Class B Stock of the Company, and (iii) the Merger shall have expired or have
been terminated.
6.12 Opinion of Counsel. The Purchaser shall have received an opinion
------------------
of counsel to the Sellers from a counsel reasonably acceptable to Purchaser
covering the matters referred to in Section 4.1 hereof.
6.13 Acquisition Agreements. Immediately following the consummation
----------------------
of this transaction and the Other Transactions (and after giving effect to the
conversion of the Class C Stock and the Convertible Notes into Class B Stock),
the Purchaser and its Subsidiaries will own a majority of the voting common
stock of the Company then entitled to vote in the election of the Company's
directors.
7. CONDITIONS TO OBLIGATIONS OF SELLERS. Unless waived, in whole or in
part, in writing by the Sellers, the obligations of the Sellers to sell the
Shares as contemplated by this Agreement shall be subject to the fulfillment
prior to or on the Closing Date of each of the following conditions:
7.1 Accuracy of Representations and Warranties. All representations
------------------------------------------
and warranties of the Purchaser contained herein shall be true and correct in
all material respects on
10
<PAGE>
and as of the Closing Date, with the same effect as though made on and as of the
Closing Date, except for changes permitted or contemplated by this Agreement.
7.2 Performance of Agreements. The Purchaser shall have performed in
-------------------------
all material respects all obligations and agreements contained in this Agreement
to be performed or complied with by it prior to or at the Closing Date.
7.3 No Adverse Enactments. There shall not have been any statute,
---------------------
rule, regulation or order promulgated, enacted or issued by any Government
Entity or court of competent jurisdiction which would make the consummation of
the sale of the Shares hereunder or the Merger illegal.
7.4 No Injunctions. None of the parties hereto shall be subject to
--------------
any order or injunction of a court of competent jurisdiction which prohibits the
consummation of the sale of the Shares to the Purchaser contemplated by this
Agreement. In the event any such order or injunction shall have been issued,
each party agrees to use its reasonable efforts to have any such injunction
lifted.
7.5 Hart-Scott-Rodino Notification. The waiting period (and any
------------------------------
extension thereof) under the HSR Act applicable to the consummation of the
purchase of the Shares pursuant to this Agreement shall have expired or have
been terminated.
7.6 Purchase Price. The Purchaser shall be prepared to deliver the
--------------
aggregate Purchase Price for all the Shares to the Sellers in the amounts and
manner contemplated hereby upon the Closing.
7.7 The PR Agreement. The Purchaser shall have executed the PR
----------------
Agreement and shall have delivered the PR Agreement to Pat Robertson.
7.8 Consummation of Other Transactions. All conditions to the
----------------------------------
consummation of the Other Transactions to be effected pursuant to the Other
Transaction Agreements shall have been satisfied or waived by the applicable
party, and the parties to such Other Transaction Agreements shall have
consummated such Other Transactions simultaneously with or prior to the sale of
the Shares to the Purchaser as contemplated hereby.
8. COVENANTS OF THE PURCHASER. The Purchaser hereby covenants and agrees
as follows:
8.1 Filings and Other Actions. As promptly as practicable after the
-------------------------
execution of this Agreement, but in any event within 5 business days, the
Purchaser shall file notification reports under the HSR Act and shall request
early termination of the waiting period under the HSR Act and use their
commercially reasonable efforts to obtain clearance or authorization under the
11
<PAGE>
HSR Act of the Merger and the purchase of the Shares contemplated by this
Agreement and the Other Transactions at the earliest practicable time. The
Purchaser agrees to cooperate fully with the Sellers to promptly effectuate the
filing of any notification required under the HSR Act.
8.2 Reasonable Efforts. Subject to the terms and conditions of this
------------------
Agreement, the Other Transaction Agreements and the Merger Agreement, the
Purchaser agrees to use all reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, the Other Transaction Agreements and the Merger Agreement. The
Purchaser hereby agrees, while this Agreement is in effect, and except as
contemplated hereby, not to intentionally and knowingly take any action with the
intention and knowledge that such action would make any of its representations
or warranties contained herein untrue or incorrect in any material respect or
have the effect of preventing or disabling it from performing its obligations
under this Agreement. The Purchaser shall not enter into, permit or give any
consent to any amendment, supplement or other modification of, or give any
consent or waiver or otherwise take any action (including agreeing to a delayed
closing date) under, any of the Other Transaction Agreements (or any of the
agreements related thereto) (collectively, a "Modification") which could
reasonably be expected to delay the Closing hereunder, or terminate any of the
Other Transaction Agreements (or any of the agreements related thereto), without
the prior written consent of the Sellers of the Control Stock. Notwithstanding
the foregoing, the Purchaser may (without the consent of the Sellers of the
Control Stock) effect any Modification to the Other Transaction Agreements (or
any of the agreements related thereto) which it determines in good faith to be
reasonably necessary to effect the transactions contemplated thereby, provided
it uses its reasonable good faith efforts to cause the closing thereunder to
occur as soon as practicable and provided further that such Modification will
not delay the Closing hereunder beyond November 30, 1997.
9. COVENANTS OF THE SELLERS. The Sellers, jointly and severally, hereby
covenant and agree as follows:
9.1 Cooperation in Filing Notification under Hart-Scott-Rodino. The
----------------------------------------------------------
Sellers agree to cooperate fully with the Purchaser to promptly effectuate the
filing of any notification required under the HSR Act.
9.2 Additional Shares. The Sellers agree that (other than purchases
-----------------
under the Company's 401(k) plan), they will not purchase additional shares of
Common Stock of the Company whether in open market purchases, privately
negotiated purchases or by the exercise or conversion of options or convertible
securities held by them between the date of this Agreement and the Closing Date.
If ownership of any additional shares of Common Stock of the Company is acquired
or transferred to any Seller (other than under the Company's 401(k) plan), such
Seller hereby agrees, while this Agreement is in effect, to promptly notify each
other party to this
12
<PAGE>
Agreement of the number of additional shares of Common Stock of the Company
acquired by it, if any, after the date hereof, and hereby agrees to sell any
such additional shares of Common Stock of the Company acquired by it after the
date hereof through the Closing Date to the Purchaser pursuant to the terms of
this Agreement, with a provision for additional payment for such shares by the
Purchaser to such Seller at the Purchase Price.
9.3 Reasonable Efforts. Subject to the terms and conditions of this
------------------
Agreement, the Sellers each agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the transactions
provided for by this Agreement. The Sellers each hereby agrees, while this
Agreement is in effect, and except as contemplated hereby, not to intentionally
and knowingly take any action with the intention and knowledge that such action
would make any of its representations or warranties contained herein untrue or
incorrect in any material respect or have the effect of preventing or disabling
it from performing its obligations under this Agreement. Notwithstanding
anything to the contrary contained herein, this Section 9.3 shall not obligate,
and shall not be interpreted to obligate, any of the holders of the Control
Stock to take any action to the extent such obligation would result in a change
in beneficial ownership of any of the Control Stock prior to the Closing.
10. POST-CLOSING COVENANTS; TERMINATION.
10.1 Further Instruments, Termination. The Sellers and the Purchaser
--------------------------------
agree to execute such further documents or instruments and to take such other
actions as are necessary to transfer the Shares to the Purchaser and to
otherwise carry out the transactions provided for by this Agreement. If the
Closing Date shall not have occurred on or prior to November 30, 1997, other
than as a result of a material breach of this Agreement by any party hereto, any
party may terminate this Agreement without liability. If the Closing Date shall
not have occurred on or prior to such date as a result of material breach of any
representation, warranty, covenant or obligation by the Sellers (or any of
them), on the one hand, or the Purchaser on the other, the non-breaching party
shall have the right to terminate this Agreement without liability. In addition,
this Agreement may be terminated by the Sellers if, after the date hereof and
before the Closing Date, the Guarantor attempts or purports to revoke or
withdraw the Guaranty or a court of competent jurisdiction finally determines
that the Guaranty is unenforceable or invalid.
10.2 Subject Options. Immediately following the Closing, and from
---------------
time to time thereafter, the Purchaser will lend to each of Pat Robertson and
Tim Robertson sufficient funds to permit each of them to exercise all Subject
Options which are then vested and exercisable or subsequently vest and become
exercisable. Upon receiving such funds, each of Pat Robertson and Tim Robertson
will immediately exercise such Subject Options, and concurrent with his receipt
of the shares of Class B Stock receivable thereunder will sell and deliver such
shares to the Purchaser for a cash purchase price per share equal to the
Purchase Price, less the amount of the loan referred to in the immediately
preceding sentence, which shall be deemed repaid in full.
13
<PAGE>
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY. Only the
representations and warranties of the Sellers contained in Section 4.4 hereto
(with respect to title) shall survive the Closing and the consummation of the
transactions contemplated hereby. No party hereto shall have any monetary or
other liability or obligation to any other party hereto for breach of any of
such first party's representations or warranties contained herein or in any
certificate or other document delivered pursuant hereto, and the sole
consequence of any such breach shall be limited to the failure to satisfy a
condition to the Closing pursuant to Article 6 or 7 and the termination right
provided in Section 10, in each case to the extent applicable according to such
Section's express terms. With respect to a breach of its representations and
warranties contained in Section 4.4 hereto, each Seller hereby covenants and
agrees with the Purchaser that it shall indemnify the Purchaser and its
directors, officers, shareholders and Affiliates, and each of their successors
and assigns and hold them harmless from, against and in respect of any and all
costs, losses, claims, liabilities, fines, penalties (including interest which
may be imposed in connection therewith and court costs and reasonable fees and
disbursements of counsel) incurred by any of them arising out of any material
breach of, or any material inaccuracy in, such representations and warranties;
provided, however, that the liability of each Seller to all such indemnified
- -------- -------
persons shall in no event exceed the proceeds received by such Seller for the
sale of its Shares hereunder.
12. MISCELLANEOUS.
12.1 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the parties hereto and their respective successors
and assigns. Other than as set forth in the immediately succeeding sentence, no
party may assign any of its rights, or delegate any of its duties or
obligations, hereunder without the prior written consent of the other party, and
any such purported assignment or delegation shall be void ab initio.
Notwithstanding the foregoing, the Purchaser, its Affiliates, and its successors
and assigns, may assign their rights and delegate their duties (i) to any
successor entity resulting from any liquidation, merger, con solidation,
reorganization, or transfer of all or substantially all of the assets or stock
of the Purchaser, or (ii) to any Affiliate of the Purchaser; provided, that in
--------
either case, any such assignee shall expressly assume all of the obligations the
Purchaser hereunder.
12.2 Notices. All notices, demands and other communications
-------
(collectively, "Notices") given or made pursuant to this Agreement shall be in
-------
writing and shall be deemed to have been duly given if sent by registered or
certified mail, return receipt requested, postage and fees prepaid, by overnight
service with a nationally recognized "next day" delivery company such as Federal
Express or United Parcel Service, by facsimile transmission, or otherwise
actually delivered to the following addresses:
(a) If to the Purchaser:
-------------------
Fox Kids Worldwide, Inc.
10960 Wilshire Boulevard
14
<PAGE>
Los Angeles, California 90024
Attn: Mel Woods
Fax: 310-235-5552
with a copy to:
--------------
Fox, Inc.
10201 West Pico Boulevard
Los Angeles, California 90035
Attn: President
Fax: 310-369-1203
and a copy to:
-------------
The News Corporation Limited
c/o News America Publishing Incorporated
1211 Avenue of the Americas
New York, New York 10036
Attn: Arthur M. Siskind, Esq.
Fax: 212-768-2029
and a copy to:
-------------
Troop Meisinger Steuber & Pasich, LLP
10940 Wilshire Boulevard
Los Angeles, California 90024
Attn: C.N. Franklin Reddick, III, Esq.
Fax: 310-443-8512
and a copy to:
-------------
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attn: Jeffrey W. Rubin, Esq.
Fax: 212-697-6686
15
<PAGE>
(b) If to the Sellers:
-----------------
c/o International Family Entertainment, Inc.
2877 Guardian Lane
Virginia Beach, Virginia 23450
Attn: Tim Robertson
Fax: 757-459-6422
with a copy to:
--------------
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: Robert E. Spatt, Esq.
Fax: 212-455-2502
Any Notice shall be deemed duly given when received by the addressee thereof.
Any of the parties to this Agreement may from time to time change its address
for receiving notices by giving written notice thereof in the manner set forth
above.
12.3 Amendment; Waiver. No provision of this Agreement may be waived
-----------------
unless in writing signed by all of the parties to this Agreement, and the waiver
of any one provision of this Agreement shall not be deemed to be a waiver of any
other provision. This Agreement may be amended, supplemented or otherwise
modified only by a written agreement executed by all of the parties to this
Agreement.
12.4 Limitation on Liability. The liability of the Sellers for any
-----------------------
breach by the Sellers of this Agreement shall be limited to the actual damages
suffered by the Purchaser or any of its Affiliates under this Agreement and the
Sellers shall not be liable for any consequential or other damages of the
Purchaser or any of its Affiliates, including any damages arising in connection
with any Other Transaction Agreement or the Merger Agreement.
12.5 Jurisdiction. The parties hereto irrevocably submit to the non-
------------
exclusive jurisdiction of the state and federal courts located in Delaware for
the purposes of any suit, action or other proceeding arising out of this
Agreement (and agree not to commence any action, suit or proceeding relating
hereto except in such courts). Each party hereto hereby irrevocably designates
CT Corporation System (or, in the case of the Sellers, Young, Conaway, Stargatt
& Taylor, at 1100 North Market Street, 11th Floor, Wilmington, Delaware 19801,
Attention: David McBride and Bruce Silverstein) as its designee, appointee and
agent to receive, for and on behalf of it, service of process in such respective
jurisdictions in any legal action or proceeding with respect to this Agreement
or any document related thereto. It is understood that a copy of such process
serviced on such agent will be promptly forwarded by mail to it at its address
set forth in Section 12.2 hereof, but the failure to receive such copy shall not
affect in any way the service of such process. Each of the parties hereto
further irrevocably consents to the service of process of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by
16
<PAGE>
registered or certified mail, postage prepaid, to it at its said address, such
service to become effective upon confirmed delivery. The parties irrevocably and
unconditionally waive any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby in the state or federal courts located in Delaware, and hereby further
irrevocably and unconditionally waive and agree not to plead or claim in any
such action, suit or proceeding brought in any such court that such action, suit
or proceeding has been brought in an inconvenient forum.
12.6 Dispute Resolution. Any dispute or claim arising hereunder shall
------------------
be settled by arbitration. Any party may commence arbitration by sending a
written notice of arbitration to the other party. The notice will state the
dispute with particularity. The arbitration hearing shall be commenced thirty
(30) days following the date of delivery of notice of arbitration by one party
to the other, by the American Arbitration Association ("AAA") as arbitrator.
---
The arbitration shall be conducted in New York City, New York in accordance with
the commercial arbitration rules promulgated by AAA, and the Sellers, on the one
hand, and the Purchaser, on the other, shall retain the right to cross-examine
the opposing party's witnesses, either through legal counsel, expert witnesses
or both. The decision of the arbitrator shall be final, binding and conclusive
on all parties (without any right of appeal therefrom) and shall not be subject
to judicial review. As part of his decision, the arbitrator may allocate the
cost of arbitration, including fees of attorneys and experts, as he or she deems
fair and equitable in light of all relevant circumstances. Judgment on the
award rendered by the arbitrator may be entered in any court of competent
jurisdiction.
12.7 Governing Law. This Agreement shall be governed by and construed
-------------
both as to validity and performance and enforced in accordance with the laws of
the State of Delaware without giving effect to the choice of law principles
thereof.
12.8 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
12.9 Remedies Cumulative. Each of the various rights, powers and
-------------------
remedies shall be deemed to be cumulative with, and in addition to, all the
rights, powers and remedies which either party may have hereunder or under
applicable law relating hereto or to the subject matter hereof, and the exercise
or partial exercise of any such right, power or remedy shall constitute neither
an exclusive election thereof nor a waiver of any other such right, power or
remedy.
12.10 Headings. The section and subsection headings contained in this
--------
Agreement are included for convenience only and form no part of the agreement
between the parties.
12.11 Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be or become
prohibited or invalid under applicable law, such provision shall be ineffective
to the extent of such prohibition or invalidity without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
17
<PAGE>
12.12 Expenses. Each party shall pay its own costs, expenses,
--------
including without limitation, the fees and expenses of their respective counsel
and financial advisors.
12.13 Entire Agreement. This Agreement constitutes and embodies the
----------------
entire understanding and agreement of the parties hereto relating to the subject
matter hereof and there are no other agreements or understandings, written or
oral, in effect between the parties relating to such subject matter except as
expressly referred to herein.
12.14 Publicity. The initial press release relating to this Agreement
---------
shall be a joint press release in the form attached hereto as Exhibit "B", and
-----------
the Purchaser and the Sellers shall use reasonable efforts to agree upon the
text of any other press release before issuing any such press release or
otherwise making public statements with respect to the transactions contemplated
hereby.
12.15 Specific Performance. Each of the parties hereto recognizes and
--------------------
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other parties to sustain damages for which they
would not have an adequate remedy at law for money damages, and therefore each
of the parties hereto agrees that in the event of any such breach the aggrieved
party or parties shall be entitled to the remedy of specific performance of such
covenants and agreements and injunctive and other equitable relief, without the
posting of bond or other security, in addition to any other remedy to which it
or they may be entitled, at law or in equity.
12.16 No Third Party Beneficiaries. This Agreement is not intended to
----------------------------
benefit, and shall not run to the benefit of or be enforceable by, any other
person or entity other than the parties hereto and their permitted successors
and assigns.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
18
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
FOX KIDS WORLDWIDE, INC.
By: /s/ Mel Woods
________________________________________________
Its: President
________________________________________________
M.G. "PAT" ROBERTSON
ROBERTSON CHARITABLE REMAINDER UNITRUST
GORDON P. ROBERTSON IRREVOCABLE TRUST
ELIZABETH F. ROBINSON IRREVOCABLE TRUST
ANN R. LABLANC IRREVOCABLE TRUST
By: /s/ M.G. "Pat" Robertson
__________________________________________________
M.G. "Pat" Robertson, individually and as trustee
TIMOTHY B. ROBERTSON
THE TIMOTHY AND LISA ROBERTSON CHILDREN'S TRUST
THE TIMOTHY B. ROBERTSON CHARITABLE TRUST
ABIGAIL H. ROBERTSON UTMA
LAURA N. ROBERTSON UTMA
ELIZABETH C. ROBERTSON UTMA
WILLIS H. ROBERTSON UTMA
CAROLINE S. ROBERTSON UTMA
By: /s/ Timothy B. Robertson
__________________________________________________
Timothy B. Robertson, individually, as joint tenant
with Lisa N. Robertson, trustee and custodian
/s/ Lisa N. Robertson
_____________________________________________________
Lisa N. Robertson, as joint tenant with Timothy B. Robertson
<PAGE>
EXHIBITS
--------
EXHIBIT "A" - Amended Affiliation Agreement
EXHIBIT "B" - Press Release
<PAGE>
EXHIBIT 2.5
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement"), dated as of June 11,
---------
1997, is entered into by and between Fox Kids Worldwide, Inc., a Delaware
corporation (the "Purchaser") and The Christian Broadcasting Network, Inc., a
---------
Virginia corporation (the "Seller") on the following terms and conditions:
------
R E C I T A L S
---------------
WHEREAS, as of the date hereof, the Seller beneficially owns 3,891,121
shares of Class B Common Stock, par value $0.01 per share, of International
Family Entertainment, Inc. (the "Company") (the "Class B Stock");
------- -------------
WHEREAS, the Purchaser desires to purchase the Class B Stock from the
Seller, and the Seller desires to sell the Class B Stock to the Purchaser, all
on the terms and subject to the conditions contained herein;
WHEREAS, concurrently herewith, the Purchaser, Fox Kids Merger Corporation,
a Delaware corporation ("FKW Sub"), and the Company are entering into that
-------
certain Agreement and Plan of Merger (as the same may be amended from time to
time in accordance with its terms, the "Merger Agreement"), providing for the
----------------
merger of FKW Sub into the Company (the "Merger"), which shall be the surviving
------
corporation, pursuant to which each share of Company Stock and Non Voting Class
C Common Stock, par value $0.01 per share, of the Company (the "Class C Stock")
-------------
which is issued and outstanding immediately prior to the effective time (the
"Effective Time") of the Merger (other than shares held by the Company, the
Purchaser or FKW Sub, or any direct or indirect subsidiary of the Company, the
Purchaser or FKW Sub) shall be canceled and extinguished and be converted into
and become a right to receive a cash payment equal to $35.00 per share (subject
to adjustment), without interest (except that any Dissenting Shares (as defined
in the Merger Agreement) shall be converted into and become a right to receive
the payment provided for under the Delaware General Corporation Law);
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, the Purchaser has requested that the Seller enter into this Agreement
and as a condition to its willingness to enter into this Agreement, the Seller
has required that the Purchaser and FKW Sub enter into the Merger Agreement;
WHEREAS, the Purchaser, Liberty Media Corporation, a Delaware corporation
("Liberty"), and Liberty IFE, Inc., a Colorado corporation ("LIFE"), have
------- ----
entered into that certain Contribution and Exchange Agreement, dated as of the
date hereof (as the same may be amended from time to time in accordance with its
terms, the "Contribution Agreement"), pursuant to which LIFE has agreed, on the
----------------------
terms and subject to the conditions therein, to contribute its
<PAGE>
shares of Class C Stock and its $23 million principal amount of 6% Convertible
Secured Notes due 2004 of the Company (the "Convertible Notes"), to the
-----------------
Purchaser in exchange for shares of a newly issued class of preferred stock of
the Purchaser;
WHEREAS, in connection with the Contribution Agreement, Satellite Services,
Inc., a Delaware corporation and an affiliate of Liberty, has entered into an
amendment to its Affiliation Agreement with the Company (the "Amended
-------
Affiliation Agreement");
- ---------------------
WHEREAS, in connection with sale of the Class B Stock to the Purchaser
hereunder, the Company, M.G. "Pat" Robertson ("Pat Robertson"), individually and
-------------
as trustee of the Robertson Charitable Remainder Unitrust, u/t/a dated January
22, 1990 (the "PR Charitable Trust"), Timothy B. Robertson ("Tim Robertson"),
------------------- -------------
individually and as trustee of the Timothy and Lisa Robertson Children's Trust,
u/t/a dated September 18, 1995 (the "TR Family Trust"), LIFE and CBN have
---------------
entered into that certain Termination to Amended and Restated Shareholder
Agreement, dated as of even date herewith (the "Termination Agreement"),
---------------------
terminating the Shareholder Agreement dated September 1, 1995, by and among the
Company, Pat Robertson, the PR Charitable Trust, Tim Robertson, the TR Family
Trust, LIFE and CBN;
WHEREAS, in connection with the sale of the Class B Stock to the Purchaser
hereunder, CBN and Regent University, a Virginia corporation ("Regent") have
------
entered into that certain Termination to Assignment and Assumption Agreement,
dated as of even date herewith (the "Assignment Termination Agreement")
--------------------------------
terminating the Assignment and Assumption Agreement, dated June 30, 1992, by and
between CBN and Regent (the "Assignment and Assumption Agreement");
-----------------------------------
WHEREAS, concurrently herewith, the Purchaser and Regent are entering into
that certain Stock Purchase Agreement with respect to the purchase by the
Purchaser of the shares of Class B Stock owned by Regent (as the same may be
amended from time to time in accordance with its terms, the "Regent Purchase
---------------
Agreement");
- ---------
WHEREAS, concurrently herewith, the Purchaser has entered into a Stock
Purchase Agreement with Pat Robertson, individually and as trustee of each of
the PR Charitable Trust, the Gordon P. Robertson Irrevocable Trust, u/t/a dated
December 18, 1996, the Elizabeth F. Robinson Irrevocable Trust, u/t/a dated
December 18, 1996, and the Ann R. Lablanc Irrevocable Trust, u/t/a dated
December 18, 1996 (the Gordon P. Robertson Irrevocable Trust, the Elizabeth F.
Robinson Irrevocable Trust and the Ann R. Lablanc Irrevocable Trust, together,
the "Irrevocable Trusts"), Lisa N. Robertson and Tim Robertson as joint tenants,
------------------
and Tim Robertson, individually, as trustee of each of the TR Family Trust and
the Timothy B. Robertson Charitable Trust, u/t/a dated December 30, 1996 (the
"TR Charitable Trust"), and custodian to and for each of Abigail H. Robertson,
- --------------------
Laura N. Robertson, Elizabeth C. Robertson, Willis H. Robertson and Caroline S.
Robertson under the Virginia Uniform Transfers to Minors Act (Pat Robertson, the
PR Charitable Trust, the Irrevocable Trusts, Lisa N. Robertson, Tim Robertson,
the TR Family Trust and the TR Charitable Trust, collectively, the
"Robertsons"), as of even date herewith,
----------
2
<PAGE>
which provides, inter alia, for the purchase of all of the shares of Class A
----------
Common Stock, par value $0.01 per share, of the Company (the "Class A Stock",
-------------
and together with all of the Class B Stock, the Class C Stock and any other
shares of any other class of common stock of the Company, the "Common Stock") in
------------
the form of Class B Stock issuable upon conversion thereof, by the Purchaser
from the Pat Charitable Trust, Tim Robertson and the Tim Family Trust, and the
purchase by the Purchaser of all of the shares of Class B Stock of the Company
owned by the Robertsons (as the same may be amended from time to time in
accordance with its terms, the "Robertson Purchase Agreement"); and
----------------------------
WHEREAS, as a condition to its willingness to enter into this Agreement,
the Seller has required that, in connection with the transactions to be effected
pursuant to this Agreement, The News Corporation Limited, a corporation
organized and existing under the laws of South Australia, Australia (the
"Guarantor") guarantee the obligations of the Purchaser to the Seller hereunder
- ----------
and the Guarantor has given a guaranty (the "Guaranty") in accordance with such
--------
determination.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration given to each party hereto, the receipt of which is
hereby acknowledged, the parties agree as follows.
1. PURCHASE AND SALE OF CLASS B STOCK. On the terms and subject to the
conditions set forth in this Agreement, the Seller agrees to sell and deliver
the Class B Stock to the Purchaser, free and clear of any mortgage, pledge,
lien, security interest or other encumbrance (each, a "Lien") or Restriction
----
created by or binding upon the Seller or the Class B Stock, and the Purchaser
agrees to purchase and acquire the Class B Stock from the Seller. For purposes
of this Agreement, "Restriction" means, when used with respect to any specified
security, any stockholders or other trust agreement, option, warrant, escrow,
proxy, buy-sell agreement, power of attorney or other contract, agreement or
arrangement which (i) grants to any Person the right to sell or otherwise
dispose of, such specified security or any interest therein, or (ii) restricts
the transfer of, or the exercise of any rights or the enjoyment of any benefits
arising by reason of the ownership of such specified security. For purposes of
this Agreement, "Person" means any individual, corporation, general or limited
partnership, limited liability company, trust, joint venture, association or
unincorporated entity of any kind.
2. PURCHASE PRICE. The Shares shall be purchased by the Purchaser from
the Seller thereof for a purchase price (the "Purchase Price") equal to $35.00
--------------
per share. Notwithstanding the foregoing, the Purchase Price shall be increased
to an amount which equals (if greater than the Purchase Price provided for
herein) the per share amount actually paid, directly or indirectly, by FKWW or
any of its Affiliates, with respect to the purchase of, or agreement to
purchase, Company Stock, or securities convertible into Company Stock, which
purchase is effected or agreement is entered into after the date hereof and
through the earlier to occur of (a) the Effective Time (as defined in the Merger
Agreement) or (b) the termination of the Merger Agreement, (x) in the Merger,
(y) from (i) LIFE, (ii) the Robertsons, (iii) Regent, (iv) any holder or "group"
3
<PAGE>
(within the meaning of Rule 13d-5(b)(1) under the Exchange Act) that owns, or
has the right to dispose of, or to direct the disposition of, 2-1/2% or more of
any class of common stock of the Company, or (v) any of the Affiliates of the
entities referred to in clauses (i), (ii), (iii) or (iv) above, or (z) in any
transaction, or series of related or unrelated transactions (excluding for
purposes of this clause (z), any transaction referred to in clauses (y)(i),
(ii), (iii) or (v)), after the date hereof and through the Effective Time,
involving, in the aggregate, 5% or more of the outstanding shares of any class
of common stock of the Company. For these purposes, it is acknowledged and
agreed that (x) the $3.5 million to be paid to LIFE under the Contribution
Agreement with respect to forfeited interest income on the Convertible Notes,
and (y) amounts to be paid with respect to any "tax gross up" with respect to
the Exchange Rights under the Contribution Agreement, shall not constitute an
amount paid, directly or indirectly, with respect to the purchase of Company
Stock. Further, the Purchase Price shall not be adjusted as a result of the
provisions of the preceding sentence with respect to any purchase effected under
any of the Contribution Agreement, the Merger Agreement, the Robertson Agreement
or the Regent Agreement unless the applicable agreement has been amended after
the date hereof so as to increase the consideration to be paid by the Purchaser
or any of its Affiliates, directly or indirectly, with respect to the Company
Stock or securities convertible into Company Stock. The Purchaser shall
promptly provide notice to the Seller of any agreement or amendment to an
existing agreement entered into by the Purchaser or any of its Affiliates with
the Company, the Robertsons or Regent, or any amendment to an Other Transaction
Agreement (as defined herein) to which LIFE or any of its Affiliates is a party,
from and after the date hereof and through the Closing Date. If the Purchase
Price is adjusted pursuant to the foregoing, following the closing under such
other agreement (or the Effective Time, if applicable), the Purchaser shall
promptly pay to the Seller the amount of any increase in the Purchase Price
resulting from such agreement. For purposes of this Agreement, "Affiliate"
---------
means, when used with reference to a specified Person, any Person that directly
or indirectly through one or more intermediaries controls or is controlled by,
or is under common control with, such specified Person and, in the case of an
individual, such Person's spouse, parents, children, siblings, mothers- and
fathers-in-law, sons-and daughters-in-law, and brothers- and sisters-in-law.
For the purposes of this definition, "control" (including the terms controlled
by and under common control with), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise. For the purposes of
this Agreement, the Purchaser shall be deemed to be an Affiliate of Fox, Inc., a
Delaware corporation, and of Saban Entertainment, Inc., a Delaware corporation,
but shall not be deemed to be an Affiliate of any of the Sellers, the Company,
LIFE, the Seller, Regent nor any of their respective Affiliates.
3. THE CLOSING. The closing (the "Closing") of the purchase and sale of
-------
the Class B Stock shall take place on the third business day following
satisfaction or waiver of each and every one of the conditions set forth in
Sections 6 and 7 hereof, or such other date and time as the parties shall
otherwise agree to. The date of the Closing is referred to herein as the
"Closing Date". At the Closing, the Seller shall deliver to the Purchaser
certificates representing the Shares (accompanied by signature guarantees in
customary form) against delivery by the Purchaser of
4
<PAGE>
payment of the Purchase Price therefor, by wire transfer or by immediately
available funds, to such accounts as Seller may specify.
4. REPRESENTATIONS AND WARRANTIES. The Seller hereby makes the following
representations and warranties. The representations and warranties contain
exceptions set forth in a written disclosure letter (the "Seller Disclosure
-----------------
Letter") delivered to the Purchaser concurrently with the execution hereof,
- ------
which is numbered to correspond to the various Sections of this Agreement and
which also sets forth certain other information called for by this Agreement.
4.1 Organization, Standing and Corporate Power. The Seller is a
------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation, with adequate corporate power and authority
to own its properties and carry on its business as presently conducted. The
Seller has the corporate power to enter into, execute and deliver this Agreement
and to consummate the transactions contemplated hereby.
4.2 Execution, Delivery and Performance. The execution, delivery and
-----------------------------------
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by its Board of Directors, and the
Seller has taken all other actions required by law, its charter and its bylaws
in order to consummate the transactions contemplated by this Agreement. This
Agreement constitutes the valid and binding obligations of the Seller and is
enforceable in accordance with its terms, except as enforceability may be
subject to or limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally.
4.3 No Consents. Other than filings required under the Hart-Scott-
-----------
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") and the
-------
filing of Forms 4 and Schedules 13D under the Securities Exchange Act of 1934,
as amended and the rules and regulations thereunder (the "Exchange Act"), no
------------
consent, authorization, order or approval of, or filing with or registration
with, any governmental authority, commission, board or other regulatory body of
the United States or any state or political subdivision thereof (each, a
"Governmental Entity"), is required to be made or obtained by the Seller for or
- --------------------
in connection with the sale by the Seller of the Class B Stock to the Purchaser
as contemplated hereby.
4.4 Title. The Seller has, and at the Closing will have, good and
-----
valid title to the Class B Stock it is selling pursuant to this Agreement, free
and clear of any Liens or Restrictions (other than those Restrictions set forth
in the Shareholder Agreement) and (subject to such Restrictions) it has the full
legal right, power and authority to sell, assign, transfer and deliver the Class
B Stock to the Purchaser and to make the representations, warranties, covenants
and agreements made by it herein; upon the delivery of and payment for such
Class B Stock as contemplated hereby the Purchaser will acquire good and valid
title thereto, free and clear of all Liens or Restrictions created by or binding
upon the Seller. The Seller has sole voting power, and sole power of
disposition, with respect to all of its Class B Stock, with no Restrictions
(other than those Restrictions set forth in the Shareholder Agreement) subject
to applicable federal and state
5
<PAGE>
securities laws, on the Seller's rights of disposition pertaining thereto. The
Class B Stock constitutes all equity or debt securities issued by the Company
held by the Seller and the Seller has no right, title or interest in or to any
other equity or debt securities of the Company (other than as remainderman in
certain of the Class A Stock) or any option or right to acquire any such equity
or debt securities (other than as set forth in the Shareholder Agreement).
4.5 No Conflicts. The execution, delivery and performance by the
------------
Seller of this Agreement will not violate any other agreement to which the
Seller is a party, including, without limitation, any voting agreement,
stockholders agreement or voting trust, or otherwise contravene, conflict with
or result in a violation of, any federal, state, local, municipal, foreign,
international, multi-national or other administrative order, constitution, law,
ordinance, regulation, statute or treaty, or give any individual, corporation,
partnership, governmental authority or regulatory body or any other person the
right to prevent the consummation of the sale of the Class B Stock contemplated
hereby.
4.6 No Broker. The Seller has not employed any investment banker,
---------
broker, finder, consultant or intermediary in connection with the transactions
contemplated by this Agreement which would be entitled to any investment
banking, brokerage, finder's or similar fee or commission in connection with
this Agreement or the transactions contemplated hereby.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
represents and warrants to the Seller as follows:
5.1 Organization, Standing and Corporate Power of the Purchaser. The
-----------------------------------------------------------
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, with adequate corporate power and
authority to own its properties and carry on its business as presently
conducted. The Purchaser has the corporate power and authority to enter into,
execute and deliver this Agreement and to consummate the transactions
contemplated hereby.
5.2 Organization, Standing and Corporate Power of the Guarantor. The
-----------------------------------------------------------
Guarantor is a corporation organized and existing under the laws of South
Australia, Australia, with adequate corporate power and authority to own its
properties and carry on its business as presently conducted. The Guarantor has
the corporate power and authority to enter into, execute and deliver the
Guaranty and to guarantee the obligations of the Purchaser hereunder pursuant to
such Guaranty.
5.3 Execution, Delivery and Performance by the Purchaser. The
----------------------------------------------------
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of the Purchaser, and the Purchaser has taken all other actions
required by law, its Amended and Restated Certificate of Incorporation and its
Bylaws in order to consummate the transactions contemplated by this Agreement.
This Agreement constitutes the valid and binding obligations of the Purchaser
and
6
<PAGE>
is enforceable in accordance with its terms, except as enforceability may be
subject to or limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally.
5.4 Execution, Delivery and Performance by the Guarantor. The
----------------------------------------------------
execution, delivery and performance of the Guaranty and the consummation of the
transactions thereby have been duly authorized by the Board of Directors of the
Guarantor, and the Guarantor has taken all other actions required by law and its
organizational documents in order to consummate the transac tions contemplated
by the Guaranty. The Guaranty constitutes the valid and binding obligations of
the Guarantor and is enforceable in accordance with its terms, except as
enforceability may be subject to or limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally.
5.5 Consents. Other than filings required under the HSR Act and the
--------
filing of a Form 4 and Schedule 13D under the Exchange Act, no consent,
authorization, order or approval of, or filing with or registration with, any
Governmental Entity is required to be made or obtained by the Purchaser for the
purchase of the Class B Stock from the Seller as contemplated hereby or by the
Guarantor for the execution, delivery and performance of the Guaranty.
5.6 No Conflicts. The execution, delivery and performance by the
------------
Purchaser of this Agreement or by the Guarantor of the Guaranty will not violate
any other agreement to which the Purchaser or the Guarantor is a party, or
otherwise contravene, conflict with or result in a violation of, any federal,
state, local, municipal, foreign, international, multi-national or other
administrative order, constitution, law, ordinance, regulation, statute or
treaty, or give any individual, corporation, partnership, governmental authority
or regulatory body or any other person the right to prevent the consummation of
the sale of the Class B Stock contemplated hereby or the enforcement by the
Seller of the Guaranty.
5.7 Purchase For Investment. The Purchaser is acquiring the Class B
------------------------
Stock for its own account, for investment purposes only, and not with a view to
or for the resale or distribution thereof, in whole or in part. The Purchaser
acknowledges and represents (i) that it is aware that the Class B Stock is not
registered under the Securities Act of 1933, as amended, and are subject to the
restrictions thereof, including pursuant to Rule 144 promulgated thereunder;
(ii) that no federal or state agency has passed upon the Class B Stock or made
any finding or determination as to the fairness of the Purchaser's investment in
the Class B Stock; (iii) that there are risks of loss associated with the
Purchaser's purchase of the Class B Stock; (iv) that the investment in the Class
B Stock is an illiquid investment and the Purchaser may bear the risk of its
investment for an indefinite period of time; and (v) that it is a sophisticated
investor, able to evaluate the risks and merits of its investment and to bear
such financial risk.
5.8 No Broker. The Purchaser has not employed any investment banker,
---------
broker, finder, consultant or intermediary in connection with the transactions
contemplated by this Agreement which would be entitled to any investment
banking, brokerage, finder's or similar fee
7
<PAGE>
or commission in connection with this Agreement or the transactions contemplated
hereby.
5.9 Transaction Agreements. This Agreement, the Merger Agreement,
----------------------
the Other Transaction Agreements (as defined herein), and the other agreements
listed in the recitals above, are the only agreements existing as of the date
hereof between the Purchaser, on the one hand, and the respective counterparties
to such agreements and any Affiliates of such parties, on the other hand, with
respect to the acquisition of Class A Stock, Class B Stock, Class C Stock or
Convertible Notes of the Company.
6. CONDITIONS TO OBLIGATIONS OF PURCHASER. Unless waived, in whole or in
part, in writing by the Purchaser, the obligations of the Purchaser to purchase
the Class B Stock and to perform any and all of its post-closing obligations
shall be subject to the satisfaction at or prior to the Closing Date of each of
the following conditions:
6.1 Accuracy of Representations and Warranties. All representations
------------------------------------------
and warranties of the Seller contained herein 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, except for changes permitted or
contemplated by this Agreement.
6.2 Performance of Agreements. The Seller shall have performed in
-------------------------
all material respects all obligations and agreements contained in this Agreement
to be performed or complied with by the Seller on or prior to or at the Closing
Date.
6.3 Certificates. The Sellers shall be prepared to deliver
------------
certificates for all the Class B Stock to the Purchaser upon the Closing.
6.4 Purchase of Control Stock. The Purchaser has acquired the
-------------------------
Control Stock (as defined in the Robertson Purchase Agreement) from the
Robertsons pursuant to the Robertson Purchase Agreement.
6.5 No Injunctions. Neither of the parties hereto shall be subject
--------------
to any order or injunction of a court of competent jurisdiction which prohibits
the consummation of the sale of the Class B Stock to the Purchaser contemplated
by this Agreement. In the event any such order or injunction shall have been
issued, each party agrees to use its reasonable efforts to have any such
injunction lifted.
6.6 No Adverse Enactments. There shall not have been any statute,
---------------------
rule, regulation or order promulgated, enacted or issued by any Government
Entity or court of competent jurisdiction, which would make the consummation of
the sale of the Class B Stock hereunder or the Merger illegal.
6.7 Banking Moratorium. There shall not have occurred and be
------------------
continuing any declaration of any banking moratorium or suspension of payments
by banks in the United States
8
<PAGE>
or any general limitation on the extension of credit by lending institutions in
the United States.
6.8 Consummation of Other Transactions. All conditions to the
----------------------------------
consummation of the transactions (the "Other Transactions") to be effected
------------------
pursuant to the Contribution Agreement, the Robertson Purchase Agreement and the
Regent Purchase Agreement (collectively, the "Other Transaction Agreements")
----------------------------
shall have been satisfied or waived by the applicable party, and the parties to
such Other Transaction Agreements shall have consummated such Other Transactions
simultaneously with or prior to the sale of the Class B Stock to the Purchaser
as contemplated hereby.
6.9 Hart-Scott-Rodino Notification. The waiting period (and any
------------------------------
extension thereof) under the HSR Act applicable to (i) the purchase of the Class
B Stock pursuant to this Agreement and the consummation of the Other
Transactions, (ii) the conversion by the Purchaser of the Class C Stock and the
Convertible Notes acquired pursuant to the Contribution Agreement into shares of
Class B Stock of the Company, and (iii) the Merger shall have expired or have
been terminated.
6.10 Opinion of Counsel. The Purchaser shall have received an
------------------
opinion of counsel to the Seller in a form reasonably acceptable to Purchaser
covering the matters referred to in Section 4.1 hereof.
6.11 Acquisition Agreements. Immediately following the consummation
----------------------
of this transaction and the Other Transactions (and after giving effect to the
conversion of the Class C Stock and the Convertible Notes into Class B Stock),
the Purchaser and its Affiliates will own a majority of the voting common stock
of the Company then entitled to vote in the election of the Company's directors.
7. CONDITIONS TO OBLIGATIONS OF SELLER. Unless waived, in whole or in
part, in writing by the Seller, the obligations of the Seller to sell the Class
B Stock as contemplated by this Agreement shall be subject to the fulfillment
prior to or on the Closing Date of each of the following conditions:
7.1 Accuracy of Representations and Warranties. All representations
------------------------------------------
and warranties of the Purchaser contained herein shall be true and correct in
all material respects on and as of the Closing Date, with the same effect as
though made on and as of the Closing Date, except for changes permitted or
contemplated by this Agreement.
7.2 Performance of Agreements. The Purchaser shall have performed in
-------------------------
all material respects all obligations and agreements contained in this Agreement
to be performed or complied with by the Purchaser on or prior to or at the
Closing Date.
7.3 No Adverse Enactments. There shall not have been any statute,
---------------------
rule, regulation or order promulgated, enacted or issued by any Government
Entity or court of
9
<PAGE>
competent jurisdiction which would make the consummation of the sale of the
Class B Stock hereunder or the Merger illegal.
7.4 No Injunctions. Neither of the parties hereto shall be subject
--------------
to any order or injunction of a court of competent jurisdiction which prohibits
the consummation of the sale of the Class B Stock to the Purchaser contemplated
by this Agreement. In the event any such order or injunction shall have been
issued, each party agrees to use its reasonable efforts to have any such
injunction lifted.
7.5 Hart-Scott-Rodino Notification. The waiting period (and any
------------------------------
extension thereof), under the HSR Act applicable to the consummation of the
purchase of the Class B Stock pursuant to this Agreement shall have expired or
have been terminated.
7.6 Purchase Price. The Purchaser shall be prepared to deliver the
--------------
aggregate Purchase Price for all the Class B Stock to the Seller in the amounts
and manner contemplated hereby upon the Closing.
7.7 Consummation of Other Transactions. Prior to or simultaneously
----------------------------------
with the sale of the Class B Stock to the Purchaser provided for by this
Agreement, all conditions to the consummation of the Other Transactions to be
effected pursuant to the Other Transaction Agreements shall have been satisfied
or waived by the applicable party, and the parties to such Other Transaction
Agreements shall have consummated such Other Transactions simultaneously with or
prior to the sale of the Class B Stock to the Purchaser as contemplated hereby.
8. COVENANTS OF THE PURCHASER. The Purchaser hereby covenants and agrees
as follows:
8.1 Filings and Other Actions. As promptly as practicable after the
-------------------------
execution of this Agreement, but in any event within 5 business days, the
Purchaser shall file notification reports under the HSR Act and shall request
early termination of the waiting period under the HSR Act and use their
commercially reasonable efforts to obtain clearance or authorization under the
HSR Act of the Merger and the purchase of the Class B Stock contemplated by this
Agreement and the Other Transactions at the earliest practicable time. The
Purchaser agrees to cooperate fully with the Seller to promptly effectuate the
filing of any notification required under the HSR Act.
8.2 Reasonable Efforts. Subject to the terms and conditions of this
------------------
Agreement, the Other Transaction Agreements and the Merger Agreement, the
Purchaser agrees to use all reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, the Other Transaction Agreements and the Merger Agreement. The
Purchaser hereby agrees, while this Agreement is in effect, and except as
contemplated hereby, not to intentionally and knowingly take any action with the
intention and knowledge that such action would make any of its representations
or warranties contained herein untrue or
10
<PAGE>
incorrect or have the effect of preventing or disabling it from performing its
obligations under this Agreement.
9. COVENANTS OF THE SELLER. The Seller hereby covenants and agrees as
follows:
9.1 Cooperation in Filing Notification under Hart-Scott-Rodino. The
----------------------------------------------------------
Seller agrees to cooperate fully with the Purchaser to promptly effectuate the
filing of any notification required under the HSR Act.
9.2 Additional Shares. The Seller agrees that it will not purchase
-----------------
additional shares of Common Stock of the Company whether in open market
purchases or privately negotiated purchases between the date of this Agreement
and the Closing Date. If ownership of any additional shares of Common Stock of
the Company is acquired or transferred to the Seller, the Seller hereby agrees,
while this Agreement is in effect, to promptly notify the Purchaser of the
number of additional shares of Common Stock of the Company acquired by it, if
any, after the date hereof, and hereby agrees to sell any such additional shares
of Common Stock of the Company acquired by it after the date hereof through the
Closing Date to the Purchaser pursuant to the terms of this Agreement, with a
provision for additional payment for such shares by the Purchaser to the Seller
at the Purchase Price.
9.3 Written Consent. Concurrently with the execution hereof, the
---------------
Seller has delivered to the Company its irrevocable written consent approving
the Merger Agreement and the Merger.
9.4 Reasonable Efforts. Subject to the terms and conditions of this
------------------
Agreement, the Seller agrees to use all reasonable efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective the transactions provided
for by this Agreement. The Seller hereby agrees, while this Agreement is in
effect, and except as contemplated hereby, not to intentionally and knowingly
take any action with the intention and knowledge that such action would make any
of its representations or warranties contained herein untrue or incorrect in any
material respect or have the effect of preventing or disabling it from
performing its obligations under this Agreement.
10. POST-CLOSING COVENANTS; TERMINATION. The Seller and the Purchaser
agree to execute such further documents or instruments and to take such other
actions as are necessary to transfer the Class B Stock to the Purchaser and to
otherwise carry out the transactions provided for by this Agreement. If the
Closing Date shall not have occurred on or prior to November 30, 1997, other
than as a result of a material breach of this Agreement by either party hereto,
either party may terminate this Agreement without liability. If the Closing
Date shall not have occurred on or prior to such date as a result of material
breach of any representation, warranty, covenant or obligation by either party,
the non-breaching party shall have the right to terminate this Agreement without
liability. In addition, this Agreement may be terminated by the Seller, if
after the date hereof and before the Closing Date, the Guarantor attempts or
purports to revoke or
11
<PAGE>
withdraw the Guaranty or a court of competent jurisdiction finally determines
that the Guaranty is unenforceable or invalid.
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY. Only the
representations and warranties of the Seller hereto contained in Section 4.4
hereto (with respect to title) shall survive the Closing and the consummation of
the transactions contemplated hereby. No party hereto shall have any monetary or
other liability or obligation to any other party hereto for breach of any of
such first party's representations or warranties contained herein or in any
certificate or other document delivered pursuant hereto and the sole consequence
of any such breach shall be limited to the failure to satisfy a condition to the
Closing pursuant to Article 6 or 7 and the termination right provided in Section
10, in each case to the extent applicable according to such Section's express
terms. With respect to a breach of its representations and warranties contained
in Section 4.4 hereto, the Seller hereby covenants and agrees with the Purchaser
that it shall indemnify the Purchaser and its directors, officers, shareholders
and Affiliates, and each of their successors and assigns and hold them harmless
from, against and in respect of any and all costs, losses, claims, liabilities,
fines, penalties (including interest which may be imposed in connection
therewith and court costs and reasonable fees and disbursements of counsel)
incurred by any of them arising out of any material breach of, or any material
inaccuracy in, such representations and warranties.
12. MISCELLANEOUS.
12.1 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective successors and
assigns. Other than as set forth in the immediately succeeding sentence, no
party may assign any of its rights, or delegate any of its duties or obligation
hereunder, under this Agreement without the prior written consent of the other
party, and any such purported assignment or delegation shall be void ab initio.
Notwithstanding the foregoing, the Purchaser, its Affiliates, and its successors
and assigns, may assign its rights and delegate its duties (i) to any successor
entity resulting from any liquidation, merger, consolidation, reorganization, or
transfer of all or substantially all of the assets or stock of the Purchaser, or
(ii) to any Affiliate of the Purchaser; provided, that in either case, any such
--------
assignee shall expressly assume all of the obligations the Purchaser hereunder.
12.2 Notices. All notices, demands and other communications
-------
(collectively, "Notices") given or made pursuant to this Agreement shall be in
-------
writing and shall be deemed to have been duly given if sent by registered or
certified mail, return receipt requested, postage and fees prepaid, by overnight
service with a nationally recognized "next day" delivery company such as Federal
Express or United Parcel Service, by facsimile transmission, or otherwise
actually delivered to the following addresses:
(a) If to the Purchaser:
-------------------
Fox Kids Worldwide, Inc.
12
<PAGE>
10960 Wilshire Boulevard
Los Angeles, California 90024
Attn: Mel Woods
Fax: 310-235-5552
with a copy to:
--------------
Fox, Inc.
10201 West Pico Boulevard
Los Angeles, California 90035
Attn: President
Fax: 310-369-1203
and a copy to:
-------------
The News Corporation Limited
1211 Avenue of the Americas
New York, New York 10036
Attn: Arthur Siskind
Fax: 212-768-2029
and a copy to:
-------------
Troop Meisinger Steuber & Pasich, LLP
10940 Wilshire Boulevard
Los Angeles, California 90024
Attn: C.N. Franklin Reddick, III, Esq.
Fax: 310-443-8512
and a copy to:
-------------
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attn: Jeffrey W. Rubin, Esq.
Fax: 212-697-6686
(b) if to the Seller:
----------------
The Christian Broadcasting Network, Inc.
977 Centerville Turnpike
Virginia Beach, Virginia 23463
Attn: Mr. Michael D. Little, President
13
<PAGE>
Fax: 757-579-2169
with a copy to:
--------------
Office of the General Counsel
977 Centerville Turnpike
Virginia Beach, Virginia 23463
Attn: Jon Kubiak, Esq.
Fax: 757-579-5770
Any Notice shall be deemed duly given when received by the addressee thereof.
Any of the parties to this Agreement may from time to time change its address
for receiving notices by giving written notice thereof in the manner set forth
above.
12.3 Amendment; Waiver. No provision of this Agreement may be waived
-----------------
unless in writing signed by all of the parties to this Agreement, and the waiver
of any one provision of this Agreement shall not be deemed to be a waiver of any
other provision. This Agreement may be amended, supplemented or otherwise
modified only by a written agreement executed by all of the parties to this
Agreement.
12.4 Limitation on Liability. The liability of the Seller for any
-----------------------
breach by the Seller of this Agreement shall be limited to the actual damages
suffered by the Purchaser or any of its Affiliates under this Agreement and the
Seller shall not be liable for any consequential or other damages of the
Purchaser or any of its Affiliates, including any damages arising in connection
with any Other Transaction Agreement or the Merger Agreement.
12.5 Jurisdiction. The parties hereto irrevocably submit to the non-
------------
exclusive jurisdiction of the state and federal courts located in Delaware for
the purposes of any suit, action or other proceeding arising out of this
Agreement (and agree not to commence any action, suit or proceeding relating
hereto except in such courts). Each party hereto hereby irrevocably designates
CT Corporation System as its designee, appointee and agent to receive, for and
on behalf of it, service of process in such respective jurisdictions in any
legal action or proceeding with respect to this Agreement or any document
related thereto. It is understood that a copy of such process serviced on such
agent will be promptly forwarded by mail to it at its address set forth in
Section 12.2 hereof, but the failure to receive such copy shall not affect in
any way the service of such process. Each of the parties hereto further
irrevocably consents to the service of process of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to it at its said address, such
service to become effective upon confirmed delivery. The parties irrevocably
and unconditionally waive any objection to the laying of venue of any action,
suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in the state or federal courts located in Delaware, and
hereby further irrevocably and unconditionally waive and agree not to plead or
claim in any such action, suit or proceeding brought in any such court that such
action, suit or proceeding has been brought in an inconvenient forum.
14
<PAGE>
12.6 Dispute Resolution. Any dispute or claim arising hereunder shall
------------------
be settled by arbitration. Any party may commence arbitration by sending a
written notice of arbitration to the other party. The notice will state the
dispute with particularity. The arbitration hearing shall be commenced thirty
(30) days following the date of delivery of notice of arbitration by one party
to the other, by the American Arbitration Association ("AAA") as arbitrator.
The arbitration shall be conducted in New York City, New York in accordance with
the commercial arbitration rules promulgated by AAA, and the Seller, on the one
hand, and the Purchaser, on the other, shall retain the right to cross-examine
the opposing party's witnesses, either through legal counsel, expert witnesses
or both. The decision of the arbitrator shall be final, binding and conclusive
on all parties (without any right of appeal therefrom) and shall not be subject
to judicial review. As part of his decision, the arbitrator may allocate the
cost of arbitration, including fees of attorneys and experts, as he or she deems
fair and equitable in light of all relevant circumstances. Judgment on the
award rendered by the arbitrator may be entered in any court of competent
jurisdiction.
12.7 Governing Law. This Agreement shall be governed by and construed
-------------
both as to validity and performance and enforced in accordance with the laws of
the State of Delaware without giving effect to the choice of law principles
thereof.
12.8 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
12.9 Remedies Cumulative. Each of the various rights, powers and
-------------------
remedies shall be deemed to be cumulative with, and in addition to, all the
rights, powers and remedies which either party may have hereunder or under
applicable law relating hereto or to the subject matter hereof, and the exercise
or partial exercise of any such right, power or remedy shall constitute neither
an exclusive election thereof nor a waiver of any other such right, power or
remedy.
12.10 Headings. The section and subsection headings contained in
--------
this Agreement are included for convenience only and form no part of the
agreement between the parties.
12.11 Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be or become
prohibited or invalid under applicable law, such provision shall be ineffective
to the extent of such prohibition or invalidity without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
12.12 Expenses. Each party shall pay its own costs, expenses,
--------
including without limitation, the fees and expenses of their respective counsel
and financial advisors.
12.13 Entire Agreement. This Agreement constitutes and embodies the
----------------
entire understanding and agreement of the parties hereto relating to the subject
matter hereof and there are no other agreements or understandings, written or
oral, in effect between the parties relating to such subject matter except as
expressly referred to herein.
15
<PAGE>
12.14 Publicity. The initial press release relating to this Agreement
---------
shall be a joint press release in the form attached hereto as Exhibit "A", and
-----------
the Purchaser and the Seller shall use reasonable efforts to agree upon the text
of any other press release before issuing any such press release or otherwise
making public statements with respect to the transactions contemplated hereby.
12.15 Specific Performance. Both of the parties hereto recognize and
--------------------
acknowledge that a breach by it of any covenants or agreements contained in this
Agreement will cause the other party to sustain damages for which it would not
have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief, without the posting of
bond or other security, in addition to any other remedy to which it may be
entitled, at law or in equity.
12.16 No Third Party Beneficiaries. This Agreement is not intended to
----------------------------
benefit, and shall not run to the benefit of or be enforceable by, any other
person or entity other than the parties hereto and their permitted successors
and assigns.
16
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
FOX KIDS WORLDWIDE, INC.
By: /s/ Mel Woods
___________________________________
Its: President
___________________________________
THE CHRISTIAN BROADCASTING NETWORK, INC.
By: /s/ Michael D. Little
___________________________________
Its: President
___________________________________
17
<PAGE>
EXHIBIT 2.6
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement"), dated as of June 11,
---------
1997, is entered into by and between Fox Kids Worldwide, Inc., a Delaware
corporation (the "Purchaser"), and Regent University, a Virginia corporation
---------
(the "Seller"), on the following terms and conditions:
------
R E C I T A L S
---------------
WHEREAS, as of the date hereof, the Seller beneficially owns 4,214,325
shares of Class B Common Stock, par value $0.01 per share, of International
Family Entertainment, Inc. (the "Company") (the "Class B Stock");
------- -------------
WHEREAS, the Purchaser desires to purchase the Class B Stock from the
Seller, and the Seller desires to sell the Class B Stock to the Purchaser, all
on the terms and subject to the conditions contained herein;
WHEREAS, concurrently herewith, the Purchaser, Fox Kids Merger Corporation,
a Delaware corporation ("FKW Sub"), and the Company are entering into that
-------
certain Agreement and Plan of Merger (as the same may be amended from time to
time in accordance with its terms, the "Merger Agreement"), providing for the
----------------
merger of FKW Sub into the Company (the "Merger"), which shall be the surviving
------
corporation, pursuant to which each share of Company Stock and Non Voting Class
C Common Stock, par value $0.01 per share, of the Company (the "Class C Stock")
-------------
which is issued and outstanding immediately prior to the effective time (the
"Effective Time") of the Merger (other than shares held by the Company, the
Purchaser or FKW Sub, or any direct or indirect subsidiary of the Company, the
Purchaser or FKW Sub) shall be canceled and extinguished and be converted into
and become a right to receive a cash payment equal to $35.00 per share (subject
to adjustment), without interest (except that any Dissenting Shares (as defined
in the Merger Agreement) shall be converted into and become a right to receive
the payment provided for under the Delaware General Corporation Law);
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, the Purchaser has requested that the Seller enter into this Agreement
and as a condition to its willingness to enter into this Agreement, the Seller
has required that the Purchaser and FKW Sub enter into the Merger Agreement;
WHEREAS, the Purchaser, Liberty Media Corporation, a Delaware corporation
("Liberty"), and Liberty IFE, Inc., a Colorado corporation ("LIFE"), have
------- ----
entered into that certain Contribution and Exchange Agreement, dated as of the
date hereof (as the same may be amended from time to time in accordance with its
terms, the "Contribution Agreement"), pursuant to which LIFE has agreed, on the
----------------------
terms and subject to the conditions therein, to contribute its shares of Class C
Stock and its $23 million principal amount of 6% Convertible Secured Notes
<PAGE>
due 2004 of the Company (the "Convertible Notes"), to the Purchaser in exchange
-----------------
for shares of a newly issued class of preferred stock of the Purchaser;
WHEREAS, in connection with the Contribution Agreement, Satellite Services,
Inc., a Delaware corporation and an affiliate of Liberty, has entered into an
amendment to its Affiliation Agreement with the Company (the "Amended
-------
Affiliation Agreement");
- ---------------------
WHEREAS, in connection with sale of the Class B Stock to the Purchaser
hereunder, the Company, M.G. "Pat" Robertson ("Pat Robertson"), individually and
-------------
as trustee of the Robertson Charitable Remainder Unitrust, u/t/a dated January
22, 1990 (the "PR Charitable Trust"), Timothy B. Robertson ("Tim Robertson"),
------------------- -------------
individually and as trustee of the Timothy and Lisa Robertson Children's Trust,
u/t/a dated September 18, 1995 (the "TR Family Trust"), LIFE and The Christian
---------------
Broadcasting Network, Inc., a Virginia corporation ("CBN") have entered into
---
that certain Termination to Amended and Restated Shareholder Agreement, dated as
of even date herewith (the "Termination Agreement"), terminating the Shareholder
---------------------
Agreement dated September 1, 1995, by and among the Company, Pat Robertson, the
PR Charitable Trust, Tim Robertson, the TR Family Trust, LIFE and CBN;
WHEREAS, in connection with the sale of the Class B Stock to the Purchaser
hereunder, CBN and Regent have entered into that certain Termination to
Assignment and Assumption Agreement, dated as of even date herewith (the
"Assignment Termination Agreement") terminating the Assignment and Assumption
- ---------------------------------
Agreement, dated June 30, 1992, by and between CBN and Regent (the "Assignment
----------
and Assumption Agreement");
- ------------------------
WHEREAS, concurrently herewith, the Purchaser and CBN are entering into
that certain Stock Purchase Agreement with respect to the purchase by the
Purchaser of the shares of Class B Stock owned by CBN (as the same may be
amended from time to time in accordance with its terms, the "CBN Purchase
------------
Agreement");
- ---------
WHEREAS, concurrently herewith, the Purchaser has entered into a Stock
Purchase Agreement with Pat Robertson, individually and as trustee of each of
the PR Charitable Trust, the Gordon P. Robertson Irrevocable Trust, u/t/a dated
December 18, 1996, the Elizabeth F. Robinson Irrevocable Trust, u/t/a dated
December 18, 1996, and the Ann R. Lablanc Irrevocable Trust, u/t/a dated
December 18, 1996 (the Gordon P. Robertson Irrevocable Trust, the Elizabeth F.
Robinson Irrevocable Trust and the Ann R. Lablanc Irrevocable Trust, together,
the "Irrevocable Trusts"), Lisa N. Robertson and Tim Robertson as joint tenants,
------------------
and Tim Robertson, individually, as trustee of each of the TR Family Trust and
the Timothy B. Robertson Charitable Trust, u/t/a dated December 30, 1996 (the
"TR Charitable Trust"), and custodian to and for each of Abigail H. Robertson,
--------------------
Laura N. Robertson, Elizabeth C. Robertson, Willis H. Robertson and Caroline S.
Robertson under the Virginia Uniform Transfers to Minors Act (Pat Robertson, the
PR Charitable Trust, the Irrevocable Trusts, Lisa N. Robertson, Tim Robertson,
the TR Family Trust and the TR Charitable Trust, collectively, the
"Robertsons"), as of even date herewith,
----------
2
<PAGE>
which provides, inter alia, for the purchase of all of the shares of Class A
----------
Common Stock, par value $0.01 per share, of the Company (the "Class A Stock",
-------------
and together with all of the Class B Stock, the Class C Stock and any other
shares of any other class of common stock of the Company, the "Common Stock") in
------------
the form of Class B Stock issuable upon the conversion thereof, by the Purchaser
from the Pat Charitable Trust, Tim Robertson and the Tim Family Trust, and the
purchase by the Purchaser of all of the shares of Class B Stock of the Company
owned by the Robertsons (as the same may be amended from time to time in
accordance with its terms, the "Robertson Purchase Agreement"); and
----------------------------
WHEREAS, as a condition to its willingness to enter into this Agreement,
the Seller has required that, in connection with the transactions to be effected
pursuant to this Agreement, The News Corporation Limited, a corporation
organized and existing under the laws of South Australia, Australia (the
"Guarantor") guarantee the obligations of the Purchaser to the Seller hereunder
- ----------
and the Guarantor has given a guaranty (the "Guaranty") in accordance with such
--------
determination.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration given to each party hereto, the receipt of which is
hereby acknowledged, the parties agree as follows.
1. PURCHASE AND SALE OF CLASS B STOCK. On the terms and subject to the
conditions set forth in this Agreement, the Seller agrees to sell and deliver
the Class B Stock to the Purchaser, free and clear of any mortgage, pledge,
lien, security interest or other encumbrance (each, a "Lien") or Restriction
----
created by or binding upon the Seller or the Class B Stock, and the Purchaser
agrees to purchase and acquire the Class B Stock from the Seller. For purposes
of this Agreement, "Restriction" means, when used with respect to any specified
security, any stockholders or other trust agreement, option, warrant, escrow,
proxy, buy-sell agreement, power of attorney or other contract, agreement or
arrangement which (i) grants to any Person the right to sell or otherwise
dispose of, such specified security or any interest therein, or (ii) restricts
the transfer of, or the exercise of any rights or the enjoyment of any benefits
arising by reason of the ownership of such specified security. For purposes of
this Agreement, "Person" means any individual, corporation, general or limited
partnership, limited liability company, trust, joint venture, association or
unincorporated entity of any kind.
2. PURCHASE PRICE. The Class B Stock shall be purchased by the Purchaser
from the Seller thereof for a purchase price (the "Purchase Price") equal to
--------------
$35.00 per share. Notwithstanding the foregoing, the Purchase Price shall be
increased to an amount which equals (if greater than the Purchase Price provided
for herein) the per share amount actually paid, directly or indirectly, by FKWW
or any of its Affiliates, with respect to the purchase of, or agreement to
purchase, Company Stock, or securities convertible into Company Stock, which
purchase is effected or agreement is entered into after the date hereof and
through the earlier to occur of (a)
3
<PAGE>
the Effective Time (as defined in the Merger Agreement) or (b) the termination
of the Merger Agreement, (x) in the Merger, (y) from (i) LIFE, (ii) the
Robertsons, (iii) CBN, (iv) any holder or "group" (within the meaning of Rule
13d-5(b)(1) under the Exchange Act) that owns, or has the right to dispose of,
or to direct the disposition of, 2-1/2% or more of any class of common stock of
the Company, or (v) any of the Affiliates of the entities referred to in clauses
(i), (ii), (iii) or (iv) above, or (z) in any transaction, or series of related
or unrelated transactions (excluding for purposes of this clause (z), any
transaction referred to in clauses (y)(i), (ii), (iii) or (v)), after the date
hereof and through the Effective Time, involving, in the aggregate, 5% or more
of the outstanding shares of any class of common stock of the Company. For these
purposes, it is acknowledged and agreed that (x) the $3.5 million to be paid to
LIFE under the Contribution Agreement with respect to forfeited interest income
on the Convertible Notes, and (y) amounts to be paid with respect to any "tax
gross up" with respect to the Exchange Rights under the Contribution Agreement,
shall not constitute an amount paid, directly or indirectly, with respect to the
purchase of Company Stock. Further, the Purchase Price shall not be adjusted as
a result of the provisions of the preceding sentence with respect to any
purchase effected under any of the Contribution Agreement, the Merger Agreement,
the Robertson Agreement or the CBN Agreement unless the applicable agreement has
been amended after the date hereof so as to increase the consideration to be
paid by the Purchaser or any of its Affiliates, directly or indirectly, with
respect to the Company Stock or securities convertible into Company Stock. The
Purchaser shall promptly provide notice to the Seller of any agreement or
amendment to an existing agreement entered into by the Purchaser or any of its
Affiliates with the Company, the Robertsons or CBN, or any amendment to an Other
Transaction Agreement (as defined herein) to which LIFE or any of its Affiliates
is a party, from and after the date hereof and through the Closing Date. If the
Purchase Price is adjusted pursuant to the foregoing, following the closing
under such other agreement (or the Effective Time, if applicable), the Purchaser
shall promptly pay to the Seller the amount of any increase in the Purchase
Price resulting from such agreement. For purposes of this Agreement, "Affiliate"
---------
means, when used with reference to a specified Person, any Person that directly
or indirectly through one or more intermediaries controls or is controlled by,
or is under common control with, such specified Person and, in the case of an
individual, such Person's spouse, parents, children, siblings, mothers- and
fathers-in-law, sons-and daughters-in-law, and brothers- and sisters-in-law. For
the purposes of this definition, "control" (including the terms controlled by
and under common control with), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise. For the purposes of
this Agreement, the Purchaser shall be deemed to be an Affiliate of Fox, Inc., a
Delaware corporation, and of Saban Entertainment, Inc., a Delaware corporation,
but shall not be deemed to be an Affiliate of any of the Seller, the Company,
LIFE, CBN, the the Robertsons nor any of their respective Affiliates.
3. THE CLOSING. The closing (the "Closing") of the purchase and sale of
-------
the Class B Stock shall take place on the third business day following
satisfaction or waiver of each and every one of the conditions set forth in
Sections 6 and 7 hereof, or such other date and time as the parties
4
<PAGE>
shall otherwise agree to. The date of the Closing is referred to herein as the
"Closing Date". At the Closing, the Seller shall deliver to the Purchaser
certificates representing the Class B Stock (accompanied by signature guarantees
in customary form) against delivery by the Purchaser of payment of the Purchase
Price therefor, by wire transfer or by immediately available funds, to such
accounts as Seller may specify.
4. REPRESENTATIONS AND WARRANTIES. The Seller hereby makes the following
representations and warranties. The representations and warranties contain
exceptions set forth in a written disclosure letter (the "Seller Disclosure
-----------------
Letter") delivered to the Purchaser concurrently with the execution hereof,
- ------
which is numbered to correspond to the various Sections of this Agreement and
which also sets forth certain other information called for by this Agreement.
4.1 Organization, Standing and Corporate Power. The Seller is a
------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation, with adequate corporate power and authority
to own its properties and carry on its business as presently conducted. The
Seller has the corporate power to enter into, execute and deliver this Agreement
and to consummate the transactions contemplated hereby.
4.2 Execution, Delivery and Performance. The execution, delivery and
-----------------------------------
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by its Board of Trustees, and the
Seller has taken all other actions required by law, its charter and its bylaws
in order to consummate the transactions contemplated by this Agreement. This
Agreement constitutes the valid and binding obligations of the Seller and is
enforceable in accordance with its terms, except as enforceability may be
subject to or limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally.
4.3 No Consents. Other than filings required under the Hart-Scott-
-----------
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") and the
-------
filing of Forms 4 and Schedules 13D under the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder (the "Exchange Act"), no
------------
consent, authorization, order or approval of, or filing with or registration
with, any governmental authority, commission, board or other regulatory body of
the United States or any state or political subdivision thereof (each, a
"Governmental Entity"), is required to be made or obtained by the Seller for or
- --------------------
in connection with the sale by the Seller of the Class B Stock to the Purchaser
as contemplated hereby.
4.4 Title. The Seller has, and at the Closing will have, good and
-----
valid title to the Class B Stock it is selling pursuant to this Agreement, free
and clear of any Liens or Restrictions (other than those Restrictions set forth
in the Assignment and Assumption Agreement) and (subject to such Restriction) it
has the full legal right, power and authority to sell, assign, transfer and
deliver the Class B Stock to the Purchaser and to make the representations,
warranties, covenants and agreements made by it herein; upon the delivery of and
payment for
5
<PAGE>
such Class B Stock as contemplated hereby the Purchaser will acquire
good and valid title thereto, free and clear of all Liens or Restrictions
created by or binding upon the Seller. The Seller has sole voting power, and
sole power of disposition, with respect to all of its Class B Stock, with no
Restrictions (other than those Restrictions set forth in the Assignment and
Assumption Agreement), subject to applicable federal and state securities laws,
on the Seller's rights of disposition pertaining thereto. The Class B Stock
constitutes all equity or debt securities issued by the Company held by the
Seller and the Seller has no right, title or interest in or to any other equity
or debt securities of the Company or any option or right to acquire any such
equity or debt securities.
4.5 No Conflicts. The execution, delivery and performance by the
------------
Seller of this Agreement will not violate any other agreement to which the
Seller is a party, including, without limitation, any voting agreement,
stockholders agreement or voting trust, or otherwise contravene, conflict with
or result in a violation of, any federal, state, local, municipal, foreign,
international, multi-national or other administrative order, constitution, law,
ordinance, regulation, statute or treaty, or give any individual, corporation,
partnership, governmental authority or regulatory body or any other person the
right to prevent the consummation of the sale of the Class B Stock contemplated
hereby.
4.6 No Broker. The Seller has not employed any investment banker,
---------
broker, finder, consultant or intermediary in connection with the transactions
contemplated by this Agreement which would be entitled to any investment
banking, brokerage, finder's or similar fee or commission in connection with
this Agreement or the transactions contemplated hereby.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
represents and warrants to the Seller as follows:
5.1 Organization, Standing and Corporate Power of the Purchaser. The
-----------------------------------------------------------
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, with adequate corporate power and
authority to own its properties and carry on its business as presently
conducted. The Purchaser has the corporate power and authority to enter into,
execute and deliver this Agreement and to consummate the transactions
contemplated hereby.
5.2 Organization, Standing and Corporate Power of the Guarantor. The
-----------------------------------------------------------
Guarantor is a corporation organized and existing under the laws of South
Australia, Australia, with adequate corporate power and authority to own its
properties and carry on its business as presently conducted. The Guarantor has
the corporate power and authority to enter into, execute and deliver the
Guaranty and to guarantee the obligations of the Purchaser hereunder pursuant to
such Guaranty.
6
<PAGE>
5.3 Execution, Delivery and Performance by the Purchaser. The
----------------------------------------------------
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of the Purchaser, and the Purchaser has taken all other actions
required by law, its Amended and Restated Certificate of Incorporation and its
Bylaws in order to consummate the transactions contemplated by this Agreement.
This Agreement constitutes the valid and binding obligations of the Purchaser
and is enforceable in accordance with its terms, except as enforceability may be
subject to or limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally.
5.4 Execution, Delivery and Performance by the Guarantor. The
----------------------------------------------------
execution, delivery and performance of the Guaranty and the consummation of the
transactions thereby have been duly authorized by the Board of Directors of the
Guarantor, and the Guarantor has taken all other actions required by law and its
organizational documents in order to consummate the transac tions contemplated
by the Guaranty. The Guaranty constitutes the valid and binding obligations of
the Guarantor and is enforceable in accordance with its terms, except as
enforceability may be subject to or limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally.
5.5 Consents. Other than filings required under the HSR Act and the
--------
filing of a Form 4 and Schedule 13D under the Exchange Act, no consent,
authorization, order or approval of, or filing with or registration with, any
Governmental Entity is required to be made or obtained by the Purchaser for the
purchase of the Class B Stock from the Seller as contemplated hereby or by the
Guarantor for the execution, delivery and performance of the Guaranty.
5.6 No Conflicts. The execution, delivery and performance by the
------------
Purchaser of this Agreement or by the Guarantor of the Guaranty will not violate
any other agreement to which the Purchaser or the Guarantor is a party, or
otherwise contravene, conflict with or result in a violation of, any federal,
state, local, municipal, foreign, international, multi-national or other
administrative order, constitution, law, ordinance, regulation, statute or
treaty, or give any individual, corporation, partnership, governmental authority
or regulatory body or any other person the right to prevent the consummation of
the sale of the Class B Stock contemplated hereby or the enforcement by the
Seller of the Guaranty.
5.7 Purchase For Investment. The Purchaser is acquiring the Class B
------------------------
Stock for its own account, for investment purposes only, and not with a view to
or for the resale or distribution thereof, in whole or in part. The Purchaser
acknowledges and represents (i) that it is aware that the Class B Stock is not
registered under the Securities Act of 1933, as amended, and are subject to the
restrictions thereof, including pursuant to Rule 144 promulgated thereunder;
(ii) that no federal or state agency has passed upon the Class B Stock or made
any finding or determination as to the fairness of the Purchaser's investment in
the Class B Stock; (iii) that there are risks of loss associated with the
Purchaser's purchase of the Class B Stock; (iv) that the
7
<PAGE>
investment in the Class B Stock is an illiquid investment and the Purchaser may
bear the risk of its investment for an indefinite period of time; and (v) that
it is a sophisticated investor, able to evaluate the risks and merits of its
investment and to bear such financial risk.
5.8 No Broker. The Purchaser has not employed any investment banker,
---------
broker, finder, consultant or intermediary in connection with the transactions
contemplated by this Agreement which would be entitled to any investment
banking, brokerage, finder's or similar fee or commission in connection with
this Agreement or the transactions contemplated hereby.
5.9 Transaction Agreements. This Agreement, the Merger Agreement,
----------------------
the Other Transaction Agreements (as defined herein), and the other agreements
listed in the recitals above, are the only agreements existing as of the date
hereof between the Purchaser, on the one hand, and the respective counterparties
to such agreements and any Affiliates of such parties, on the other hand, with
respect to the acquisition of Class A Stock, Class B Stock, Class C Stock or
Convertible Notes of the Company.
6. CONDITIONS TO OBLIGATIONS OF PURCHASER. Unless waived, in whole or in
part, in writing by the Purchaser, the obligations of the Purchaser to purchase
the Class B Stock and to perform any and all of its post-closing obligations
shall be subject to the satisfaction at or prior to the Closing Date of each of
the following conditions:
6.1 Accuracy of Representations and Warranties. All representations
------------------------------------------
and warranties of the Seller contained herein 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, except for changes permitted or
contemplated by this Agreement.
6.2 Performance of Agreements. The Seller shall have performed in
-------------------------
all material respects all obligations and agreements contained in this Agreement
to be performed or complied with by the Seller on or prior to or at the Closing
Date.
6.3 Certificates. The Sellers shall be prepared to deliver
------------
certificates for all the Class B Stock to the Purchaser upon the Closing.
6.4 Purchase of Control Stock. The Purchaser has acquired the
-------------------------
Control Stock (as defined in the Robertson Purchase Agreement) from the
Robertsons pursuant to the Robertson Purchase Agreement.
6.5 No Injunctions. Neither of the parties hereto shall be subject
--------------
to any order or injunction of a court of competent jurisdiction which prohibits
the consummation of the sale of the Class B Stock to the Purchaser contemplated
by this Agreement. In the event any such order or injunction shall have been
issued, each party agrees to use its reasonable efforts to have any such
injunction lifted.
8
<PAGE>
6.6 No Adverse Enactments. There shall not have been any statute,
---------------------
rule, regulation or order promulgated, enacted or issued by any Government
Entity or court of competent jurisdiction, which would make the consummation of
the sale of the Class B Stock hereunder or the Merger illegal.
6.7 Banking Moratorium. There shall not have occurred and be
------------------
continuing any declaration of any banking moratorium or suspension of payments
by banks in the United States or any general limitation on the extension of
credit by lending institutions in the United States.
6.8 Consummation of Other Transactions. All conditions to the
----------------------------------
consummation of the transactions (the "Other Transactions") to be effected
------------------
pursuant to the Contribution Agreement, the CBN Purchase Agreement and the
Robertson Purchase Agreement (collectively, the "Other Transaction Agreements")
----------------------------
shall have been satisfied or waived by the applicable party, and the parties to
such Other Transaction Agreements shall have consummated such Other Transactions
simultaneously with or prior to the sale of the Class B Stock to the Purchaser
as contemplated hereby.
6.9 Hart-Scott-Rodino Notification. The waiting period (and any
------------------------------
extension thereof) under the HSR Act applicable to (i) the purchase of the Class
B Stock pursuant to this Agreement and the consummation of the Other
Transactions, (ii) the conversion by the Purchaser of the Class C Stock and the
Convertible Notes acquired pursuant to the Contribution Agreement into shares of
Class B Stock of the Company, and (iii) the Merger shall have expired or have
been terminated.
6.10 Opinion of Counsel. The Purchaser shall have received an opinion
------------------
of counsel to the Seller in a form reasonably acceptable to Purchaser covering
the matters referred to in Section 4.1 hereof.
6.11 Acquisition Agreements. Immediately following the consummation
----------------------
of this transaction and the Other Transactions (and after giving effect to the
conversion of the Class C Stock and the Convertible Notes into Class B Stock),
the Purchaser and its Affiliates will own a majority of the voting common stock
of the Company then entitled to vote in the election of the Company's directors.
7. CONDITIONS TO OBLIGATIONS OF SELLER. Unless waived, in whole or in
part, in writing by the Seller, the obligations of the Seller to sell the Class
B Stock as contemplated by this Agreement shall be subject to the fulfillment
prior to or on the Closing Date of each of the following conditions:
7.1 Accuracy of Representations and Warranties. All representations
------------------------------------------
and warranties of the Purchaser contained herein shall be true and correct in
all material respects on
9
<PAGE>
and as of the Closing Date, with the same effect as though made on and as of the
Closing Date, except for changes permitted or contemplated by this Agreement.
7.2 Performance of Agreements. The Purchaser shall have performed in
-------------------------
all material respects all obligations and agreements contained in this Agreement
to be performed or complied with by the Purchaser on or prior to or at the
Closing Date.
7.3 No Adverse Enactments. There shall not have been any statute,
---------------------
rule, regulation or order promulgated, enacted or issued by any Government
Entity or court of competent jurisdiction which would make the consummation of
the sale of the Class B Stock hereunder or the Merger illegal.
7.4 No Injunctions. Neither of the parties hereto shall be subject
--------------
to any order or injunction of a court of competent jurisdiction which prohibits
the consummation of the sale of the Class B Stock to the Purchaser contemplated
by this Agreement. In the event any such order or injunction shall have been
issued, each party agrees to use its reasonable efforts to have any such
injunction lifted.
7.5 Hart-Scott-Rodino Notification. The waiting period (and any
------------------------------
extension thereof), under the HSR Act applicable to the consummation of the
purchase of the Class B Stock pursuant to this Agreement shall have expired or
have been terminated.
7.6 Purchase Price. The Purchaser shall be prepared to deliver the
--------------
aggregate Purchase Price for all the Class B Stock to the Seller in the amounts
and manner contemplated hereby upon the Closing.
7.7 Consummation of Other Transactions. All conditions to the
----------------------------------
consummation of the Other Transactions to be effected pursuant to the Other
Transaction Agreements shall have been satisfied or waived by the applicable
party, and the parties to such Other Transaction Agreements shall have
consummated such Other Transactions simultaneously with or prior to the sale of
the Class B Stock to the Purchaser as contemplated hereby.
8. COVENANTS OF THE PURCHASER. The Purchaser hereby covenants and agrees
as follows:
8.1 Filings and Other Actions. As promptly as practicable after the
-------------------------
execution of this Agreement, but in any event within 5 business days, the
Purchaser shall file notification reports under the HSR Act and shall request
early termination of the waiting period under the HSR Act and use its
commercially reasonable efforts to obtain clearance or authorization under the
HSR Act of the Merger and the purchase of the Class B Stock contemplated by this
Agreement and the Other Transactions at the earliest practicable time. The
Purchaser agrees to cooperate fully with the Seller to promptly effectuate the
filing of any notification required under the HSR Act.
10
<PAGE>
8.2 Reasonable Efforts. Subject to the terms and conditions of this
------------------
Agreement, the Other Transaction Agreements and the Merger Agreement, the
Purchaser agrees to use all reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, the Other Transaction Agreements and the Merger Agreement. The
Purchaser hereby agrees, while this Agreement is in effect, and except as
contemplated hereby, not to intentionally and knowingly take any action with the
intention and knowledge that such action would make any of its representations
or warranties contained herein untrue or incorrect or have the effect of
preventing or disabling it from performing its obligations under this Agreement.
9. COVENANTS OF THE SELLER. The Seller hereby covenants and agrees as
follows:
9.1 Cooperation in Filing Notification under Hart-Scott-Rodino. The
----------------------------------------------------------
Seller agrees to cooperate fully with the Purchaser to promptly effectuate the
filing of any notification required under the HSR Act.
9.2 Additional Shares. The Seller agrees that it will not purchase
-----------------
additional shares of Common Stock of the Company whether in open market
purchases or privately negotiated purchases between the date of this Agreement
and the Closing Date. If ownership of any additional shares of Common Stock of
the Company is acquired or transferred to the Seller, the Seller hereby agrees,
while this Agreement is in effect, to promptly notify the Purchaser of the
number of additional shares of Common Stock of the Company acquired by it, if
any, after the date hereof, and hereby agrees to sell any such additional shares
of Common Stock of the Company acquired by it after the date hereof through the
Closing Date to the Purchaser pursuant to the terms of this Agreement, with a
provision for additional payment for such shares by the Purchaser to the Seller
at the Purchase Price.
9.3 Written Consent. Concurrently with the execution hereof, the
---------------
Seller has delivered to the Company its irrevocable written consent approving
the Merger Agreement and the Merger.
9.4 Reasonable Efforts. Subject to the terms and conditions of this
------------------
Agreement, the Seller agrees to use all reasonable efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective the transactions provided
for by this Agreement. The Seller hereby agrees, while this Agreement is in
effect, and except as contemplated hereby, not to intentionally and knowingly
take any action with the intention and knowledge that such action would make any
of its representations or warranties contained herein untrue or incorrect in any
material respect or have the effect of preventing or disabling it from
performing its obligations under this Agreement.
11
<PAGE>
10. POST-CLOSING COVENANTS; TERMINATION. The Seller and the Purchaser
agree to execute such further documents or instruments and to take such other
actions as are necessary to transfer the Class B Stock to the Purchaser and to
otherwise carry out the transactions provided for by this Agreement. If the
Closing Date shall not have occurred on or prior to November 30, 1997, other
than as a result of a material breach of this Agreement by either party hereto,
either party may terminate this Agreement without liability. If the Closing
Date shall not have occurred on or prior to such date as a result of material
breach of any representation, warranty, covenant or obligation by either party,
the non-breaching party shall have the right to terminate this Agreement without
liability. In addition, this Agreement may be terminated by the Seller, if
after the date hereof and before the Closing Date, the Guarantor attempts or
purports to revoke or withdraw the Guaranty or a court of competent jurisdiction
finally determines that the Guaranty is unenforceable or invalid.
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY. Only the
representations and warranties of the Seller hereto contained in Section 4.4
hereto (with respect to title) shall survive the Closing and the consummation of
the transactions contemplated hereby. No party hereto shall have any monetary or
other liability or obligation to any other party hereto for breach of any of
such first party's representations or warranties contained herein or in any
certificate or other document delivered pursuant hereto, and the sole
consequence of any such breach shall be limited to the failure to satisfy a
condition to the Closing pursuant to Article 6 or 7 and the termination right
provided in Section 10, in each case to the extent applicable according to such
Section's express terms. With respect to a breach of its representations and
warranties contained in Section 4.4 hereto, the Seller hereby covenants and
agrees with the Purchaser that it shall indemnify the Purchaser and its
directors, officers, shareholders and Affiliates, and each of their successors
and assigns and hold them harmless from, against and in respect of any and all
costs, losses, claims, liabilities, fines, penalties (including interest which
may be imposed in connection therewith and court costs and reasonable fees and
disbursements of counsel) incurred by any of them arising out of any material
breach of, or any material inaccuracy in, such representations and warranties.
12. MISCELLANEOUS.
12.1 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective successors and
assigns. Other than as set forth in the immediately succeeding sentence, no
party may assign any of its rights, or delegate any of its duties or obligation
hereunder, under this Agreement without the prior written consent of the other
party, and any such purported assignment or delegation shall be void ab initio.
Notwithstanding the foregoing, the Purchaser, its Affiliates, and its successors
and assigns, may assign its rights and delegate its duties (i) to any successor
entity resulting from any liquidation, merger, consolidation, reorganization, or
transfer of all or substantially all of the assets or stock of the Purchaser, or
(ii) to any Affiliate of the Purchaser; provided, that in either case, any such
--------
assignee shall expressly assume all of the obligations the Purchaser hereunder.
12
<PAGE>
12.2 Notices. All notices, demands and other communications
-------
(collectively, "Notices") given or made pursuant to this Agreement shall be in
-------
writing and shall be deemed to have been duly given if sent by registered or
certified mail, return receipt requested, postage and fees prepaid, by overnight
service with a nationally recognized "next day" delivery company such as Federal
Express or United Parcel Service, by facsimile transmission, or otherwise
actually delivered to the following addresses:
(a) If to the Purchaser:
-------------------
Fox Kids Worldwide, Inc.
10960 Wilshire Boulevard
Los Angeles, California 90024
Attn: Mel Woods
Fax: 310-235-5552
with a copy to:
--------------
Fox, Inc.
10201 West Pico Boulevard
Los Angeles, California 90035
Attn: President
Fax: 310-369-1203
and a copy to:
-------------
The News Corporation Limited
1211 Avenue of the Americas
New York, New York 10036
Attn: Arthur Siskind
Fax: 212-768-2029
and a copy to:
-------------
Troop Meisinger Steuber & Pasich, LLP
10940 Wilshire Boulevard
Los Angeles, California 90024
Attn: C.N. Franklin Reddick, III, Esq.
Fax: 310-443-8512
and a copy to:
-------------
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
13
<PAGE>
551 Fifth Avenue
New York, New York 10176
Attn: Jeffrey W. Rubin, Esq.
Fax: 212-697-6686
(b) if to the Seller:
----------------
Regent University
1000 Regent University Drive
Virginia Beach, Virginia 23463
Attn: John Mulford
Fax: 757-579-4349
with a copy to:
--------------
Office of the General Counsel
Regent University
1000 Regent University Drive
Virginia Beach, Virginia 23463
Attn: John Mulford
Fax: 757-579-4349
Any Notice shall be deemed duly given when received by the addressee thereof.
Any of the parties to this Agreement may from time to time change its address
for receiving notices by giving written notice thereof in the manner set forth
above.
12.3 Amendment; Waiver. No provision of this Agreement may be
-----------------
waived unless in writing signed by all of the parties to this Agreement, and the
waiver of any one provision of this Agreement shall not be deemed to be a waiver
of any other provision. This Agreement may be amended, supplemented or
otherwise modified only by a written agreement executed by all of the parties to
this Agreement.
12.4 Limitation on Liability. The liability of the Seller for any
-----------------------
breach by the Seller of this Agreement shall be limited to the actual damages
suffered by the Purchaser or any of its Affiliates under this Agreement and the
Seller shall not be liable for any consequential or other damages of the
Purchaser or any of its Affiliates, including any damages arising in connection
with any Other Transaction Agreement or the Merger Agreement.
12.5 Jurisdiction. The parties hereto irrevocably submit to the non-
------------
exclusive jurisdiction of the state and federal courts located in Delaware for
the purposes of any suit, action or other proceeding arising out of this
Agreement (and agree not to commence any action, suit or proceeding relating
hereto except in such courts). Each party hereto hereby irrevocably designates
14
<PAGE>
CT Corporation System as its designee, appointee and agent to receive, for and
on behalf of it, service of process in such respective jurisdictions in any
legal action or proceeding with respect to this Agreement or any document
related thereto. It is understood that a copy of such process serviced on such
agent will be promptly forwarded by mail to it at its address set forth in
Section 12.2 hereof, but the failure to receive such copy shall not affect in
any way the service of such process. Each of the parties hereto further
irrevocably consents to the service of process of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to it at its said address, such
service to become effective upon confirmed delivery. The parties irrevocably
and unconditionally waive any objection to the laying of venue of any action,
suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in the state or federal courts located in Delaware, and
hereby further irrevocably and unconditionally waive and agree not to plead or
claim in any such action, suit or proceeding brought in any such court that such
action, suit or proceeding has been brought in an inconvenient forum.
12.6 Dispute Resolution. Any dispute or claim arising hereunder
------------------
shall be settled by arbitration. Any party may commence arbitration by sending
a written notice of arbitration to the other party. The notice will state the
dispute with particularity. The arbitration hearing shall be commenced thirty
(30) days following the date of delivery of notice of arbitration by one party
to the other, by the American Arbitration Association ("AAA") as arbitrator.
The arbitration shall be conducted in New York City, New York in accordance with
the commercial arbitration rules promulgated by AAA, and the Seller, on the one
hand, and the Purchaser, on the other, shall retain the right to cross-examine
the opposing party's witnesses, either through legal counsel, expert witnesses
or both. The decision of the arbitrator shall be final, binding and conclusive
on all parties (without any right of appeal therefrom) and shall not be subject
to judicial review. As part of his decision, the arbitrator may allocate the
cost of arbitration, including fees of attorneys and experts, as he or she deems
fair and equitable in light of all relevant circumstances. Judgment on the
award rendered by the arbitrator may be entered in any court of competent
jurisdiction.
12.7 Governing Law. This Agreement shall be governed by and construed
-------------
both as to validity and performance and enforced in accordance with the laws of
the State of Delaware without giving effect to the choice of law principles
thereof.
12.8 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
12.9 Remedies Cumulative. Each of the various rights, powers and
-------------------
remedies shall be deemed to be cumulative with, and in addition to, all the
rights, powers and remedies which either party may have hereunder or under
applicable law relating hereto or to the subject matter hereof, and the exercise
or partial exercise of any such right, power or remedy shall constitute neither
an exclusive election thereof nor a waiver of any other such right, power or
remedy.
15
<PAGE>
12.10 Headings. The section and subsection headings contained in this
--------
Agreement are included for convenience only and form no part of the agreement
between the parties.
12.11 Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be or become
prohibited or invalid under applicable law, such provision shall be ineffective
to the extent of such prohibition or invalidity without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
12.12 Expenses. Each party shall pay its own costs, expenses,
--------
including without limitation, the fees and expenses of their respective counsel
and financial advisors.
12.13 Entire Agreement. This Agreement constitutes and embodies the
----------------
entire understanding and agreement of the parties hereto relating to the subject
matter hereof and there are no other agreements or understandings, written or
oral, in effect between the parties relating to such subject matter except as
expressly referred to herein.
12.14 Publicity. The initial press release relating to this Agreement
---------
shall be a joint press release in the form attached hereto as Exhibit "A", and
-----------
the Purchaser and the Seller shall use reasonable efforts to agree upon the text
of any other press release before issuing any such press release or otherwise
making public statements with respect to the transactions contemplated hereby.
12.15 Specific Performance. Both of the parties hereto recognize and
--------------------
acknowledge that a breach by it of any covenants or agreements contained in this
Agreement will cause the other party to sustain damages for which it would not
have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief, without the posting of
bond or other security, in addition to any other remedy to which it may be
entitled, at law or in equity.
12.16 No Third Party Beneficiaries. This Agreement is not intended to
----------------------------
benefit, and shall not run to the benefit of or be enforceable by, any other
person or entity other than the parties hereto and their permitted successors
and assigns.
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16
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
FOX KIDS WORLDWIDE, INC.
By: /s/ Mel Woods
_______________________________
Its: President
_______________________________
REGENT UNIVERSITY
By: /s/ Terrence R. Lindvall
_______________________________
Its: President
_______________________________
17
<PAGE>
EXHIBIT 2.7
AMENDED AND RESTATED AGREEMENT
This Agreement (this "Agreement") is made and entered into as of the
---------
1st day of August, 1997 by and among Fox Kids Worldwide, Inc. ("Fox Kids"),
--------
Saban Entertainment, Inc. ("Saban"), Fox Broadcasting Sub, Inc. ("Fox
----- ---
Broadcasting Sub"), Allen & Company Incorporated ("Allen"), Haim Saban and each
- ---------------- -----
of the entities listed on Schedule "A" hereto (the "SEI Entities" and, with Haim
------------ ------------
Saban, the "SEI Stockholders").
----------------
R E C I T A L S
- - - - - - - -
A. Effective June 1, 1995, the SEI Stockholders and Fox
Broadcasting, the sole stockholder of FCN Holding, Inc. ("FCN Holding"), agreed
-----------
to form a strategic alliance which would provide for the joint control and
management, as well as the sharing of economic risks and rewards, of Saban, FCN
Holding, and of all of their respective Subsidiaries.
B. In connection with the strategic alliance, Haim Saban, Saban, the
SEI Entities, Fox Broadcasting, FCN Holding and FCNH Sub, Inc. ("FCNH Sub")
--------
entered into that certain Strategic Stockholders Agreement dated as of December
22, 1995, as amended by Amendment No. 1 thereto dated as of February 26, 1996,
and as further amended by Amendment No. 2 thereto dated as of September 27,
1996, and as supplemented by that Supplement to Strategic Stockholders Agreement
dated as of September 27, 1996 (together, the "Strategic Stockholders
----------------------
Agreement"), which provided for, among other things, the terms of a
- ---------
reorganization of Saban and FCN Holding in contemplation of an initial public
offering of a "Successor Entity" (as that term is defined in the Strategic
Stockholders Agreement).
C. Saban and Fox Broadcasting have decided not to pursue an initial
public offering at this time. However, Saban and Fox Broadcasting have decided
to complete the reorganization described in the Strategic Stockholders
Agreement, pursuant to which Saban and FCN Holding will be restructured and
reorganized into Fox Kids such that Fox Kids will own the business and
operations of Saban, FCN Holding, and of all of their respective Subsidiaries
(the "Reorganization").
--------------
D. Fox Broadcasting, FCN Holding and the SEI Stockholders formed Fox
Kids as of August 27, 1996.
E. Pursuant to Section 6 of the Strategic Stockholders Agreement, the
parties hereto have entered into this Agreement to memorialize and confirm the
steps necessary to effect the Reorganization contemplated by the Strategic
Stockholders Agreement.
1
<PAGE>
F. The Reorganization is to be made concurrently with the
contribution to Fox Kids of shares of non-voting Class C Common Stock, par value
$0.01 per share, of International Family Entertainment, a Delaware corporation
("IFE"), and of $23 million principal amount of 6% Convertible Secured Notes due
---
2004 of IFE (the "Contribution"), contemplated by that certain Contribution and
------------
Exchange Agreement (the "LIFE Contribution Agreement"), dated as of the date
---------------------------
hereof, by and among Liberty Media Corporation, a Delaware corporation
("Liberty"), Liberty IFE, Inc., a Colorado corporation and a wholly owned
-------
subsidiary of Liberty, and Fox Kids.
G. The Contribution and the exchange of shares necessary to effect
the Reorganization are intended to qualify as a tax-free exchange pursuant to
Section 351 of the Internal Revenue Code of 1986, as amended (the "Code"),
----
except to the extent that the Exchange Right (as defined in the LIFE
Contribution Agreement) constitutes "taxable boot" under the Code.
H. Any capitalized term used herein but not defined shall have the
meaning assigned to such term in the Strategic Stockholders Agreement.
NOW, THEREFORE, pursuant to the Strategic Stockholders Agreement and
to the other agreements referred to above, and in consideration of the premises
and the mutual promises herein made, and in consideration of the
representations, warranties and covenants herein contained, the parties agree
that the Reorganization shall be effected as follows:
1. Issuances of Capital Stock of Fox Kids. At the "Closing" (as defined
--------------------------------------
in Section 4 hereof):
a. Exchange by Fox Broadcasting Sub and Allen. Fox Broadcasting Sub
------------------------------------------
will contribute to Fox Kids 800 shares of the common stock of FCN Holding ("FCNH
----
Common Stock") in exchange for 7,920,000 shares of Class B Common Stock, $0.001
- ------------
par value per share, of Fox Kids (the "Class B Common Stock"). Allen will
--------------------
contribute to Fox Kids 16 16/99 shares of FCNH Common Stock in exchange for
160,000 shares of Class A Common Stock, $0.001 par value per share, of Fox Kids
(the "Class A Common Stock").
--------------------
b. Exchange by SEI Stockholders. The SEI Stockholders will
----------------------------
contribute to Fox Kids their Saban Common Stock (as set forth on Schedule "A"
------------
hereto) in exchange for an aggregate of 7,920,000 shares of the Class B Common
Stock. The shares of Class B Common Stock to be held by each SEI Stockholder
are set forth on Schedule "A" hereto with respect to each SEI Stockholder.
------------
2
<PAGE>
2. Representations and Warranties.
------------------------------
a. By Fox Kids. Fox Kids represents and warrants to Saban, Fox
-----------
Broadcasting Sub, Allen and the SEI Stockholders that the following statements
are true and correct as of the date hereof, and will be true and correct at the
Closing Date:
(1) Organization and Standing; Articles and By-Laws. Fox Kids is a
-----------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Fox Kids is qualified, licensed or domesticated as a
foreign corporation and is in good standing in all jurisdictions where the
character of its properties owned or held under lease or the nature of its
activities make such qualification necessary, except where the failure to be so
qualified, licensed or domesticated would not have a material adverse effect on
Fox Kids. Fox Kids has all requisite power and authority and all requisite
licenses, permits and franchises necessary to own, lease and operate its
properties and assets and to carry on its business in the manner and in the
locations as presently conducted, except where the failure to do so would not
have a material adverse effect on Fox Kids. Copies of the Restated Certificate
of Incorporation (as certified by the Delaware Secretary of State) and By-Laws
of Fox Kids have been delivered to the other parties to this Agreement and are
accurate and complete as of the date hereof.
(2) Authorization. Fox Kids has the requisite corporate power and
-------------
authority to enter into and carry out the terms and conditions of this Agreement
and all the transactions contemplated hereunder. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by Fox Kids' Board of Directors, and all corporate
proceedings have been taken and no other corporate proceedings on the part of
Fox Kids or its Affiliates is necessary to authorize the execution, delivery and
performance by Fox Kids of this Agreement. This Agreement has been duly
executed and delivered by Fox Kids and constitutes the valid and binding
obligations of Fox Kids, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting creditors'
rights generally from time to time in effect and except that equitable remedies
may not in all cases be available (regardless of whether enforceability is
considered in a proceeding at law or in equity) (collectively, the "Remedies
--------
Exception"). The execution, delivery and performance of this Agreement by Fox
- ---------
Kids will not conflict with or constitute a breach, violation or default under
Fox Kids' Restated Certificate of Incorporation or By-Laws, any statute, law or
administrative regulation, or under any judgment, decree, order, writ,
governmental permit or license, any material contract, agreement, lease,
indenture or instrument to which Fox Kids or any of its Affiliates is a party or
by which Fox Kids or any of its Affiliates is bound.
(3) No Consents. No consent, authorization, order or approval of, or
-----------
filing with or registration with, any governmental authority, commission, board
or other regulatory body of the United States or any State or political
subdivision thereof, or any other Person, is required to be made or obtained by
Fox Kids or any of its Affiliates, for or in
3
<PAGE>
connection with the execution and delivery by Fox Kids of this Agreement and the
consummation by Fox Kids of the transactions contemplated hereby.
(4) Capital Stock. The authorized capital stock of Fox Kids consists
-------------
of 10,000,000 shares of Class A Common Stock, 10,000,000 shares of Class B
Common Stock 20,000,000 shares of "blank check" Preferred Stock (together, the
"Fox Kids Stock"). As of the date hereof, there are 0.02 shares of Class A
- ---------------
Common Stock, two (2) shares of Class B Common Stock, no shares of Preferred
Stock issued and outstanding. All of the issued and outstanding shares of Class
A and Class B Common Stock are duly authorized, validly issued, fully paid and
non-assessable and were not issued in violation of any preemptive rights or any
Federal or State securities laws, and the issued and outstanding shares of Class
A Common Stock are held by Allen and the issued and outstanding shares of Class
B Common Stock are held by Fox Broadcasting Sub and the SEI Stockholders. As of
the date hereof, there are no options, warrants, calls, subscriptions,
convertible securities or other rights (including preemptive rights),
agreements, understandings, arrangements or commitments of any character
obligating Fox Kids now or at any time in the future to issue or sell any of the
capital stock of Fox Kids.
(5) No Disposition. Fox Kids has no plan or intention to dispose of
--------------
any of the property received by it pursuant to this Agreement.
b. By the SEI Stockholders. Each of the SEI Stockholders represents
-----------------------
and warrants to Fox Kids, Saban, Fox Broadcasting Sub and Allen that the
following statements are true and correct as of the date hereof, and will be
true and correct at the Closing Date:
(1) Organization and Standing; Articles and By-Laws. To the extent an
-----------------------------------------------
SEI Stockholder is not a natural person, such SEI Stockholder is a corporation,
partnership, limited liability partnership or similar entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization. Each such SEI Stockholder is qualified, licensed or domesticated
as a foreign entity and is in good standing in all jurisdictions where the
character of its properties owned or held under lease or the nature of its
activities make such qualification necessary, except where the failure to be so
qualified, licensed or domesticated would not have a material adverse effect on
such SEI Stockholder. Each SEI Stockholder has all requisite power and
authority and all requisite licenses, permits and franchises necessary to own,
lease and operate its properties and assets and to carry on its business in the
manner and in the locations as presently conducted, except where the failure to
do so would not have a material adverse effect on such SEI Stockholder. Copies
of the organizational documents of each SEI Stockholder have been delivered to
the other parties to this Agreement and are accurate and complete as of the date
hereof.
(2) Authorization. Each SEI Stockholder has the requisite power and
-------------
authority to enter into and carry out the terms and conditions of this Agreement
and all the transactions contemplated hereunder. The execution and delivery of
this Agreement and the
4
<PAGE>
consummation of the transactions contemplated hereby have been duly authorized
by each SEI Stockholder's Board of Directors or similar entity, and all
proceedings have been taken and no other proceedings on the part of any SEI
Stockholder or its Affiliates is necessary to authorize the execution, delivery
and performance by such SEI Stockholder of this Agreement. This Agreement has
been duly executed and delivered by each SEI Stockholder and constitutes the
valid and binding obligations of such SEI Stockholder, enforceable in accordance
with its terms, except as enforceability may be limited by the Remedies
Exception. The execution, delivery and performance of this Agreement by each SEI
Stockholder will not conflict with or constitute a breach, violation or default
under its organizational documents, any statute, law or administrative
regulation, or under any judgment, decree, order, writ, governmental permit or
license, any material contract, agreement, lease, indenture or instrument to
which such SEI Stockholder or any of its Affiliates is a party or by which such
SEI Stockholder or any of its Affiliates is bound.
(3) No Consents. No consent, authorization, order or approval of, or
-----------
filing with or registration with, any governmental authority, commission, board
or other regulatory body of the United States or any State or political
subdivision thereof, or any other Person, is required to be made or obtained by
any SEI Stockholder or any of their Affiliates, for or in connection with the
execution and delivery by such SEI Stockholder of this Agreement and the
consummation by such SEI Stockholder of the transactions contemplated hereby.
(4) Title to Saban Stock. Each SEI Stockholder has, and at the
--------------------
Closing will have, good and valid title to the shares of Saban Stock listed on
Schedule "A" hereto, owned by it, free and clear of any liens, encumbrances,
- ------------
equities, security interests, claims and other restrictions of any nature
whatsoever, and each SEI Stockholder has the full legal right, power and
authority, and any approval required by law, to sell, assign, transfer and
deliver the Saban Stock and to make the representations, warranties, covenants
and agreements made by it. Upon the effectiveness of the Reorganization, Fox
Kids will acquire good and valid title to the Saban Stock, free and clear of all
liens, encumbrances, equities, security interests, claims and other restrictions
of any nature whatsoever. None of the SEI Stockholders has entered into any
agreements, understandings or undertakings with respect to the Saban Stock under
which such SEI Stockholder is or may become obligated, directly or indirectly,
to transfer, dispose of, or assign the Saban Stock, or which would result in any
Person placing a Lien upon the Saban Stock.
(5) Investment. Each SEI Stockholder acknowledges that the shares of
----------
Class B Common Stock have not been registered under the Securities Act nor
qualified under any state securities or "Blue Sky" law, on the basis that no
distribution or public offering of the Class B Common Stock is to be effected,
and in this connection Fox Kids is relying in part on the representations of
such SEI Stockholder. Each SEI Stockholder further represents and warrants to
Fox Kids that:
(a) Investment Intent. The Class B Common Stock is being acquired by
-----------------
such SEI Stockholder solely for its own account, for investment purposes only,
and
5
<PAGE>
with no present intention of distributing, selling or otherwise transferring
or disposing of the Class B Common Stock.
(b) Access. Each SEI Stockholder has had, during the course of this
------
transaction and prior to its execution of this Agreement, the opportunity to ask
questions of, and receive answers from Fox Kids and its management concerning
their respective businesses, operations and financial condition, and the terms
and conditions of this Agreement. Each SEI Stockholder acknowledges that its
representatives have received all such information as it considers necessary for
evaluating the risks and merits of acquiring the Class B Common Stock and for
verifying the accuracy of any information furnished to it or to which it has had
access, and that each SEI Stockholder has entered into this Agreement on the
basis of its own judgment and analysis of the Company and the transaction.
(c) Illiquidity. Each SEI Stockholder understands that there is no
-----------
public market for the Class B Common Stock or for any securities, and that there
may never be such a public market, and that even if a market develops such SEI
Stockholder may never be able to sell or dispose of the Class B Common Stock and
may thus have to bear the risk of its investment for a substantial period of
time, or forever.
(d) Accredited Investor. Each SEI Stockholder is an "accredited
-------------------
investor" for purposes of Regulation D promulgated by the Securities and
Exchange Commission under the Securities Act.
(6) Brokers, etc. None of the SEI Stockholders has incurred, directly
-------------
or indirectly, any obligation or liability for brokers' or finders' fees,
agents' commissions or other similar charges in connection with this Agreement
or any other similar charges in connection with this Agreement; and, without
limiting the generality of the foregoing, to the extent such SEI stockholder is
not a natural person, none of the officers, directors or employees of such SEI
Stockholder have any right to receive a beneficial interest in any of the Class
B Common Stock, or otherwise to participate in such SEI Stockholder's investment
in Fox Kids.
c. By Fox Broadcasting Sub. Fox Broadcasting Sub represents and
-----------------------
warrants to Fox Kids, Saban, Allen and each of the SEI Stockholders that the
following statements are true and correct as of the date hereof, and will be
true and correct at the Closing Date:
(1) Organization and Standing; Articles and By-Laws. Fox Broadcasting
-----------------------------------------------
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware. Fox Broadcasting Sub is qualified, licensed
or domesticated as a foreign corporation and is in good standing in all
jurisdictions where the character of its properties owned or held under lease or
the nature of its activities make such qualification necessary, except where the
failure to be so qualified, licensed or domesticated would not have a material
adverse effect on Fox Broadcasting Sub. Fox Broadcasting Sub has all requisite
power and authority and all
6
<PAGE>
requisite licenses, permits and franchises necessary to own, lease and operate
its properties and assets and to carry on its business in the manner and in the
locations as presently conducted, except where the failure to do so would not
have a material adverse effect on Fox Broadcasting Sub. Copies of the
Certificate of Incorporation (as certified by the Delaware Secretary of State)
and By-Laws of Fox Broadcasting Sub have been delivered to the other parties to
this Agreement and are accurate and complete as of the date hereof.
(2) Authorization. Fox Broadcasting Sub has the requisite corporate
-------------
power and authority to enter into and carry out the terms and conditions of this
Agreement and all the transactions contemplated hereunder. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by Fox Broadcasting Sub's Board of Directors,
and all corporate proceedings have been taken and no other corporate proceedings
on the part of Fox Broadcasting Sub or its Affiliates is necessary to authorize
the execution, delivery and performance by Fox Broadcasting Sub of this
Agreement. This Agreement has been duly executed and delivered by Fox
Broadcasting Sub and constitutes the valid and binding obligations of Fox
Broadcasting Sub, enforceable in accordance with its terms, except as
enforceability may be limited by the Remedies Exception. The execution,
delivery and performance of this Agreement by Fox Broadcasting Sub will not
conflict with or constitute a breach, violation or default under Fox
Broadcasting Sub's Certificate of Incorporation or By-Laws, any statute, law or
administrative regulation, or under any judgment, decree, order, writ,
governmental permit or license, any material contract, agreement, lease,
indenture or instrument to which Fox Broadcasting Sub or any of its Affiliates
is a party or by which Fox Broadcasting Sub or any of its Affiliates is bound.
(3) No Consents. No consent, authorization, order or approval of, or
-----------
filing with or registration with, any governmental authority, commission, board
or other regulatory body of the United States or any State or political
subdivision thereof, or any other Person, is required to be made or obtained by
Fox Broadcasting Sub or any of its Affiliates, for or in connection with the
execution and delivery by Fox Broadcasting Sub of this Agreement and the
consummation by Fox Broadcasting Sub of the transactions contemplated hereby.
(4) Title to FCNH Common Stock. Fox Broadcasting Sub has, and at the
--------------------------
Closing will have, good and valid title to the 800 shares of FCNH Common Stock,
owned by it, free and clear of any liens, encumbrances, equities, security
interests, claims and other restrictions of any nature whatsoever, and it has
the full legal right, power and authority, and any approval required by law, to
sell, assign, transfer and deliver the FCNH Common Stock and to make the
representations, warranties, covenants and agreements made by it. Upon the
effectiveness of the Reorganization as contemplated hereby, Fox Kids will
acquire good and valid title to the FCNH Common Stock, free and clear of all
liens, encumbrances, equities, security interests, claims and other restrictions
of any nature whatsoever. Fox Broadcasting Sub has not entered into any
agreements, understandings or undertakings with respect to the FCNH Common Stock
under which Fox Broadcasting Sub is or may become obligated, directly or
indirectly, to
7
<PAGE>
transfer, dispose of, or assign the FCNH Common Stock, or which would result in
any Person placing a Lien upon the FCNH Common Stock.
(5) Investment. Fox Broadcasting Sub acknowledges that the shares of
----------
Class B Common Stock have not been registered under the Securities Act nor
qualified under any state securities or "Blue Sky" law, on the basis that no
distribution or public offering of the Class B Common Stock is to be effected,
and in this connection Fox Kids is relying in part on the representations of Fox
Broadcasting Sub. Fox Broadcasting Sub further represents and warrants to Fox
Kids that:
(a) Investment Intent. The Class B Common Stock is being acquired by
-----------------
Fox Broadcasting Sub solely for its own account, for investment purposes only,
and with no present intention of distributing, selling or otherwise transferring
or disposing of the Class B Common Stock.
(b) Access. Fox Broadcasting Sub has had, during the course of this
------
transaction and prior to its execution of this Agreement, the opportunity to ask
questions of, and receive answers from Fox Kids and its management concerning
their respective businesses, operations and financial condition, and the terms
and conditions of this Agreement. Fox Broadcasting Sub acknowledges that its
representatives have received all such information as it considers necessary for
evaluating the risks and merits of acquiring the Class B Common Stock, and for
verifying the accuracy of any information furnished to it or to which it has had
access, and that Fox Broadcasting Sub has entered into this Agreement on the
basis of its own judgment and analysis of Fox Kids and the transaction.
(c) Illiquidity. Fox Broadcasting Sub understands that there is no
-----------
public market for the Class B Common Stock, or for any securities, and that
there may never be such a public market, and that even if a market develops Fox
Broadcasting Sub may never be able to sell or dispose of the Class B Common
Stock, and may thus have to bear the risk of its investment for a substantial
period of time, or forever.
(d) Accredited Investor. Fox Broadcasting Sub is an "accredited
-------------------
investor" for purposes of Regulation D promulgated by the Securities and
Exchange Commission under the Securities Act.
(6) Brokers, etc. Fox Broadcasting Sub has not incurred, directly or
-------------
indirectly, any obligation or liability for brokers' or finders' fees, agents'
commissions or other similar charges in connection with this Agreement or any
other similar charges in connection with this Agreement; and, without limiting
the generality of the foregoing, none of the officers, directors or employees of
Fox Broadcasting Sub have any right to receive a beneficial interest in any of
the Class B Common Stock or otherwise to participate in Fox Broadcasting Sub's
investment in Fox Kids.
8
<PAGE>
d. By Allen. Allen represents and warrants to Fox Kids, Saban, Fox
--------
Broadcasting Sub and each of the SEI Stockholders that the following statements
are true and correct as of the date hereof, and will be true and correct at the
Closing Date:
(1) Organization and Standing; Articles and By-Laws. Allen is a
-----------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of New York. Allen is qualified, licensed or domesticated as a
foreign corporation and is in good standing in all jurisdictions where the
character of its properties owned or held under lease or the nature of its
activities make such qualification necessary, except where the failure to be so
qualified, licensed or domesticated would not have a material adverse effect on
Allen. Allen has all requisite power and authority and all requisite licenses,
permits and franchises necessary to own, lease and operate its properties and
assets and to carry on its business in the manner and in the locations as
presently conducted, except where the failure to do so would not have a material
adverse effect on Allen. Copies of the Articles of Incorporation (as certified
by the New York Secretary of State) and By-Laws of Allen have been delivered to
the other parties to this Agreement and are accurate and complete as of the date
hereof.
(2) Authorization. Allen has the requisite corporate power and
-------------
authority to enter into and carry out the terms and conditions of this Agreement
and all the transactions contemplated hereunder. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by Allen's Board of Directors, and all corporate
proceedings have been taken and no other corporate proceedings on the part of
Allen or its Affiliates is necessary to authorize the execution, delivery and
performance by Allen of this Agreement. This Agreement has been duly executed
and delivered by Allen and constitutes the valid and binding obligations of
Allen, enforceable in accordance with its terms, except as enforceability may be
limited by applicable the Remedies Exception. The execution, delivery and
performance of this Agreement by Allen will not conflict with or constitute a
breach, violation or default under Allen's Articles of Incorporation or By-Laws,
any statute, law or administrative regulation, or under any judgment, decree,
order, writ, governmental permit or license, any material contract, agreement,
lease, indenture or instrument to which Allen or any of its Affiliates is a
party or by which Allen or any of its Affiliates is bound.
(3) No Consents. No consent, authorization, order or approval of, or
-----------
filing with or registration with, any governmental authority, commission, board
or other regulatory body of the United States or any State or political
subdivision thereof, or any other Person, is required to be made or obtained by
Allen or any of its Affiliates, for or in connection with the execution and
delivery by Allen of this Agreement and the consummation by Allen of the
transactions contemplated hereby.
(4) Title to FCNH Common Stock. Allen has, and at the Closing will
--------------------------
have, good and valid title to the 16 16/99 shares of FCNH Common Stock, owned by
it, free and clear of any liens, encumbrances, equities, security interests,
claims and other restrictions of any
9
<PAGE>
nature whatsoever, and it has the full legal right, power and authority, and any
approval required by law, to sell, assign, transfer and deliver the FCNH Common
Stock and to make the representations, warranties, covenants and agreements made
by it. Upon the effectiveness of the Reorganization as contemplated hereby, Fox
Kids will acquire good and valid title to the FCNH Common Stock, free and clear
of all liens, encumbrances, equities, security interests, claims and other
restrictions of any nature whatsoever. Allen has not entered into any
agreements, understandings or undertakings with respect to the FCNH Common Stock
under which Allen is or may become obligated, directly or indirectly, to
transfer, dispose of, or assign the FCNH Common Stock, or which would result in
any Person placing a Lien upon the FCNH Common Stock.
(5) Investment. Allen acknowledges that the shares of Class A Common
----------
Stock, respectively, have not been registered under the Securities Act nor
qualified under any state securities or "Blue Sky" law, on the basis that no
distribution or public offering of the Class A Common Stock is to be effected,
and in this connection Fox Kids is relying in part on the representations of
Allen. Allen further represents and warrants to Fox Kids that:
(a) Investment Intent. The Class A Common Stock is being acquired by
-----------------
Allen solely for its own account, for investment purposes only, and with no
present intention of distributing, selling or otherwise transferring or
disposing of the Class A Common Stock.
(b) Access. Allen has had, during the course of this transaction and
------
prior to its execution of this Agreement, the opportunity to ask questions of,
and receive answers from Fox Kids and its management concerning their respective
businesses, operations and financial condition, and the terms and conditions of
this Agreement. Allen acknowledges that its representatives have received all
such information as it considers necessary for evaluating the risks and merits
of acquiring the Class A Common Stock and for verifying the accuracy of any
information furnished to it or to which it has had access, and that Allen has
entered into this Agreement on the basis of its own judgment and analysis of Fox
Kids and the transaction.
(c) Illiquidity. Allen understands that there is no public market for
-----------
the Class A Common Stock, or for any securities, and that there may never be
such a public market, and that even if a market develops Allen may never be able
to sell or dispose of the Class A Common Stock, and may thus have to bear the
risk of its investment for a substantial period of time, or forever.
(d) Accredited Investor. Allen is an "accredited investor" for
-------------------
purposes of Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act.
10
<PAGE>
(6) Brokers, etc. Allen has not incurred, directly or indirectly,
-------------
any obligation or liability for brokers' or finders' fees, agents' commissions
or other similar charges in connection with this Agreement or any other similar
charges in connection with this Agreement; and, without limiting the generality
of the foregoing, none of the officers, directors or employees of Allen have any
right to receive a beneficial interest in any of the Class A Common Stock or
otherwise to participate in Allen's investment in Fox Kids.
3. Amendments to Strategic Stockholders Agreement.
----------------------------------------------
a. Reorganization as a "Reorganization" under the Strategic
--------------------------------------------------------
Stockholders Agreement. While this Agreement is being entered into other than
- ----------------------
in contemplation of an Initial Public Offering, this Agreement shall, for all
purposes of the Strategic Stockholders Agreement, constitute and be included
within the definition of a "Reorganization" thereunder, and, without limiting
the generality of the foregoing:
i) Fox Kids is the "Successor Entity" under the Strategic
Stockholders Agreement;
ii) All shares of capital stock of Fox Kids issued to the
SEI Stockholders in the Reorganization shall be shares of "SEI Common
Stock" under the provisions of the Strategic Stockholders Agreement, and,
without limiting the generality of the foregoing, shall be subject to all
of the provisions of Sections 2, 3, 4, 6 and 7 relating to the SEI Common
Stock, and shall constitute "SEI Option Shares" under Section 7 of the
Strategic Stockholders Agreement;
iii) All shares of capital stock of Fox Kids issued to Fox
Broadcasting Sub in the Reorganization shall be shares of "FCNH Common
Stock" under the provisions of the Strategic Stockholders Agreement, and,
without limiting the generality of the foregoing, shall be subject to all
of the provisions of Sections 2, 3, 4, 6 and 7 relating to the FCNH Common
Stock.
iv) All shares of capital stock of Fox Kids issued to Allen
in the Reorganization shall be "Allen Shares" under the provisions of the
Strategic Stockholders Agreement, and, without limiting the generality of
the foregoing, shall be subject to all of the provisions of Sections 2, 3,
4, 5, 6 and 7 relating to the Allen Shares.
b. Consent to Reorganization. Each of the parties to the Strategic
-------------------------
Stockholders Agreement hereby consents to the transfer of the Shares pursuant to
the Reorganization.
11
<PAGE>
c. Agreement of Fox Kids. By entering into this Agreement, Fox
---------------------
Kids, as the "Successor Entity," agrees to be bound by each and all of the
covenants and obligations of the Successor Entity under and pursuant to the
Strategic Stockholders Agreement.
4. Closing. The closing of the Reorganization (the "Closing") shall
------- -------
occur concurrently with the contribution contemplated by the LIFE Contribution
Agreement.
5. Prior Issuances. Concurrently with the Closing, the prior issuance of
---------------
two shares of Class B Common Stock to Fox Broadcasting Sub and the SEI
Stockholders shall be cancelled and the shares of Class B Common Stock shall
cease to be outstanding and the prior issuance of .02 shares of Class A Common
Stock to Allen shall be cancelled and the shares of Class A Common Stock shall
cease to be outstanding.
6. Miscellaneous. All of the provisions of Section 11 of the Strategic
-------------
Stockholders Agreement (other than Sections 11(b), (k) and (p)) shall apply with
respect to this Agreement.
7. Definitions. As used in this Agreement, the following terms shall
-----------
have the meanings set forth below:
"AFFILIATE" means, when used with reference to a specified Person, any
Person that directly or indirectly through one or more intermediaries controls
or is controlled by, or is under common control with, the specified Person. For
the purposes of this definition, "control" (including the terms "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies to such Person, whether through the
ownership of voting securities, by contract or otherwise, and any Person owning
10% or more of the equity or voting power of any other Person shall be deemed to
control such other Person.
"PERSON" includes an individual, corporation, partnership, limited
liability company, limited liability partnership, trust, estate, joint venture,
incorporated or unincorporated association, government (or a bureau, agency or
political subdivision thereof) or other entity of whatsoever kind or nature.
"SUBSIDIARY" of a corporation means (i) any corporation of which
equity securities possessing a majority of the ordinary voting power in electing
the board of directors are, at the time as of which such determination is being
made, owned by such corporation either directly or indirectly through one or
more Subsidiaries, and (ii) any Person (other than a corporation) in which such
corporation or any Subsidiary, directly or indirectly, has more than a 10%
ownership interest or over which it exercises control.
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
FOX KIDS WORLDWIDE, INC.
By /s/ Mel Woods
----------------------------------------
Mel Woods
President
SABAN ENTERTAINMENT, INC.
By /s/ Haim Saban
-----------------------------------------
Haim Saban
Chief Executive Officer
/s/ Haim Saban
--------------------------------------------
HAIM SABAN
QUARTZ ENTERPRISES, L.P.
By /s/ Haim Saban
-------------------------------------------
Name: Haim Saban
Title: General Partner, Indigo
Enterprises, L.P.
General Partner
MERLOT INVESTMENTS
By /s/ Haim Saban
-----------------------------------------
Name: Haim Saban
Title: General Partner, Indigo
Enterprises, L.P.
General Partner
<PAGE>
SILVERLIGHT ENTERPRISES, L.P.
By /s/ Haim Saban
-----------------------------------------
Name: Haim Saban
Title: General Partner, Glass Ware
Enterprises, L.P.
General Partner
CELIA ENTERPRISES, L.P.
By /s/ Haim Saban
-----------------------------------------
Name: Haim Saban
Title: General Partner
FOX BROADCASTING SUB, INC.
By /s/ Jay Itzkowitz
-----------------------------------------
Name: Jay Itzkowitz
Title: Senior Vice President
<PAGE>
FCN HOLDING, INC.
By /s/ Jay Itzkowitz
-----------------------------------------
Name: Jay Itzkowitz
Title: Senior Vice President
ALLEN & COMPANY INCORPORATED
By /s/ William F. Leimkuhler
----------------------------------------
Name: William F.Leimkuhler
Title: Vice President & General Counsel
<PAGE>
SCHEDULE "A"
------------
<TABLE>
=========================================================================================
<CAPTION>
Number of Shares of Class
Number of Shares of Saban B Common Stock of Fox
Name Common Stock Kids
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Haim Saban 377.56 3,737,844
- -----------------------------------------------------------------------------------------
Quartz Enterprises, L.P. 76.80 760,320
- -----------------------------------------------------------------------------------------
Merlot Enterprises 65.19 645,381
- -----------------------------------------------------------------------------------------
Silverlight Enterprises, L.P. 278.76 2,759,724
- -----------------------------------------------------------------------------------------
Celia Enterprises, L.P. 1.69 16,731
- -----------------------------------------------------------------------------------------
Total 800.00 7,920,000
========================================================================================
</TABLE>
<PAGE>
EXHIBIT 3.1
CORRECTED
RESTATED CERTIFICATE OF INCORPORATION
OF FOX KIDS WORLDWIDE, INC.
Fox Kids Worldwide, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, does hereby
certify:
1. A Restated Certificate of Incorporation was filed with the Secretary of
State of the State of Delaware on August 1, 1997, which contains an inaccurate
record of the corporate action taken therein, and said Certificate requires
correction as permitted by subsection (f) of Section 103 of the General
Corporation Law of the State of Delaware.
2. The inaccuracy in said Restated Certificate of Incorporation is that the
Restated Certificate of Incorporation inadvertently designated 10,000,000 shares
of the Company's 20,000,000 authorized shares of Common Stock as Class A Common
Stock, and 10,000,000 shares of the Company's authorized Common Stock as Class B
Common Stock, whereas the Board of Directors of the Company intended to increase
the authorized Common Stock to 32,000,000 shares and to allocate enough
authorized Common Stock as Class B Common Stock to effectuate the stock
issuances of Class B Common Stock made on August 1, 1997. Therefore, the
Restated Certificate of Incorporation should have reflected that the Corporation
increased the Company's authorized Common Stock to 32,000,000 shares, and of the
32,000,000 shares designated as Common Stock of the Company, 16,000,000 shares
shall be shares of Class A Common Stock and 16,000,000 shall be shares of Class
B Common Stock.
3. The Certificate is corrected to read in its entirety as follows:
A. The name of the corporation is Fox Kids Worldwide, Inc. Fox Kids
Worldwide, Inc. was originally incorporated under the same name and the original
Certificate of Incorporation of the corporation was filed with the Secretary of
State of the State of Delaware on August 26, 1996.
B. A Restated Certificate of Incorporation of this corporation was filed
with the Secretary of State of the State of Delaware on April 14, 1997, and a
Certificate of Amendment thereto was filed with the Secretary of State of the
State of Delaware on June 6, 1997.
C. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, this Restated Certificate of Incorporation restates and
integrates and further amends the provisions of the Certificate of Incorporation
of this Corporation.
D. This Restated Certificate of Incorporation was duly adopted in
accordance with Sections 242 and 245 of the Delaware General Corporation Law.
E. The text of the Restated Certificate of Incorporation is hereby
restated and further amended to read in its entirety as follows:
<PAGE>
FIRST: The name of the Company is FOX KIDS WORLDWIDE, INC.
-----
SECOND: The address of the registered office of the Company in the State
------
of Delaware is 9 East Loockerman Street, in the City of Dover, County of Kent,
19901. The name of its registered agent at that address is National Corporate
Research, Ltd.
THIRD: The purpose of the Company is to engage in any lawful act or
-----
activity for which a corporation may be organized under the Delaware General
Corporation Law (the "DGCL").
FOURTH: A. Authorized Capital Stock. The Company is authorized to
------ ------------------------
issue 52,000,000 shares of capital stock: 32,000,000 shares shall be shares of
Common Stock, par value $0.001 per share, of which 16,000,000 shares shall be
shares of Class A Common Stock, par value $0.001 per share ("Class A Common
Stock") and 16,000,000 shares shall be shares of Class B Common Stock, par value
$0.001 per share ("Class B Common Stock" and, together with the Class A Common
Stock, the "Common Stock"); 20,000,000 shares shall be shares of Preferred
Stock, par value $0.001 per share ("Preferred Stock"), of which 500,000 shares
shall be shares of Series A Preferred Stock, par value $0.001 per share ("Series
A Preferred Stock").
B. Common Stock. The powers, preferences and rights, and the
------------
qualifications, limitations and restrictions of each class of the Common Stock
are as follows:
(1) Voting. (a) At each annual or special meeting of stockholders,
------
in the case of any written consent of stockholders in lieu of a meeting and for
all other purposes, each holder of record of shares of Class A Common Stock on
the relevant record date shall be entitled to one (1) vote for each share of
Class A Common Stock standing in such person's name on the stock transfer
records of the Company, and each holder of record of Class B Common Stock on the
relevant record date shall be entitled to ten (10) votes for each share of Class
B Common Stock standing in such person's name on the stock transfer records of
the Company. Except as otherwise required by law, and subject to the rights of
holders of any series of Preferred Stock of the Company that may be issued from
time to time, the holders of shares of Class A Common Stock and of shares of
Class B Common Stock shall vote as a single class on all matters with respect to
which a vote of the stockholders of the Company is required under applicable
law, this Restated Certificate of Incorporation or the Bylaws of the Company, or
on which a vote of stockholders is otherwise duly called for by the Company,
including, but not limited to, the election of directors, matters concerning the
sale, lease or exchange of all or substantially all of the property and assets
of the Company, mergers or consolidations with another entity or entities,
dissolution of the Company and amendments to this Restated Certificate of
Incorporation. Except as provided in this Article FOURTH or by applicable law,
whenever applicable law, this Restated Certificate of Incorporation or the
Bylaws of the Company provide for the necessity of an affirmative vote of the
stockholders entitled to cast at least a majority (or any other greater
percentage) of the votes which all stockholders are entitled to cast thereon, or
a "majority (or any other greater percentage) of the voting stock," or language
of similar effect, any and all such language shall mean that the holders of
shares of Class A Common Stock and the holders of shares of Class B Common Stock
shall vote as one class and that a majority (or any other greater percentage)
consists of a majority
2
<PAGE>
(or such other greater percentage) of the total number of votes entitled to be
cast in accordance with the provisions of this Article FOURTH.
(b) Neither the holders of shares of Class A Common Stock nor the
holders of shares of Class B Common Stock shall have cumulative voting rights.
(c) The Company may, as a condition to counting the votes cast by any
holder of shares of Class B Common Stock at any annual or special meeting of
stockholders, in the case of any written consent of stockholders in lieu of a
meeting, or for any other purpose, re quire the furnishing of such affidavits
or other proof as it may reasonably request to establish that the shares of
Class B Common Stock held by such holder have not, by virtue of the provisions
of subparagraphs (B)(6) or (7) of this Article FOURTH, been converted into
shares of Class A Common Stock.
(2) Dividends; Stock Splits. Subject to the rights of the holders of
-----------------------
shares of any series of Preferred Stock, and subject to any other provisions of
this Restated Certificate of Incorporation, holders of shares of Class A Common
Stock and shares of Class B Common Stock shall be entitled to receive such
dividends and other distributions in cash, stock or property of the Company as
may be declared thereon by the Board of Directors of the Company from time to
time out of assets or funds of the Company legally available therefor. If at any
time a dividend or other distribution in cash or other property (other than
dividends or other distributions payable in shares of Common Stock or options or
warrants to purchase shares of Common Stock or securities convertible into or
exchangeable for shares of Common Stock) is paid on the shares of Class A Common
Stock or the shares of Class B Common Stock, a like dividend or other
distribution in cash or other property also shall be paid on shares of Class B
Common Stock or shares of Class A Common Stock, as the case may be, in an equal
amount per share. If at any time a dividend or other distribution payable in
shares of Common Stock or options or warrants to purchase shares of Common Stock
or securities convertible into or exchangeable for shares of Common Stock is
paid on shares of Class A Common Stock or Class B Common Stock, a like dividend
or other distribution shall be paid also on shares of Class B Common Stock or
Class A Common Stock, as the case may be, in an equal amount per share; provided
--------
that, for this purpose, if shares of Class A Common Stock or other voting
securities, or options or warrants to purchase shares of Class A Common Stock or
other voting securities or securities convertible into or exchangeable for
shares of Class A Common Stock or other voting securities, are paid on shares of
Class A Common Stock and shares of Class B Common Stock or voting securities
identical to the other securities paid on the shares of Class A Common Stock
(except that the voting securities paid on the Class B Common Stock may have ten
(10) times the number of votes per share as the other voting securities to be
received by the holders of the Class A Common Stock) or options or warrants to
purchase shares of Class B Common Stock or such other voting securities or
securities convertible into or exchangeable for shares of Class B Common Stock
or such other voting securities, are paid on shares of Class B Common Stock in
an equal amount per share of Class A Common Stock and Class B Common Stock, such
dividend or other distribution shall be deemed to be a like dividend or other
distribution. In the case of any split, subdivision, combination or
reclassification of shares of Class A Common Stock or Class B Common Stock, the
shares of Class B Common Stock or Class A Common Stock, as the case may be, also
shall be split, subdivided,
3
<PAGE>
combined or reclassified so that the number of shares of Class A Common Stock
and Class B Common Stock outstanding immediately following such split,
subdivision, combination or reclassification shall bear the same relationship to
each other as did the number of shares of Class A Common Stock and Class B
Common Stock outstanding immediately prior to such split, subdivision,
combination or reclassification.
(3) Liquidation, Dissolution, etc. In the event of any liquidation,
------------------------------
dissolution or winding up (either voluntary or involuntary) of the Company, the
holders of shares of Class A Common Stock and the holders of shares of Class B
Common Stock shall be entitled to receive the assets and funds of the Company
available for distribution, after payments to creditors and to the holders of
any Preferred Stock of the Company that may at the time be outstanding, in
proportion to the number of shares held by them, respectively, without regard to
class.
(4) Mergers, etc. In the event of any corporate merger, consolidation,
------------
purchase or acquisition of property or stock, or other reorganization in which
any consideration is to be received by the holders of shares of Class A Common
Stock or the holders of shares of Class B Common Stock, the holders of shares of
Class A Common Stock and the holders of shares of Class B Common Stock shall
receive the same consideration on a per share basis; provided that, if such
--------
consideration shall consist in any part of voting securities (or of options or
warrants to purchase, or of securities convertible into or exchangeable for,
voting securities), the holders of shares of Class B Common Stock may receive,
on a per share basis, voting securities with ten (10) times the number of votes
per share as those voting securities to be received by the holders of shares of
Class A Common Stock (or options or warrants to purchase, or securities
convertible into or exchangeable for, voting securities with ten (10) times the
number of votes per share as those voting securities issuable upon exercise of
the options or warrants to be received by the holders of the shares of Class A
Common Stock, or into which the convertible or exchangeable securities to be
received by the holders of the shares of Class A Common Stock may be converted
or exchanged).
(5) No Preemptive or Subscription Right. No holder of shares of Class
-----------------------------------
A Common Stock or Class B Common Stock shall be entitled to preemptive or
subscription rights.
(6) Transfer Restriction; Change of Control of Holders. Shares of
--------------------------------------------------
Class A Common Stock are freely transferable, however, (a) except as provided in
subparagraph (B)(6)(d) of this Article FOURTH, no person holding record
ownership of shares of Class B Common Stock (hereinafter called a "Class B
Holder") may transfer, and the Company shall not register the transfer of, such
shares of Class B Common Stock, except to a Permitted Transferee of such Class B
Holder. Any purported transfer by a Class B Holder, other than to a Permitted
Transferee, shall be null and void and of no effect and such purported transfer
by the Class B Holder will result in the immediate and automatic conversion of
such Holder's shares of Class B Common Stock into shares of Class A Common
Stock. For the purposes hereof, a "Permitted Transferee" shall mean:
(i) any other Class B Stockholder, any of Haim Saban's family
members, any trust established solely for the benefit of one or more of Haim
Saban's family members or any legal entity in which Haim Saban or such persons
are the sole beneficial owners;
4
<PAGE>
(ii) a direct or indirect wholly-owned subsidiary of such Class
B Stockholder (or with respect to a Class B Stockholder which is a natural
person, a corporation or other person wholly-owned by the Class B Stockholder);
(iii) in the case of a Class B Holder which is the estate of a
deceased Class B Holder, or which is the estate of a bankrupt or insolvent Class
B Holder, such Class B Holder's "Permitted Transferee" means a Permitted
Transferee of such deceased, bankrupt or insolvent Class B Holder; or
(iv) in the case of any Class B Holder, such Class B Holder's
"Permitted Transferee" means, without limitation of the foregoing, any direct or
indirect Permitted Transferee of a Permitted Transferee of such Class B Holder.
(b) Notwithstanding anything to the contrary set forth
herein, but subject to the provisions of subparagraph (B)(6)(d) of this Article
FOURTH, in the event of any direct or indirect transfer of beneficial ownership
of any shares of Class B Common Stock which, had such transfer also been a
transfer of record ownership of such shares of Class B Common Stock, would not
have been to a Permitted Transferee, each share of Class B Common Stock
transferred shall be deemed, without further act of the part of the holder
thereof or the Company, to be converted into one share of Class A Common Stock,
and stock certificates formerly representing each share of Class B Common Stock
shall thereupon and thereafter be deemed to represent such number of shares of
Class A Common Stock as equals the number of shares of Class A Common Stock into
which such shares of Class B Common Stock could be converted pursuant to the
terms hereof.
(c) Notwithstanding anything to the contrary set forth
herein, any event which would result in the automatic conversion of shares of
Class B Common Stock into shares of Class A Common Stock shall not result in
such conversion if, after such event, the record holder of such shares of Class
B Common Stock is a corporation, limited liability company or partnership as to
which, with respect to the shares of Class B Common Stock held by such
corporation, limited liability company or partnership, any Permitted Transferee
of the Class B Holder prior to such event has, directly or indirectly, both
investment power (which includes the power to dispose, or direct the disposition
of such shares of Class B Common Stock) and voting power (which includes the
power to vote, or direct the voting of, such shares of Class B Common Stock);
provided that no transaction or event intended to avoid the automatic conversion
- --------
provisions of this subparagraph (B)(6) of Article FOURTH shall in any event be
entitled to the benefit of this subparagraph (B)(6)(c) of Article FOURTH.
(d) Notwithstanding anything to the contrary set forth
herein, any Class B Holder may pledge such Class B Holder's shares of Class B
Common Stock to a pledgee pursuant to a bona fide pledge of such shares as
collateral security for any indebtedness or other obligation of any person;
provided that, even if such shares are registered in the name of the pledgee or
its nominee (which registration is hereby expressly permitted and shall not be
considered a transfer hereunder), such shares shall remain subject to the
provisions of this subparagraph (B)(6) of Article FOURTH. In the event that such
pledged shares of Class B Common Stock (the "Pledged Stock") are foreclosed
upon, each share of such Pledged Stock shall
5
<PAGE>
be deemed, without further act on the part of the holder thereof or the Company,
to be converted into one share of Class A Common Stock, and stock certificates
formerly representing one share of Class B Common Stock shall thereupon and
thereafter be deemed to represent such number of shares of Class A Common Stock
as equals the number of shares of Class A Common Stock into which such shares of
Class B Common Stock could be converted pursuant to the terms hereof upon the
earlier of (i) if the pledgor is contesting the foreclosure on such shares of
Pledged Stock, 30 days after the date on which the foreclosure on such Pledged
Stock becomes final and non-appealable or (ii) if the pledgor is not contesting
the foreclosure on such shares of Pledged Stock, 30 days after the date on which
such Pledged Stock is foreclosed upon; provided that the Pledged Stock shall not
be automatically converted as provided in this subparagraph (B)(6)(d) of Article
FOURTH hereof as a result of such foreclosure if, prior to expiration of either
such 30-day period, the Pledged Stock shall be transferred by the pledgee or the
purchaser in such foreclosure to a Class B Holder or one or more Permitted
Transferees of a Class B Holder, or such foreclosure is by a Secured Party (as
such term is defined in the Credit Agreement referred to below) or any successor
in such position, in connection with the financing for the Company and its
subsidiaries provided by Citicorp USA, Inc. (the "Administrative Agent") and
other financial institutions pursuant to a certain Credit Agreement (the "Credit
Agreement") among the Company, FCN Holding, Inc., Fox Kids Merger Corporation,
Saban Entertainment, Inc., the banks, financial institutions and other
institutional lenders from time to time party thereto, Citicorp Securities,
Inc., as arranger, and the Administrative Agent, and any related document, and
any amendments or supplements to or refinancing of such financing.
(e) Notwithstanding anything to the contrary herein, the
Company shall not register the transfer of any shares of Class B Common Stock,
unless the transferee and the transferor of such Class B Common Stock have
furnished such affidavits and other proof as the Company may reasonably request
to establish that such proposed transferee is a Permitted Transferee. In
addition, upon any purported transfer of shares of Class B Common Stock not
permitted hereunder, each share of Class B Common Stock purported to be so
transferred shall be deemed, without further act on the part of the holder
thereof or the Company, to be converted into one share of Class A Common Stock,
and stock certificates formerly representing one share of Class B Common Stock
shall thereupon and thereafter be deemed to represent such number of shares of
Class A Common Stock as equals the number of shares of Class A Common Stock into
which such shares of Class B Common Stock could be converted pursuant to the
terms hereof, and the Company shall register such shares of Class A Common Stock
in the name of the person to whom such shares of Class B Common Stock were
purported to be transferred.
(f) The Company shall include on the certificates for
shares of Class B Common Stock a legend referring to the restrictions on
transfer and registration of transfer imposed by this subparagraph (B)(6) of
Article FOURTH.
(7) Voluntary Conversion. Each share of Class B Common Stock shall be
--------------------
convertible, at the option of its record holder, at any time into one validly
issued, fully paid and non-assessable share of Class A Common Stock. At the
time of a voluntary conversion, the record holder of shares of Class B Common
Stock shall deliver to the principal office of the Company or any transfer agent
for shares of the Class A Common Stock (i) the certificate or certificates
6
<PAGE>
representing the shares of Class B Common Stock to be converted, duly endorsed
in blank or accompanied by proper instruments of transfer and (ii) written
notice to the Company specifying the number of shares of Class B Common Stock to
be converted into shares of Class A Common Stock and stating the name or names
(with addresses) and denominations in which the certificate or certificates
representing the shares of Class A Common Stock issuable upon such conversion
are to be issued and including instructions for the delivery thereof.
Conversion shall be deemed to have been effected at the time when delivery is
made to the Company of both such written notice and the certificate or
certificates representing the shares of Class B Common Stock to be converted or
such later time as may be specified in such written notice, and as of such time
each person named in such written notice as the person to whom a certificate
representing shares of Class A Common Stock is to be issued shall be deemed to
be the holder of record of the number of shares of Class A Common Stock to be
evidenced by that certificate. Delivery of such certificates and such written
notice shall obligate the Company to issue such shares of Class A Common Stock,
and thereupon the Company or its transfer agent shall promptly issue and deliver
at such stated address to such record holder of shares of Class A Common Stock a
certificate or certificates representing the number of shares of Class A Common
Stock to which such record holder is entitled by reason of such conversion, and
shall cause such shares of Class A Common Stock to be registered in the name of
such record holder.
(8) Unconverted Shares; Notice Required. In the event of the
-----------------------------------
conversion of less than all of the shares of Class B Common Stock evidenced by a
certificate surrendered to the Company in accordance with the procedures of
subparagraphs (B)(6), (7) or (8) of this Article FOURTH, the Company shall
execute and deliver to or upon the written order of the holder of such
unconverted shares, without charge to such holder, a new certificate evidencing
the number of shares of Class B Common Stock not converted.
(9) Reservation. The Company hereby reserves and shall at all times
-----------
reserve and keep available, out of its authorized and unissued shares of Class A
Common Stock, for the purposes of effecting conversions, such number of duly
authorized shares of Class A Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Class B Common
Stock. All of the shares of Class A Common Stock so issuable shall, when so
issued, be duly and validly issued, fully paid and non-assessable. The Company
shall take all action as may be necessary to ensure that all such shares of
Class A Common Stock may be so issued without violation of any applicable law or
regulation, or of any requirements of any national securities exchange upon
which the shares of Class A Common Stock are or may be listed, or of any inter-
dealer quotation system of a registered national securities association upon
which the shares of Class A Common Stock are or may be listed or authorized for
quotation.
(10) Power to Sell and Purchase Shares. Subject to applicable law, the
---------------------------------
Company shall have the power and authority to issue and sell all or any part of
any shares of any class of capital stock herein or hereafter authorized to such
persons, and for such consideration, as the Board of Directors shall from time
to time, in its discretion, determine, whether or not greater consideration
could be received upon the issue or sale of the same number of shares of another
class, and as otherwise permitted by law. The Company shall have the power to
purchase any shares of any class of capital stock herein or hereafter authorized
from such persons, and for such
7
<PAGE>
consideration, as the Board of Directors shall from time to time, in its
discretion, determine, whether or not less consideration could be paid upon the
purchase of the same number of shares of another class, and as otherwise
permitted by law.
(11) Rights Otherwise Identical. Except as expressly set forth herein,
--------------------------
the rights of the holders of Class A Common Stock and the rights of the holders
of Class B Common Stock shall be in all respects identical.
(12) For purposes of this Article FOURTH:
(a) The relationship of any person that is derived by or through
legal adoption shall be considered a natural one.
(b) Each joint owner of shares of Class B Common Stock shall be
considered a "Class B Holder" of such shares.
(c) A minor for whom shares of Class B Common Stock are held
pursuant to the Uniform Gifts to Minors Act or similar law shall be considered a
"Class B Holder" of such shares.
(d) The term "beneficial ownership" (including, with a
correlative meaning, the term "beneficially own"), shall have the meaning
assigned such term in Rules 13d-3 and 13d-5 under the Securities Exchange Act of
1934, as amended, as in effect on April 1, 1997, except that a person shall be
deemed to have "beneficial ownership" of all shares that such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time.
(e) Unless otherwise specified, the term "person" means both
natural persons and legal entities.
(f) The term "transfer" means any direct or indirect transfer
(including by sale, assignment, gift, bequest, appointment or otherwise), and
shall also include, with respect to any Class B Holder, any direct or indirect
change in control of such person.
(g) The term "control" (including, with correlative meanings, the
terms "controlling," "controlled by" and "under common control with"), as
applied to any person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
person or entity, whether through the ownership of voting securities, by
contract or otherwise.
C. Preferred Stock.
---------------
The Board of Directors is expressly authorized to provide for the issuance
of all or any shares of the Preferred Stock in one or more classes or series,
and to fix for each such class or series such voting powers, full or limited, or
no voting powers, and such designations, preferences
8
<PAGE>
and relative, participating, optional or other special rights and such
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions adopted by the Board of Directors
providing for the authorization of such class or series, including, without
limitation, the authority to provide that any such class or series may be (i)
subject to redemption at such time or times and at such price or prices, (ii)
entitled to receive dividends (which may be cumulative or non-cumulative) at
such rates, on such conditions, and at such times, and payable in preference to,
or in such relation to, the dividends payable on any other class or classes or
any other series, (iii) entitled to such rights upon the dissolution of, or upon
any distribution of the assets of, the Company, and/or (iv) convertible into, or
exchangeable for, shares of any other class or classes of capital stock, or of
any other series of the same or any other class or classes of stock, of the
Company at such price or prices or at such rates of exchange and with such
adjustments, all as may be stated in such resolution or resolutions.
(1) Terms Applicable to the Series A Preferred Stock. The powers, preferences
------------------------------------------------
and relative, participating, optional and other special rights of the
Series A Preferred Stock and the qualifications, limitations and
restrictions thereof are as follows:
(a) Fractional Shares. The Series A Preferred Stock is issuable
-----------------
solely in whole shares that shall entitle the holder thereof to exercise the
voting rights, to participate in the distributions and to have the benefit of
all other rights of holders of the Series A Preferred Stock as set forth herein.
(b) Definitions. As used herein, the following terms shall have the
-----------
respective meanings given thereto in the subparagraphs of this subparagraph (1)
indicated below:
9
<PAGE>
<TABLE>
<CAPTION>
Defined in
Defined Term Section
- ------------ ----------
<S> <C>
"Actual ADS Price".............. (h)
"ADSs".......................... (h)
"Applicable Discount"........... (h)
"Business Day".................. (c)(ii)
"Discounted ADS Price".......... (h)
"Dividend Payment Date"......... (c)(ii)
"Event of Default".............. (h)
"FKW Affiliate"................. (g)(iii)
"Funding Agreement"............. (g)(ii)
"Junior Stock".................. (d)
"Liberty"....................... (g)(i)
"Liberty Affiliate"............. (g)(i)
"Liquidation"................... (d)
"Liquidation Price"............. (d)
"Missed Redemption Date"........ (h)(i)
"NPAL".......................... (g)(ii)
"NPAL Preferred Stock".......... (h)(iii)
"NYSE".......................... (h)
"Taxable Transaction............ (g)(i)
"TNCL".......................... (g)(ii)
"TNCL Preferred Stock".......... (h)
</TABLE>
(c) Dividends Rights.
----------------
(i) Holders of the outstanding shares of Series A Preferred Stock
shall be entitled to receive, if, as and when declared by the Board of
Directors, cumulative dividends as set forth in this Restated Certificate of
Incorporation. Dividends shall be payable in cash on the shares of Series A
Preferred Stock out of funds legally available therefor at a rate per annum
equal to 9.0% (subject to adjustment as provided below) of the Liquidation
Price, payable quarterly in arrears. If any quarterly dividend is not declared
and paid in full on a Dividend Payment Date (i) such accrued and unpaid
dividends will be added cumulatively to the Liquidation Price and remain a part
thereof until such accrued dividends (together with all other dividends accrued
on such cumulated dividends) are declared and paid in full and, (ii) the
dividend rate will increase to a rate per annum equal to 11.5% of the
Liquidation Price and continue at such rate until all dividends that have been
added cumulatively to and remain part of the Liquidation Price (together with
all other dividends accrued on such cumulated dividends) are declared and paid
in full. Notwithstanding the foregoing, if a full quarterly dividend payment
has not been declared and paid on a Dividend Payment Date and immediately prior
to such date the dividend rate per annum is equal to 9.0% of the Liquidation
Price (i.e., (i) no Events of Default were continuing as of such time and (ii)
no dividends had been added cumulatively to and remain part of the
10
<PAGE>
Liquidation Price), then if such quarterly dividend, and all dividends accrued
thereon at the rate per annum of 9.0%, are declared and paid in full by no later
than the tenth day following the original Dividend Payment Date (or, if such
tenth day is not a Business Day, the immediately succeeding Business Day), the
dividend rate shall not, solely as a result of such failure to pay dividends on
the original Dividend Payment Date, increase to a rate per annum equal to 11.5%
of the Liquidation Price; provided, however, that if such unpaid dividend and
the dividends accrued thereon are not declared and paid as aforesaid in full by
such tenth day (or, if such tenth day is not a Business Day, the immediately
succeeding Business Day), then such accrued and unpaid dividends shall be added
cumulatively to the Liquidation Price and the dividend rate shall increase to a
rate of 11.5% per annum of the Liquidation Price, in each case effective as of
the original Dividend Payment Date, and such increased dividend rate shall
continue in effect until all dividends that have been added to and remain a part
of the Liquidation Price (and all other dividends accrued on such cumulative
dividends) have been paid in full and no Events of Default shall have occurred
and be continuing.
(ii) Accrued dividends on the Series A Preferred Stock shall be
payable quarterly in arrears on the last day of each March, June, September and
December, or the immediately succeeding Business Day if such last day is not a
Business Day (each such payment date being hereinafter referred to as a
"Dividend Payment Date"), commencing on September 30, 1997. Each such dividend
shall be paid to the holders of record of shares of Series A Preferred Stock as
they appear on the stock register of the Company on the record date for payment
of such dividend, which record date shall be a date, not more than 45 days or
less than 15 days preceding the payment date for such dividend, as shall be
fixed by the Board of Directors. Dividends on the shares of Series A Preferred
Stock shall accrue as set forth herein, commencing on the date of original
issuance of the Series A Preferred Stock, on a daily basis whether or not there
are funds legally available for payment of such dividends and whether or not
such dividends are declared. Dividends shall be computed on the basis of a 365-
day or 366-day year, as the case may be. "Business Day" shall mean any day other
than a Saturday, Sunday, or day on which banking institutions in the State of
New York are authorized or obligated by law or executive order to close.
(iii) When dividends are not paid in full upon the shares of the
Series A Preferred Stock, all dividends declared upon shares of the Series A
Preferred Stock shall be declared pro rata so that the amount of dividends
declared per share on the shares of the Series A Preferred Stock shall be the
same for each share of Series A Preferred Stock.
(iv) Accrued and unpaid dividends for any past quarterly dividend
period or periods that have been added to the Liquidation Price, together with
all accrued and unpaid dividends thereon, may be declared and paid at any time,
without reference to any Dividend Payment Date, to holders of record on a date
not more than 45 days or less than 15 days preceding the payment date thereof as
shall be fixed by the Board of Directors. Any such accrued and unpaid dividends
that have been added to the Liquidation Price but are subsequently paid shall be
subtracted from the Liquidation Price upon the date of such payment.
11
<PAGE>
(d) Liquidation Preference. Upon any liquidation, dissolution or
----------------------
winding up of the Company, whether voluntary or involuntary (a "Liquidation"),
the holders of shares of Series A Preferred Stock shall be entitled to receive
from assets available for distribution to stockholders, before any payment or
distribution is made to holders of any class of capital stock of the Company
ranking junior to the Series A Preferred Stock as to dividend rights, rights of
redemption or rights on Liquidation (the "Junior Stock"), an amount in cash per
share equal to the Liquidation Price of a share of Series A Preferred Stock as
of the date of payment. As used in this Restated Certificate of Incorporation,
the "Liquidation Price" of any share of Series A Preferred Stock as of any date
will be the sum of (x) $1,000, plus (y) an amount equal to all unpaid dividends
on such share that have accrued and been added to the Liquidation Price and
remain a part thereof as of such date pursuant to subparagraph (c)(i) above,
plus (z) for purposes of determining the amount payable upon Liquidation or on
any redemption of such share (but not for purposes of calculating dividends), an
amount equal to all unpaid dividends accrued on the sum of the amounts specified
in clauses (x) and (y) that have not been added to the Liquidation Price during
the period from the immediately preceding Dividend Payment Date (or, if there
has been no Dividend Payment Date, from the date of original issuance of the
Series A Preferred Stock) to and including the date in question. If, upon
Liquidation, the amounts payable with respect to the liquidation preference of
the Series A Preferred Stock are not paid in full, the holders of Series A
Preferred Stock will share pro rata in the amounts payable and other property
distributable with respect to such Liquidation so that the per share amounts to
which holders of Series A Preferred Stock are entitled will in all cases be the
same. After payment in full of the Liquidation Price per share of Series A
Preferred Stock, the holders of such shares in their capacity as such shall not
be entitled to any further right or claim to any remaining assets of the
Company. The Company shall mail written notice of any Liquidation to each
record holder of Series A Preferred Stock not less than 30 days prior to the
date on which such Liquidation shall occur or become effective; provided,
however, that in the case of any involuntary liquidation such notice shall be
given as soon as practicable. Neither a consolidation or merger of the Company
with or into another corporation, nor a merger of any other corporation with or
into the Company, nor the sale, transfer or lease of all or any part of the
Company's property, assets or business (other than in connection with a winding
up of its business) will be considered a Liquidation for purposes of this
Restated Certificate of Incorporation.
(e) Redemption.
----------
(i) On August 1, 2027, the Company shall redeem, out of
funds legally available therefor, all then outstanding shares of Series A
Preferred Stock, if any, at a redemption price equal to the Liquidation Price
thereof as of the date of redemption, payable in cash.
(ii) Each holder of Series A Preferred Stock shall have the
right, at such holder's option and exercisable during the 30-day period
commencing upon August 2 of the years 2017 and 2022, to require redemption by
the Company of such holder's shares of Series A Preferred Stock, in whole or in
part, at a redemption price (subject to adjustment as provided in subparagraph
(h) below) equal to the Liquidation Price per share thereof as of the date of
redemption of such shares, payable in cash. Holders may exercise such right by
giving written notice of such exercise during such 30-day period, stating the
number of shares of Series A Preferred Stock to be redeemed, to the Company at
its principal office at 10960 Wilshire Boulevard, Los Angeles, CA,
12
<PAGE>
90024, Attention: President, with a copy to c/o News America Publishing
Incorporated, 1211 Avenue of the Americas, New York, New York 10036, Attention:
Arthur M. Siskind, Esq., Senior Executive Vice President and Group General
Counsel of The News Corporation Limited, or such other address as the Company
shall designate by written notice to the holders of the Series A Preferred
Stock. The Company shall redeem, out of funds legally available therefor, the
shares of Series A Preferred Stock so requested to be redeemed within twenty
(20) Business Days following the expiration of such 30-day period. If the funds
of the Company legally available for redemption of shares of Series A Preferred
Stock are insufficient to redeem the total number of shares required to be
redeemed pursuant to this subparagraph (e)(ii), those funds which are legally
available for redemption of such shares of Series A Preferred Stock will be used
to redeem, at the Liquidation Price per share, the maximum possible number of
such shares of Series A Preferred Stock ratably among the holders who have given
timely notice of exercise of their right to have shares of Series A Preferred
Stock redeemed under this subparagraph (e)(ii). At any time thereafter when
additional funds of the Company are legally available and not so restricted for
such purpose, such funds will immediately be used to redeem the shares of Series
A Preferred Stock the Company failed to redeem, at the Liquidation Price per
share as of the date of actual redemption, until the balance of such shares of
Series A Preferred Stock are redeemed.
(iii) At any time after August 1, 2007, the Company, by resolution of
the Board of Directors, may redeem all, but not less than all, of the shares of
Series A Preferred Stock at a redemption price (subject to adjustment as
provided in subparagraph (h) below) equal to the Liquidation Price thereof as of
the date of redemption, payable in cash.
(iv) Written notice of any redemption pursuant to subparagraph (e)(i)
or (e)(iii) shall be given by the Company to each record holder of the shares of
the Series A Preferred Stock to be redeemed, not more than 60 nor less than 30
days prior to such redemption date, to the respective addresses of such holders
as the same shall appear on the stock transfer records of the Company. Each
notice shall state: (i) the redemption date; (ii) the redemption price; (iii)
the place or places where certificates for such shares are to be surrendered for
payment of the redemption price; and (iv) that dividends on the shares to be
redeemed will cease to accrue on such redemption date unless the applicable
redemption price is not paid in full on such date. Failure to give such notice,
or any defect in such notice, to any holder of shares of Series A Preferred
Stock shall not affect the validity of the proceedings for the redemption of any
shares of Series A Preferred Stock, except as to the holders to whom the Company
has failed to give said notice as set forth above.
(v) If the notice of redemption with respect to shares of Series A
Preferred Stock to be redeemed pursuant to this subparagraph (e) shall have been
timely given as provided above in subparagraph (e)(ii) or (e)(iv), and if on or
before the applicable date of redemption the Company shall have deposited with a
redemption agent for the Series A Preferred Stock (or, if there is no redemption
agent, shall have set apart so as to be available for such purpose and only such
purpose) cash sufficient to pay in full the aggregate redemption price for such
shares of Series A Preferred Stock on such date of redemption, then effective as
of the close of business on such redemption, such shares of Series A Preferred
Stock shall no longer be deemed outstanding notwithstanding that any certificate
therefor shall not have been surrendered for cancellation,
13
<PAGE>
dividends with respect to the shares so called for redemption shall cease to
accrue on such date of redemption and all rights with respect to the shares so
called for redemption shall forthwith after such date cease and terminate,
except the right of such holders, upon the surrender of certificates evidencing
the shares of Series A Preferred Stock so redeemed, to receive the cash in
payment of the redemption price therefor.
(f) Ranking. The Series A Preferred Stock will rank senior as to
-------
dividend rights, rights of redemption and rights on Liquidation to all other
classes and series of capital stock of the Company authorized on the date of
issuance of the Series A Preferred Stock. So long as any shares of Series A
Preferred Stock are outstanding, the Company will not issue any shares of any
class or series of capital stock ranking senior to or pari passu with the Series
A Preferred Stock as to dividend rights, rights of redemption or rights on
Liquidation.
(g) Certain Covenants.
-----------------
(i) Prior to the tenth anniversary of the date of original
issuance of the Series A Preferred Stock, the Company will not, without the
prior written approval of Liberty Media Corporation, a Delaware corporation (or
any successor thereto by merger or by acquisition of all or substantially all of
its assets) ("Liberty"), consummate any transaction (including, but not limited
to, a merger), transfer any stock, securities or other assets or consummate any
other action which, as determined under Federal income tax rules, results in (x)
the transaction by which Liberty obtained the Series A Preferred Stock becoming
taxable, in whole or in part, or (y) a taxable exchange, conversion or
disposition (except any voluntary disposition by Liberty or a Liberty Affiliate
(as defined below)) of any shares of Series A Preferred Stock by Liberty or a
Liberty Affiliate that owns of record Series A Preferred Stock (a "Taxable
Transaction"). As used herein, a "Liberty Affiliate" shall mean any entity
which, directly or indirectly, controls, is under common control with, or is
controlled by Liberty. From and after such tenth anniversary, the Company may
effect a Taxable Transaction without the prior written approval of Liberty,
provided that prior to such Taxable Transaction being effected the Company shall
have redeemed all of the shares of Series A Preferred Stock then owned of record
by Liberty or any Liberty Affiliate at the Liquidation Price per share (as
adjusted pursuant to subparagraph (h), if applicable) as of the date of
redemption, payable in cash. This subparagraph (g)(i) shall not apply to, and is
not intended to benefit, any person other than Liberty and any Liberty
Affiliates that own of record Series A Preferred Stock, and shall not extend to
any transferee of Liberty or any Liberty Affiliate (except for a transferee
which is Liberty or a Liberty Affiliate).
(ii) For so long as any shares of Series A Preferred Stock remain
outstanding, the Funding Agreement, dated as of June 11, 1997 (the "Funding
Agreement"), among the Company, The News Corporation Limited, a corporation
organized and existing under the laws of South Australia, Australia ("TNCL"),
and News Publishing Australia Limited, a Delaware corporation ("NPAL"), shall
continue in full force and effect and the Company shall not (i) fail to enforce
all of its rights under the Funding Agreement, (ii) waive, amend or modify or
agree to waive, amend or modify any provisions of the Funding Agreement, (iii)
assign or delegate, or permit TNCL or NPAL to assign or delegate, any of its
obligations or duties under the Funding Agreement to any other person or entity
or (iv) assign or agree to assign, or permit NPAL to assign or agree to assign,
14
<PAGE>
any of its rights under the Funding Agreement to any other person or entity, in
each case without the prior approval of the holders of not less 66 2/3% of the
issued and outstanding shares of Series A Preferred Stock.
(iii) For so long as any shares of Series A Preferred Stock are
outstanding, no dividend, whether in cash or property (other than a stock
dividend paid in shares of the same class or series of Junior Stock), shall be
paid or declared, nor shall any other distribution be made, on any Junior Stock,
nor shall any shares of Junior Stock be purchased, redeemed, or otherwise
acquired for value by the Company or any person or entity which, directly or
indirectly, is controlled by the Company (an "FKW Affiliate"), unless (i) the
holders of the Series A Preferred Stock shall have been paid all accrued
dividends for all quarterly dividend periods ending on or before the date on
which any such dividend on Junior Stock, or such purchase, redemption or other
acquisition of such Junior Stock, is to occur, (ii) no dividends shall have been
cumulatively added to the Liquidation Price or, if so added, such dividends,
together with all dividends accrued thereon, shall have been declared and paid
and (iii) no Events of Default shall have occurred and be continuing.
(iv) For so long as Liberty or a Liberty Affiliate is an owner of
record of shares of Series A Preferred Stock, the Company shall furnish to
Liberty, on each December 31, a certificate of a responsible officer of the
Company stating that during the preceding 12-month period ending on the
immediately preceding June 30 (or if no such certificate has previously been
delivered, during the period from the original issuance of the Series A
Preferred Stock to June 30, 1998), the Company has observed all of the covenants
in this subparagraph (g), and that such officer has obtained no knowledge of any
Event of Default except as specified in such certificate. The Company shall,
upon becoming aware of the occurrence of any Event of Default, promptly notify
the holders of the Series A Preferred Stock of such Event of Default and of
their rights under subparagraph (h). The Company shall also provide to Liberty
any and all compliance certificates that the Company receives from TNCL and NPAL
under the terms of the Funding Agreement, promptly after the Company receives
such certificates.
(h) Events of Default and Remedies. In addition to any other remedies
------------------------------
the holders of Series A Preferred Stock may have, if any of the following events
shall occur:
(i) the Company shall fail to redeem any shares of Series A
Preferred Stock required to be so redeemed under subparagraph (e)(i), (ii) or
(iii) at the applicable redemption price (whether or not there are funds legally
available therefor) and on the date fixed, or by the last day of the period
within which the Company is to required to fix a date, for redemption (a "Missed
Redemption Date"); or
(ii) the Company shall be in breach of any of the covenants set
forth under subparagraph (g)(i), (ii), (iii) or (iv) hereof and such breach
shall not have been cured within thirty (30) days of the Company's first having
actual knowledge of such breach (including by notice from a holder of Series A
Preferred Stock); or
15
<PAGE>
(iii) if any shares of Preferred Stock, par value $.001 per
share, of NPAL ("NPAL Preferred Stock") are issued and outstanding, an Event of
Default (as such term is defined in Article FOURTH of the Certificate of
Incorporation of NPAL) under the terms of the NPAL Preferred Stock shall have
occurred and be continuing;
then, upon the occurrence of any of the events set forth in clauses
(i), (ii) or (iii) above (each, an "Event of Default") and at all times
thereafter until such time as such Event of Default has been cured in full and
no other Event of Default remains uncured, (i) the dividend rate applicable to
the Series A Preferred Stock shall increase to a rate per annum equal to 11.5%
of the Liquidation Price (if not already at such dividend rate pursuant to
subparagraph (c) hereof) effective upon (A) the Missed Redemption Date, (B) the
expiration of the 30-day period described in clause (ii) above if the breached
covenant(s) specified in clause (ii) have not then been cured within such period
or (C) the occurrence of an Event of Default under the terms of the NPAL
Preferred Stock, as the case may be, (ii) in the case of an Event of Default
referred to in clauses (ii) or (iii) above, each holder of Series A Preferred
Stock shall have the right, at such holder's option, to require the redemption
by the Company, in whole or in part, of such holder's shares of Series A
Preferred Stock (in accordance with the procedures set forth in subparagraph
(e)(ii) hereof), (iii) if a holder exercises its right of redemption pursuant to
the immediately preceding clause (ii) or in the case of an Event of Default
under clause (i) above where the Company shall have failed to cure such Event of
Default within ten (10) days after the original date fixed for redemption (or
the last day, if any, of the period within which the Company is required to fix
a date for redemption), the redemption price for the shares of Series A
Preferred Stock to be redeemed shall be (or shall be increased to) the amount
determined by dividing the Liquidation Price as of the date of such redemption
by the Discounted ADS Price and multiplying the resulting quotient by the Actual
ADS Price and (iv) the holders of a majority of the outstanding shares of Series
A Preferred Stock shall have the right to cause the Company to enforce the
Company's rights under the Funding Agreement and to direct the time, method and
place of conducting any remedy available to the Company thereunder. In the event
the Company breaches any of the provisions of subparagraph (g)(iii), or if any
of the provisions of Section 7(c) of Article FOURTH of the Certificate of
Incorporation of NPAL or Section 4 of the Funding Agreement shall be breached,
such breach shall be deemed cured at such time as all accrued and unpaid
dividends, if any, on the Series A Preferred Stock that has been cumulatively
added to the Liquidation Price, together with all other dividends accrued and
unpaid on the Series A Preferred Stock, shall have been declared and paid in
full to the holders of the Series A Preferred Stock. For greater certainty, if
a holder of Series A Preferred Stock exercises its rights of redemption pursuant
to clause (ii) above, then the redemption price, as adjusted pursuant to this
subparagraph (h), shall be payable by the Company irrespective of any subsequent
cure of the Event of Default(s) that resulted in such right of redemption under
clause (ii) above.
As used above, "Actual ADS Price" means the average for the ten (10)
trading days preceding the date of redemption of shares of Series A Preferred
Stock of (i) the closing sale price, regular way, of the American Depositary
Receipts representing Preferred Limited Voting Ordinary Shares, par value A$.50
per share (the "TNCL Preferred Stock"), of TNCL ("ADSs") on the New York Stock
Exchange, Inc. (the "NYSE") or on the principal exchange on which such ADSs are
traded, (ii) if the primary trading market for the ADSs is not the NYSE or
another exchange, the last sale price of the ADSs on the Nasdaq National Market
or (iii) if the ADSs are not traded on the
16
<PAGE>
NYSE, another exchange or the Nasdaq National Market, then the average of the
bid and asked prices for the ADSs as furnished by any NYSE member firm selected
from time to time by the Board of Directors for such purpose. "Discounted ADS
Price" means the product of the Applicable Discount times the lower of (x) the
Actual ADS Price and (y) US$14.537 (the average of the closing prices on the
NYSE of the ADS's for the ten (10) trading days preceding June 11, 1997), in
each case appropriately adjusted to take into account any stock dividend on the
ADSs, or any subdivision, split, combination or reclassification of the ADSs or
the TNCL Preferred Stock or any change to the number of shares of TNCL Preferred
Stock underlying each ADS since June 11, 1997. If the TNCL Preferred Stock is
not outstanding during the period required for determining the "Actual ADS
Price," then "ADS" shall refer to the ordinary or preferred shares of TNCL with
the greatest liquidity in the public market.
"Applicable Discount" means the following percentages for the 365-366 day
period preceding August 1 of each year indicated below:
<TABLE>
<CAPTION>
Percentage Year
- ---------- ----
<S> <C>
60% 1998
63% 1999
66% 2000
69% 2001
72% 2002
75% 2003
81.25% 2004
87.50% 2005
93.75% 2006
100% 2007 and any year thereafter
</TABLE>
(i) Voting Rights. Other than as set forth in subparagraph (j) below,
-------------
the holders of Series A Preferred Stock shall not have any voting rights, except
as otherwise required by law.
(j) Amendment. For so long as any shares of Series A Preferred Stock
---------
remain outstanding, the affirmative vote of the holders of at least 66 2/3% of
the outstanding shares of Series A Preferred Stock (excluding for these purposes
any shares held by the Company or any FKW Affiliate), voting separately as a
class, shall be necessary before the Company may (i) amend,
17
<PAGE>
alter or repeal any of the provisions of this subparagraph C.(1) of Article
FOURTH or (ii) amend, modify or eliminate the Certificate of Incorporation of
the Company (including any amendment, modification or elimination by means of a
merger) in a manner that would adversely affect the powers, preferences or
rights of the holders of the shares of Series A Preferred Stock then
outstanding; provided, however, that the Company may amend or modify the
Certificate of Incorporation of the Company without the vote of any holders of
Series A Preferred Stock in order to satisfy its obligations under Section
2.1(c) of the Contribution and Exchange Agreement, dated June 11, 1997, among
Liberty Media Corporation, a Delaware corporation, Liberty IFE, Inc., a Colorado
corporation, and FKW, as such agreement may be amended from time to time. In the
event of a proposed merger or share exchange involving the Company (in which the
Company is not the surviving corporation) at a time when there are any shares of
Series A Preferred Stock outstanding, the Company, prior to any such merger or
share exchange, shall make appropriate provisions so that the surviving
corporation shall issue to the holders of the Series A Preferred Stock a series
of preferred stock of such surviving corporation with substantially identical
designations, voting powers, preferences and relative participating, optional
and special rights as those contained herein.
(k) Preemptive Rights. The holders of the Series A Preferred Stock
-----------------
will not have any preemptive right to subscribe for or purchase any shares of
stock or any other securities which may be issued by this Company.
(l) Conversion. The Series A Preferred Stock shall not be convertible
----------
into any other capital stock or instrument of the Company.
(m) Exclusion of Other Rights. Except as may otherwise be required by
-------------------------
law, the shares of Series A Preferred Stock shall not have any designations,
preferences, limitations or relative rights, other than those specifically set
forth in this Restated Certificate of Incorporation.
(n) Status of Acquired Shares. Shares of Series A Preferred Stock
-------------------------
redeemed by the Company pursuant to subparagraph (e) or otherwise acquired by
the Company will be restored to the status of authorized but unissued shares of
preferred stock, without designation as to class, and may thereafter be issued,
but not as shares of Series A Preferred Stock.
(o) Legending of Series A Preferred Stock. Each certificate
-------------------------------------
representing shares of Series A Preferred Stock shall bear a legend in
substantially the form set forth below:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION
UNDER THE SECURITIES ACT OR UNLESS THE TRANSACTION IS EXEMPT FROM OR NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT."
18
<PAGE>
FIFTH: The following provisions are inserted for the management of the
-----
business and the conduct of the affairs of the Company, and for further
definition, limitation and regulation of the powers of the Company and of its
directors and stockholders:
A. The business and affairs of the Company shall be managed by or under
the direction of the Board of Directors.
B. All actions of the Board of Directors (including, but not limited to,
interested party transactions, financing transactions, mergers and acquisitions,
changes in executive officers, director nominations and committee appointments)
will require the vote of at least 75% of the then duly elected and acting
members of the Board of Directors. Interested directors will be counted, and
may cast votes.
C. An amendment of the Bylaws or this Restated Certificate of
Incorporation shall require the unanimous approval of the stockholders.
D. The number of directors of the Company shall be as from time to time
fixed by, or in the manner provided in, the Bylaws of the Company. Election of
directors need not be by written ballot unless the Bylaws so provide.
E. The Board of Directors may by resolution designate one or more
committees and delegate certain responsibilities, powers and the authority to
act to such committees, except to the extent such delegation is prohibited by
Section 141 of the DGCL, and only as provided for more specifically in the
Bylaws of the Company.
F. No director shall be personally liable to the Company or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct of a knowing violation of law, (iii)
pursuant to Section 174 of the DGCL, or (iv) for any transaction from which the
director derived an improper personal benefit. Any repeal or modification of
this Article FIFTH by the stockholders of the Company shall not adversely affect
any right or protection of a director of the Company existing at the time of
such repeal or modification with respect to acts or omissions occurring prior to
such repeal or modification.
G. In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be exercised or done by
the Company, subject, nevertheless, to the provisions of the DGCL, this Restated
Certificate of Incorporation and any Bylaws adopted by the stockholders;
provided, however, that no Bylaws hereafter adopted by the stockholders shall
- -------- -------
invalidate any prior act of the directors which would have been valid if such
Bylaws had not been adopted.
SIXTH: The Company shall, to the fullest extent permitted by the DGCL, as
-----
the same may be amended and supplemented, indemnify any and all directors whom
it shall have power to indemnify under said law from and against any and all of
the expenses, liabilities, or other matters
19
<PAGE>
referred to in or covered by said law, and the indemnification provided for
herein shall not be deemed exclusive of any other rights of which those
indemnified may be entitled under any Bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director and shall inure to the
benefit of the heirs, executors, and administrators of such person. The Company
shall, in its sole discretion, have the power to indemnify any and all officers
of the Company and its subsidiaries to the fullest extent permitted by the DGCL,
as the same may be amended and supplemented.
Any repeal or modification of the foregoing paragraph shall not adversely
affect any right or protection of a director or officer of the Company existing
hereunder with respect to any act or omission occurring prior to such repeal or
modification.
SEVENTH: Meetings of stockholders may be held within or without the State
-------
of Delaware, as the Bylaws may provide. The books of the Company may be kept
(subject to any provision contained in the DGCL) outside the State of Delaware
at such place or places as may be designated from time to time by the Board of
Directors or in the Bylaws of the Company.
EIGHTH: The Company reserves the right to amend, alter, change or repeal
------
any provision contained in this Restated Certificate of Incorporation, in the
manner now or hereafter prescribed in this Restated Certificate of
Incorporation, the Bylaws of the Company or the laws of the State of Delaware,
and all rights herein conferred upon stockholders are granted subject to such
reservation.
20
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Restated Certificate of
Incorporation to be duly executed this 15th day of October, 1997.
FOX KIDS WORLDWIDE, INC.
By /s/ William Josey
------------------
William Josey
Secretary
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
FOX KIDS WORLDWIDE, INC.
A DELAWARE CORPORATION
<PAGE>
<TABLE>
<S> <C>
ARTICLE I - CORPORATE OFFICES.
Section 1. Registered Office....................................... 1
Section 2. Principal Office........................................ 1
Section 3. Other Offices........................................... 1
ARTICLE II - STOCKHOLDERS MEETINGS.
Section 1. Place of Meeting........................................ 1
Section 2. Annual Meetings......................................... 1
Section 3. Special Meetings........................................ 1
Section 4. Notice of Meetings...................................... 2
Section 5. Quorum.................................................. 3
Section 6. Adjourned Meeting....................................... 3
Section 7. Voting.................................................. 3
Section 8. Proxies................................................. 4
Section 9. Stockholder List........................................ 4
Section 10. Consent of Stockholders in Lieu of Meeting.............. 4
Section 11. Inspectors of Election.................................. 5
Section 12. Record Date............................................. 5
Section 13. Procedures for Meetings................................. 6
Section 14. Opening and Closing of Polls............................ 6
ARTICLE III - BOARD OF DIRECTORS.
Section 1. Powers.................................................. 6
Section 2. Number and Qualification................................ 7
Section 3. Election and Term of Office............................. 7
Section 4. Vacancies............................................... 7
Section 5. Place of Meeting........................................ 8
Section 6. Regular Meetings........................................ 8
Section 7. Special Meetings........................................ 9
Section 8. Meetings by Communication Equipment..................... 9
Section 9. Quorum and Manner of Acting............................. 9
Section 10. Validation of Defectively Called or Noticed Meetings.... 9
Section 11. Action Without Meeting.................................. 9
Section 12. Compensation of Directors...............................10
Section 13. Committees..............................................10
ARTICLE IV - OFFICERS.
Section 1. Officers................................................10
Section 2. Election of Officers....................................10
Section 3. Subordinate Officers....................................10
Section 4. Removal and Resignation of Officers.....................11
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 5. Vacancies in Offices....................................11
Section 6. Chairman of the Board...................................11
Section 7. Chief Executive Officer.................................11
Section 8. Office of the President.................................11
Section 9. Vice Presidents.........................................12
Section 10. Secretary...............................................12
Section 11. Chief Financial Officer.................................12
ARTICLE V - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND OTHER AGENTS.
Section 1. Agents, Proceedings and Expenses........................12
Section 2. Actions Other Than By The Company.......................13
Section 3. Actions by the Company..................................13
Section 4. Successful Defense by Agent.............................14
Section 5. Required Approval.......................................14
Section 6. Advance of Expenses.....................................14
Section 7. Contractual Rights......................................14
Section 8. Limitations.............................................14
Section 9. Insurance...............................................14
Section 10. Constituent Corporations................................15
Section 11. Definitions.............................................15
ARTICLE VI - MISCELLANEOUS.
Section 1. Inspection of Books and Records by Stockholders.........15
Section 2. Inspection of Books and Records by Directors............16
Section 3. Checks, Drafts, Evidences of Indebtedness...............16
Section 4. Corporate Contracts and Instruments; How Executed.......16
Section 5. Certificates for Shares.................................16
Section 6. Transfer of Shares......................................16
Section 7. Lost, Stolen or Destroyed Certificates..................17
Section 8. Representation of Shares of Other Companies.............17
Section 9. Construction and Definitions............................17
Section 10. Amendments..............................................17
Section 11. Conformance to the Law..................................17
Section 12. Seal....................................................17
Section 13. Fiscal Year.............................................17
Section 14. Dividends; Surplus......................................17
</TABLE>
ii
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
FOX KIDS WORLDWIDE, INC.
A DELAWARE CORPORATION
ARTICLE I
CORPORATE OFFICES
-----------------
Section 1. Registered Office. The registered office of Fox Kids
-----------------
Worldwide, Inc. (the "Company") in the State of Delaware is hereby located at 9
East Loockerman Street, City of Dover, County of Kent, 19901.
Section 2. Principal Office. The principal office of the Company is
----------------
hereby located at 10960 Wilshire Boulevard, Los Angeles, California 90024.
The Board of Directors (herein referred to as the "Board") is hereby granted the
full power and authority, by a resolution of a majority of the directors, to
change the principal office from one location to another. Any such change shall
be noted in these Bylaws opposite this section, and this section may be amended
to state the new location.
Section 3. Other Offices. The Company may establish any additional
-------------
offices, at any place or places, as the Board may designate, or as the business
of the Company shall require.
ARTICLE II
STOCKHOLDERS MEETINGS
---------------------
Section 1. Place of Meeting. Meetings of the Stockholders of the
----------------
Company shall be held at the principal office or at such place, within or
without the State of Delaware, as may from time to time be designated for that
purpose either by the Board or by the written consent of all persons entitled to
vote thereat and not present at the meeting, given either before or after the
meeting and filed with the Secretary of the Company.
Section 2. Annual Meetings. The annual meeting of the Stockholders
---------------
shall be held on such date and at such time designated, from time to time, by
resolution of the Board.
Section 3. Special Meetings. Special meetings of the Stockholders for
----------------
the purpose of taking any action which the Stockholders are permitted to take
under the General Corporation Law of the State of Delaware (herein, as the same
may from time to time be amended, referred to as
<PAGE>
the "DGCL") may be called at any time by the Chairman of the Board of Directors,
either President, or by order of the Board of Directors.
Section 4. Notice of Meetings. Except as otherwise provided by
------------------
statute, written or printed notice of each meeting of the Stockholders of the
Company, whether annual or special, shall be given not less than ten nor more
than sixty days prior to the date upon which the meeting is to be held to each
Stockholder entitled to vote at such meeting by leaving such notice with him
personally at, or by transmitting such notice with confirmed delivery (including
telex, telegraph, cable or other form of recorded communication, provided that
delivery of such notice in written form is confirmed in a writing) to, his
residence or usual place of business. If mailed, such notice shall be deemed
delivered when deposited in the United States mail in a sealed envelope
addressed to the Stockholder at his address as it appears on the stock records
of the Company, with postage thereon prepaid. Such notice shall state the
place, date and hour of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called. If a meeting is adjourned
to another time or place, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken and, at the adjourned meeting, such business may be transacted as might
properly have been transacted at the original meeting. If the adjournment is
for more than 30 days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each Stockholder of record entitled to vote at the meeting.
Notice of a Stockholders' meeting or adjournment thereof is waived upon the
occurrence of the following:
(a) A Stockholders' meeting is adjourned and a time and place for
readjournment is announced at the meeting at which the adjournment is taken, and
such date of readjustment is no more than 30 days from the date of adjournment.
(b) Receipt by the Company of a written notice of waiver, signed by the
person entitled to notice before or after the time stated therein.
(c) Attendance by the person entitled to notice and failure of such person
to object to the transaction of any business because the meeting is not lawfully
called or convened.
Whenever notice is required to be given under any statute or the
Certificate of Incorporation or these Bylaws to any Stockholder to whom (a)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings or (b) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve month period, have been mailed addressed to such
person at his address as shown on the records of the Company and have been
returned undeliverable, the giving of notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such
2
<PAGE>
person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the Company a written notice setting
forth his then current address, the requirement that notice be given to such
person shall be reinstated. In the event that the action taken by the Company is
such as to require the filing of a certificate under any of the other sections
of the DGCL, the certificate need not state that notice was not given to persons
to whom notice was not required to be given pursuant to this Section 4.
Section 5. Quorum. On all questions, the presence of the holders of a
------
majority of the shares entitled to vote, in person or by proxy, shall constitute
a quorum for the transaction of busi ness at any meeting of the Stockholders.
On all questions, the Stockholders present at a duly called or held meeting at
which a quorum is present may continue to do business until adjournment,
notwithstanding the withdrawal of enough Stockholders to leave less than a
quorum, if any action taken (other than adjournment) is approved by at least a
majority of the shares required to constitute a quorum.
Section 6. Adjourned Meeting. Any Stockholders' meeting, annual or
-----------------
special, whether or not a quorum is present, may be adjourned by vote of a
majority of the shares present, either in person or by proxy, but in the absence
of a quorum no other business may be transacted at such meeting, except as
expressly provided in Section 5 of this Article.
Section 7. Voting.
------
(a) The Stockholders entitled to notice of any meeting or to vote at such
meeting shall only be persons whose names stand on the stock records of the
Company on the record date determined in accordance with the provisions of
Section 12 of this Article; provided, however, that if no such record date shall
-------- -------
be fixed by the Board, only persons in whose names shares stand on the stock
records of the Company at the close of business on the business day next
preceding the day on which notice of the meeting is given or if such notice is
waived, at the close of business on the business day next preceding the day on
which the meeting of Stockholders is held, shall be entitled to vote at such
meeting, and such day shall be the record date for such meeting.
(b) Voting shall in all cases be subject to the provisions of Sections 217
and 218 of the DGCL (relating to voting of shares held by fiduciaries, or
pledges, held in joint ownership, and voting of shares by voting trusts or in
accordance with other voting agreements).
(c) At each meeting of the Stockholders of the Company, holders of a
majority of the voting power of the Company entitled to vote thereat, present
either in person or by proxy, shall constitute a quorum for the transaction of
business. In the absence of a quorum, the Stockholders of the Company present
in person or by proxy and entitled to vote at the meeting may, by majority vote,
or, in the absence of all Stockholders, any officer entitled to preside or act
as Secretary at such meeting, shall have the power to adjourn the meeting from
time to time until Stockholders holding the requisite amount of stock shall be
present in person or by proxy. At any such
3
<PAGE>
adjourned meeting at which a quorum may be present, any business may be
transacted which might have been transacted at the meeting as originally called.
(d) Each Stockholder of the Company entitled to vote on such questions
shall be entitled to vote in person or by proxy one vote for each share of Class
A Common Stock and ten votes for each share of Class B Common Stock of the
Company held by such Stockholder. Unless otherwise provided in the Certificate
of Incorporation or by statute, a casting in the affirmative of a majority of
the votes represented and voting at a duly held meeting at which a quorum is
present shall be the act of the Stockholders. Unless demanded by a Stockholder
present in person or by proxy at any meeting and entitled to vote thereat, the
vote on any question need not be by ballot. Upon demand for a vote by ballot
upon any question by any Stockholder present in person or by proxy at any
meeting and entitled to vote thereat, such vote shall be taken by ballot. On
any vote taken by ballot, each ballot shall be signed by the Stockholder voting,
or by his lawful proxy, and shall state the number and kind of shares voted.
Section 8. Proxies. Each Stockholder entitled to vote at a meeting of
-------
Stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy, but no such proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period. Any such proxy shall be
delivered to the secretary of such meeting, at or prior to the time designated
in the order of business for so delivering such proxies. A duly elected proxy
shall be irrevocable if it states that it is irrevocable and if, and only so
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the Company generally.
Section 9. Stockholder List. The officer who has charge of the stock
----------------
ledger of the Company shall prepare and make, at least ten days before every
meeting of Stockholders, a complete list of the Stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
Stockholder and the number of shares registered in the name of each Stockholder.
Such list shall be open to the examination of any Stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list also shall be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any Stockholder who is
present.
Section 10. Consent of Stockholders in Lieu of Meeting. Any action
------------------------------------------
required to be taken, or that may be taken, at any annual or special meeting of
the Stockholders of the Company, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action to
be taken, shall have been signed by the holders of outstanding stock, eligible
to vote on such action, having not less than the minimum number of votes of
each class
4
<PAGE>
of stock that would be necessary to authorize or take such action at a meeting
at which all shares of each class of stock entitled to vote thereon were present
and voted.
The Secretary shall give prompt notice of the taking of any corporate
action without a meeting by less than unanimous written consent to those
Stockholders who have not consented in writing.
Section 11. Inspectors of Election. In advance of any meeting of the
----------------------
Stockholders, the Board shall appoint at least one person, other than nominees
for office as inspectors of election to act at such meeting or any adjournment
thereof. The number of such inspectors of election shall be one or three. In
case any person appointed as inspector fails to appear or refuses to act, the
vacancy shall be filled by appointment by the Board in advance of the meeting,
or at the meeting by the chairman of the meeting. If there are three inspectors
of election, the decision, act or certificate of a majority is effective in all
respects as the decision, act or certificate of all.
The duties of each such inspector shall include: determining the number of
shares outstanding and voting power of each; determining the shares represented
at the meeting; determining the existence of a quorum; determining the
authenticity, validity and effect of proxies; receiving votes, ballots or
consents; hearing and determining all challenges and questions in any way
arising in connection with the right to vote; retaining for a reasonable period
the disposition of any challenges made to the inspector's determinations;
counting and tabulating all votes; determining when the polls shall close;
determining the result of any election; certifying the determination of the
number of shares represented at the meeting, and the count of all votes and
ballots; certifying any information considered in determining the validity and
counting of proxies and ballots if that information is used for the purpose of
reconciling proxies and ballots submitted by or on behalf of banks, brokers,
their nominees or similar persons which represent more votes than the
Stockholder holds of record; and performing such acts as may be proper to
conduct the election or vote with fairness to all Stockholders.
Section 12. Record Date. In order that the Company may determine the
-----------
Stockholders entitled to notice of or to vote at any meeting of Stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board may fix, in advance, a record date, which shall
not be more than sixty nor less than ten days before the date of such meeting,
nor more than sixty days prior to any other action.
If no record date is fixed:
(a) The record date for determining Stockholders entitled to notice of or
to vote at a meeting of Stockholders shall be at the close of business on the
day next preceding the day on
5
<PAGE>
which notice is given, or, if notice is waived, at the close of business on the
day next preceding the day on which the meeting is held;
(b) The record date for determining Stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the Board is necessary, shall be the day on which the first written consent
is expressed;
(c) The record date for determining Stockholders for any other purpose
shall be at the close of business on the day on which the Board adopts the
resolution relating thereto.
A determination of Stockholders of record entitled to notice of or to vote
at a meeting of Stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board may fix a new record date for the adjourned
- -------- -------
meeting.
Section 13. Procedures for Meetings. All meetings of Stockholders shall
-----------------------
be conducted according to such rules and procedures as the Board of Directors
may establish by resolution from time to time as being in the best interests of
the Stockholders and as may be deemed appropriate for insuring that such
meetings are conducted in a fair and orderly manner and in accordance with the
Certificate of Incorporation and these Bylaws.
Section 14. Opening and Closing of Polls. An announcement shall be made
----------------------------
at each meeting of the Stockholders by the chairman of the meeting of the date
and time of the opening and closing of polls for each matter upon which the
Stockholders will vote at the meeting. No ballot, proxies or votes, nor any
revocations thereof or changes thereto, shall be accepted by the inspectors
after the closing of the polls unless the Delaware Court of Chancery upon
application by a Stockholder shall determine otherwise.
ARTICLE III
BOARD OF DIRECTORS
------------------
Section 1. Powers. The business and affairs of the Company shall be
------
managed by, or under the direction of the Board, except as may be otherwise
provided by the DGCL or in the Certificate of Incorporation or these Bylaws.
Without prejudice to such powers, but subject to the same limitation, it is
hereby expressly declared that the directors shall have the following powers in
addition to other powers enumerated in these Bylaws:
(a) To select and remove all officers, agents and employees of the Company;
prescribe any powers and duties for them that are consistent with law, with the
Certificate of Incorporation, and with these Bylaws; fix their compensation; and
require from them security for faithful service;
6
<PAGE>
(b) To conduct, manage and control the affairs and business of the Company,
and to make rules and regulations therefor consistent with law, with the
Certificate of Incorporation and with these Bylaws;
(c) To change the offices of the Company from one location to another; to
fix and locate from time to time one or more other offices of the Company within
or without the State of Delaware; to cause the Company to be qualified to do
business and to conduct business in any other state, territory, dependency or
country; and to designate any place within or without the State of Delaware for
the holding of any Stockholders meeting or meetings, including annual meetings;
(d) To adopt, make and use a corporate seal; to prescribe the forms and
certificates of stock; and to alter the form of the seal and certificates;
(e) To authorize the issuance of shares of stock of the Company from time
to time, upon such terms and for such consideration as may be lawful;
(f) To borrow money and incur indebtedness for the purposes of the Company,
and to cause to be executed and delivered therefor, in the corporate name,
promissory notes, bonds, debentures, deeds of trust, mortgages, pledges,
hypothecations, and other evidences of debt and securities therefor.
Section 2. Number and Qualification. The number of directors of the
------------------------
Company shall be fixed at six (6). A change in the number of directors shall
require the vote of 75% of the Board of Directors and the unanimous approval of
the Stockholders. Directors need not be Stockholders of the Company unless
required by the Certificate of Incorporation.
Section 3. Election and Term of Office. Members of the initial Board
---------------------------
shall hold office until the first annual meeting of Stockholders and until their
successors have been elected and qualified. The directors of the Company shall
be elected at the annual meeting of the Stockholders, but if such annual meeting
is not held or the directors are not elected thereat, the directors may be
elected at a special meeting held for that purpose. Each director shall hold
office until the next annual meeting and until a successor is elected and
qualified.
Section 4. Vacancies.
---------
(a) Unless otherwise provided in the Certificate of Incorporation,
vacancies and newly created directorships resulting from any increase in the
authorized number of directors elected by all of the Stockholders having the
right to vote as a single class may be filled by a majority of the directors
then in office, although less than a quorum, or by a sole remaining director.
7
<PAGE>
(b) If at any time, by reason of death or resignation or other cause, the
Company should have no directors in office, then any officer or any Stockholder
or an executor, administrator, trustee or guardian of a Stockholder, or other
fiduciary entrusted with like responsibility for the person or estate of a
Stockholder, may call a special meeting of Stockholders in accordance with the
provisions of the Certificate of Incorporation and the Bylaws or may apply to
the Delaware Court of Chancery for a decree summarily ordering an election as
provided in Section 211 of the DGCL.
(c) If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole Board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any Stockholder or
Stockholders holding at least 10 percent of the total number of shares at the
time outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by Section 211 of the DGCL.
(d) Unless otherwise provided in the Certificate of Incorporation, when one
or more directors shall resign from the Board, effective at a future date, a
majority of the directors then in office, including those who have so resigned,
shall have the power to fill such vacancy or vacancies, the vote thereon to take
effect when such resignation or resignations shall become effec tive, and each
director so chosen shall hold office as provided in these Bylaws.
(e) Any director or the entire Board may be removed, with or without cause,
by the holders of 75% of the shares then entitled to vote at an election of
directors.
(f) Any director may resign effective upon giving written notice to the
Chairman of the Board, either President, the Secretary or the Board, unless the
notice specifies a later date for the effectiveness of such resignation.
Section 5. Place of Meeting. Unless otherwise provided in the
----------------
Certificate of Incorporation, or by unanimous written consent of all acting
directors, meetings, both regular and special, of the Board shall be held at the
Company's principal executive offices within the State of California or at such
other place or places within or without the State of Delaware, as the Board may
from time to time determine.
Section 6. Regular Meetings. Immediately following each annual meeting
----------------
of the Stockholders, the Board shall hold a regular meeting at the same place at
which such Stockholders' meeting is held, or any other place as may be fixed
from time to by the Board. Notice of such meeting need not be given.
8
<PAGE>
Other regular meetings of the Board shall be held without call at such time
and place as the Board may from time to time by resolution determine. If any
day fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting which would otherwise be held on that
day shall be held at the same hour on the next succeeding business day not a
legal holiday. Notice of a regular meeting need not be given.
Section 7. Special Meetings. Except as otherwise provided in the
----------------
Certificate of Incorporation, special meetings of the Board for any purpose or
purposes may be called at any time by the Chairman of the Board, either
President, the Secretary or by any three directors.
Written notice of the time and place of special meetings shall be delivered
personally to each director or communicated to each director by telephone or
telegraph or telex or cable or mail or other form of recorded communication,
charges prepaid, addressed to each director at that director's address as it is
shown on the records of the Company or, if it is not so shown on such records or
is not readily ascertainable, at that director's residence or usual place of
business. In case such notice is mailed, it shall be deposited in the United
States mail at least seven days prior to the time of the holding of the meeting.
In case such notice is delivered personally or by other form of written
communication, it shall be delivered at least 48 hours before the time of the
holding of the meeting. The notice shall state the time of the meeting, but
need not specify the place of the meeting if the meeting is to be held at the
principal executive office of the Company. The notice need not state the
purpose of the meeting unless expressly provided otherwise by statute.
Section 8. Meetings by Communication Equipment. Members of the Board,
-----------------------------------
or any committee designated by the Board, may participate in a meeting of the
Board or committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other. Participation in a meeting pursuant to this section shall
constitute presence in person at such meeting.
Section 9. Quorum and Manner of Acting. The presence of a majority of
---------------------------
the total number of directors shall constitute a quorum for the transaction of
business, and the act of 75% of all directors shall be the act of the Board.
In the absence of a quorum, a majority of the directors present may adjourn any
meeting from time to time until a quorum is present. Notice of an adjourned
meeting need not be given.
Section 10. Validation of Defectively Called or Noticed Meetings. The
----------------------------------------------------
transactions of any meeting of the Board, however called and noticed or wherever
held, shall be as valid as though made or performed at a meeting duly held after
regular call and notice, if, either before or after the meeting, each of the
directors not present or who, though present, has prior to the meeting or at its
commencement protested the lack of proper notice to such director, signs a
written waiver of notice or a consent to holding such meeting or approval of the
minutes thereof.
9
<PAGE>
All such waivers, consents or approvals shall be filed with the corporate
records or made a part of the minutes of the meeting.
Section 11. Action Without Meeting. Any action required or permitted to
----------------------
be taken at any meeting of the Board, or of any committee thereof, may be taken
without a meeting if all members of the Board or committee, as the case may be,
consent thereto in writing and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
Section 12. Compensation of Directors. Directors and members of
-------------------------
committees may receive such compensation, if any, for their services, and such
reimbursement for expenses incurred by them, as may be fixed or determined by
resolution of the Board.
Section 13. Committees. The Board shall have only an Audit Committee
----------
and a Compensation Committee. Each committee will consist of four directors of
the Company. All actions by such committees will require the affirmative vote
of three of its four members. The Board may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. No committee shall have or exercise all
the powers and authority of the Board in the management of the business and
affairs of the Company. Any director may be removed from a committee with or
without cause by the affirmative vote of 75% of the entire Board.
ARTICLE IV
OFFICERS
--------
Section 1. Officers. The officers of the Company shall be a Chairman,
--------
a Chief Executive Officer, two Presidents (who collectively operate the Office
of the President), a Chief Financial Officer and a Secretary. The Company may
also have, at the discretion of the Board, one or more Vice Presidents, one or
more Assistant Secretaries, one or more Assistant Treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article. Any number of offices may be held by the same person.
Section 2. Election of Officers. The officers of the Company, except
--------------------
such officers as may be appointed in accordance with the provisions of Section 3
or Section 5 of this Article, shall be chosen annually by the Board, and each
shall serve at the pleasure of the Board, subject to the rights, if any, of an
officer under any contract of employment or other contractual arrangement with
the Company or its affiliates which prohibits his removal by the Board.
Section 3. Subordinate Officers. The Board may appoint, and may
--------------------
empower the Chief Executive Officer to appoint, such other officers as the
business of the Company may require, each of whom shall hold office for such
period, have such authority and perform such duties as are
10
<PAGE>
provided in these Bylaws or as the Board or Chief Executive Officer may from
time to time determine.
Section 4. Removal and Resignation of Officers. Without prejudice to
-----------------------------------
the rights, if any, of an officer under any contract of employment or other
contractual arrangement with the Company or its affiliates which prohibits his
removal by the Board, any officer may be removed, either with or without cause,
by the Board, at any regular or special meeting of the Board, or by any officer
upon whom such power of removal may be conferred by the Board.
Any officer may resign at any time by giving written notice to the Company.
Any resignation shall take effect at the date of the receipt of that notice or
at any later time specified in that notice; the acceptance of the resignation
shall not be necessary to make it effective. Any resignation is without
prejudice to the rights, if any, of the Company under any contract to which the
officer is a party.
Section 5. Vacancies in Offices. A vacancy in any office because of
--------------------
death, resignation, removal, disqualification or any other cause shall be filled
in the manner prescribed in these Bylaws for regular election or appointment to
such office.
Section 6. Chairman of the Board. The Chairman of the Board, if such
---------------------
an officer be elected, shall, if present, preside at all meetings of the Board
and exercise and perform such other powers and duties as may be from time to
time assigned to him by the Board.
Section 7. Chief Executive Officer. Subject to such supervisory
-----------------------
powers, if any, as may be given by the Board to the Chairman of the Board, the
Chief Executive Officer, if such an officer be elected, shall, subject to the
control of the Board and the Chairman, have general supervision, direction and
control of the business and the officers of the Company. The Chief Executive
Officer shall preside at all meetings of the Stockholders and, in the absence of
the Chairman of the Board, or if there be none, at all meetings of the Board.
The Chief Executive Officer shall exercise and perform such other powers and
duties as may be from time to time assigned to him by the Board.
Section 8. Office of the President. Subject to such supervisory
-----------------------
powers, if any, as may be given by the Board to the Chairman of the Board and
the Chief Executive Officer, if there be such officers, the Office of the
President shall, subject to the control of the Board, have general supervision,
direction, and control of the business and the officers of the Company (other
than the Chairman and Chief Executive Officer). The Office of the President may
consist of one or two Presidents of equal authority to act on behalf of the
Company. At least one President shall preside at all meetings of the
Stockholders in the absence of the Chairman and the Chief Executive Officer,
and, in the absence of the Chairman and the Chief Executive Officer, at all
meetings of the Board. Each President shall have the general powers and duties
of management usually vested
11
<PAGE>
in the office of the president and general manager of a corporation, and shall
have such other powers and duties as may be prescribed by the Board and the
Chief Executive Officer.
Section 9. Vice Presidents. In the absence or disability of the
---------------
Chairman, the Chief Executive Officer and both Presidents, the Vice Presidents,
if any, in order of their rank as fixed by the Board, or, if not ranked, the
Vice President designated by the Board shall perform all the duties of such
officer, and when so acting shall have all the powers of, and be subject to all
the restrictions upon, such offices. The Vice Presidents shall have such other
powers and perform such other duties as from time to time may be prescribed for
them respectively by the Board, the Chief Executive Officer or the Office of the
President.
Section 10. Secretary. The Secretary shall keep, or cause to be kept,
---------
at the principal executive office or such other place as the Board may direct, a
book of minutes of all meetings and actions of directors, committees of
directors, and Stockholders, with the time and place of holding, whether regular
or special, and, if special, how authorized, the notice given, the names of
those present at directors' meetings or committee meetings, the number of shares
present or represented at Stockholders' meetings, and the proceedings.
The Secretary shall give, or cause to be given, notice of all meetings of
the Stockholders and of the Board required by the Bylaws or by law to be given,
and he shall keep the seal of the Company, if one be adopted, in safe custody,
and shall have such other powers and perform such other duties as may be
prescribed by the Board.
Section 11. Chief Financial Officer. The Chief Financial Officer shall
-----------------------
keep and maintain, or cause to be kept and maintained, adequate and correct
books and records of accounts of the properties and business transactions of the
Company, including accounts of its assets, liabilities, receipts, disbursements,
gains, losses, capital, retained earnings and shares, and shall send or cause to
be sent to the Stockholders of the Company such financial statements and reports
as are by law or these Bylaws required to be sent to them. The books of account
shall at all reasonable times be open to inspection by any director.
The Chief Financial Officer shall deposit all monies and other valuables in
the name or to the credit of the Company with such depositories as may be
designated by the Board. The Chief Financial Officer shall disburse the funds
of the Company as may be ordered by the Board, shall render to the Presidents
and directors, whenever they request it, an account of all transactions
undertaken as Chief Financial Officer and of the financial condition of the
Company, and shall have such other powers and perform such other duties as may
be prescribed by the Board.
ARTICLE V
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND OTHER AGENTS
------------------------------------
12
<PAGE>
Section 1. Agents, Proceedings and Expenses. For the purposes of this
--------------------------------
Article, "agent" means any person who is or was a director, officer, employee or
other agent of the corporation, or is or was a director, officer, employee or
other agent of the corporation as a director, officer, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, or was a director, officer, employee or agent of a foreign or
domestic corporation which was a predecessor corporation of the corporation or
of another enter prise at the request of such predecessor corporation;
"proceeding" means any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative, or investigative; and "expenses"
includes, without limitation, attorneys' fees and any expenses of establishing a
right to indemnification under Section 2 or Section 3 of this Article.
Section 2. Actions Other Than By The Company. The Company shall have
---------------------------------
the power to indemnify any person who was or is a party or is threatened to be
made a party to any threat ened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Company) by reason of the fact that he is or
was an agent of the Company, or is or was serving at the request of the Company
as a director, officer, employee or agent of another Company, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceed ing if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 3. Actions by the Company. The Company shall have power to
----------------------
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Company to procure a judgment in its favor by reason of the fact that he is or
was an agent of the Company, or is or was serving at the request of the Company
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the Company
and except that no indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the Company unless
and only to the extent that the Delaware Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of
13
<PAGE>
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Delaware Court of Chancery or such other court shall deem
proper.
Section 4. Successful Defense by Agent. To the extent that a director,
---------------------------
officer, employee or agent of the Company has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Sections 2
and 3 of this Article, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Section 5. Required Approval. Any indemnification under Sections 1 and
-----------------
2 of this Article (unless ordered by a court) shall be made by the Company only
as authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in Sections 2 and 3.
Such determination shall be made (a) by the Board by a 75% vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding,
or (b) if such disin terested directors so direct, by independent legal counsel
in a written opinion, or (c) by the affirmative vote of a majority of
Stockholders.
Section 6. Advance of Expenses. Expenses incurred in defending a civil
-------------------
or criminal action, suit or proceeding may be paid by the Company in advance of
the final disposition of such action, suit or proceeding as authorized by the
Board in the specific case upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the Company as
authorized in this Article. Such expenses incurred by other employees and agents
may be so paid upon such terms and conditions, if any, as the Board deems
appropriate.
Section 7. Contractual Rights. The indemnification provided by this
------------------
Article shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any agreement, vote of Stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
Section 8. Limitations. No indemnification or advance shall be made
-----------
under this Article, except as provided in Section 4 of this Article, in any
circumstance where it appears:
(a) That it would be inconsistent with a provision of the Certificate of
Incorporation, a resolution of the Stockholders or an agreement in effect at the
time of accrual of the alleged cause of action asserted in the proceeding in
which the expenses were incurred or other amounts were paid, which prohibits or
otherwise limits indemnification; or
14
<PAGE>
(b) That it would be inconsistent with any condition expressly imposed by a
court in approving a settlement.
Section 9. Insurance. The Company shall have the power to purchase and
---------
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Company, or is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Company would have the power to indemnify
him against such liability under the provisions of this Article.
Section 10. Constituent Corporations. For purposes of this Article,
------------------------
references to "the Company" shall include, in addition to the Company, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents, so that any person who is or was a director, officer, employee or agent
of such constit uent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enter prise, shall
stand in the same position under the provisions of this Article with respect to
the resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
Section 11. Definitions. For purposes of this Article, references to
-----------
"other enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee or agent of the Company
which imposes duties on, or involves services by, such director, officer,
employee, or agent with respect to an employee benefit plan, its participants,
or beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Company" as referred to in this Article.
ARTICLE VI
MISCELLANEOUS
-------------
Section 1. Inspection of Books and Records by Stockholders. Any
-----------------------------------------------
Stockholder of record, in person or by attorney or other agent, shall, upon
written demand under oath stating the purpose thereof, have the right during the
usual hours for business to inspect for any proper purpose the Company's stock
ledger, a list of its Stockholders, and its other books and records, and to make
copies or extracts therefrom. A proper purpose shall mean a purpose reasonably
related to such person's interest as a Stockholder. In every instance where an
attorney or other
15
<PAGE>
agent shall be the person who seeks the right to inspection, the demand under
oath shall be accompanied by a power of attorney or such other writing which
authorizes the attorney or other agent to so act on behalf of the Stockholder.
The demand under oath shall be directed to the Company at its registered office
in the State of Delaware or at its principal place of business.
Section 2. Inspection of Books and Records by Directors. Any director
--------------------------------------------
shall have the right to examine the Company's stock ledger, a list of its
Stockholders and its other books and records for a purpose reasonably related to
his position as a director. Such right to examine the books and records of the
Company shall include the right to make copies and extracts therefrom.
Section 3. Checks, Drafts, Evidences of Indebtedness. All checks,
-----------------------------------------
drafts or other orders for payment of money, notes or other evidences of
indebtedness, issued in the name of or payable to the Company, shall be signed
or endorsed by such person or persons and in such manner as, from time to time,
shall be determined by resolution of the Board.
Section 4. Corporate Contracts and Instruments; How Executed. The
-------------------------------------------------
Board, except as otherwise provided in these Bylaws, may authorize any officer
or officers, agent or agents, to enter into any contract or execute any
instrument in the name of and on behalf of the Company, and this authority may
be general or confined to specific instances; and, unless so authorized or
ratified by the Board or within the agency power of an officer, no officer,
agent, or employee shall have any power or authority to bind the Company by any
contract or engagement or to pledge its credit or to render it liable for any
purpose or for any amount.
Section 5. Certificates for Shares. Every holder of stock in the
-----------------------
Company shall be entitled to have a certificate signed by, or in the name of the
Company by the Chairman, Chief Executive Officer or either President, and by the
Chief Financial Officer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the Company representing the number of shares owned by
him in the Company. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Company with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
Section 6. Transfer of Shares. Transfers of shares of the capital
------------------
stock of the Company shall be made only on the books of the Company by the
holder thereof, or by his attorney thereunto authorized by a power of attorney
duly executed and filed with the Secretary of the Company or a transfer agent of
the Company, if any, and on surrender of the certificate or certificates for
such shares properly endorsed. A person in whose name shares of stock appear on
the books of the Company shall be deemed the owner thereof as regards the
Company, and upon any transfer of shares of stock the person or persons into
whose name or names such shares shall have been transferred, shall enjoy and
bear all rights, privileges and obligations of holders of stock of the Company
as against the Company or any other person or persons. The term
16
<PAGE>
"person" or "persons" wherever used herein shall be deemed to include any
partnership, corpora tion, association or other entity. Whenever any transfer of
shares shall be made for collateral security, and not absolutely, such fact, if
known to the Secretary or to such transfer agent, shall be so expressed in the
entry of transfer.
Section 7. Lost, Stolen or Destroyed Certificates. The Company may
--------------------------------------
issue a new certificate of stock in the place of any certificate theretofore
issued by it, alleged to have been lost, stolen or destroyed, and the Company
may require the owner of the lost, stolen or destroyed certificate, or his legal
representative, to give the Company a bond sufficient to indemnify it against
any claim that may be made against it on account of the alleged loss, theft or
destruction of any such certificate or the issuance of such new certificate.
Section 8. Representation of Shares of Other Companies. The Chairman
-------------------------------------------
of the Board, Chief Executive Officer, each President or any person designated
by any of such officers, is authorized, in the absence of authorization by the
Board, to vote on behalf of the Company any and all shares of any other
corporation or corporations, foreign or domestic, for which the Company has the
right to vote. The authority granted to these officers to vote or represent on
behalf of the Company any and all shares held by the Company in any other
corporation or corporations may be exercised by any of these officers in person
or by any person authorized to do so by proxy duly executed by these officers.
Section 9. Construction and Definitions. Unless the context requires
----------------------------
otherwise, the general provisions, rules of construction, and definitions in the
DGCL shall govern the construction of these Bylaws. Without limiting the
generality of this provision, the singular number includes the plural and the
plural number includes the singular.
Section 10. Amendments. Unless otherwise provided in the Certificate of
----------
Incorporation, the adoption, amendment or repeal of any Bylaws of the Company
shall require the unanimous approval of the Stockholders.
Section 11. Conformance to the Law. In the event that it is determined
----------------------
that these Bylaws, as now written or as amended, conflict with the DGCL, or any
other applicable law, as now enforced or as amended, these Bylaws shall be
deemed amended, without action of the Board or the Stockholders, to conform with
such law. Such amendment to be so interpreted as to bring these Bylaws within
minimum compliance. For purposes of this section "amendment" shall include a
repeal of, or a change in interpretation of, the relevant compendium.
Section 12. Seal. The Board of Directors shall provide a corporate
----
seal, which shall be in the form of a circle and shall have inscribed thereon
the name of the Company, the year of its incorporation and the words "Corporate
Seal, Delaware." Said seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.
17
<PAGE>
Section 13. Fiscal Year. The fiscal year of the Company shall begin on
-----------
the first day of July of each year.
Section 14. Dividends; Surplus. Subject to the provisions of the
------------------
Certificate of Incorporation and any restrictions imposed by statute, the Board
may declare dividends out of the net assets of the Company in excess of its
capital or, in case there shall be no such excess, out of the net profits of the
Company for the fiscal year then current and/or the preceding fiscal year, or
out of any funds at the time legally available for the declaration of dividends
(hereinafter referred to as "surplus or net profits") whenever, and in such
amounts as, in its sole discretion, the conditions and affairs of the Company
shall render advisable. The Board in its sole discretion may, in accordance
with law, from time to time set aside from surplus or net profits such sum or
sums as it may think proper as a reserve fund to meet contingencies, or for
equalizing dividends, or for the purpose of maintaining or increasing the
property or business of the Company, or for any other purpose as it may think
conducive to the best interests of the Company.
18
<PAGE>
CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
(1) That I am the duly elected and acting Secretary of Fox Kids Worldwide,
Inc., a Delaware corporation, and
(2) That the foregoing Bylaws comprising of eighteen (18) pages,
constitute the Bylaws of said Company as of August 1, 1997 as duly adopted by
the written consent of the Incorporator.
IN WITNESS WHEREOF, I have hereunto subscribed my name as of this 1st day
of August, 1997.
/s/ William Josey
--------------------------------
William Josey, Secretary
19
<PAGE>
EXHIBIT 4.1
- --------------------------------------------------------------------------------
FOX KIDS WORLDWIDE, INC.
and
The Bank of New York
as Trustee
----------------------
INDENTURE
Dated as of October 28, 1997
----------------------
$475,000,000 9 1/4% Senior Notes due 2007, Series A
$475,000,000 9 1/4% Senior Notes due 2007, Series B
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1. Definitions.................................................... 1
Acquired Indebtedness.................................................. 2
Act.................................................................... 2
Affiliate.............................................................. 2
Asset Acquisition...................................................... 3
Asset Sale............................................................. 3
Asset Sale Offer....................................................... 4
Asset Sale Offer Price................................................. 4
Asset Sale Purchase Date............................................... 4
Asset Sale Purchase Price.............................................. 4
Attributable Value..................................................... 4
Authenticating Agent................................................... 4
Average Life to Stated Maturity........................................ 4
Bank Facility.......................................................... 5
Board of Directors..................................................... 5
Board Resolution....................................................... 5
Business Day........................................................... 5
Capital Stock.......................................................... 5
Capitalized Lease Obligation........................................... 5
Cash Equivalents....................................................... 6
Cash Interest Election................................................. 6
Cash Interest Election Date............................................ 6
Cedel.................................................................. 6
Change of Control...................................................... 6
Change of Control Offer................................................ 7
Change of Control Purchase Date........................................ 7
Change of Control Purchase Price....................................... 7
Code................................................................... 7
Commission............................................................. 7
Common Stock........................................................... 8
Company................................................................ 8
Company Request........................................................ 8
Consolidated Cash Flow................................................. 8
Consolidated Income Tax Expense........................................ 8
Consolidated Interest Expense.......................................... 9
Consolidated Net Income................................................ 9
Consolidated Net Tangible Assets....................................... 10
Consolidated Non-cash Charges.......................................... 10
control................................................................ 10
Corporate Trust Office................................................. 10
_______________________
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
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Page
----
corporation............................................................ 10
Covenant Defeasance.................................................... 10
Currency Agreement..................................................... 10
Deeply Subordinated Shareholder Loans.................................. 11
Default................................................................ 11
Default Amount......................................................... 11
Defeasance............................................................. 11
Depository............................................................. 11
Disinterested Member of the Board of Directors of the Company.......... 11
Entertainment/Programming Business..................................... 12
Euroclear.............................................................. 12
Event of Default....................................................... 12
Excess Proceeds........................................................ 12
Excess Proceeds........................................................ 12
Exchange Act........................................................... 12
Existing Preferred..................................................... 12
Existing Subordinated Securities....................................... 12
Existing Subordinated Note Refinancing Debt............................ 12
Fair Market Value...................................................... 12
GAAP................................................................... 13
Global Securities...................................................... 13
Government Securities.................................................. 13
guarantee.............................................................. 13
Holder................................................................. 13
Indebtedness........................................................... 13
Indenture.............................................................. 14
Independent Financial Advisor.......................................... 15
Initial Purchasers..................................................... 15
Initial Securities..................................................... 15
Interest Payment Date.................................................. 15
Interest Rate Protection Agreement..................................... 15
Interest Rate Protection Obligations................................... 15
Investment............................................................. 15
Issue Date............................................................. 16
Lien................................................................... 16
Marketable Securities.................................................. 16
Maturity Date.......................................................... 16
Merrill Lynch.......................................................... 16
Moody's................................................................ 16
Murdoch Family......................................................... 16
Net Cash Proceeds...................................................... 16
News Corp.............................................................. 17
Non-U.S. Person........................................................ 17
Notice of Default...................................................... 17
NPAL................................................................... 17
Offer.................................................................. 17
Offer to Purchase...................................................... 17
Offering Memorandum.................................................... 20
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Page
----
Officers' Certificate.................................................. 20
144A Global Security................................................... 20
Opinion of Counsel..................................................... 20
Other Senior Debt Pro Rata Share....................................... 20
Outstanding............................................................ 21
Paying Agent........................................................... 22
Permitted Holder....................................................... 22
Permitted Indebtedness................................................. 22
Permitted Investments.................................................. 25
Permitted Liens........................................................ 26
Person................................................................. 29
Preferred Stock........................................................ 29
Private Exchange Securities............................................ 29
Private Placement Legend............................................... 29
Public Equity Offering................................................. 29
Purchase Amount........................................................ 29
Purchase Date.......................................................... 29
Qualified Equity Interest.............................................. 30
Qualified Institutional Buyer.......................................... 30
Record Expiration Date................................................. 30
Redeemable Capital Stock............................................... 30
Redemption Date........................................................ 30
Redemption Price....................................................... 30
Registrable Securities................................................. 30
Registration Rights Agreement.......................................... 30
Regular Record Date.................................................... 30
Regulation S........................................................... 30
Regulation S Global Security........................................... 30
Replacement Assets..................................................... 31
Required Filing Dates.................................................. 31
Responsible Officer.................................................... 31
Restricted Payments.................................................... 31
Restricted Period...................................................... 31
Restricted Security.................................................... 31
Restricted Subsidiary.................................................. 31
Restricted Subsidiary Indebtedness..................................... 31
Revocation............................................................. 31
Rule 144A.............................................................. 31
Sale-Leaseback Transaction............................................. 32
S&P.................................................................... 32
Securities............................................................. 32
Securities Act......................................................... 32
Security Register...................................................... 32
Senior Securities...................................................... 32
Series A Preferred Stock............................................... 32
Significant Subsidiary................................................. 32
Special Purpose Vehicle................................................ 32
Special Record Date.................................................... 33
Stated Maturity........................................................ 33
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Page
----
Strategic Equity Investor.............................................. 33
Subordinated Indebtedness.............................................. 33
Subsidiary............................................................. 33
Trustee................................................................ 33
Trust Indenture Act.................................................... 34
Unrestricted Securities................................................ 34
Unrestricted Subsidiary................................................ 34
U.S. Government Obligation............................................. 34
Vice President......................................................... 34
Voting Stock........................................................... 34
SECTION 1.2. Compliance Certificates and Opinions.......................... 34
SECTION 1.3. Form of Documents Delivered to Trustee........................ 35
SECTION 1.4. Acts of Holders; Record Dates................................. 36
SECTION 1.5. Notices to Trustee and Company................................ 39
SECTION 1.6. Notice to Holders; Waiver..................................... 39
SECTION 1.7. Conflict with Trust Indenture Act............................. 40
SECTION 1.8. Effect of Headings and Table of Contents...................... 40
SECTION 1.9. Successors and Assigns........................................ 40
SECTION 1.10. Separability Clause........................................... 40
SECTION 1.11. Benefits of Indenture......................................... 40
SECTION 1.12. Governing Law................................................. 41
SECTION 1.13. Legal Holidays................................................ 41
ARTICLE II
SECURITY FORMS
SECTION 2.1. Forms Generally................................................ 41
ARTICLE III
THE SECURITIES
SECTION 3.1. Title and Terms............................................... 42
SECTION 3.2. Denominations................................................. 43
SECTION 3.3. Execution, Authentication, Delivery and Dating................ 43
SECTION 3.4. Temporary Securities.......................................... 44
SECTION 3.5. Registration, Registration of Transfer and Exchange........... 45
SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Securities.............. 46
SECTION 3.7. Payment of Interest; Rights Preserved......................... 47
SECTION 3.8. Persons Deemed Owners......................................... 49
SECTION 3.9. Cancellation.................................................. 49
SECTION 3.10. Computation of Interest....................................... 49
SECTION 3.11. CUSIP and CINS Numbers........................................ 49
SECTION 3.12. Deposits of Monies............................................ 50
SECTION 3.13. Book-Entry Provisions for Global Securities................... 50
SECTION 3.14. Special Transfer Provisions................................... 51
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<PAGE>
ARTICLE IV
SATISFACTION AND DISCHARGE
Page
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SECTION 4.1. Satisfaction and Discharge of Indenture....................... 55
SECTION 4.2. Application of Trust Money.................................... 56
ARTICLE V
REMEDIES
SECTION 5.1. Events of Default............................................. 57
SECTION 5.2. Acceleration of Maturity; Rescission
and Annulment............................................. 59
SECTION 5.3. Collection of Indebtedness and Suits for
Enforcement by Trustee.................................... 60
SECTION 5.4. Trustee May File Proofs of Claim.............................. 61
SECTION 5.5. Trustee May Enforce Claims Without
Possession of Securities.................................. 62
SECTION 5.6. Application of Money Collected................................ 62
SECTION 5.7. Limitation on Suits........................................... 63
SECTION 5.8. Unconditional Right of Holders to Receive
Principal, Premium and Interest........................... 64
SECTION 5.9. Restoration of Rights and Remedies............................ 64
SECTION 5.10. Rights and Remedies Cumulative................................ 64
SECTION 5.11. Delay or Omission Not Waiver.................................. 65
SECTION 5.12. Control by Holders............................................ 65
SECTION 5.13. Waiver of Past Defaults....................................... 65
SECTION 5.14. Undertaking for Costs......................................... 66
SECTION 5.15. Waiver of Stay or Extension Laws.............................. 66
ARTICLE VI
THE TRUSTEE
SECTION 6.1. Certain Duties and Responsibilities........................... 67
SECTION 6.2. Notice of Defaults............................................ 68
SECTION 6.3. Certain Rights of Trustee..................................... 68
SECTION 6.4. Not Responsible for Recitals or Issuance
of Securities............................................. 70
SECTION 6.5. May Hold Securities........................................... 71
SECTION 6.6. Money Held in Trust........................................... 71
SECTION 6.7. Compensation and Reimbursement................................ 71
SECTION 6.8. Conflicting Interests......................................... 72
SECTION 6.9. Corporate Trustee Required; Eligibility....................... 72
SECTION 6.10. Resignation and Removal; Appointment of
Successor................................................. 73
SECTION 6.11. Acceptance of Appointment by Successor........................ 75
SECTION 6.12. Merger, Conversion, Consolidation or
Succession to Business.................................... 75
SECTION 6.13. Preferential Collection of Claims Against
Company................................................... 76
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Page
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SECTION 6.14. Appointment of Authenticating Agent........................... 76
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.1. Company to Furnish Trustee Names and
Addresses of Holders....................................... 78
SECTION 7.2. Preservation of Information; Communications
to Holders................................................. 79
SECTION 7.3. Reports by Trustee............................................. 79
SECTION 7.4. Reports by Company............................................. 79
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.1. Company May Consolidate, Etc. Only on
Certain Terms.............................................. 80
SECTION 8.2. Successor Substituted.......................................... 81
ARTICLE IX
AMENDMENTS; WAIVERS; SUPPLEMENTAL INDENTURES
SECTION 9.1. Amendments, Waivers and Supplemental
Indentures Without Consent of Holders...................... 82
SECTION 9.2. Modifications, Amendments and Supplemental
Indentures with Consent of Holders......................... 83
SECTION 9.3. Execution of Supplemental Indentures........................... 84
SECTION 9.4. Effect of Supplemental Indentures.............................. 84
SECTION 9.5. Conformity with Trust Indenture Act............................ 84
SECTION 9.6. Reference in Securities to Supplemental
Indentures................................................. 84
ARTICLE X
COVENANTS
SECTION 10.1. Payment of Principal, Premium and
Interest................................................. 85
SECTION 10.2. Maintenance of Office or Agency.............................. 85
SECTION 10.3. Money for Security Payments to be Held in
Trust.................................................... 86
SECTION 10.4. Existence.................................................... 87
SECTION 10.5. Maintenance of Properties.................................... 87
SECTION 10.6. Payment of Taxes and Other Claims............................ 88
SECTION 10.7. Maintenance of Insurance..................................... 88
SECTION 10.8. Limitation on Indebtedness................................... 88
SECTION 10.9. Limitation on Restricted Payments............................ 89
SECTION 10.10. Limitation on Preferred Stock of
Restricted Subsidiaries.................................. 93
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SECTION 10.11. Limitation on Transactions with
Affiliates............................................... 94
SECTION 10.12. Limitations on Liens......................................... 95
SECTION 10.13. Change of Control............................................ 95
SECTION 10.14. Disposition of Proceeds of Asset Sales....................... 97
SECTION 10.15. Limitation on Dividends and Other Payment
Restrictions Affecting Restricted
Subsidiaries............................................. 100
SECTION 10.16. Limitations on Sale-Leaseback
Transactions............................................. 101
SECTION 10.17. Limitations on Designation of
Unrestricted Subsidiaries................................ 102
SECTION 10.18. Provision of Financial Information........................... 103
SECTION 10.19. Statement by Officers as to Default;
Compliance Certificates.................................. 104
SECTION 10.20. Waiver of Certain Covenants.................................. 105
SECTION 10.21. Calculation of Original Issue Discount....................... 105
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.1. Right of Redemption.......................................... 106
SECTION 11.2. Applicability of Article..................................... 106
SECTION 11.3. Election to Redeem; Notice to Trustee........................ 106
SECTION 11.4. Selection by Trustee of Securities to Be
Redeemed................................................. 106
SECTION 11.5. Notice of Redemption......................................... 107
SECTION 11.6. Deposit of Redemption Price.................................. 108
SECTION 11.7. Securities Payable on Redemption Date........................ 108
SECTION 11.8. Securities Redeemed in Part.................................. 109
ARTICLE XII
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 12.1. Company's Option to Effect Defeasance or
Covenant Defeasance...................................... 109
SECTION 12.2. Defeasance and Discharge..................................... 109
SECTION 12.3. Covenant Defeasance.......................................... 110
SECTION 12.4. Conditions to Defeasance or Covenant
Defeasance............................................... 110
SECTION 12.5. Deposited Money and U.S. Government
Obligations to Be Held in Trust;
Miscellaneous Provisions................................. 113
SECTION 12.6. Reinstatement................................................ 114
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<PAGE>
Page
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Exhibit A-1 Form of Series A Security
Exhibit A-2 Form of Series B Security
Exhibit B Form of Legend for Book-entry Securities
Exhibit C Form of Certificate
Exhibit D Form of Certificate to be Delivered in
Connection with Transfers to Non-Q1B
Institutional Accredited Investors
Exhibit E Form of Deeply Subordinated Shareholder
Note
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<PAGE>
INDENTURE, dated as of October 28, 1997, between Fox Kids Worldwide,
Inc., a corporation duly organized and existing under the laws of the State of
Delaware (herein called the "Company"), having its principal office at 10960
Wilshire Boulevard, Los Angeles, California 90024, and The Bank of New York, a
New York banking corporation, having its principal corporate trust office
located at 101 Barclay Street, New York New York 10286, as Trustee (herein
called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of 9 1/4%
Senior Notes due 2007, Series A, and 9 1/4% Senior Notes due 2007, Series B (the
"Securities"), of substantially the tenor and amount hereinafter set forth, and
to provide therefor the Company has duly authorized the execution and delivery
of this Indenture.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the Company
the valid obligations of the Company, and to make this Indenture a valid
agreement of the Company, in accordance with their and its terms, have been
done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders (as defined herein) thereof, it is mutually covenanted
and agreed, for the equal and proportionate benefit of all Holders of the
Securities, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1. Definitions.
-----------
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
<PAGE>
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(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP (whether or not such is
indicated herein);
(4) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or Section, as the case may
be, of this Indenture;
(5) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision; and
(6) each reference herein to a rule or form of the Commission shall
mean such rule or form and any rule or form successor thereto, in each case
as amended from time to time.
Certain terms, used principally in Article VI, are defined in that
Article.
Whenever this Indenture requires that a particular ratio or amount be
calculated with respect to a specified period after giving effect to certain
transactions or events on a pro forma basis, such calculation shall be made as
--- -----
if the transactions or events occurred on the first day of such period, unless
otherwise specified.
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in
connection with an Asset Acquisition from such Person or (b) existing at the
time such Person becomes a Subsidiary of any other Person and not incurred in
connection with, or in contemplation of, such Asset Acquisition or such Person
becoming a Subsidiary.
"Act," when used with respect to any Holder, has the meaning specified
in Section 1.4.
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or
<PAGE>
-3-
controlled by or under direct or indirect common control with such specified
Person, (ii) any other Person that owns, directly or indirectly, 10% or more of
such specified Person's Capital Stock, (iii) any officer or director of (A) any
such specified Person, (B) any Subsidiary of such specified Person or (C) any
Person described in clauses (i) or (ii) above or (iv) the spouse of any natural
Person described in clauses (i), (ii) or (iii) above or any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such spouse.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person which
constitute all or substantially all of the assets of such Person, any division
or line of business of such Person or any other properties or assets of such
Person other than in the ordinary course of business.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or
other disposition by the Company or any Restricted Subsidiary of the Company to
any Person other than the Company or a Restricted Subsidiary of the Company, in
one or a series of related transactions for an aggregate consideration of more
than $1,000,000, of (a) any Capital Stock of any Subsidiary of the Company; (b)
all or substantially all of the properties and assets of any division or line of
business of the Company or any Restricted Subsidiary of the Company; or (c) any
other properties or assets of the Company or any Restricted Subsidiary of the
Company other than in the ordinary course of business. (Any disposition of
obsolete or worn-out assets shall be deemed to be in the ordinary course of
business). For purposes of Section 10.14, the following shall not be deemed an
Asset Sale: (i) any sale or other disposition by the Company or a Restricted
Subsidiary of the Company of the assets held for disposition or discontinuance
of International Family Entertainment, Inc. ("IFE") identified in the Offering
Memorandum for Fair Market Value or (ii) an Investment of cash not prohibited by
this Indenture. For the purposes of this definition, the term "Asset Sale" shall
not include any sale, issuance, conveyance, transfer, lease or other disposition
of properties or assets that is governed by the provisions described under
Article VIII.
<PAGE>
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"Asset Sale Offer" has the meaning specified in Section 10.14.
"Asset Sale Offer Price" has the meaning specified in Section 10.14.
"Asset Sale Purchase Date" has the meaning specified in Section 10.14.
"Asset Sale Purchase Price" has the meaning specified in Section
10.14.
"Attributable Value" means, as to any particular lease under which any
Person is at the time liable other than a Capitalized Lease Obligation, and at
any date as of which the amount thereof is to be determined, the total net
amount of rent required to be paid by such Person under such lease during the
remaining term thereof (whether or not such lease is terminable at the option of
the lessee prior to the end of such term), including any period for which such
lease has been, or may, at the option of the lessor, be extended, discounted
from the last date of such term to the date of determination at a rate per annum
equal to the discount rate which would be applicable to a Capitalized Lease
Obligation with like term in accordance with GAAP. The net amount of rent
required to be paid under any lease for any such period shall be the aggregate
amount of rent payable by the lessee with respect to such period after excluding
amounts required to be paid on account of insurance, taxes, assessments,
utility, operating and labor costs and similar charges. "Attributable Value"
means, as to a Capitalized Lease Obligation under which any Person is at the
time liable and at any date as of which the amount thereof is to be determined,
the capitalized amount thereof that would appear on the face of a balance sheet
of such Person in accordance with GAAP.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 6.14 hereof to act on behalf of the Trustee to authenticate
Securities.
"Average Life to Stated Maturity" means, with respect to any
Indebtedness, as at any date of determination, the quotient obtained by dividing
(i) the sum of the products of (a) the number of years from such date to the
date or dates of each successive scheduled principal payment (including, without
limitation, any sinking fund requirements) of such Indebtedness and (b) the
amount of each such principal payment by (ii) the sum of all such principal
payments.
<PAGE>
-5-
"Bank Facility" means the Amended and Restated Credit Agreement dated
September 4, 1997 among the Company and certain of its Subsidiaries, the lenders
named therein, and Citicorp USA, Inc., as Administrative Agent, and Citicorp
Securities, Inc., as Arranger, including any initial or successive deferrals,
renewals, waivers, extensions, replacements, refinancings (in whole or in part)
or refundings thereof, or any amendments, modifications, restatements or
supplements thereto and including any related notes, guarantees, security
agreements, pledge agreements, mortgages and other collateral documents and
other instruments and agreements executed in connection therewith.
"Board of Directors" means the board of directors of a company or its
equivalent, including managers of a limited liability company (or members of a
member managed limited liability company), general partners of a partnership or
trustees of a business trust, or any duly authorized committee thereof.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in the Borough of
Manhattan, The City of New York are authorized or obligated by law or executive
order to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such Person's capital stock or equity participations, and any rights (other
than debt securities convertible into capital stock), warrants or options
exchangeable for or convertible into such capital stock and, including, without
limitation, with respect to partnerships, limited liability companies or
business trusts, ownership interests (whether general or limited) and any other
interest or participation that confers on a Person the right to receive a share
of the profits and losses of, or distributions of assets of, such partnerships,
limited liability companies or business trusts.
"Capitalized Lease Obligation" means any obligation under a lease of
(or other agreement conveying the right to use) any property (whether real,
personal or mixed) that is required to be classified and accounted for as a
capital lease obligation under GAAP, and, for the purpose of this Indenture,
<PAGE>
-6-
the amount of such obligation at any date shall be the capitalized amount
thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means, at any time, (i) any evidence of
Indebtedness with a maturity of 365 days or less issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof); (ii) certificates of deposit
or acceptances with a maturity of 365 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500,000,000, whose debt is rated
at least A-1 by S&P or at least P-1 by Moody's or at least an equivalent rating
category of another nationally recognized rating agency; (iii) commercial paper
with a maturity of 365 days or less issued by a corporation that is not an
Affiliate of the Company organized under the laws of any state of the United
States or the District of Columbia and rated at least A-1 by S&P or at least P-1
by Moody's or at least an equivalent rating category of another nationally
recognized securities rating agency; (iv) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations issued or
unconditionally guaranteed by the government of the United States of America or
issued by any agency thereof and backed by the full faith and credit of the
United States of America, in each case maturing within 365 days from the date of
acquisition; and (v) money market instruments which are principally invested in
Cash Equivalents referred to in the preceding clauses (i) through (iv).
"Cash Interest Election" means the election of the Company on any
Interest Payment Date to commence the accrual of cash interest from and after
the Cash Interest Election Date.
"Cash Interest Election Date" means the Interest Payment Date as of
which the Company makes a Cash Interest Election.
"Cedel" means Cedel Bank, Societe anonyme.
---------------
"Change of Control" means the occurrence of any of the following
events: (a) (i) the Permitted Holders cease to own at least 50% of the total
Voting Stock of the Company or (ii) The News Corporation Limited, the Murdoch
Family, or any of their respective Affiliates cease to own at least 30% of the
total Voting Stock of the Company; (b) the Company consoli-
<PAGE>
-7-
dates with, or merges with or into, another Person or sells, assigns, conveys,
transfers, leases or otherwise disposes of all or substantially all of its
assets to any Person, or any Person consolidates with, or merges with or into,
the Company, in any such event pursuant to a transaction in which the
outstanding Voting Stock of the Company is converted into or exchanged for cash,
securities or other property, other than any such transaction where (i) the
outstanding Voting Stock of the Company is converted into or exchanged for
Voting Stock (other than Redeemable Capital Stock) of the surviving or
transferee corporation and immediately after such transaction, (ii) the
Permitted Holders own at least 50% of the total Voting Stock of the surviving or
transferee corporation and (iii) The News Corporation Limited, the Murdoch
Family or any of their respective Affiliates own at least 30% of the total
Voting Stock of the surviving or transferee corporation; (c) during any
consecutive two-year period, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the stockholders of the Company was approved by a vote of 66-2/3% of
the directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute at least 50% of the Board of
Directors of the Company then in office; or (d) the Company is liquidated or
dissolved or adopts a plan of liquidation or any order, judgment or decree shall
be entered against the Company decreeing the dissolution or splitup of the
Company and such order shall remain undischarged or unstayed for a period in
excess of 60 days.
"Change of Control Offer" has the meaning specified in Section 10.13.
"Change of Control Purchase Date" has the meaning specified in Section
10.13.
"Change of Control Purchase Price" has the meaning specified in
Section 10.13.
"Code" means the Internal Revenue Code, as amended from time to time,
and the rules and regulations thereunder.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this instrument such Commission is not existing and
performing the
<PAGE>
-8-
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Stock" means, with respect to any Person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or nonvoting) of, such Person's common stock, whether
outstanding at the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture and thereafter "Company"
shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Chief
Executive Officer, its President or a Vice President, and by its Treasurer, an
Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to
the Trustee.
"Consolidated Cash Flow" means, with respect to any Person for any
period, (i) the sum of, without duplication, the amounts for such period, taken
as a single accounting period, of (a) Consolidated Net Income, (b) Consolidated
Non-cash Charges, (c) Consolidated Interest Expense, (d) Consolidated Income Tax
Expense (other than income tax expense (either positive or negative)
attributable to extraordinary and nonrecurring gains or losses) and (e) an
amount equal to any extraordinary and nonrecurring losses (to the extent such
losses were deducted in computing Consolidated Net Income), less (ii) non-cash
items increasing Consolidated Net Income; provided, however, that if, during
-------- -------
such period, such Person or any of its Restricted Subsidiaries shall have made
any Asset Sales or Asset Acquisitions, Consolidated Cash Flow for such Person
and its Restricted Subsidiaries for such period shall be adjusted to give
pro forma effect to the Consolidated Cash Flow directly attributable to the
- --- -----
assets which are the subject of such Asset Sales or Asset Acquisitions during
such period.
"Consolidated Income Tax Expense" means, with respect to any Person
for any period, the provision for federal, state, local and foreign income taxes
of such Person and its Restricted Subsidiaries for such period as determined on
a consolidated basis in accordance with GAAP.
<PAGE>
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"Consolidated Interest Expense" means, with respect to any Person for
any period, without duplication, the sum of (i) the interest expense of such
Person and its Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP, including, without limitation, (a)
any amortization of debt discount, (b) the net cost under Interest Rate
Protection Obligations (including any amortization of discounts), (c) the
interest portion of any deferred payment obligation, excluding accretion
recorded based upon liabilities arising from purchase accounting adjustments
from the acquisition of IFE, (d) all commissions, discounts and other fees and
charges owed with respect to letters of credit, bankers' acceptance financing or
similar facilities and (e) all capitalized and accrued interest and (ii) the
interest component of Capitalized Lease Obligations paid, accrued and/or
scheduled to be paid or accrued by such Person and its Restricted Subsidiaries
during such period and (iii) the aggregate amount of dividends and other
distributions paid or accrued during such period in respect of Redeemable
Capital Stock (other than payments made in respect of the redemption of such
Redeemable Capital Stock (other than accrued and unpaid dividends thereon) of
such Person and its Restricted Subsidiaries on a consolidated basis, as
determined on a consolidated basis in accordance with GAAP. In no event shall
Consolidated Interest Expense include interest expense associated with Deeply
Subordinated Shareholder Loans.
"Consolidated Net Income" means, with respect to any Person for any
period, the consolidated net income (or loss) of such Person and its Restricted
Subsidiaries for such period as determined in accordance with GAAP, adjusted, to
the extent included in calculating such net income, by excluding, without
duplication, (i) all extraordinary gains or losses (net of fees and expenses
relating to the transaction giving rise thereto), (ii) the portion of net income
of such Person and its Restricted Subsidiaries derived from or in respect of
Investments in Persons other than Restricted Subsidiaries except to the extent
that cash dividends or distributions have not actually been received by such
Person or one of its Restricted Subsidiaries, (iii) net income (or loss) of any
Person combined with such Person or one of its Restricted Subsidiaries on a
"pooling of interests" basis attributable to any period prior to the date of
combination, (iv) gains or losses in respect of any Asset Sales by such Person
or one of its Restricted Subsidiaries (net of fees and expenses relating to the
transaction giving rise thereto), on an after-tax basis, (v) the net income of
any Restricted Subsidiary of such Person to the extent that the declaration of
dividends or similar distributions by that Restricted Subsidiary of that income
is not at the time permit-
<PAGE>
-10-
ted, directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulations applicable to that Restricted Subsidiary or its stockholders and
(vi) any gain or loss realized as a result of the cumulative effect of a change
in accounting principles.
"Consolidated Net Tangible Assets" of any person means, as of any
date, (a) all amounts that would be shown as assets on a consolidated balance
sheet of such Person and its Restricted Subsidiaries prepared in accordance with
GAAP, less (b) the amount thereof constituting goodwill and other intangible
assets as calculated in accordance with GAAP.
"Consolidated Non-cash Charges" means, with respect to any Person for
any period, the aggregate depreciation, amortization (excluding amortization of
programming costs) and other non-cash expenses of such Person and its Restricted
Subsidiaries reducing Consolidated Net Income of such Person and its Restricted
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP (excluding any such charges constituting an extraordinary item or loss
or any such charge which requires an accrual of or a reserve for cash charges
for any future period).
"control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered,
which address as of the date of this Indenture is located at 101 Barclay Street,
Floor 21 West, New York, New York, 10286.
"Corporation" means a corporation, association, company, joint-stock
company or business trust.
"Covenant Defeasance" has the meaning specified in Section 12.3.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Company or any of its Restricted Subsidiaries against fluctuations in currency
values.
<PAGE>
-11-
"Deeply Subordinated Shareholder Loans" means any Indebtedness of the
Company for money borrowed from and held unsecured by either (x) a Permitted
Holder or (y) another person whose obligations have been guaranteed by a
Permitted Holder, provided that, except to the extent expressly permitted
--------
by the covenant in Section 10.9, such Indebtedness of the Company (i) has been
expressly subordinated in right of payment as to all payments of interest and
principal to the Securities, (ii) provides for no payments of interest (other
than payments in-kind) or principal prior to the earlier of (a) the end of the
sixth month after final maturity of the Securities and (b) the payment in full
cash of all Securities (or due provision therefor which results in the discharge
of all obligations under this Indenture); provided, further, that the terms of
-------- -------
any such Indebtedness shall be evidenced by a note in the form
annexed hereto as Exhibit E and the Company shall have delivered the specified
Opinions of Counsel as to the validity and enforceability of the subordination
terms thereof.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Default Amount" means, (i) as of any date prior to the earlier of
November 1, 2002 and the Cash Interest Election Date, the Accreted Value of all
outstanding Securities as of such date and (ii) as of any date on or after the
earlier of November 1, 2002 and the Cash Interest Election Date, the principal
amount at maturity of all Outstanding Securities, plus accrued and unpaid
interest, if any, thereon.
"Defeasance" has the meaning specified in Section 12.2.
"Depository" means The Depository Trust Company or its successor.
"Disinterested Member of the Board of Directors of the Company" means,
with respect to any transaction or series of transactions, a member of the Board
of Directors of the Company other than a member who has any material direct or
indirect financial interest in or with respect to such transaction or series of
transactions or who is an officer, director or an employee of any Person who has
any direct or indirect financial interest in or with respect to such transaction
or series of transactions (other than the Company or a Restricted Subsidiary of
the Company).
<PAGE>
-12-
"Entertainment/Programming Business" means a business engaged
primarily in the ownership, operation, acquisition, development, production,
distribution or syndication of general entertainment or children's programming
including, without limitation, any business engaged in by the Company and its
Restricted Subsidiaries on the Issue Date.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
Office, as operator of the Euroclear System.
"Event of Default" has the meaning specified in Section 5.1.
"Excess Proceeds" has the meaning specified in Section 10.14.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Preferred" means the Series A Preferred Stock outstanding on
the Issue Date.
"Existing Subordinated Notes" means (i) the Subordinated Note of the
Company issued to News America Holdings Incorporated in the principal amount
(excluding accreted interest) of approximately $345.5 million outstanding on the
Issue Date (before giving effect to the use of the proceeds from the Offering
and the Flextech Transaction) and (ii) the Subordinated Notes of the Company to
Fox Broadcasting Company issued in the principal amount (excluding accreted
interest) of approximately $104 million, which amount will be increased to
$108.6 million and which is to be repaid in May 2008 (before giving effect to
the use of proceeds from the Offering). Notwithstanding anything herein to the
contrary, the Company may amend the term of the Existing Subordinated Notes to
make them Deeply Subordinated Shareholder Loans.
"Existing Subordinated Note Refinancing Debt" means Indebtedness the
proceeds of which is to purchase, redeem, acquire or retire all of the Existing
Subordinated Securities.
"Fair Market Value" means, with respect to any asset, the price which
could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of which is under pressure
or compulsion to complete the transaction; provided, however, that, except with
-------- -------
respect to any Asset Sale which involves an asset or assets constituting less
than $25,000,000, the determination of
<PAGE>
-13-
the Fair Market Value of any asset or assets shall be approved by the Board of
Directors of the Company, acting in good faith and shall be evidenced by
resolutions of the Board of Directors of the Company delivered to the Trustee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States of America, which are applicable at the date of
this Indenture.
"Global Securities" means one or more Regulation S Global Securities
and 144A Global Securities.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"guarantee" means, as applied to any obligation, (i) a guarantee
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner, of any part or
all of such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of nonperformance) of all or any
part of such obligation, including, without limiting the foregoing, the payment
of amounts available to be drawn down under letters of credit of another Person.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indebtedness" means, with respect to any Person, without duplication,
(a) all liabilities of such Person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payables and other
accrued current liabilities and liabilities for entertainment programming,
participations or residuals incurred in the ordinary course of business, but
including, without limitation, all obligations, contingent or otherwise, of such
Person in connection with any letters of credit, banker's acceptance or other
similar credit transaction, (b) all obligations of such Person evidenced by
bonds, notes, debentures or other similar instru-
<PAGE>
-14-
ments, (c) all indebtedness created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such Person
(even if the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), but
excluding trade accounts payable arising in the ordinary course of business, (d)
all Capitalized Lease Obligations of such Person, (e) all Indebtedness referred
to in the preceding clauses of other Persons and all dividends of other Persons,
the payment of which is secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien upon
property (including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness, (f) all guarantees of Indebtedness referred to in
this definition by such Person, (g) all Redeemable Capital Stock of such Person
valued at the greater of its voluntary or involuntary maximum fixed repurchase
price plus accrued dividends, (h) all obligations under or in respect of
Interest Rate Protection Obligations of such Person, and (i) any amendment,
supplement, modification, deferral, renewal, extension, refinancing or refunding
of any liability of the types referred to in clauses (a) through (h) above. For
purposes hereof, the "maximum fixed repurchase price" of any Redeemable Capital
Stock which does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Redeemable Capital Stock as if such Redeemable
Capital Stock were purchased on any date on which Indebtedness shall be required
to be determined pursuant to this Indenture, and if such price is based upon, or
measured by, the fair market value of such Redeemable Capital Stock, such fair
market value shall be approved in good faith by the Board of Directors of the
issuer of such Redeemable Capital Stock. In the case of Indebtedness of other
Persons, the payment of which is secured by a Lien on property owned by a Person
as referred to in clause (e) above, the amount of the Indebtedness of such
Person attributable to such Lien at any date shall be the lesser of the Fair
Market Value at such date of any asset subject to such Lien and the amount of
the Indebtedness secured. In no event shall "Indebtedness" include (i) Deeply
Subordinated Shareholder Loans so long as they are issued to and held by a
Permitted Holder or (ii) the Existing Preferred to the extent the terms thereof
are as in effect on the Issue Date.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all
<PAGE>
-15-
purposes of this instrument and any such supplemental indenture, the provisions
of the Trust Indenture Act that are deemed to be a part of and govern this
instrument and any such supplemental indenture, respectively.
"Independent Financial Advisor" means a nationally recognized
accounting, appraisal or investment banking firm (i) which does not, and whose
directors, officers and employees or Affiliates do not have, a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"Initial Purchasers" means Merrill Lynch, Citicorp Securities, Inc.,
Merrill Lynch, Bear Stearns & Co. Inc., Donaldson, Lufkin & Jenrette Securities
Corporation, and Morgan Stanley Dean Witter.
"Initial Securities" means the 9 1/4% Senior Notes due 2007, Series A,
of the Company.
"Interest Payment Date" means May 1 and November 1 of each year,
provided that no cash interest shall be paid on any Interest Payment Date,
- --------
except as provided in this Indenture and in the Securities.
"Interest Rate Protection Agreement" means, with respect to any
Person, any arrangement with any other Person whereby, directly or indirectly,
such Person is entitled to receive from time to time periodic payments
calculated by applying either a floating or a fixed rate of interest on a stated
notional amount in exchange for periodic payments made by such Person calculated
by applying a fixed or a floating rate of interest on the same notional amount
and shall include, without limitation, interest rate swaps, caps, floors,
collars and similar agreements.
"Interest Rate Protection Obligations" means the obligations of any
Person pursuant to any Interest Rate Protection Agreements.
"Investment" means, with respect to any Person, any direct or indirect
loan or other extension of credit (including, without limitation, a guarantee)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other
<PAGE>
-16-
securities or evidences of Indebtedness issued by, any other Person.
"Issue Date" means the original date of issuance of the Securities.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or preference
or priority or other encumbrance upon or with respect to any property of any
kind. A Person shall be deemed to own subject to a Lien any property which such
Person has acquired or holds subject to the interest of a vendor or lessor under
any conditional sale agreement, capital lease or other title retention
agreement.
"Marketable Securities" means Government Securities maturing no later
than 30 days after the date of acquisition.
"Maturity Date" means November 1, 2007.
"Merrill Lynch" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Murdoch Family" means one or more of (a) K. Rupert Murdoch, his wife,
parents, children or more remote issue, or brothers or sisters or children or
more remote issue of a brother or sister, (b) any person directly or indirectly
controlled by one or more of the persons referred to in clause (a) or (b) of
this definition or can be removed or replaced by one or more of the persons
referred to in clause (a) or (b) of this definition.
"Net Cash Proceeds" means, with respect to an Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to the Company or any Restricted Subsidiary of the Company) net of
(i) brokerage commissions and other fees and expenses (including, without
limitation, fees and expenses of legal counsel and investment bankers) related
to such Asset Sale, (ii) provisions for all taxes payable as a result of such
Asset Sale and relocation costs, (iii) amounts required to be paid to any Person
(other than the Company or any Restricted Subsidiary of the Company) owning a
beneficial interest in or a
<PAGE>
-17-
Lien upon the assets subject to the Asset Sale, (iv) payments made to retire
Indebtedness where payment of such Indebtedness is secured by the assets or
property the subject of such Asset Sale, and (v) appropriate amounts to be
provided by the Company or any Restricted Subsidiary of the Company, as the case
may be, as a reserve required in accordance with GAAP against any liabilities
associated with such Asset Sale and retained by the Company or any Restricted
Subsidiary of the Company, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as reflected in
an officers' certificate delivered to the Trustee.
"News Corp." means The News Corporation Limited.
"Non-U.S. Person" has the meaning assigned to such term in
Regulation S.
"Notice of Default" means a written notice of the kind specified in
Section 5.2.
"NPAL" means News Publishing Australia Limited.
"Offer" has the meaning set forth in "Offer to Purchase" below.
"Offer to Purchase" means a written offer (the "Offer") sent by or on
behalf of the Company by first-class mail, postage prepaid, to each Holder of
Securities at his address appearing in the register for the Securities on the
date of the Offer offering to purchase up to the principal amount or Accreted
Value of Securities specified in such Offer at the purchase price specified in
such Offer (as determined pursuant to this Indenture). Unless otherwise provided
in Section 10.13 or 10.14 or otherwise required by applicable law, the Offer
shall specify an expiration date (the "Expiration Date") of the Offer to
Purchase, which shall be not less than 20 Business Days nor more than 60 days
after the date of such Offer, and a settlement date (the "Purchase Date") for
purchase of Securities to occur no later than five Business Days after the
Expiration Date. The Company shall notify the Trustee at least 15 Business Days
(or such shorter period as is acceptable to the Trustee) prior to the mailing of
the Offer of the Company's obligation to make an Offer to Purchase, and the
Offer shall be mailed by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company. The Of-
<PAGE>
-18-
fer shall contain all the information required by applicable law to be included
therein. The Offer shall also contain information concerning the business of the
Company and its Subsidiaries which the Company in good faith believes will
enable such Holders to make an informed decision with respect to the Offer to
Purchase (which at a minimum will include (i) the most recent annual and
quarterly financial statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained in the document
required to be filed with the Trustee pursuant to this Indenture (which
requirements may be satisfied by delivery of such documents together with the
Offer), (ii) a description of material developments in the Company's business
subsequent to the date of the latest of such financial statements referred to in
clause (i) (including a description of the events requiring the Company to make
the Offer to Purchase), (iii) if applicable, appropriate pro forma financial
--- -----
information concerning the Offer to Purchase and the events requiring the
Company to make the Offer to Purchase and (iv) any other information required by
applicable law to be included therein). The Offer shall contain all instructions
and materials necessary to enable such Holders to tender Securities pursuant to
the Offer to Purchase. The Offer shall also state:
(1) the Section of this Indenture pursuant to which the Offer to
Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the Outstanding Securities
offered to be purchased by the Company pursuant to the Offer to Purchase
(including, if less than 100%, the manner by which such amount has been
determined pursuant to the Section of this Indenture requiring the Offer to
Purchase) (the "Purchase Amount");
(4) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Securities accepted for payment (as specified
pursuant to this Indenture) (the "Purchase Price");
(5) that the Holder may tender all or any portion of the Securities
registered in the name of such Holder and that any portion of a Security
tendered must be tendered in an integral multiple of $1,000 principal face
amount;
(6) the place or places where Securities are to be surrendered for
tender pursuant to the Offer to Purchase;
<PAGE>
-19-
(7) that interest on any Security not tendered or tendered but not
purchased by the Company pursuant to the Offer to Purchase will continue to
accrue;
(8) that on the Purchase Date the Purchase Price will become due and
payable upon each Security being accepted for payment pursuant to the Offer
to Purchase and that interest thereon shall cease to accrue on and after
the Purchase Date;
(9) that each Holder electing to tender all or any portion of a
Security pursuant to the Offer to Purchase will be required to surrender
such Security at the place or places specified in the Offer prior to the
close of business on the Expiration Date (such Security being, if the
Company or the Trustee so requires, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or his attorney duly
authorized in writing);
(10) that Holders will be entitled to withdraw all or any portion of
Securities tendered if the Company (or its Paying Agent) receives, not
later than the close of business on the fifth Business Day next preceding
the Expiration Date, a facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Security the Holder
tendered, the certificate number of the Security the Holder tendered and a
statement that such Holder is withdrawing all or a portion of his tender;
(11) that (a) if Securities in an aggregate principal amount less than
or equal to the Purchase Amount are duly tendered and not withdrawn
pursuant to the Offer to Purchase, the Company shall purchase all such
Securities and (b) if Securities in an aggregate principal amount in excess
of the Purchase Amount are tendered and not withdrawn pursuant to the Offer
to Purchase, the Company shall purchase Securities having an aggregate
principal amount equal to the Purchase Amount on a pro rata basis (with
--- ----
such adjustments as may be deemed appropriate so that only Securities in
denominations of $1,000 principal amount at maturity or integral multiples
thereof shall be purchased); and
(12) that in the case of a Holder whose Security is purchased only in
part, the Company shall execute and the Trustee shall authenticate and
deliver to the Holder of
<PAGE>
-20-
such Security without service charge, a new Security or Securities, of any
authorized denomination as requested by such Holder, in an aggregate
principal amount equal to and in exchange for the unpurchased portion of
the Security so tendered.
An Offer to Purchase shall be governed by and effected in accordance with the
provisions pertaining to the type of Offer to which it relates. References
above to principal amount shall mean and refer to principal amount at maturity
unless the context otherwise requires.
"Offering Memorandum" means the Offering Memorandum dated October 22,
1997 pursuant to which the Securities were offered.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the Chief Executive Officer, the President or a Vice President, and
by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Company, and delivered to the Trustee. One of the officers
signing an Officers' Certificate given pursuant to Section 10.20 shall be the
principal executive, financial or accounting officer of the Company.
"144A Global Security" means a permanent global security in registered
form representing the aggregate principal amount at maturity of Securities sold
in reliance on Rule 144A under the Securities Act.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be reasonably acceptable to the Trustee.
"Other Senior Debt Pro Rata Share" means under this Indenture the
amount of the applicable Excess Proceeds obtained by multiplying the amount of
such Excess Proceeds by a fraction, (i) the numerator of which is the aggregate
accreted value and/or principal amount, as the case may be, of all Indebtedness
(other than (x) the Securities and (y) Subordinated Indebtedness) of the Company
outstanding at the time of the applicable Asset Sale with respect to which the
Company is required to use Excess Proceeds to repay or make an offer to purchase
or repay and (ii) the denominator of which is the sum of (a) the aggregate
principal amount of all Securities that are outstanding at the time of the offer
to purchase or repay with respect to the applicable Asset Sale and (b) the
aggregate principal amount or the aggregate accreted value, as the case
<PAGE>
-21-
may be, of all other Indebtedness (other than Subordinated Indebtedness) of the
Company outstanding at the time of the applicable Asset Sale Offer with respect
to which the Company is required to use the applicable Excess Proceeds to offer
to repay or make an offer to purchase or repay.
"Outstanding," when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
------
(i) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company) in trust or set aside and segregated
in trust by the Company (if the Company shall act as its own Paying Agent)
for the Holders of such Securities; provided that, if such Securities are
--------
to be redeemed, notice of such redemption has been duly given pursuant to
this Indenture or provision therefor satisfactory to the Trustee, has been
made;
(iii) Securities which have been paid pursuant to Section 3.6 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Company; and
(iv) Securities as to which Defeasance has been effected pursuant to
Section 12.2;
provided, however, that in determining whether the Holders of the requisite
- -------- -------
principal amount at maturity of the Outstanding Securities have given, made or
taken any request, demand, authorization, direction, notice, consent, waiver or
other action hereunder as of any date, Securities owned by the Company or any
other obligor upon the Securities or any Affiliate of the Company or of such
other obligor shall be disregarded and deemed not to be Outstanding, except
that, in determining whether the Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent, waiver or other
action, only Securities which a Responsible Officer of the Trustee actually
knows to be so owned shall be so disregarded. Securities so owned which have
been pledged in
<PAGE>
-22-
good faith may be regarded as outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company.
"Permitted Holder" means any member of the Murdoch Family, The News
Corporation Limited, Haim Saban and their respective Affiliates.
"Permitted Indebtedness" means, without duplication:
(a) Indebtedness of the Company evidenced by the Securities;
(b) Indebtedness of the Company and its Restricted Subsidiaries under
the Bank Facility in an aggregate principal amount at any one time
outstanding not to exceed $725 million, less any amounts permanently repaid
in accordance with Section 10.14;
(c) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the Issue Date;
(d) Indebtedness to third parties for the production of television
programming by one or more special-purpose partnerships, corporations,
joint ventures or similar structures (in which any interest of the Company
is held through a Special Purpose Vehicle), the production decisions in
respect of which are controlled by the Company or a Restricted Subsidiary;
(e) Indebtedness consisting of the liabilities and obligations,
contingent or otherwise, incurred by the Company or its Restricted
Subsidiaries in the ordinary course of business (other than for borrowed
money) to acquire, produce, license or distribute television programming;
(f) Indebtedness of the Company or any Restricted Subsidiary of the
Company incurred in respect of performance bonds, bankers' acceptances and
letters of credit in the ordinary course of business, including
Indebtedness evidenced by letters of credit issued in the ordinary course
of business to support the insurance or self-
<PAGE>
-23-
insurance obligations of the Company or any of its Restricted Subsidiaries
(including to secure workers' compensation and other similar insurance
coverages), in the aggregate amount not to exceed $10 million at any time;
but excluding letters of credit issued to secure money borrowed;
(g) (i) Interest Rate Protection Obligations of the Company covering
Indebtedness of the Company and (ii) Interest Rate Protection Obligations
of any Restricted Subsidiary of the Company covering Indebtedness of such
Restricted Subsidiary; provided that in the case of either clause (i) or
--------
(ii) the notional principal amount of any such Interest Rate Protection
Obligations that exceeds the principal amount of the Indebtedness to which
such Interest Rate Protection Obligations relate is otherwise permitted to
be incurred under this Indenture;
(h) Indebtedness of the Company or any Restricted Subsidiaries under
Currency Agreements; provided that (x) such Currency Agreements relate to
--------
Indebtedness or the purchase price of goods purchased or sold by the
Company or any Restricted Subsidiary in the ordinary course of its business
and (y) such Currency Agreements do not increase the Indebtedness or other
obligations of the Company or a Restricted Subsidiary outstanding other
than as a result of fluctuations in foreign currency exchange rates or by
reason of fees, indemnities and compensation payable thereunder;
(i) Indebtedness of a Restricted Subsidiary owed to and held by the
Company or another Restricted Subsidiary, except that (i) any transfer of
such Indebtedness by the Company or a Restricted Subsidiary (other than to
the Company or another Restricted Subsidiary) and (ii) the sale, transfer
or other disposition by the Company or any Restricted Subsidiary of the
Company of Capital Stock of a Restricted Subsidiary (other than to the
Company or a Restricted Subsidiary) which is owed Indebtedness of another
Restricted Subsidiary shall, in each case, be an incurrence of Indebtedness
by such Restricted Subsidiary subject to the other provisions of this
Indenture;
(j) Indebtedness of the Company owed to and held by a Restricted
Subsidiary which is unsecured and subordinated in right of payment to the
payment and performance of the obligations of the Company under this
Indenture and the Securities, except that (i) any transfer of such
In-
<PAGE>
-24-
debtedness by the Company or a Restricted Subsidiary (other than to another
Restricted Subsidiary) and (ii) the sale, transfer or other disposition by
the Company or any Restricted Subsidiary of the Company of Capital Stock of
a Restricted Subsidiary (other than to the Company or a Restricted
Subsidiary) which is owed Indebtedness of the Company shall, in each case,
be an incurrence of Indebtedness by the Company, subject to the other
provisions of this Indenture;
(k) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
-------- -------
Indebtedness is extinguished within five Business Days of
incurrence;
(l) Indebtedness of the Company, in addition to that described in
clauses (a) through (k) of this definition, in an aggregate principal
amount outstanding at any time not to exceed $150 million;
(m) Indebtedness represented by obligations to purchase Capital Stock
of the Company pursuant to agreements, as in effect on the Issue Date, with
employees of the Company and its Restricted Subsidiaries upon the
termination of their employment in an aggregate principal amount not to
exceed $30 million during the term of this Indenture; and
(n) (i) Indebtedness of the Company the proceeds of which are used
solely to refinance (whether by amendment, renewal, extension or refunding)
Indebtedness of the Company or any of its Restricted Subsidiaries and (ii)
Indebtedness of any Restricted Subsidiary of the Company the proceeds of
which are used solely to refinance (whether by amendment, renewal,
extension or refunding) Indebtedness of any Restricted Subsidiary (in each
case other than the Indebtedness to be refinanced, redeemed or retired as
described under "Use of Proceeds" in the Offering Memorandum, and
Indebtedness under clause (b) or (g) through (m) of this definition);
provided, however, that (x) the principal amount of Indebtedness incurred
-------- -------
pursuant to this clause (n) (or, if such Indebtedness provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the maturity thereof, the original issue
price of such Indebted-
<PAGE>
-25-
ness) shall not exceed the sum of the principal amount of Indebtedness so
refinanced, plus the amount of any premium required to be paid in
connection with such refinancing pursuant to the terms of such Indebtedness
or the amount of any premium reasonably determined by the Company as
necessary to accomplish such refinancing by means of a tender offer or
privately negotiated purchase, plus the amount of expenses in connection
therewith, and (y) in the case of Indebtedness incurred pursuant to this
clause (n) to refinance Subordinated Indebtedness, such Indebtedness (A)
has no scheduled principal payment prior to the 91st day after the Maturity
Date, (B) has an Average Life to Stated Maturity greater than the remaining
Average Life to Stated Maturity of the Securities and (C) is subordinated
to the Securities in the same manner and to the same extent that the
Subordinated Indebtedness being refinanced is subordinated to the
Securities. Nothing in this clause (n) shall restrict the ability of the
Company or any Restricted Subsidiary to refinance any Indebtedness pursuant
to the terms of any other clause or provision of this Indenture, such as
those contemplated by the definition "Bank Facility."
"Permitted Investments" means any of the following: (i) Investments in
the Company or in a Restricted Subsidiary; (ii) Investments in another Person,
if as a result of such Investment (A) such other Person becomes a Restricted
Subsidiary or (B) such other Person is merged or consolidated with or into, or
transfers or conveys all or substantially all of its assets to the Company or a
Restricted Subsidiary; (iii) Investments representing Capital Stock or
obligations issued to the Company or any of its Restricted Subsidiaries in
settlement of claims against any other Person by reason of a composition or
readjustment of debt or a reorganization of any debtor of the Company or such
Restricted Subsidiary; (iv) Investments in Interest Rate Protection Agreements
on commercially reasonable terms entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business in connection with
the operations of the business of the Company or its Restricted Subsidiaries to
hedge against fluctuations in interest rates on its outstanding Indebtedness;
(v) Investments in the Securities; (vi) Investments in Cash Equivalents; (vii)
Investments acquired by the Company or any Restricted Subsidiary in connection
with an Asset Sale permitted under Section 10.14 to the extent such Investments
are non-cash proceeds as permitted under such covenant; (viii) advances to
employees or officers of the Company in the ordinary course of business; (ix)
any Investment to the extent that the consideration therefor is Capi-
<PAGE>
-26-
tal Stock (other than Redeemable Capital Stock) of the Company; and (x)
Investments in any Person engaged in the Entertainment/Programming Business not
to exceed $65,000,000 at any time outstanding.
"Permitted Liens" means the following types of Liens:
(a) any Lien existing as of the date of this Indenture;
(b) Liens securing Indebtedness and other amounts owing under the
Bank Facility;
(c) any Lien securing Acquired Indebtedness created prior to (and not
created in connection with, or in contemplation of) the incurrence of such
Indebtedness by the Company or any Restricted Subsidiary, if such Lien does
not attach to any property or assets of the Company or any Restricted
Subsidiary other than the property or assets subject to the Lien prior to
such incurrence;
(d) Liens in favor of the Company or a Restricted Subsidiary;
(e) Liens on and pledges of the Capital Stock of any Unrestricted
Subsidiary securing any Indebtedness of such Unrestricted Subsidiary;
(f) Liens for taxes, assessments or governmental charges or claims
either (i) not delinquent for 90 days or more or (ii) contested in good
faith by appropriate proceedings and as to which the Company or its
Restricted Subsidiaries shall have set aside on its books such reserves as
may be required pursuant to GAAP;
(g) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent for
90 days of more or being contested in good faith and as to which reserves
or other appropriate provisions, if any, as shall be required by GAAP shall
have been made in respect thereof;
(h) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory
<PAGE>
-27-
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(i) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(j) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Restricted Subsidiaries;
(k) any interest or title of a lessor or sublessor and any
restriction or encumbrance to which the interest or title of such lessor or
sublessor may be subject;
(l) purchase money Liens to finance property or assets of the Company
or any Restricted Subsidiary of the Company acquired in the ordinary course
of business; provided, however, that (i) the related purchase money
-------- -------
Indebtedness shall not be secured by any property or assets of the Company
other than the property and assets so acquired and (ii) the Lien securing
such Indebtedness shall be created within 180 days of such acquisition;
(m) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(n) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Company or any of its Restricted Subsidiaries, including rights of offset
and set-off;
(o) Liens securing Interest Rate Protection Obligations which
Interest Rate Protection Obligations relate to Indebtedness that is secured
by Liens otherwise permitted under this Indenture;
(p) Liens on assets of Unrestricted Subsidiaries;
<PAGE>
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(q) Liens securing Capitalized Lease Obligations or incurred in
connection with Sale-Leaseback Transactions;
(r) Liens securing other Indebtedness in an aggregate amount not to
exceed 10% of the Company's Consolidated Net Tangible Assets as of the last
day of the Company's most recently completed fiscal period for which
financial information is available;
(s) Liens in favor of the Screen Actors Guild, the Writers Guild of
America, the Directors Guild of America or any other unions, guilds or
collective bargaining units under the collective bargaining agreements,
which Liens are incurred in the ordinary course of business solely to
secure the payment of residuals and other collective bargaining obligations
required to be paid by the Company or any of its Restricted Subsidiaries
under any such collective bargaining agreement;
(t) Liens arising in connection with completion guarantees entered
into in the ordinary course of business and consistent with then current
industry practices, securing obligations (other than Indebtedness for
borrowed money) of the Company or any of its Restricted Subsidiaries not
yet due and payable;
(u) Liens in favor of suppliers and/or producers of any programming
that are incurred in the ordinary course of business solely to secure the
purchase price of such programming and such directly related rights or the
rendering of services necessary for the production of such programming;
provided, however, that no such Lien shall extend to or cover any property
-------- -------
or assets other than the programming and the rights directly related
thereto being so acquired or produced; and provided, further, that any
-------- -------
payment obligations secured by such Liens shall be their terms by payable
solely from the revenues that are derived directly from the exhibition,
syndication, exploitation, distribution or disposition of such item of
programming and/or such directly related rights;
(v) Liens upon any item of programming and rights directly related
thereto in favor of distributors of such item of programming that are
incurred in each case in the ordinary course of business solely to secure
delivery of such item of programming and the licensing of the rights in
such item of programming directly related thereto; provided, however, that
-------- -------
no such Lien shall extend to or cover
<PAGE>
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any property or assets other than the item of programming being so
delivered and the rights directly related thereto; and provided, further,
-------- -------
that any payment obligations secured by such Liens shall by
their terms by payable solely from the revenues that are derived directly
from the exhibition, syndication, exploitation, distribution or disposition
of such item of Product and/or such directly related rights; and
(w) Liens on assets or Capital Stock of a Special Purpose Vehicle.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock," as applied to any Person, means Capital Stock of
any class or classes (however designated) which is preferred as to the payment
of dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person.
"Private Exchange Securities" has the meaning set forth in the
Registration Rights Agreement.
"Private Placement Legend" shall mean the legend initially set forth
on the Securities in the form set forth on Exhibit B-1.
"Public Equity Offering" means an underwritten public offering of
Capital Stock (other than Redeemable Capital Stock) for the Company pursuant to
a registration statement filed with the Commission in accordance with the
Securities Act, which public equity offering results in net cash proceeds to the
Company of not less than $100 million.
"Purchase Amount," when used with respect to an Offer to Purchase,
shall mean the aggregate principal amount of the Outstanding Securities offered
to be purchased by the Company pursuant to the Offer to Purchase.
"Purchase Date" shall have the meaning set forth in the definition of
"Offer to Purchase."
<PAGE>
-30-
"Qualified Equity Interest" in a Person means any interest in Capital
Stock of such Person, other than Redeemable Capital Stock.
"Qualified Institutional Buyer" or "QIB" has the meaning specified in
Rule 144A under the Securities Act.
"Record Expiration Date" has the meaning specified in Section 1.4.
"Redeemable Capital Stock" means any class or series of Capital Stock
that, either by its terms, by the terms of any security into which it is
convertible or exchangeable or by contract or otherwise, is or upon the
happening of an event or passage of time would be, required to be redeemed prior
to the Maturity Date or is redeemable at the option of the Holder thereof at any
time prior to the Maturity Date, or is convertible into or exchangeable for debt
securities at any time prior to the Maturity Date.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registrable Securities" has the meaning set forth in the Registration
Rights Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement with respect to the Securities dated as of October 28, 1997 by and
among the Company and the Initial Purchasers, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the April 15 or October 15 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Security" means a permanent global Security in
registered form representing the aggregate
<PAGE>
-31-
principal amount at maturity of Securities sold in reliance on Regulation S
under the Securities Act.
"Replacement Assets" has the meaning specified in Section 10.14.
"Required Filing Dates" has the meaning specified in Section 10.19.
"Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Office, including, any vice president,
any assistant vice president, any assistant secretary, any assistant treasurer,
or any other officer of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.
"Restricted Payments" has the meaning specified in Section 10.9.
"Restricted Period" has the meaning set forth in Section 3.14.
"Restricted Security" means a Security that constitutes a "restricted
security" within the meaning of Rule 144(a)(3) under the Securities Act;
provided, however, that the Trustee shall be entitled to request and
- -------- -------
conclusively rely on an Opinion of Counsel with respect to whether any Security
constitutes a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company that is
not an Unrestricted Subsidiary.
"Restricted Subsidiary Indebtedness" means Indebtedness of any
Restricted Subsidiary (i) which is not subordinated to any other Indebtedness of
such Restricted Subsidiary and (ii) in respect of which the Company is not also
obligated (by means of a guarantee or otherwise) other than, in the case of this
clause (ii), Indebtedness under the Bank Facility.
"Revocation" has the meaning set forth in Section 10.18.
"Rule 144A" means Rule 144A under the Securities Act.
<PAGE>
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"Sale-Leaseback Transaction" of any Person means an arrangement with
any lender or investor or to which such lender or investor is a party providing
for the leasing by such Person of any property or asset of such Person which has
been or is being sold or transferred by such Person after the acquisition
thereof or the completion of construction or commencement of operation thereof
to such lender or investor or to any Person to whom funds have been or are to be
advanced by such lender or investor on the security of such property or asset.
The stated maturity of such arrangement shall be the date of the last payment of
rent or any other amount due under such arrangement prior to the first date on
which such arrangement may be terminated by the lessee without payment of a
penalty.
"S&P" means Standard & Poor's Ratings Group, and its successors.
"Securities" means securities designated in the first paragraph of the
RECITALS OF THE COMPANY.
"Securities Act" means the Securities Act of 1933 and any statute
successor thereto, in each case as amended from time to time.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.5.
"Senior Discount Notes" means the 10 1/4% Senior Discount Notes due
2007 issued by the Company, pursuant to an indenture dated as of the date
hereof.
"Series A Preferred Stock" means the Series A Preferred Stock of the
Company.
"Significant Subsidiary " of any Person means a Restricted Subsidiary
of such Person which would be a significant subsidiary of such Person as
determined in accordance with the definition in Section 210.1-02(w) of
Regulation S-X promulgated by the Commission and as in effect on the date of
this Indenture.
"Special Purpose Vehicle" means a Person which is, or was,
established: (i) with separate legal identity and limited liability; (ii) as an
Affiliate of the Company; and (iii) for the sole purpose of a single
transaction, or series of related transactions, and which has no assets and
liabilities other than those directly acquired or incurred in connection with
such transaction(s).
<PAGE>
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"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 3.7.
"Stated Maturity" means, when used with respect to any Security or any
installment of interest thereon, the date specified in such Security as the
fixed date on which the principal of such Security or such installment of
interest is due and payable, and when used with respect to any other
Indebtedness, means the date specified in the instrument governing such
Indebtedness as the fixed date on which the principal of such Indebtedness, or
any installment of interest thereon, is due and payable.
"Strategic Equity Investor" means a corporation or entity with an
equity market capitalization, a net asset value or annual revenues of at least
$1.0 billion that primarily owns and operates businesses in the entertainment,
cable television, programming or similar or related industries.
"Subordinated Indebtedness" means, with respect to the Company,
Indebtedness of the Company which is expressly subordinated in right of payment
to the Securities.
"Subsidiary" means, with respect to any Person, (i) a corporation at
least 50% of whose Voting Stock is at the time, directly or indirectly, owned by
such Person, by one or more Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof and (ii) any other Person (other than a
corporation), including, without limitation, a partnership, limited liability
company, business trust or a joint venture, in which such Person, one or more
Subsidiaries thereof or such Person and one or more Subsidiaries thereof,
directly or indirectly, at the date of determination thereof, has at least a 50%
ownership interest entitled to vote in the election of directors, managers or
trustees thereof (or other Person performing similar functions). For purposes of
this definition, any directors' qualifying shares or investments by foreign
nationals mandated by applicable law shall be disregarded in determining the
ownership of a Subsidiary.
"Trustee" means the Person named as the Trustee, in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
<PAGE>
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"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided, however,
-------- -------
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"Unrestricted Securities" means one or more Securities that do not and
are not required to bear the Private Placement Legend in the form set forth in
Exhibit A-1, including, without limitation, the Exchange Securities.
- -----------
"Unrestricted Subsidiary" means each Subsidiary of the Company
designated as such pursuant to and in compliance with the covenant described
under Section 10.18.
"U.S. Government Obligation" has the meaning specified in
Section 12.4.
"Vice President," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president."
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least 50% of the board of directors, managers or
trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes shall have, or might have, voting power by reason of
the happening of any contingency).
SECTION 1.2. Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of
an Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirement set forth in
this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
<PAGE>
-35-
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 1.3. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
<PAGE>
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Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.4. Acts of Holders; Record Dates.
-----------------------------
Any request, demand, authorization, direction, notice, consent, waiver
or other action provided or permitted by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
The ownership of Securities shall be proved by the Security Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in
<PAGE>
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respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to give or take any
request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Indenture to be given or taken by Holders
of Securities, provided that the Company may not set a record date for, and the
--------
provisions of this paragraph shall not apply with respect to, the giving or
making of any notice, declaration, request or direction referred to in the next
paragraph. If any record date is set pursuant to this paragraph, the Holders of
Outstanding Securities on such record date, and no other Holders, shall be
entitled to take the relevant action, whether or not such Holders remain Holders
after such record date; provided that no such action shall be effective
--------
hereunder unless taken on or prior to the applicable Record Expiration Date by
Holders of the requisite principal amount at maturity of Outstanding Securities
on such record date; and provided, further, that for the purpose of determining
-------- -------
whether Holders of the requisite principal amount at maturity of such Securities
have taken such action, no Security shall be deemed to have been Outstanding on
such record date unless it is also Outstanding on the date such action is to
become effective. Nothing in this paragraph shall prevent the Company from
setting a new record date for any action for which a record date has previously
been set pursuant to this paragraph (whereupon the record date previously set
shall automatically and with no action by any Person be cancelled and of no
effect), nor shall anything in this paragraph be construed to render ineffective
any action taken pursuant to or in accordance with any other provision of this
Indenture by Holders of the requisite principal amount at maturity of
Outstanding Securities on the date such action is taken. Promptly after any
record date is set pursuant to this paragraph, the Company, at its own expense,
shall cause notice of such record date, the proposed action by Holders and the
applicable Record Expiration Date to be given to the Trustee in writing and to
each Holder of Securities in the manner set forth in Section 1.6.
The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to join in the giving
or making of (i) any Notice of Default, (ii) any declaration of acceleration
referred to in Section 5.2, (iii) any request to institute proceedings referred
to in Section 5.7(2) or (iv) any direction referred to
<PAGE>
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in Section 5.12. If any record date is set pursuant to this paragraph, the
Holders of Outstanding Securities on such record date, and no other Holders,
shall be entitled to join in such notice, declaration, request or direction,
whether or not such Holders remain Holders after such record date; provided that
-------- ----
no such action shall be effective hereunder unless taken on or prior to the
applicable Record Expiration Date by Holders of the requisite principal amount
at maturity of Outstanding Securities on such record date; and provided,
--------
further, that for the purpose of determining whether Holders of the requisite
- -------
principal amount at maturity of such Securities have taken such action, no
Security shall be deemed to have been Outstanding on such record date unless it
is also Outstanding on the date such action is to become effective. Nothing in
this paragraph shall be construed to prevent the Trustee from setting a new
record date for any action (whereupon the record date previously set shall
automatically and without any action by any Person be cancelled and of no
effect), nor shall anything in this paragraph be construed to render ineffective
any action taken pursuant to or in accordance with any other provision of this
Indenture by Holders of the requisite principal amount at maturity of
Outstanding Securities on the date such action is taken. Promptly after any
record date is set pursuant to this paragraph, the Trustee, at the Company's
expense, shall cause notice of such record date, the matter(s) to be submitted
for potential action by Holders and the applicable Record Expiration Date to be
given to the Company in writing and to each Holder of Securities in the manner
set forth in Section 1.6.
With respect to any record date set pursuant to this Section, the
party hereto that sets such record date may designate any day as the "Record
Expiration Date" and from time to time may change the Record Expiration Date to
any earlier or later day, provided that no such change shall be effective unless
--------
notice of the proposed new Record Expiration Date is given to the other party
hereto in writing, and to each Holder of Securities in the manner set forth in
Section 1.6, on or before the existing Record Expiration Date. If a Record
Expiration Date is not designated with respect to any record date set pursuant
to this Section, the party hereto that set such record date shall be deemed to
have initially designated the 180th day after such record date as the Record
Expiration Date with respect thereto, subject to its right to change the Record
Expiration Date as provided in this paragraph. Notwithstanding the foregoing,
no Record Expiration Date shall be later than the 180th day after the applicable
record date.
<PAGE>
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Without limiting the foregoing, a Holder entitled hereunder to take
any action hereunder with regard to any particular Security may do so with
regard to all or any part of the principal amount at maturity of such Security
or by one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such principal amount at maturity.
SECTION 1.5. Notices to Trustee and Company.
------------------------------
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
and mailed, first-class postage prepaid, to or with the Trustee at its
Corporate Trust Office, Attention: Corporate Trust Administration;
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this instrument, with a copy to The News Corporation
Limited at 1211 Avenue of the Americas, 3rd Floor, New York, NY 10036,
Attention: Arthur M. Siskind, Esq., or at any other address previously
furnished in writing to the Trustee by the Company.
SECTION 1.6. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice.
In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders.
<PAGE>
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Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 1.7. Conflict with Trust Indenture Act.
---------------------------------
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be part
of and govern this Indenture, the latter provision shall control. if any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be.
SECTION 1.8. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 1.9. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by each of the Company
shall bind its successors and assigns, whether so expressed or not.
SECTION 1.10. Separability Clause.
-------------------
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 1.11. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the par-
<PAGE>
-41-
ties hereto and their successors hereunder and the Holders of Securities, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 1.12. Governing Law.
-------------
This Indenture and the Securities shall be governed by and construed
in accordance with the laws of the State of New York, without regard to the
conflicts of laws principles thereof.
SECTION 1.13. Legal Holidays.
--------------
In any case where any Interest Payment Date, Redemption Date, Purchase
Date or Stated Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal (and premium, if any) need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect (including with respect to the accrual of interest) as if made on the
Interest Payment Date, Redemption Date or Purchase Date, or at the Stated
Maturity.
ARTICLE II
SECURITY FORMS
SECTION 2.1. Forms Generally.
---------------
The Securities and the Trustee's certificates of authentication shall
be in substantially the forms set forth or referenced in Exhibit A-1 and Exhibit
A-2 annexed hereto, with such appropriate insertions, omissions, substitutions
and other variations as are required or permitted by this Indenture, and may
have such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such Securities, as evidenced by their execution thereof.
The definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these methods on steel engraved borders or may
be produced in any other manner permitted by the rules of any securities
exchange on which the Securities may be listed, all as determined by the
<PAGE>
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officers executing such Securities, as evidenced by their execution of such
Securities.
ARTICLE III
THE SECURITIES
SECTION 3.1. Title and Terms.
---------------
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $475,000,000
principal face amount of Initial Securities and up to $475,000,000 principal
face amount of Securities exchanged therefor in accordance with the Registration
Rights Agreement, except for Securities authenticated and delivered upon
registration or transfer of, or in exchange for, or in lieu of, other Securities
pursuant to Section 3.4, 3.5, 3.6, 9.6 or 11.8 or in connection with an Offer
pursuant to Sections 10.13 or 10.14.
The Securities shall be known and designated as the "9 1/4% Senior
Notes due 2007" of the Company. Their Stated Maturity shall be November 1,
2007. Interest on the Securities shall accrue at the rate of 9 1/4% per annum
and shall be payable semi-annually on each May 1 and November 1, commencing May
1, 1998, to the Holders of record of Securities at the close of business on the
April 15 and October 15 immediately preceding such Interest Payment Date.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the Issue Date of
such Securities. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
The principal of (and premium, if any) and interest on the Securities
shall be payable at the office or agency of the Company in the Borough of
Manhattan, The City of New York maintained for such purpose and at any other
office or agency maintained by the Company for such purpose; provided, however,
-------- -------
that, at the option of the Company, payment of interest may be made by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register.
The Company may be required to make a Change of Control Offer as
provided in Section 10.13, or an Asset Sale Offer as provided in Section 10.14.
<PAGE>
-43-
The Securities shall be redeemable as provided in Article II and
Article XI.
The Securities shall be subject to Defeasance and/or Covenant
Defeasance as provided in Article XII.
SECTION 3.2. Denominations.
-------------
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 principal face amount at maturity
and any integral multiple thereof.
SECTION 3.3. Execution, Authentication, Delivery and Dating.
----------------------------------------------
The Initial Securities and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A-1 hereto. The Exchange
-----------
Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A-2 hereto.
-----------
The terms and provisions contained in the Securities annexed hereto as
Exhibits A-1 and A-2 shall constitute, and are hereby expressly made, a part of
- ------------ ---
this Indenture and, to the extent applicable, the Company and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
Securities offered and sold in reliance on Rule 144A and Securities
offered and sold in reliance on Regulation S shall be issued initially in the
form of one or more Global Securities, substantially in the form set forth in
Exhibit A-1, deposited with the Trustee, as custodian for the Depository, duly
- -----------
executed by the Company and authenticated by the Trustee as hereinafter provided
and shall bear the legend set forth in Exhibit B. The aggregate principal amount
---------
at maturity of the Global Securities may from time to time be increased or
decreased by adjustments made on the records of the Trustee, as custodian for
the Depository, as hereinafter provided.
All Securities shall remain in the form of a Global Security, except
as provided herein.
The Securities shall be executed on behalf of each of the Company by
its Chairman of the Board, its Chief Executive Officer, its President or one of
its Vice Presidents, attested by its Secretary or one of its Assistant
Secretaries. The sig-
<PAGE>
-44-
nature of any of these officers on the Securities and the Seal may be manual or
facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall authenticate and make available for delivery such
Securities as in this Indenture provided and not otherwise.
The Trustee shall have the right to decline to authenticate and make
available for delivery any Securities under this Section if the Trustee, being
advised by counsel, determines that such action may not lawfully be taken or if
the Trustee in good faith by its board of directors or trustees, executive
committee, or a trust committee of directors or trustees or vice presidents
shall determine that such action would expose the Trustee to personal liability
to existing Holders.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and made available for delivery hereunder.
SECTION 3.4. Temporary Securities.
--------------------
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and make
available for delivery, temporary Securities which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of
<PAGE>
-45-
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Company designated pursuant to Section 10.2, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities the Company shall execute and the Trustee shall authenticate and make
available for delivery in exchange therefor a like principal amount at maturity
of definitive Securities of authorized denominations and of a like tenor. Until
so exchanged the temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities.
SECTION 3.5. Registration, Registration of Transfer and Exchange.
---------------------------------------------------
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 10.2 being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as the Company may prescribe, the Company shall provide
for the registration of Securities and of transfers of Securities. The Trustee
is hereby appointed "Security Registrar" for the purpose of registering
Securities and transfers of Securities as herein provided.
Subject to Sections 3.13 and 3.14 of this Indenture, upon surrender
for registration of transfer of any Security at an office or agency of the
Company designated pursuant to Section 10.2 for such purpose, the Company shall
execute, and the Trustee shall authenticate and make available for delivery, in
the name of the designated transferee or transferees, one more or more new
Securities of any authorized denominations and of a like aggregate principal
amount at maturity and tenor.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations and of a like aggregate principal
amount at maturity and tenor, upon surrender of the Securities to be exchanged
at such office or agency. Whenever any Securities are so surrendered for
ex-
<PAGE>
-46-
change, the Company shall execute, and the Trustee shall authenticate and make
available for delivery, the Securities which the Holder making the exchange is
entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 3.4, 9.6 or 11.8 or in accordance with any Change
of Control Offer pursuant to Section 10.13 or any Asset Sale Offer pursuant to
Section 10.14 and in any such case not involving any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the day of the mailing of a notice of redemption of Securities
selected for redemption under Section 11.4 and ending at the close of business
on the day of such mailing, or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Securities.
------------------------------------------------
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and make available for delivery
in exchange therefor a new Security of like tenor and principal amount at
maturity and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company, and the Trustee (i)
evidence to their satisfaction of the destruction,
<PAGE>
-47-
loss or theft of any Security and (ii) such security or indemnity as may be
required by them to save each of them and any agent of each of them harmless,
then, in the absence of actual notice to the Company or the Trustee that such
Security has been acquired by a bona fide purchaser, the Company shall execute,
and upon their request the Trustee shall authenticate and make available for
delivery, in lieu of any such destroyed, lost or stolen Security, a new Security
of like tenor and principal amount at maturity and bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of, issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.7. Payment of Interest; Rights Preserved.
-------------------------------------
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more predecessor securities) is registered
at the close of business on the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
De-
<PAGE>
-48-
faulted Interest may be paid by the Company, at their election in each case,
as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each Security and
the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date
of the proposed payment, such money when deposited to be held in trust for
the benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be given to each Holder in the manner
specified in Section 1.6, not less than 10 days prior to such Special
Record Date. Notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor having been so mailed, such Defaulted
Interest shall be paid to the Persons in whose names the Securities (or
their respective Predecessor Securities) are registered at the close of
business on such Special Record Date and shall no longer be payable
pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this Clause,
such manner of payment shall be deemed practicable by the Trustee.
<PAGE>
-49-
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 3.8. Persons Deemed Owners.
---------------------
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of (and premium, if
any) and (subject to Section 3.7) interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 3.9. Cancellation.
------------
All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any Change of Control Offer pursuant
to Section 10.13 or any Asset Sale Offer pursuant to Section 10.14 shall, if
surrendered to any Person other than the Trustee, be made available for delivery
to the Trustee and shall be promptly canceled by it. The Company may at any
time deliver to the Trustee for cancellation any Securities previously
authenticated and made available for delivery hereunder which the Company may
have acquired in any manner whatsoever, and all Securities so delivered shall be
promptly canceled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities canceled as provided in this Section,
except as expressly permitted by this Indenture. All canceled Securities held
by the Trustee shall be disposed of as directed by a Company Order; provided,
--------
however, that the Trustee shall not be required to destroy canceled Securities.
- -------
SECTION 3.10. Computation of Interest.
-----------------------
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
SECTION 3.11. CUSIP and CINS Numbers.
----------------------
The Company in issuing the Securities may use "CUSIP" and "CINS"
numbers (if then generally in use), and, if so, the
<PAGE>
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Trustee shall use the CUSIP or CINS numbers in notices of redemption or
repurchase as a convenience to Holders; provided that any such notice may state
--------
that no representation is made as to the correctness of such numbers either as
printed on the Securities or as contained in any notice of a redemption or
repurchase and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption or repurchase shall
not be affected by any defect in or omission of such numbers. The Company shall
promptly notify the Trustee of any change in the CUSIP or CINS numbers.
SECTION 3.12. Deposits of Monies.
------------------
(a) The Company may from time to time appoint one or more Paying
Agents under this Indenture and the Securities.
(b) Unless the Company shall be acting as Paying Agent as provided in
Section 10.3 hereof, prior to 1:00 p.m. New York City time on each Interest
Payment Date, Redemption Date, Stated Maturity, and Purchase Date, the Company
shall deposit with the Paying Agent in immediately available funds money
sufficient to make cash payments, if any, due on such Interest Payment Date,
Redemption Date, Stated Maturity and Purchase Date, as the case may be, in a
timely manner which permits the Paying Agent to remit payment to the Holders on
such Interest Payment Date, Redemption Date, Stated Maturity, and Purchase Date,
as the case may be.
SECTION 3.13. Book-Entry Provisions for Global Securities.
-------------------------------------------
(a) The Global Securities initially shall (i) be registered in the
name of the Depository or the nominee of such Depository, (ii) be delivered to
the Trustee as custodian for such Depository and (iii) bear legends as set forth
in Exhibit C hereto.
---------
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository, or the Trustee as its custodian, or under any
Global Security, and the Depository may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of the Global
Securities for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company, or
the Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Deposi-
<PAGE>
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tory or impair, as between the Depository and its Agent Members, the operation
of customary practices governing the exercise of the rights of a Holder of any
Security.
(b) Transfer of Global Securities shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Securities may not be
transferred or exchanged for physical securities, except that physical
securities shall be transferred to all beneficial owners in exchange for their
beneficial interests in Global Securities if (i) the Depository notifies the
Company that it is unwilling or unable to continue as Depository for any Global
Security, or that it will cease to be a "Clearing Agency" under the Exchange
Act, and in either case a successor Depository is not appointed by the Company
within 90 days of such notice or (ii) an Event of Default has occurred and is
continuing and the Registrar has received a written request from the Depository
to issue physical securities.
(c) the Holder of any Global Security may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Securities.
SECTION 3.14. Special Transfer Provisions.
---------------------------
(a) Transfers to Non-U.S. Persons. The following additional
-----------------------------
provisions shall apply with respect to the registration of any proposed transfer
of an Initial Security to any Non-U.S. Person:
(i) the Registrar shall register the transfer of any Initial
Security, whether or not such Security bears the Private Placement Legend,
if (x) the requested transfer is after the second anniversary of the Issue
Date; provided, however, that neither the Company, nor any Affiliate of the
-------- -------
Company, has held any beneficial interest in such Security, or portion
thereof, at any time on or prior to the second anniversary of the Issue
Date and such transfer can otherwise be lawfully made under the Securities
Act without registering such Initial Security thereunder or (y) the
proposed transferor has delivered to the Registrar a certificate
substantially in the form of Exhibit D hereto;
---------
(ii) if the proposed transferor is an Agent Member seeking to
transfer an interest in a 144A Global Security,
<PAGE>
-52-
upon receipt by the Registrar of (x) written instructions given in
accordance with the Depository's and the Registrar's procedures and (y) the
appropriate certificate, if any, required by clause (y) of paragraph (i)
above, together with any required legal opinions and certifications, the
Registrar shall register the transfer and reflect on its books and records
the date and (A) a decrease in the principal amount at maturity of the 144A
Global Security from which such interests are to be transferred in an
amount equal to the principal amount at maturity of the Securities to be
transferred and (B) an increase in the principal amount at maturity of the
Regulation S Global Security in an amount equal to the principal amount at
maturity of the Global Security to be transferred; and
(iii) subject to Section 3.14(b), until the 41st day after the
Issue Date (the "Restricted Period"), an owner of a beneficial interest in
the Regulation S Global Security may not transfer such interest to a
transferee that is a U.S. Person or for the account or benefit of a U.S.
Person within the meaning of Rule 902(o) of the Securities Act. Subject to
Section 3.14(b), during the Restricted Period, all beneficial interests in
the Regulation S Global Security shall be transferred only through Cedel or
Euroclear, either directly if the transferor and transferee are
participants in such systems, or indirectly through organizations that are
participants therein.
(b) Transfers to QIBs. The following provisions shall apply with
-----------------
respect to the registration of any proposed transfer of an Initial Security to a
QIB (excluding Non-U.S. Persons):
(i) the Registrar shall register the transfer of any Initial
Security, whether or not such Security bears the Private Placement Legend,
if (x) the requested transfer is after the second anniversary of the Issue
Date; provided, however, that neither the Company nor any Affiliate of the
-------- -------
Company has held any beneficial interest in such Security, or portion
thereof, at any time on or prior to the second anniversary of the Issue
Date and such transfer can otherwise be lawfully made under the Securities
Act without registering such Initial Security thereunder or (y) such
transfer is being made by a proposed transferor who has checked the box
provided for on the form of Security stating, or has otherwise advised the
Company and the Registrar in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a transferee who has
<PAGE>
-53-
signed the certification provided for on the form of Security stating, or
has otherwise advised the Company and the Registrar in writing, that it is
purchasing the Security for its own account or an account with respect to
which it exercises sole investment discretion and that it and any such
account is a QIB within the meaning of Rule 144A, and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges that it
has received such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such information and
that it is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration provided
by Rule 144A; and
(ii) if the proposed transferor is an Agent Member seeking to
transfer an interest in a Regulation S Global Security, upon receipt by the
Registrar of written instructions given in accordance with the Depository's
and the Registrar's procedures, the Registrar shall register the transfer
and reflect on its books and records the date and (A) a decrease in the
principal amount at maturity of the Regulation S Global Security from which
interests are to be transferred in an amount equal to the principal amount
at maturity of the Securities to be transferred and (B) an increase in the
principal amount at maturity of the 144A Global Security in an amount equal
to the principal amount at maturity of the Global Security to be
transferred.
(c) Transfers to Non-QIB Institutional Accredited Investors. The
-------------------------------------------------------
following provisions shall apply with respect to the registration of any
proposed transfer of an Initial Security to any Institutional Accredited
Investor that is not a QIB (excluding Non-U.S. persons):
(i) The Registrar shall register the transfer of any Initial
Security, whether or not such Security bears the Private Placement Legend,
if (x) the requested transfer is subsequent to a date that is two years
after the later of the Issue Date and the last date on that the Company or
any of its Affiliates was the owner of such Security or (y) the proposed
transferee has delivered to the Security Registrar a certificate
substantially in the form of Exhibit D hereto.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in a Global Security seeking to transfer a Physical
Security to another person, upon
<PAGE>
-54-
receipt by the Registrar of (x) the documents, if any, required by
paragraph (i) and (y) instructions given in accordance with the
Depository's and the Registrar's procedures therefor, the Registrar shall
reflect on its books and records the date and a decrease in the principal
amount of such Global Security in an amount equal to the principal amount
of the beneficial interest in such Global Security to be transferred, and
the Company shall execute, and the Trustee shall authenticate and deliver,
one or more Physical Certificates of like tenor and amount.
(d) Private Placement Legend. Upon the registration of transfer,
------------------------
exchange or replacement of Securities not bearing the Private Placement Legend,
the Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the registration of transfer, exchange or replacement of
Securities bearing the Private Placement Legend, the Registrar shall deliver
only Securities that bear the Private Placement Legend unless (i) the
circumstances contemplated by paragraph (a)(i)(x) of this Section 3.14 exists,
(ii) there is delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act or (iii) such
Security has been sold pursuant to an effective registration statement under the
Securities Act.
(e) Other Transfers. If a Holder proposes to transfer a Security
---------------
constituting a Restricted Security pursuant to any exemption from the
registration requirements of the Securities Act other than as provided for by
Section 3.14(a), (b), (c), and (d), the Registrar shall only register such
transfer or exchange if such transferor delivers an Opinion of Counsel
satisfactory to the Company and the Registrar that such transfer is in
compliance with the Securities Act and the terms of this Indenture.
(f) General. By its acceptance of any Security bearing the Private
-------
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 3.13 or this Section 3.14.
The Company shall have the right to inspect and make copies of all such letters,
notices
<PAGE>
-55-
or other written communications at any reasonable time upon the giving of
reasonable prior written notice to the Registrar.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Securities herein
expressly provided for), and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and
which have been replaced or repaid as provided in Section 3.6 and (ii)
Securities for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided in
Section 10.3) have been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee
for cancellation (other than Securities which have been destroyed,
lost or stolen and which have been replaced or repaid as provided in
Section 3.6),
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name, and at the
expense, of the Company,
<PAGE>
-56
and the Company, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be deposited with the Trustee as
trust funds in trust for the purpose an amount sufficient to pay and
discharge the entire Indebtedness on such Securities not theretofore
delivered to the Trustee for cancellation, for principal (and premium,
if any) and interest on the Securities to the date of such deposit (in
the case of Securities which have become due and payable) or to the
Stated Maturity or Redemption Date, as the case may be, together with
irrevocable instructions from the Company directing the Trustee to
apply such funds to the payment thereof at maturity or redemption, as
the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture pursuant to
this Article IV, the obligations of the Company to the Trustee under Section
6.7, the obligations of the Company to any Authenticating Agent under Section
6.14 and, if money shall have been deposited with the Trustee pursuant to
subclause (B) of clause (1) of this Section, the obligations of the Trustee
under Section 4.2 and the last paragraph of Section 10.3 shall survive.
SECTION 4.2. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 10.3, all
money deposited with the Trustee pursuant to Section 4.1 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee.
<PAGE>
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ARTICLE V
REMEDIES
SECTION 5.1. Events of Default.
-----------------
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) default in the payment of the principal of or premium, if any,
when due and payable, on any of the Securities (at Stated Maturity, upon
optional redemption, required purchase or otherwise); or
(2) default in the payment of an installment of interest on any of the
Securities, when due and payable, for 30 days; or
(3) (a) default in the performance, or breach, of any covenant or
agreement of the Company under the Indenture (other than a default in the
performance or breach of a covenant or agreement which is specifically
dealt with in clauses (1) or (2) or subclauses (b), (c) or (d) of this
clause (3)) and such default or breach shall continue for a period of 45
days after written notice has been given, by certified mail, (x) to the
Company by the Trustee or (y) to the Company and the Trustee by the Holders
of at least 25% in aggregate principal amount at maturity of the
Outstanding Securities; (b) there shall be a default in the performance or
breach of the provisions of Article VIII; (c) the Company shall have failed
to make or consummate a Change of Control Offer in accordance with the
provisions of the Indenture described under Section 10.13; or (d) the
Company shall have failed to make or consummate an Asset Sale Offer in
accordance with the provisions of this Indenture described under Section
10.14; or
(4) default or defaults under one or more agreements, instruments,
mortgages, bonds, debentures or other evidences of Indebtedness under which
the Company or any Significant Subsidiary of the Company then has
outstanding Indebtedness in excess of $20,000,000, individually or in
<PAGE>
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the aggregate, and either (a) such Indebtedness is already due and payable
in full or (b) such default or defaults have resulted in the acceleration
of the maturity of such Indebtedness; or
(5) one or more judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the
payment of money in excess of $20,000,000 (net of any amounts covered by
insurance therefor of which the insurance provider has been notified and
not challenged coverage) either individually or in the aggregate, shall be
entered against the Company or any Significant Subsidiary of the Company or
any of their respective properties and shall not be discharged and there
shall have been a period of 60 days after the date on which any period for
appeal has expired and during which a stay of enforcement of such judgment,
order or decree, shall not be in effect; or
(6) the entry of a decree or order by a court having jurisdiction in
the premises (A) for relief in respect of the Company or any Significant
Subsidiary in an involuntary case or proceeding under the Federal
Bankruptcy Code or any other federal, state or foreign bankruptcy,
insolvency, reorganization or similar law or (B) adjudging the Company or
any Significant Subsidiary bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment or composition of or in respect of
the Company or any Significant Subsidiary under the Federal Bankruptcy Code
or any other similar federal, state or foreign law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Company or any Significant Subsidiary or of any
substantial part of any of their properties, or ordering the winding up or
liquidation of any of their affairs, and the continuance of any such decree
or order unstayed and in effect for a period of 60 consecutive days; or
(7) the institution by the Company or any Significant Subsidiary of a
voluntary case or proceeding under the Federal Bankruptcy Code or any other
similar federal, state or foreign law or any other case or proceedings to
be adjudicated a bankrupt or insolvent, or the consent by the Company or
any Significant Subsidiary to the entry of a decree or order for relief in
respect of the Company or any Significant Subsidiary in any involuntary
case or proceeding under the Federal Bankruptcy Code or any other similar
federal, state or foreign law or to the institu-
<PAGE>
-59-
tion of bankruptcy or insolvency proceedings against the Company or any
Significant Subsidiary, or the filing by the Company or any Significant
Subsidiary of a petition or answer or consent seeking reorganization or
relief under the Federal Bankruptcy Code or any other similar federal,
state or foreign law, or the consent by it to the filing of any such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or other similar
official) of any of the Company or any Significant Subsidiary or of any
substantial part of its property, or the making by it of an assignment for
the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due or the taking of
corporate action by the Company or any Significant Subsidiary in
furtherance of any such action.
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
If an Event of Default (other than those covered by clause (6) or (7)
of Section 5.1 with respect to the Company) shall occur and be continuing, the
Trustee, by notice to the Company, or the Holders of at least 25% in aggregate
principal amount at maturity of the Securities then Outstanding, by notice to
the Trustee and the Company, may declare the Default Amount to be due and
payable immediately, upon which declaration, the Default Amount shall be
immediately due and payable, provided, however, that so long as the Bank
-------- -------
Facility shall be in full force and effect, any acceleration arising from any
Event of Default (other than an Event of Default with respect to the Company
described in clause (6) or (7) of the preceding paragraph) shall not become
effective until the earlier of (x) five Business Days following delivery of
written notice of such acceleration of the Securities to the agent under the
Bank Facility and (y) the acceleration (ipso facto or otherwise) of any
---- -----
Indebtedness under the Bank Facility. If an Event of Default specified in
clause (6) or (7) of Section 5.1 with respect to the Company occurs and is
continuing, then the Default Amount shall ipso facto become and be immediately
due and payable without any declaration or other act on the part of the Trustee
or any Holder of Securities.
After a declaration of acceleration under the Indenture, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the Holders of a majority in aggregate principal amount at maturity of
the Outstanding
<PAGE>
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Securities, by written notice to the Company and the Trustee, may rescind such
declaration if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all sums paid or advanced by the Trustee under this Indenture
and the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel,
(B) all overdue interest on all Securities,
(C) the principal of and premium, if any, on any Securities which
have become due otherwise than by such declaration of acceleration and
interest thereon at the rate borne by the Securities, and
(D) to the extent that payment of such interest is lawful,
interest upon overdue interest and overdue principal at the rate borne
by the Securities which has become due otherwise than by such
declaration of acceleration;
(2) the rescission would not conflict with any judgment or decree of a
court of competent jurisdiction; and
(3) all Events of Default, other than the nonpayment of principal of,
premium, if any, and interest on the Securities that has become due solely
by such declaration of acceleration, have been cured or waived.
No such rescission shall affect any subsequent default or impair any
right consequent thereto.
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee.
---------------------------------------------------------------
The Company covenants that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or premium, if
any, on) any Security at the Maturity thereof or, with respect to any
Security required to have been purchased pursuant to a Change of Control
Offer or an
<PAGE>
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Asset Sale Offer made by the Company, at the purchase date
thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and, to the extent
that payment of such interest shall be legally enforceable, interest on any
overdue principal (and premium, if any) and on any overdue interest, at the rate
provided by the Securities, and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
In addition to the rights and powers set forth in Section 317(a) of
the Trust Indenture Act, the Trustee shall be entitled to file such other papers
or documents as may be necessary or advisable in order to have the claims of the
Trustee and of the Holders of the Securities allowed in any judicial proceeding
relative to the Company or other obligor upon the Securities, its creditors, or
its property, and to collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute the same after the deduction
of its charges and expenses; and any receiver, assignee or trustee in bankruptcy
or reorganization is hereby authorized by each of the Holders to make such
payments to the Trustee, and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for compensation and expenses, including counsel fees and expenses
incurred by it up to the date of such distribution.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 5.4. Trustee May File Proofs of Claim.
--------------------------------
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take
<PAGE>
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any and all actions authorized under the Trust Indenture Act in order to have
claims of the Holders and the Trustee allowed in any such proceeding. In
particular, the Trustee shall be authorized to collect and receive any moneys or
other property payable or deliverable on any such claims and to distribute the
same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator
or other similar official in any such judicial proceeding is hereby authorized
by each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 6.7.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding; provided,
--------
however, that the Trustee may, on behalf of the Holders, vote for the election
- -------
of a trustee in bankruptcy or similar official and be a member of a creditors'
or other similar committee.
SECTION 5.5. Trustee May Enforce Claims Without Possession of Securities.
-----------------------------------------------------------
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
distributions and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 5.6. Application of Money Collected.
------------------------------
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal (or premium,
if any) or interest, upon presentation of the Securities and the notation
<PAGE>
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thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
6.7; and
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal (and premium, if
any) and interest, respectively.
SECTION 5.7. Limitation on Suits.
-------------------
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount at maturity
of the Outstanding Securities shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its
own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 15 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 15-day period by the Holders of a majority in
principal amount at maturity of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or
<PAGE>
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to seek to obtain priority or preference over any other Holders or to enforce
any right under this Indenture, except in the manner herein provided and for the
equal and ratable benefit of all the Holders.
SECTION 5.8. Unconditional Right of Holders to Receive Principal, Premium and
----------------------------------------------------------------
Interest.
---------
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Section 3.7) interest on such Security on the respective Stated Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date or in the case of a Change of Control Offer or an Asset Sale Offer made by
the Company and required to be accepted as to such Security, on the relevant
purchase date) and to institute suit for the enforcement of any such payment,
and such rights shall not be impaired without the consent of such Holder.
SECTION 5.9. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adverseLY to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 3.6, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
<PAGE>
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SECTION 5.11. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 5.12. Control by Holders.
------------------
The Holders of a majority in principal amount at maturity of the
Outstanding Securities shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, provided that
--------
(1) such direction shall not be in conflict with any rule of law or
with this Indenture, and
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
SECTION 5.13. Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in principal amount at
maturity of the Outstanding Securities may on behalf of the Holders of all the
Securities waive any past default hereunder and its consequences, except a
default
(1) in the payment of the principal of (or premium, if any) or
interest on any Security (including any Security which is required to have
been purchased pursuant to a Change of Control Offer or an Asset Sale Offer
which has been made by the Company), or
(2) in respect of a covenant or provision hereof which under Article
IX cannot be modified or amended without the consent of the Holder of each
Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no
<PAGE>
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such waiver shall extend to any subsequent or other default or impair any right
consequent thereon.
SECTION 5.14. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, including reasonable attorneys' fees and expenses, in
the manner and to the extent provided in the Trust Indenture Act; provided, that
--------
neither this Section nor the Trust Indenture Act shall be deemed to authorize
any court to require such an undertaking or to make such an assessment in any
suit instituted by the Company, in any suit instituted by the Trustee, in any
suit instituted by any Holder, or group of Holders, holding in the aggregate
more than 10% in principal amount at maturity of the Outstanding Securities, or
in any suit instituted by any Holder for the enforcement of the payment of the
principal of (or premium, if any) or interest on any Security on or after the
Stated Maturity expressed in such Security (or, in the case of redemption, on or
after the Redemption Date or, in the case of a Change of Control Offer or an
Asset Sale Offer, made by the Company and required to be accepted as to such
Security, on the Change of Control Purchase Date or the Asset Sale Offer date,
as the case may be).
SECTION 5.15. Waiver of Stay or Extension Laws.
--------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
<PAGE>
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ARTICLE VI
THE TRUSTEE
SECTION 6.1. Certain Duties and Responsibilities.
-----------------------------------
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by the provisions
hereof are specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture (but need not
confirm or investigate the accuracy of mathematical calculations or other
facts stated therein).
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent misconduct, except that
(1) no provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of
its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it;
<PAGE>
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(2) this subsection (c) shall not be construed to limit the effect of
Subsection (a) of this Section 6.1;
(3) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(4) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the Holders of a majority in principal amount at maturity of the
Outstanding Securities determined as provided in Sections 1.1, 1.4 and
5.12, relating to the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Indenture with respect to the
Securities.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section 6.1.
SECTION 6.2. Notice of Defaults.
------------------
Within 90 days after the occurrence of any Default, the Trustee shall
transmit by mail to all Holders, as their names and addresses appear in the
Security Register, notice of such Default hereunder known to the Trustee, unless
such Default shall have been cured or waived; provided, however, that, except in
-------- -------
the case of a Default in the payment of the principal of, premium, if any, or
interest on any Security, the Trustee shall be protected in withholding such
notice if and so long as a trust committee of Responsible Officers of the
Trustee in good faith determines that the withholding of such notice is in the
interest of the Holders and provided, further, that in the case of any Default
-------- -------
of the character specified in Section 5.1(4), no such notice to Holders shall be
given until at least 30 days after the occurrence thereof.
SECTION 6.3. Certain Rights of Trustee.
-------------------------
Subject to the provisions of Section 6.1:
(a) the Trustee may conclusively rely as to the truth of the
statements and correctness of the opinions expressed therein and shall be
fully protected in acting
<PAGE>
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or refraining from acting upon any resolution, Officers' Certificate,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the
proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled (subject to reasonable confidentiality arrangements as
may be proposed by the Company) to ex-
<PAGE>
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amine the books, records and premises of the Company, personally or by
agent or attorney at the sole expense of the Company and, in the absence of
negligence and bad faith, shall incur no liability or additional liability
of any kind by reason of such inquiry or investigation;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or custodians or nominees and the Trustee shall not be
responsible for the supervision of, or any misconduct or negligence on the
part of any agent or attorney appointed with due care by it hereunder;
(h) the Trustee shall not be liable for any action taken, suffered,
or omitted to be taken by it in good faith and reasonably believed by it to
be authorized or within the discretion or rights or powers conferred upon
it by this Indenture;
(i) in the event that the Trustee is also acting as Authenticating
Agent, Paying Agent or Security Registrar hereunder, the rights and
protections afforded to the Trustee pursuant to this Article VI shall also
be afforded to such Authenticating Agent, Paying Agent and Security
Registrar; and
(j) the Trustee shall not be deemed to have notice of any Default or
Event of Default unless a Responsible Officer of the Trustee has actual
knowledge thereof or unless written notice of any event which is in fact
such a Default is received by the Trustee at the Corporate Trust Office of
the Trustee, and such notice references the Securities.
SECTION 6.4. Not Responsible for Recitals
or Issuance of Securities.
----------------------------
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee or any Authenticating Agent assumes no
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or of the Securities. The
Trustee shall not be accountable for the use or application by the Company of
Securities or the proceeds thereof.
<PAGE>
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SECTION 6.5. May Hold Securities.
-------------------
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company or, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
6.8 and 6.13, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Security
Registrar or such other agent.
SECTION 6.6. Money Held in Trust.
-------------------
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
SECTION 6.7. Compensation and Reimbursement.
------------------------------
The Company agrees
(1) to pay to the Trustee from time to time such reasonable
compensation as the Company and the Trustee shall from time to time agree
in writing for all services rendered by it hereunder (which compensation
shall not be limited by any provision of law in regard to the compensation
of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(3) to indemnify each of the Trustee or any predecessor trustee, its
directors, officers, agents and employees for, and to hold them harmless
against, any and all loss, damage, claim, liability or expense incurred
without negligence or bad faith on its part, including taxes (other than
taxes based upon, measured by or determined by the revenue or income of the
Trustee), arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of defending
itself against any claim or liability in connec-
<PAGE>
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tion with the exercise or performance of any of its powers or duties
hereunder.
The Trustee shall have a lien prior to the Securities as to all
property and funds held by it hereunder for any amount owing to it or any
predecessor trustee pursuant to this Section 6.7, except with respect to funds
held in trust for the benefit of the Holders of particular Securities.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 5.1(6) or Section 5.1(7), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or State bankruptcy, insolvency or
other similar law.
The provisions of this Section shall survive any termination of this
Indenture.
SECTION 6.8. Conflicting Interests.
---------------------
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 6.9. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $100,000,000 and its Corporate
Trust Office in the Borough of Manhattan, The City of New York. If such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section and to the extent permitted by the Trust Indenture Act, the
combined capital and surplus of such Person shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
<PAGE>
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SECTION 6.10. Resignation and Removal;
Appointment of Successor.
------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 6.11.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
in accordance with the applicable requirements of Section 6.11 shall not have
been delivered to the Trustee within 30 days after the giving of such notice of
resignation, at the expense of the Company the resigning Trustee may petition
any court of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount at maturity at Stated Maturity of the Outstanding
Securities, delivered to the Trustee and to the Company. If an instrument of
acceptance by a successor Trustee in accordance with the applicable requirements
of Section 6.11 shall not have been delivered to the Trustee within 30 days
after the giving of notice of such removal, at the expense of the Company the
removed Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.8 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 6.9 and shall
fail to resign after written request therefor by the Company or by any such
Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
<PAGE>
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then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 5.14, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount at maturity at Stated Maturity of the
Outstanding Securities delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment in accordance with the applicable requirements of Section 6.11,
become the successor Trustee and supersede the successor Trustee appointed by
the Company. If no successor Trustee shall have been so appointed by the
Company or the Holders and accepted appointment in accordance with the
applicable requirements of Section 6.11, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 1.6. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
(g) The resignation or removal of the Trustee pursuant to this
Section 6.10 shall not affect the obligation of the Company to indemnify the
Trustee pursuant to Section 6.7(3) in connection with the exercise or
performance by the Trustee prior to its resignation or removal of any of its
powers or duties hereunder.
(h) No Trustee under this Indenture shall be liable for any action or
omission of any successor Trustee.
<PAGE>
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SECTION 6.11. Acceptance of Appointment by Successor.
--------------------------------------
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee,
the Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 6.12. Merger, Conversion, Consolidation
or Succession to Business.
---------------------------------
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
<PAGE>
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SECTION 6.13. Preferential Collection of Claims Against Company.
-------------------------------------------------
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
SECTION 6.14. Appointment of Authenticating Agent.
-----------------------------------
The Trustee may appoint an Authenticating Agent or Agents which shall
be authorized to act on behalf of the Trustee to authenticate Securities issued
upon original issue and upon exchange, registration of transfer or partial
redemption or partial purchase or pursuant to Section 3.6, and Securities so
authenticated shall be entitled to the benefits of this Indenture and shall be
valid and obligatory for all purposes as if authenticated by the Trustee
hereunder. Wherever reference is made in this Indenture to the authentication
and delivery of Securities by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication and
delivery on behalf of the Trustee by an Authenticating Agent and a certificate
of authentication executed on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent shall be acceptable to the Company and shall at all
times be a corporation organized and doing business under the laws of the United
States of America, any State thereof or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus of not less than $100,000,000 and subject to supervision or examination
by Federal or State authority. If such Authenticating Agent publishes reports
of condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Authenticating Agent shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent shall cease to
be eligible in accordance with the provisions of this Section, such
Authenticating Agent shall resign immediately in the manner and with the effect
specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially
<PAGE>
-77-
all of the corporate agency or corporate trust business of an Authenticating
Agent, shall continue to be an Authenticating Agent, provided such corporation
shall be otherwise eligible under this Section, without the execution or filing
of any paper or any further act on the part of the Trustee or the Authenticating
Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice
of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give notice of such
appointment in the manner provided in Section 1.6, to all Holders as their names
and addresses appear in the Security Register. Any successor Authenticating
Agent upon acceptance of its appointment hereunder shall become vested with all
the rights, powers and duties of its predecessor hereunder, with like effect as
if originally named as an Authenticating Agent. No successor Authenticating
Agent shall be appointed unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
<PAGE>
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If an appointment is made pursuant to this Section, the Securities may
have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:
This is one of the Securities described in the within-mentioned
Indenture.
Dated:
The Bank of New York,
As Trustee
By
------------------------------------
As Authenticating Agent
By:
------------------------------------
Authorized Signatory
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.1. Company to Furnish Trustee Names and
Addresses of Holders.
------------------------------------
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 days after each May 1 and
November 1, commencing May 1, 1998, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders as of such
Regular Record Date, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
- ---------
capacity as Security Registrar.
<PAGE>
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SECTION 7.2. Preservation of Information;
Communications to Holders.
----------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar, if so acting. The Trustee may destroy any list furnished to it as
provided in Section 7.1 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to the names and addresses of Holders made pursuant
to the Trust Indenture Act.
SECTION 7.3. Reports by Trustee.
------------------
(a) Within 60 days after May 1 of each year commencing May 1, 1998,
the Trustee shall transmit to Holders such reports concerning the Trustee and
its actions under this Indenture to the extent required pursuant to the Trust
Indenture Act at the times and in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the Commission and with the Company. The
Company will promptly notify the Trustee in writing when the Securities are
listed on any stock exchange or any delisting thereof.
SECTION 7.4. Reports by Company.
------------------
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; provided that any such
information, documents or reports required to be filed
<PAGE>
-80-
with the Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be
filed with the Trustee within 15 days after the same is so required to be filed
with the Commission. Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.1. Company May Consolidate,
Etc. Only on Certain Terms.
--------------------------
The Company (x) shall not, in any transaction or series of
transactions, merge or consolidate with or into, or sell, assign, convey,
transfer, lease or otherwise dispose of all or substantially all of its
properties and assets as an entirety to, any Person or Persons, and (y) shall
not permit any of its Restricted Subsidiaries to enter into any such transaction
or series of transactions if such transaction or series of transactions, in the
aggregate, would result in a sale, assignment, conveyance, transfer, lease or
other disposition of all or substantially all of the properties and assets of
the Company or the Company and its Restricted Subsidiaries, taken as a whole, to
any other Person or Persons, unless, in each case (x) or (y), at the time and
after giving effect thereto
(1) either:
(A) if the transaction or transactions is a merger or
consolidation, the Company or such Restricted Subsidiary, as the case
may be, shall be the surviving Person of such merger or consolidation,
or
(B) the Person formed by such consolidation or into which the
Company or such Restricted Subsidiary, as the case may be, is merged
or to which the properties and assets of the Company or such
Restricted Subsidiary, as the case may be, substantially as an
entirety, are transferred (any such surviving Person or transferee
Person being the "Surviving Entity")
<PAGE>
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shall be a corporation organized and existing under the laws of the
United States of America, any state thereof or the District of
Columbia and shall expressly assume by a supplemental indenture
executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of the Company, under the Securities and
this Indenture and the Registration Rights Agreement, and in each
case, this Indenture shall remain in full force and effect;
(2) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (including,
--- -----
without limitation, any Indebtedness incurred or anticipated to be incurred
in connection with or in respect of such transaction or series of
transactions), no Default or Event of Default shall have occurred and be
continuing; and
(3) the Company or the Surviving Entity, as the case may be, after
giving effect to such transaction or series of transactions on a pro forma
--- -----
basis (including, without limitation, any Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such
transaction or series of transactions), could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under Section 10.8.
In connection with any consolidation, merger, sale, assignment,
conveyance, transfer, lease or other disposition contemplated by the foregoing
provisions of this Section 8.1, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger, sale, assignment, conveyance, transfer, lease or
other disposition and the indenture supplemental hereto in respect thereof
(required under clause (1)(B) of this Section 8.1) comply with the requirements
of this Indenture. Each such Officers' Certificate shall set forth the manner
of determination of the ability to Incur Debt in accordance with clause (3) of
this Section 8.1.
SECTION 8.2. Successor Substituted.
---------------------
Upon any transaction or series of transactions that are of the type
described in clause (x) or (y) of, and are effected in accordance with, Section
8.1, the Surviving Entity shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Securities,
<PAGE>
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this Indenture and/or the Registration Rights Agreement with the same effect as
if such Surviving Entity had been named as the Company herein, and thereafter,
except in the case of a lease, the predecessor Person shall be relieved of all
obligations and covenants under this Indenture and the Securities.
ARTICLE IX
AMENDMENTS; WAIVERS; SUPPLEMENTAL INDENTURES
SECTION 9.1. Amendments, Waivers and Supplemental
Indentures Without Consent of Holders.
-------------------------------------
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may amend,
waive or supplement this Indenture, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
(3) to secure the Securities pursuant to the requirements of Section
10.12 or otherwise; or
(4) to comply with any requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act; or
(5) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture which shall not be inconsistent with
the provisions of this Indenture,
provided that the Company shall have delivered to the Trustee an Opinion of
- --------
Counsel stating that such action pursuant to clauses (1), (2), (3), (4) or (5)
above does not adversely affect the rights of any Holder of Securities.
<PAGE>
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SECTION 9.2. Modifications, Amendments and Supplemental
Indentures with Consent of Holders.
------------------------------------------
With the consent of the Holders of not less than a majority in
principal amount at maturity of the Outstanding Securities, by Act of said
Holders delivered to the Company, and the Trustee, the Company, when authorized
by a Board Resolution, and the Trustee may modify, amend or supplement this
Indenture for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Indenture or of modifying in any
manner the rights of the Holders under this Indenture; provided, however, that
-------- -------
no such modification, amendment or supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby,
(1) reduce the principal amount at maturity of, extend the Stated
Maturity of or alter the Redemption provisions of, the Securities,
(2) change the currency in which any Securities or any premium or the
interest thereon is payable,
(3) reduce the percentage in principal amount at maturity of
Outstanding Securities that must consent to an amendment, supplement or
waiver or consent to take any action under the Indenture or the Securities,
(4) impair the right to institute suit for the enforcement of any
payment on or with respect to the Securities,
(5) waive a default in payment with respect to the Securities,
(6) amend, change or modify the obligation of the Company to make and
consummate a Change of Control Offer in the event of a Change of Control or
make and consummate the offer with respect to any Asset Sale or modify any
of the provisions or definitions with respect thereto,
(7) reduce or change the rate or time for payment of interest on the
Securities; or
(8) modify or change any provision of this Indenture affecting the
ranking of the Securities in a manner adverse to the Holders of the
Securities.
<PAGE>
-84-
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed amendment or supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof. The
Company may, but shall not be obligated to, fix a record date for the purpose of
determining the Persons entitled to consent to any indenture supplemental hereto
in accordance with Section 1.4 hereof.
SECTION 9.3. Execution of Supplemental Indentures.
------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 6.1) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.4. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 9.5. Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 9.6. Reference in Securities to Supplemental Indentures.
--------------------------------------------------
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenti-
<PAGE>
-85-
cated and delivered by the Trustee in exchange for Outstanding Securities.
ARTICLE X
COVENANTS
SECTION 10.1. Payment of Principal, Premium
and Interest.
-----------------------------
The Company will duly and punctually pay the principal of (and
premium, if any) and interest on the Securities in accordance with the terms of
the Securities and this Indenture.
SECTION 10.2. Maintenance of Office or Agency.
-------------------------------
The Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency where Securities may be presented or surrendered for
payment, where Securities may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. The Company will give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office of the Trustee, and the Company hereby
appoints the Trustee as its agent to receive all such presentations, surrenders,
notices and demands. In the event any such notice or demands are so made or
served on the Trustee, the Trustee will promptly forward copies thereof to the
Company.
The Company may also from time to time designate one or more other
offices or agencies (in or outside the Borough of Manhattan, The City of New
York) where the Securities may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
-------- -------
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
The City of New York, for such purposes. The Company will give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
<PAGE>
-86-
SECTION 10.3. Money for Security Payments to be Held in Trust.
-----------------------------------------------
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of (and premium, if any) or interest
on any of the Securities, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal (and premium, if
any) or interest so becoming due until such sums shall be paid to such Persons
or otherwise disposed of as herein provided and will promptly notify the Trustee
of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, the Company
will, prior to 1:00 p.m. New York City time on each due date of the principal of
(and premium, if any) or interest on any Securities, deposit with a Paying Agent
a sum sufficient to pay the principal (and premium, if any) or interest so
becoming due, such sum to be held as provided by the Trust Indenture Act, and
(unless such Paying Agent is the Trustee) the Company will promptly notify the
Trustee of its action or failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will: (i) comply with the provisions of the Trust Indenture
Act applicable to it as Paying Agent and (ii) during the continuance of any
default by the Company (or any other obligor upon the Securities) in the making
of any payment in respect of the Securities, upon the written request of the
Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent as such.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by such Paying Agent; and, upon
such payment by any Paying Agent (other than the Company) to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any) or interest on any Secu-
<PAGE>
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rity and remaining unclaimed for two years after such principal (and premium,
if any) or interest has become due and payable shall be paid to the Company on
Company Request, or (if then held by the Company) shall be discharged from such
trust; and the Holder of such Security shall thereafter, as an unsecured general
creditor, look only to the Company for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all liability
of the Company as trustee thereof, shall thereupon cease; provided, however,
-------- -------
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in a
newspaper published in the English language, customarily published on each
Business Day and of general circulation in The City of New York, notice that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
SECTION 10.4. Existence.
---------
Subject to Article VIII, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and material franchises; provided, however, that
-------- -------
the Company shall not be required to preserve any such right or franchise if the
Board of Directors in good faith shall determine that the preservation thereof
is no longer desirable in the conduct of the business of the Company and that
the loss thereof is not disadvantageous in any material respect to the Holders.
SECTION 10.5. Maintenance of Properties.
-------------------------
The Company will cause all material properties used or useful in the
conduct of its business or the business of any Restricted Subsidiary to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section shall prevent the Company from
- -------- -------
discontinuing the operation or maintenance of any of such material properties if
such discontinuance is desirable in the conduct of its business or the business
of any Restricted Subsidiary and not disadvantageous in any material respect to
the Holders.
<PAGE>
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SECTION 10.6. Payment of Taxes and Other Claims.
---------------------------------
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any of its Restricted
Subsidiaries or upon the income, profits or property of the Company or any of
its Restricted Subsidiaries, and (2) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of the
Company or any of its Restricted Subsidiaries; provided, however, that the
-------- -------
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings.
SECTION 10.7. Maintenance of Insurance.
------------------------
The Company shall, and shall cause its Restricted Subsidiaries to,
keep at all times all of their properties which are of an insurable nature
insured against loss or damage with insurers believed by the Company to be
responsible to the extent that property of similar character is usually so
insured by corporations similarly situated and owning like properties in
accordance with good business practice. Subject to the terms of any agreement
relating to Indebteness of the Company, including the Bank Facility, the Company
shall, and shall cause its Restricted Subsidiaries to, use the proceeds from any
such insurance policy to repair, replace or otherwise restore all material
properties to which such proceeds relate, provided, however, that the Company
-------- -------
shall not be required to repair, replace or otherwise restore any such material
property if such inaction is desirable in the conduct of the business of the
Company or any Restricted Subsidiary and not disadvantageous in any material
respect to the Holders.
SECTION 10.8. Limitation on Indebtedness.
--------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or in any manner become directly or indirectly liable, contingently or otherwise
(in each case, to "incur"), for the payment of any Indebtedness (including any
Acquired Indebtedness) other than Permitted Indebtedness unless the ratio of (i)
the aggregate consolidated principal amount of Indebtedness of the Company and
its Restricted Subsidiaries outstanding as reflected on the most recent
available quarterly or annual balance sheet, after giving
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pro forma effect to the incurrence of such Indebtedness and any other
- --- -----
Indebtedness incurred since such balance sheet date and the receipt and
application of the proceeds thereof, to (ii) Consolidated Cash Flow of the
Company and its Restricted Subsidiaries for the four full fiscal quarters next
preceding the incurrence of such Indebtedness for which consolidated financial
statements are available, determined on a pro forma basis as if any such
--- -----
Indebtedness had been incurred and the proceeds thereof had been applied at the
beginning of such four fiscal quarters, would be less than 6.0 to 1.
SECTION 10.9. Limitation on Restricted Payments.
---------------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other distribution or
payment on or in respect of Capital Stock of the Company or any of its
Restricted Subsidiaries or make any payment to the direct or indirect
holders (in their capacities as such) of Capital Stock of the Company or
any of its Restricted Subsidiaries (other than dividends or distributions
payable solely in Capital Stock of the Company (other than Redeemable
Capital Stock) or in options, warrants or other rights to purchase Capital
Stock of the Company (other than Redeemable Capital Stock)) (other than the
declaration or payment of dividends or other distributions to the extent
declared or paid to the Company or any Restricted Subsidiary),
(2) purchase, redeem, defease or otherwise acquire or retire for value
any Capital Stock (other than Redeemable Capital Stock) of the Company (or
of any Restricted Subsidiaries of the Company if such Capital Stock is
owned by an Affiliate of the Company) or any options, warrants, or other
rights to purchase any such Capital Stock (other than any such securities
owned by a Restricted Subsidiary),
(3) make any principal payments on, or purchase, defease, repurchase,
redeem or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment, scheduled sinking fund payment or other
Stated Maturity, any Redeemable Capital Stock or Subordinated Indebtedness
of the Company (other than any such Redeemable Capital Stock or
Subordinated Indebtedness owned by the Company or a Restricted Subsidiary),
<PAGE>
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(4) make any Investment (other than any Permitted Investment) in any
Person
(5) (i) make any principal, interest or other payments on or in
respect of Deeply Subordinated Shareholder Loans or (ii) make any
principal, interest (other than interest payments after November 1, 2002)
or other payments on or in respect of the Existing Subordinated Securities
or any Existing Subordinated Note Refinancing Debt
(such payments or Investments described in the preceding clauses (1), (2),
(3),(4) and (5) are collectively referred to as "Restricted Payments"), unless,
at the time of and after giving effect to the proposed Restricted Payment (the
amount of any such Restricted Payment, if other than cash, shall be the Fair
Market Value of the asset(s) proposed to be transferred by the Company or such
Restricted Subsidiary, as the case may be, pursuant to such Restricted Payment),
(A) no Default or Event of Default shall have occurred and be continuing, (B)
immediately prior to and after giving effect to such Restricted Payment, the
Company would be able to incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) and (C) the aggregate amount of all Restricted Payments
declared or made from and after the Issue Date would not exceed the sum of:
(i) the excess of the aggregate Consolidated Cash Flow of the
Company minus the product of 1.5 times the Consolidated Interest Expense of
the Company accrued on a cumulative basis during the period beginning on
the Issue Date and ending on the last day of the fiscal quarter of the
Company immediately preceding the date of such proposed Restricted Payment;
(ii) the aggregate net cash proceeds received by the Company as
capital contributions to the Company after the Issue Date and which
constitute shareholders' equity of the Company in accordance with GAAP;
(iii) the aggregate net cash proceeds received by the Company from
the issuance or sale of Capital Stock (excluding Redeemable Capital Stock)
of the Company to any Person (other than to a Subsidiary of the Company)
after the Issue Date;
(iv) the aggregate net cash proceeds received by the Company from
any Person (other than a Subsidiary of the Company) upon the exercise of
any options, warrants or rights to purchase shares of Capital Stock (other
than Re-
<PAGE>
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deemable Capital Stock) of the Company after the Issue Date;
(v) the aggregate net cash proceeds received after the Issue Date by
the Company from any Person (other than a Subsidiary of the Company) for
debt securities that have been converted or exchanged into or for Capital
Stock of the Company (other than Redeemable Capital Stock) (to the extent
such debt securities were originally sold for cash) plus the aggregate
amount of cash received by the Company (other than from a Subsidiary of the
Company) in connection with such conversion or exchange;
(vi) the aggregate net cash proceeds received after the Issue Date
by the Company from the issuance of Deeply Subordinated Shareholder Loans
to a Permitted Holder (other than a Subsidiary of the Company);
(vii) in the case of the disposition or repayment of any Investment
constituting a Restricted Payment after the Issue Date, an amount equal to
the lesser of the return of capital with respect to such Investment and the
initial amount of such Investment, in either case, less the cost of the
disposition of such Investment; and
(viii) so long as the Designation thereof was treated as a
Restricted Payment made after the Issue Date, with respect to any
Unrestricted Subsidiary that has been redesignated as a Restricted
Subsidiary after the Issue Date in accordance with Section 10.18 of this
Indenture, the Fair Market Value of the Company's interest in such
Subsidiary calculated in accordance with GAAP, provided that such amount
shall not in any case exceed the Designation Amount with respect to such
Restricted Subsidiary upon its Designation,
minus:
-----
the Designation Amount (measured as of the date of Designation) with
respect to any Subsidiary of the Company which has been designated as an
Unrestricted Subsidiary after the Issue Date in accordance with Section
10.18 of this Indenture.
For purposes of the preceding clause (C)(iv), the value of the
aggregate net proceeds received by the Company upon the issuance of Capital
Stock upon the exercise of options, warrants or rights will be the net cash
proceeds re-
<PAGE>
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ceived upon the issuance of such options, warrants or rights plus the
incremental amount received by the Company upon the exercise thereof.
None of the foregoing provisions in this Section 10.9 will prohibit,
so long, in the case of clauses (2) to (5) and (8) below, as there is no Default
or Event of Default continuing, (1) the payment of any dividend or distribution
within 60 days after the date of its declaration, if at the date of declaration
such payment would be permitted by the foregoing paragraph; (2) the redemption,
repurchase or other acquisition or retirement of any shares of any class of
Capital Stock of the Company in exchange for, or out of the net cash proceeds
of, a substantially concurrent issue and sale of other shares of Capital Stock
(other than Redeemable Capital Stock) of the Company to any Person (other than
to a Subsidiary of the Company); provided, however, that such net cash proceeds
-------- -------
are excluded from clause (C) of the second preceding paragraph; (3) any
redemption, repurchase or other acquisition or retirement of Subordinated
Indebtedness by exchange for, or out of the net cash proceeds of, a
substantially concurrent issue and sale of (A) Capital Stock (other than
Redeemable Capital Stock) of the Company to any Person (other than to a
Subsidiary of the Company); provided, however, that any such net cash proceeds
-------- -------
are excluded from clause (C) of the second preceding paragraph; or (B)
Indebtedness of the Company so long as such Indebtedness is Subordinated
Indebtedness which (w) has no Stated Maturity earlier than the 91st day after
the Maturity Date, (x) has an Average Life to Stated Maturity greater than the
remaining Average Life to Stated Maturity of the Securities and (y) is
subordinated to the Securities in the same manner and to the same extent as the
Subordinated Indebtedness so purchased, exchanged, redeemed, acquired or retired
and (z) if the proceeds of such Indebtedness is to purchase, redeem, acquire or
retire all of the Existing Subordinated Notes ("Existing Subordinated Note
Refinancing Debt"), such Existing Subordinated Note Refinance Debt provides for
no cash payments of interest prior to November 1, 2002 other than cash payments
otherwise permitted by this covenant; (4) any redemption, repurchase or other
acquisition or retirement of Deeply Subordinated Shareholder Loans by exchange
for, or out of the net cash proceeds of, a substantially concurrent issue and
sale of (1) Capital Stock (other than Redeemable Capital Stock) of the Company
to any person (other than a Subsidiary of the Company) or (2) other Deeply
Subordinated Shareholder Loans to any Permitted Holder; provided, however, that,
-------- -------
in either case, such net cash proceeds are excluded from clause (C) of the
preceding paragraph; (5) Investments constituting Restricted Payments made as a
result of the receipt of
<PAGE>
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non-cash consideration from any Asset Sale made pursuant to and in compliance
with this Indenture; (6) payments to purchase Capital Stock from management or
employees of the Company or any of its Subsidiaries, or their authorized
representatives, upon the happening of an event which provides for payment under
any applicable plan, or upon the death, disability or termination of employment
of such employees, in aggregate amounts under this clause (6) not to exceed
$8,000,000 in any fiscal year of the Company; (7) the payment of pro rata
dividends to holders of Capital Stock of Restricted Subsidiaries; (8) the
payment of dividends on the Existing Preferred in accordance with its terms as
in effect on the Issue Date (or payments in comparable amounts to such dividends
and at comparable times in respect of claims by The News Corporation Limited
("News Corp.") or News Publishing Australia Limited ("NPAL") arising from News
Corp. or NPAL having cured or avoided a default by the Company in respect of the
Existing Preferred or the Company's Wilshire Boulevard lease; provided amounts
--------
contributed to the Company by News Corp. or NPAL for such purpose shall not be
included in the calculation of clause (C) above; (9) the payment of in-kind
interest in respect of Deeply Subordinated Shareholder Loans and in respect of
Existing Subordinated Notes; (10) the repayment of the Existing Subordinated
Notes contemplated under "Use of Proceeds" in the Offering Memorandum. Any
payments made pursuant to clauses (1), (5) and (7) of this paragraph shall,
without duplication, be taken into account in calculating the amount of
Restricted Payments made from and after the Issue Date.
SECTION 10.10. Limitation on Preferred Stock of Restricted Subsidiaries.
--------------------------------------------------------
The Company shall not permit any Restricted Subsidiary to issue any
Preferred Stock other than Preferred Stock issued to the Company or a Restricted
Subsidiary. The Company shall not sell, transfer or otherwise dispose of
Preferred Stock issued by a Restricted Subsidiary of the Company or permit a
Restricted Subsidiary to sell, transfer or otherwise dispose of Preferred Stock
issued by a Restricted Subsidiary, other than to the Company or a Restricted
Subsidiary. Notwithstanding the foregoing, nothing in such covenant will
prohibit the ownership of Preferred Stock issued by a Person prior to the time
(A) such Person becomes a Restricted Subsidiary of the Company, (B) such Person
merges with or into a Restricted Subsidiary of the Company or (C) a Restricted
Subsidiary of the Company merges with or into such Person; provided, further,
-------- -------
that such Preferred Stock was not issued or incurred by such
<PAGE>
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Person in anticipation of a transaction contemplated by subclause (A), (B) or
(C) above.
SECTION 10.11. Limitation on Transactions with Affiliates.
------------------------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into any transaction or series of
related transactions (including, without limitation, the sale, transfer,
disposition, purchase, exchange or lease of assets, property or services) with,
or for the benefit of, any of its Affiliates (other than Restricted
Subsidiaries), except (a) on terms that are no less favorable to the Company or
such Restricted Subsidiary, as the case may be, than those which could have been
obtained in a comparable transaction at such time from Persons who are not
Affiliates of the Company, (b) with respect to a transaction or series of
related transactions involving aggregate payments or value equal to or greater
than $25,000,000, the Company shall have delivered an Officers' Certificate to
the Trustee certifying that such transaction or transactions comply with the
preceding clause (a) and that such transaction or transactions have been
approved by a majority of the Disinterested Members of the Board of Directors of
the Company and (c) with respect to a transaction or series of related
transactions involving aggregate payments or value equal to or greater than
$50,000,000 (other than agreements whereby the Company or a Restricted
Subsidiary of the Company obtains or grants a license or other rights to
syndicated entertainment programs in the ordinary course of business), the
Company shall have obtained a written opinion from an Independent Financial
Advisor stating that the terms of such transaction or series of transactions are
fair, from a financial point of view, to the Company or the Restricted
Subsidiary involved, as the case may be.
Notwithstanding the foregoing, the restrictions set forth in this
covenant shall not apply to (i) transactions with or among the Company and the
Restricted Subsidiaries, (ii) customary directors' fees, indemnification and
similar arrangements, consulting fees, employee salaries, bonuses or employment
agreements, compensation or employee benefit arrangements and incentive
arrangements with any officer, director or employee of the Company or any
Restricted Subsidiary entered into in the ordinary course of business, (iii) any
dividends made in compliance with Section 10.9 of this Indenture, (iv) Permitted
Investments, (v) loans and advances to officers, directors and employees of the
Company or any Restricted Subsidiary for travel, entertainment, moving and other
relocation expenses, in
<PAGE>
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each case made in the ordinary course of business, (vi) transactions pursuant to
agreements existing on the date of this Indenture or amendment thereto so long
as not disadvantageous to the Holders of Securities, (vii) Deeply Subordinated
Shareholder Loans and loans and advances on the same terms as the Existing
Subordinated Notes or (viii) the incurrence of intercompany Indebtedness which
constitutes Permitted Indebtedness.
SECTION 10.12. Limitations on Liens.
--------------------
The Company shall not, and shall not permit any of its Subsidiaries
to, create, incur, assume or suffer to exist any Liens of any kind against or
upon any of its property or assets, or any proceeds therefrom, unless the
Securities are equally and ratably secured (except that Liens securing
Subordinated Indebtedness shall not be permitted in any circumstances), except
for (a) Liens securing the Securities; (b) Liens securing Indebtedness which is
(i) incurred to refinance Indebtedness which has been secured by a Lien
permitted under this Indenture and (ii) incurred in accordance with the
provisions of this Indenture; provided, however, that such Liens do not extend
-------- -------
to or cover any property or assets of the Company or any of its Restricted
Subsidiaries not securing the Indebtedness so refinanced; and (c) Permitted
Liens.
SECTION 10.13. Change of Control.
-----------------
Upon the occurrence of a Change of Control (the "Change of Control
Date"), the Company shall make an Offer to Purchase (a "Change of Control
Offer") on a business day (the "Change of Control Purchase Date") not more than
60 nor less than 30 days following the occurrence of the Change of Control all
of the then Outstanding Securities tendered at a purchase price in cash (the
"Change of Control Purchase Price") equal to 101% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the Change of
Control Purchase Date. The Company shall be required to purchase all Securities
tendered into the Change of Control Offer and not withdrawn. The Change of
Control offer is required to remain open for at least 20 business days and until
the close of business on the Change of Control Purchase Date.
In order to effect such Change of Control Offer, the Company shall,
not later than the 30th day after the Change of Control, mail to each holder of
Securities notice of the Change of Control Offer, which notice shall govern the
terms of the Change of Control Offer and shall state, among other things, the
procedures that holders of Securities must follow to accept
<PAGE>
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the Change of Control Offer. Prior to mailing a notice of a Change of Control
Offer, but in any event within 30 days following a Change of Control, the
Company shall either permanently repay all outstanding amounts under the Bank
Facility and terminate all commitments of the lenders thereunder or offer to
permanently repay in full all outstanding amounts under the Bank Facility and
permanently repay the Obligations held by each lender who has accepted such
offer or obtain the requisite consents, if any, under the Bank Facility to
permit the repurchase of the Securities required hereby. The failure to mail
notice of the Change of Control Offer when required will nonetheless constitute
a Default hereunder.
On the Change of Control Purchase Date, the Company shall (i) accept
for payment Securities or portions thereof tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent money, in immediately
available funds, sufficient to pay the purchase price of all Securities or
portions thereof so tendered and accepted and (iii) deliver to the Trustee the
Securities so accepted together with an Officers' Certificate setting forth the
Securities or portions thereof tendered to and accepted for payment by the
Company. The Paying Agent shall promptly mail or deliver to the Holders of
Securities so accepted payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and make available for delivery to such
Holders a new Security of like tenor equal in principal amount at maturity to
any unpurchased portion of the Security surrendered. Any Securities not so
accepted shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company shall publicly announce the results of the Change of
Control Offer not later than the first Business Day following the Change of
Control Purchase Date.
The Company shall not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements
applicable to a Change of Control Offer made by the Company and purchases all
Securities validly tendered and not withdrawn under such Change of Control
Offer.
The Company shall comply with Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder, to the extent such laws or
regulations are applicable, in the event that a Change of Control occurs and the
Company is required to purchase Securities as described above.
<PAGE>
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SECTION 10.14. Disposition of Proceeds of Asset Sales.
--------------------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any Asset Sale unless (a) the Company or such Restricted
Subsidiary, as the case may be, receives consideration at the time of such Asset
Sale at least equal to the Fair Market Value of the shares or assets sold or
otherwise disposed of and (b) at least 75% of such consideration consists of
cash or Cash Equivalents or properties or assets that will be used in the
business of the Company and its Restricted Subsidiaries; provided that the
--------
amount of any liabilities (other than Subordinated Indebtedness or Indebtedness
of a Restricted Subsidiary that would not constitute Restricted Subsidiary
Indebtedness) that are assumed by the transferee of any such assets pursuant to
an agreement that unconditionally releases the Company or such Restricted
Subsidiary, as the case may be, from further liability shall be treated as cash
for purposes of clause (b). The Company or the applicable Restricted
Subsidiary, as the case may be, shall, at the Company's option, (i) apply the
Net Cash Proceeds from any such Asset Sale within 365 days of the receipt
thereof to repay Indebtedness under the Bank Facility and elect to permanently
reduce the commitments thereunder by the amount of Indebtedness so repaid, (ii)
apply the Net Cash Proceeds from any such Asset Sale within 365 days of the
receipt thereof to repay an amount of other Indebtedness (other than
Subordinated Indebtedness) of the Company in an amount not exceeding the Other
Senior Debt Pro Rata Share and, in such case, elect to permanently reduce the
amount of the commitments thereunder by the amount of the Indebtedness so
repaid, (iii) apply the Net Cash Proceeds from any such Asset Sale by the
Company or a Restricted Subsidiary to repay any Restricted Subsidiary
Indebtedness and elect to permanently reduce the commitments thereunder by the
amount of the Indebtedness so repaid and/or (iv) apply the Net Cash Proceeds
from any Asset Sale by the Company or a Restricted Subsidiary, (x) to repay
Indebtedness incurred not more than 90 days before such Asset Sale to purchase,
or (y) to the purchase price for any acquisition consummated not more than 90
days before such Asset Sale of, or (z) within 365 days after such Asset Sale to
an investment in, properties and assets that replace the properties and assets
that were the subject of such Asset Sale or in properties and assets that will
be used in the business of the Company and its Restricted Subsidiaries existing
on the Issue Date or in businesses reasonably related thereto ("Replacement
Assets"). Pending the final application of any such Net Cash Proceeds, the
Company or such Restricted Subsidiary may temporarily reduce Indebtedness under
a revolving credit facility, if any, or otherwise invest such Net Cash
<PAGE>
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Proceeds in Cash Equivalents. Any Net Cash Proceeds from any Asset Sale that are
neither used to repay, and permanently reduce the commitments under, any
Restricted Subsidiary Indebtedness as set forth in clause (iii) of the second
preceding sentence or invested in Replacement Assets within the 365-day period
as set forth in clause (iii) and (iv) shall constitute "Excess Proceeds." Any
Excess Proceeds not used as set forth in clause (i) or (ii) of the third
preceding sentence shall constitute "Offer Excess Proceeds" subject to
disposition as provided below.
When the aggregate amount of Offer Excess Proceeds equals or exceeds
$15,000,000, the Company shall make an Offer to Purchase (an "Asset Sale
Offer"), from all Holders of the Securities, an aggregate principal amount of
Securities equal to such Offer Excess Proceeds, at a price (the "Asset Sale
Purchase Price") in cash equal to 100% of the outstanding principal amount
thereof, plus accrued and unpaid interest, if any, to the purchase date, and
from all Holders of the Company's Senior Discount Notes, 100% of the Accrued
Value on the purchase date, unless the purchase date is on or after the earlier
to occur of November 1, 2002 and the Cash Interest Election Date, in which case
such purchase price shall be equal to 100% of the outstanding principal amount
at maturity thereof plus accrued and unpaid interest, if any, to the purchase
date. To the extent that the aggregate principal amount of Securities tendered
pursuant to an Asset Sale Offer is less than the Offer Excess Proceeds, the
Company may use such deficiency for any purpose not prohibited hereunder. The
Securities shall be purchased by the Company, at the option of the Holder
thereof, in whole or in part in integral multiples of $1,000 principal amount,
on a date that is not earlier than 30 days and not later than 60 days from the
date the notice is given to holders, or such later date as may be necessary for
the Company to comply with the requirements under the Exchange Act. If the
aggregate purchase price of Securities validly tendered and not withdrawn by
holders thereof exceeds the Offer Excess Proceeds, Securities to be purchased
will be selected on a pro rata basis, based on the Asset Sale Purchase Price.
Upon completion of such Asset Sale Offer, the amount of Excess Proceeds shall be
reset to zero.
Notwithstanding the two immediately preceding paragraphs, the Company
and its Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent (i) at least 75% of the
consideration of such Asset Sale constitutes Replacement Assets, cash or Cash
Equivalents (including obligations deemed to be cash
<PAGE>
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under this covenant) and (ii) such Asset Sale is for Fair Market Value; provided
--------
that (i) any consideration constituting (or deemed to constitute) Cash
Equivalents received by the Company or any of its Restricted Subsidiaries in
connection with any Asset Sale permitted to be consummated under this paragraph
shall constitute Net Cash Proceeds subject to the provisions of the two
preceding paragraphs and (ii) to the extent such replacement Assets include any
Capital Stock of any Person, such Person becomes a Restricted Subsidiary.
On the Asset Sale Offer Purchase Date, the Company shall (i) accept
for payment (subject to proration as described in the Offer to Purchase)
Securities or portions thereof tendered pursuant to the Asset Sale Offer, (ii)
deposit with the Paying Agent money, in immediately available funds, sufficient
to pay the purchase price of all Securities or portions thereof so tendered and
accepted and (iii) deliver to the Trustee the Securities so accepted together
with an Officers' Certificate setting forth the Securities or portions thereof
tendered to and accepted for payment by the Company. The Paying Agent shall
promptly mail or deliver to the Holders of Securities so accepted payment in an
amount equal to the purchase price, and the Trustee shall promptly authenticate
and make available for delivery to such Holders a new Security of like tenor
equal in principal amount at maturity to any unpurchased portion of the Security
surrendered. Any Securities not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company shall publicly
announce the results of the Asset Sale Offer not later than the first Business
Day following the Asset Sale Offer Purchase Date.
The Company shall not, and shall not permit any Restricted Subsidiary
of the Company to, create or permit to exist or become effective any restriction
(other than restrictions existing under Indebtedness outstanding on the date of
this Indenture and in the Bank Facility as of the date of its execution) that
would materially impair the ability of the Company to make an Asset Sale Offer
or, if such an offer is made, to pay for the Securities tendered for purchase.
The Company shall comply with Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder, to the extent such laws
and regulations are applicable, in the event that an Asset Sale occurs and the
Company is required to purchase Securities as described above.
<PAGE>
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SECTION 10.15. Limitation on Dividends and Other
Payment Restrictions Affecting
Restricted Subsidiaries.
---------------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to
(1) pay dividends, in cash or otherwise, or make any other
distributions on or in respect of its Capital Stock or any other interest
or participation in, or measured by, its profits,
(2) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary of the Company,
(3) make loans or advances to the Company or any other Restricted
Subsidiary of the Company,
(4) transfer any of its properties or assets to the Company or any
other Restricted Subsidiary of the Company or
(5) guarantee any Indebtedness of the Company or any other Restricted
Subsidiary of the Company,
except for such encumbrances or restrictions existing under or by reason of
(A) applicable law,
(B) customary non-subletting, non-assignment or other non-transfer
provisions of any license, contract, or any lease governing a leasehold
interest of the Company or any Restricted Subsidiary of the Company,
(C) customary restrictions on transfers of property subject to a Lien
permitted under the Indenture,
(D) the Bank Facility, but only if the Bank Facility permits payments
to the Company by its Restricted Subsidiaries in amounts sufficient to make
interest payments on the Securities unless there is a continuing default
under the Bank Facility or the making of any such interest payment would
(with or without the giving of notice or pas-
<PAGE>
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sage of time or both) result in a default under the Bank Facility,
(E) any agreement or other instrument of a Person acquired by the
Company or any Restricted Subsidiary of the Company in existence at the
time of such acquisition (but not created in contemplation thereof), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person or any of its
Subsidiaries, or the property or assets of the Person or any of its
Subsidiaries, so acquired,
(F) an agreement entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of a Restricted Subsidiary
or an agreement entered into for the sale of specified assets (in either
case, so long as such encumbrance or restriction, by its terms, terminates
on the earlier of the termination of such agreement or the consummation of
such agreement and so long as such restriction applies only to the Capital
Stock or assets to be sold),
(G) any encumbrance or restriction in effect on the Issue Date, and
(H) any agreement that amends, extends, refinances, renews or replaces
any agreement described in the foregoing clauses, provided that the terms
--------
and conditions of any such agreement are not materially less favorable to
the Holders of the Securities than those under or pursuant to the agreement
amended, extended, refinanced, renewed or replaced.
SECTION 10.16. Limitations on Sale-Leaseback Transactions.
------------------------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any Sale-Leaseback Transaction with respect to any
property of the Company or any of its Restricted Subsidiaries. Notwithstanding
the foregoing, the Company and its Restricted Subsidiaries may enter into Sale-
Leaseback Transactions, provided, that (a) the Attributable Value of such Sale-
--------
Leaseback Transaction shall be deemed to be Indebtedness of the Company or a
Restricted Subsidiary and (b) after giving pro forma effect to any such Sale-
--- -----
Leaseback Transaction and the foregoing clause (a), the Company or a Restricted
Subsidiary would be able to incur $1.00 of ad-
<PAGE>
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ditional Indebtedness (other than Permitted Indebtedness) pursuant to
Section 10.8 of this Indenture.
SECTION 10.17. Limitations on Designation of Unrestricted Subsidiaries.
-------------------------------------------------------
(a) The Company may designate after the Issue Date any Restricted
Subsidiary as an "Unrestricted Subsidiary" under this Indenture (a
"Designation") only if:
(i) no Default shall have occurred and be continuing at the time of
or after giving effect to such Designation;
(ii) the Company would be permitted to make an Investment (other
than a Permitted Investment) at the time of Designation (assuming the
effectiveness of such Designation) pursuant to the first paragraph of
Section 10.9 in an amount (the "Designation Amount") equal to the Fair
Market Value of the Company's interest in such Subsidiary on such date
calculated in accordance with GAAP; and
(iii) the Company would be permitted under the Indenture to incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to Section 10.8 at the time of such Designation (assuming the
effectiveness of such Designation).
In the event of any such Designation, the Company shall be deemed to
have made an Investment constituting a Restricted Payment pursuant to Section
10.9 for all purposes of this Indenture in the Designation Amount. Each of the
Subsidiaries conducting the business identified as assets held for disposition
or discontinuance in the Offering Memorandum shall constitute "Unrestricted
Subsidiaries" on the Issue Date.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, at any time (x) provide credit support other than guarantees or
pledges under the Bank Facility for or subject any of its property or assets
(other than the Capital Stock of any Unrestricted Subsidiary) to the
satisfaction of, any Indebtedness of any Unrestricted Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness), (y) be
directly or indirectly liable for any Indebtedness of any Unrestricted
Subsidiary or (z) be directly or indirectly liable for any Indebtedness which
provides that the holder thereof may (upon notice, lapse of time or both)
declare a default thereon or cause the payment thereof to be accelerated or
payable prior to its final scheduled maturity
<PAGE>
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upon the occurrence of a default with respect to any Indebtedness of any
Unrestricted Subsidiary (including any right to take enforcement action against
such Unrestricted Subsidiary), except any non-recourse guarantee given solely to
support the pledge by the Company or any Restricted Subsidiary of the Capital
Stock of an Unrestricted Subsidiary. No Unrestricted Subsidiary shall at any
time guarantee or otherwise provide credit support for any obligation of the
Company or any Restricted Subsidiary, except as provided in the Bank Facility.
All Subsidiaries of Unrestricted Subsidiaries shall automatically be deemed to
be Unrestricted Subsidiaries.
(b) The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") if:
(i) no Default shall have occurred and be continuing at the time of
and after giving effect to such Revocation;
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time by a Restricted Subsidiary, have been permitted to be incurred
for all purposes of this Indenture; and
(iii) any transaction (or series of related transactions) between
such Subsidiary and any of its Affiliates that occurred on or after the
Issue Date while such Subsidiary was an Unrestricted Subsidiary would be
permitted by Section 10.11 as if such transaction (or series of related
transactions) had occurred at the time of such Revocation.
(c) In the event the Company or a Restricted Subsidiary makes any
Investment in any Person which was not previously a Subsidiary and such Person
thereby becomes a Subsidiary, such Person shall automatically be an Unrestricted
Subsidiary and the Company may designate such Subsidiary as a Restricted
Subsidiary only if it meets the foregoing requirements of clauses (i) and (ii)
of paragraph (b).
(d) All Designations and Revocations must be evidenced by Board
Resolutions of the Company delivered to the Trustee certifying compliance with
the foregoing provisions.
SECTION 10.18. Provision of Financial Information.
----------------------------------
For as long as the Securities are outstanding whether or not the
Company is subject to Section 13(a) or 15(d) of the
<PAGE>
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Exchange Act, or any successor provision thereto, the Company shall file with
the Commission the annual reports, quarterly reports and other documents which
the Company would have been required to file with the Commission (if permitted
by Commission practice and applicable law and regulations) pursuant to such
Section 13(a) or 15(d) or any successor provision thereto if the Company were
subject thereto, such documents to be filed with the Commission on or prior to
the respective dates (the "Required Filing Dates") by which the Company would
have been required to file them. The Company shall also in any event (a) within
15 days after each Required Filing Date (i) transmit, or cause to be
transmitted, by mail to all Holders, as their names and addresses appear in the
Security Register, without cost to such Holders, and (ii) file with the Trustee
copies of the annual reports, quarterly reports and other documents which the
Company is required to file with the Commission pursuant to the preceding
sentence or, if such filing is not so permitted, information of a similar nature
and (b) if filing such documents by the Company with the Commission is not
permitted by Commission practice and applicable law and regulations, promptly
upon written request supply copies of such documents to any prospective Holder.
In addition, for so long as any Securities remain outstanding, the Company will
furnish to the Holders of Securities and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act, and, to any beneficial Holder of
Securities, if not obtainable from the Commission, information of the type that
would be filed with the Commission pursuant to the foregoing provisions upon the
request of any such Holder.
SECTION 10.19. Statement by Officers as to Default; Compliance Certificates.
------------------------------------------------------------
(a) The Company shall deliver to the Trustee, prior to May 1 in each
year, an Officers' Certificate, stating whether or not to the best knowledge of
the signers thereof the Company is in default in the performance and observance
of any of the terms, provisions and conditions of this Indenture (without regard
to any period of grace or requirement of notice provided hereunder) and if the
Company shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge.
(b) The Company shall deliver to the Trustee, as soon as possible and
in any event within five days after the Company becomes aware of the occurrence
of a Default or an Event of Default, an Officers' Certificate setting forth the
<PAGE>
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details of such Default or Event of Default, and the action which the Company
proposes to take with respect thereto.
SECTION 10.20. Waiver of Certain Covenants.
---------------------------
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Section 8.1, provided pursuant to Section
9.1(2) and set forth in Sections 10.4 to 10.12 and 10.15 to 10.17, inclusive, if
before the time for such compliance the Holders of at least a majority in
principal amount at maturity of the Outstanding Securities shall, by Act of such
Holders, either waive such compliance in such instance or generally waive
compliance with such covenant or condition, but no such waiver shall extend to
or affect such covenant or condition except to the extent so expressly waived,
and, until such waiver shall become effective, the obligations of the Company
and the duties of the Trustee in respect of any such covenant or condition shall
remain in full force and effect; provided, however, with respect to an Offer as
-------- -------
to which an Offer to Purchase has been mailed, no such waiver may be made or
shall be effective against any Holder tendering Securities pursuant to such
Offer, and the Company may not omit to comply with the terms of such Offer as to
such Holder.
Notwithstanding anything set forth in this Indenture to the contrary,
if no Default shall have occurred and be continuing on any day when the
Securities are rated by both Moody's and S&P in one of its generic rating
categories which signifies investment grade (which at the date of this Indenture
are the four highest rating categories (within which there are sub-categories
indicating relative standing)), the limitations set forth in Sections 10.4 to
10.11 and 10.14 to 10.17, inclusive and clause (c) in Section 8.1 shall no
longer be applicable.
SECTION 10.21. Calculation of Original Issue Discount.
--------------------------------------
The Company shall file with the Trustee promptly at the end of each
calendar year (i) a written notice specifying the amount of original issue
discount (including daily rates and accrual periods) accrued on Outstanding
Securities as of the end of such year and (ii) such other specific information
relating to such original issue discount as may then be relevant under the
Internal Revenue Code of 1986, as amended from time to time.
<PAGE>
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ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.1. Right of Redemption.
-------------------
The Securities may be redeemed at the election of the Company, in the
amounts, at the times, at the Redemption Prices (together with any applicable
accrued and unpaid interest to the Redemption Date), and subject to the
conditions specified in the form of Security hereinafter set forth.
SECTION 11.2. Applicability of Article.
------------------------
Redemption of Securities at the election of the Company, as permitted
by this Indenture and the provisions of the Securities, shall be made in
accordance with such provisions and this Article.
SECTION 11.3. Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Securities pursuant to
Section 11.1, shall be evidenced by a Board Resolution. In the event of any
redemption at the election of the Company pursuant to Section 11.1, the Company
shall notify the Trustee, in case of a redemption of less than all the
Securities, at least 60 days, and in the case of a redemption of all the
Securities, at least 40 days, prior to the Redemption Date fixed by the Company
(in each case, unless a shorter notice shall be satisfactory to the Trustee)of
such Redemption Date and of the principal amount at maturity of Securities to be
redeemed.
SECTION 11.4. Selection by Trustee of
Securities to Be Redeemed.
-------------------------
In the event that less than all of the Securities are to be redeemed
at any time, selection of such Securities for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which the Securities are listed or, if the Securities are
not then listed on a national securities exchange, on a pro rata basis, by lot
--------
or by such method as the Trustee shall deem fair and appropriate; provided,
--------
however, that Securities shall only be redeemable in amounts of $1,000 principal
- -------
amount at maturity or an integral multiple of $1,000.
<PAGE>
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The Trustee shall promptly notify the Company and each Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected for partial redemption, the principal amount at
maturity thereof to be redeemed.
For all purposes of this Indenture and of the Securities, unless the
context otherwise requires, all provisions relating to the redemption of
Securities shall relate, in the case of any Securities redeemed or to be
redeemed only in part, to the portion of the principal amount at maturity of
such Securities which has been or is to be redeemed.
SECTION 11.5. Notice of Redemption.
--------------------
Notice of redemption shall be given by first class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall identify the Securities to be redeemed
(including, if used, CUSIP or CINS numbers) and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities are to be redeemed,
the identification (and, in the case of partial redemption, the principal
amount at maturity) of the particular Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and that interest
thereon will cease to accrue on and after such Redemption Date,
(5) the place or places where such Securities are to be surrendered
for payment of the Redemption Price, and
(6) if the redemption is being made pursuant to the provisions of the
Securities regarding a Public Equity Offering or a sale of Qualified Equity
Interests of the Company to Strategic Equity Investors, a brief description
of the transaction or transactions giving rise to such redemption, the
nature and amount of Qualified Equity Inter-
<PAGE>
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ests sold by the Company thereto in such transaction or transactions, the
aggregate purchase price thereof and the net cash proceeds therefrom
available for such redemption, the date or dates on which such transaction
or transactions were completed and the percentage of the aggregate
principal amount at maturity of Outstanding Securities being redeemed.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall be irrevocable.
SECTION 11.6. Deposit of Redemption Price.
---------------------------
Prior to 1:00 p.m., New York City time, on any Redemption Date, the
Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 10.3) an amount of money sufficient to pay the Redemption
Price of, and (except if the Redemption Date shall be an Interest Payment Date)
any applicable accrued interest on, all the Securities which are to be redeemed
on that date.
SECTION 11.7. Securities Payable on Redemption Date.
-------------------------------------
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and any applicable
accrued interest) such Securities shall not bear interest. Upon surrender of
any such Security for redemption in accordance with said notice, such Security
shall be paid by the Company at the Redemption Price, together with any
applicable accrued and unpaid interest to the Redemption Date; provided,
--------
however, that installments of interest whose Stated Maturity is on or prior to
- -------
the Redemption Date shall be payable to the Holders of such Securities, or one
or more predecessor securities, registered as such at the close of business on
the relevant Record Dates according to their terms and the provisions of Section
3.7.
If any Security called for redemption in accordance with the election
of the Company made pursuant to Section 11.1 shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
bear inter-
<PAGE>
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est from the Redemption Date at the rate provided by the Security.
SECTION 11.8. Securities Redeemed in Part.
---------------------------
Any Security which is to be redeemed only in part shall be surrendered
at an office or agency of the Company designated for that purpose pursuant to
Section 10.2 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney duly authorized
in writing), and the Company and shall execute, and the Trustee shall
authenticate and make available for delivery to the Holder of such Security
without service charge, a new Security or Securities, of any authorized
denomination as requested by such Holder, in aggregate principal amount at
maturity equal to and in exchange for the unredeemed portion of the principal
amount at maturity of the Security so surrendered.
ARTICLE XII
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 12.1. Company's Option to Effect
Defeasance or Covenant Defeasance.
----------------------------------
The Company may elect, at its option at any time, to have Section 12.2
or Section 12.3 applied to the Outstanding Securities (as a whole and not in
part) upon compliance with the conditions set forth below in this Article. Any
such election shall be evidenced by a Board Resolution.
SECTION 12.2. Defeasance and Discharge.
------------------------
Upon the Company's exercise of its option to have this Section applied
to the Outstanding Securities (as a whole and not in part), the Company shall be
deemed to have been discharged from its obligations with respect to such
Securities as provided in this Section on and after the date the conditions set
forth in Section 12.4 are satisfied (hereinafter called "Defeasance"). For this
purpose, such Defeasance means that the Company shall be deemed to have paid and
discharged the entire Indebtedness represented by such Securities and to have
satisfied all its other obligations under such Securities and this Indenture
insofar as such Securities are concerned (and
<PAGE>
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the Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same), subject to the following which shall survive until
otherwise terminated or discharged hereunder: (1) the rights of Holders of
Outstanding Securities to receive, solely from the trust fund described in
Section 12.4 and as more fully set forth in such Section, payments in respect of
the principal of, premium, if any, and interest on such Securities when payments
are due, (2) the Company's obligations with respect to such Securities under
Sections 3.4, 3.5, 3.6, 10.2 and 10.3, (3) the rights, powers, trusts, duties
and immunities of the Trustee hereunder and (4) this Article. Subject to
compliance with this Article, the Company may exercise its option to have this
Section applied to the Outstanding Securities (as a whole and not in part)
notwithstanding the prior exercise of its option to have Section 12.3 applied to
such Securities.
SECTION 12.3. Covenant Defeasance.
-------------------
Upon the Company's exercise of its option to have this Section applied
to the Outstanding Securities (as a whole and not in part), (i) the Company
shall be released from its obligations under Section 8.1(3), Sections 10.5
through 10.19, inclusive, and any covenant provided pursuant to Section 9.1(2)
and (ii) the occurrence of any event specified in Section 5.1(3) (with respect
to Section 8.1(3) and any of Sections 10.5 through 10.18, inclusive, and any
such covenants provided pursuant to Section 9.1(2)), shall be deemed not to be
or result in an Event of Default, in each case with respect to such Securities
as provided in this Section on and after the date the conditions set forth in
Section 12.4 are satisfied (hereinafter called "Covenant Defeasance"). For this
purpose, such Covenant Defeasance means that, with respect to such Securities,
the Company may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such specified Section (to
the extent so specified in the case of Section 5.1(3)), whether directly or
indirectly, by reason of any reference elsewhere herein to any such Section or
by reason of any reference in any such Section to any other provision herein or
in any other document, but the remainder of this Indenture and such Securities
shall be unaffected thereby.
SECTION 12.4. Conditions to Defeasance or
Covenant Defeasance.
---------------------------
The following shall be the conditions to the application of Section
12.2 or Section 12.3 to the Outstanding Securities:
<PAGE>
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(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee which satisfies the
requirements contemplated by Section 6.9 and agrees to comply with the
provisions of this Article applicable to it) as trust funds in trust for
the purpose of making the following payments, specifically pledged as
security for, and dedicated solely to, the benefits of the Holders of such
Securities, (A) money in an amount, or (B) U.S. Government obligations
which through the scheduled payment of principal and interest in respect
thereof in accordance with their terms will provide, not later than one day
before the due date of any payment, money in an amount, or (C) a
combination thereof, in each case sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge, and which shall be applied by the Trustee (or any such other
qualifying trustee) to pay and discharge, the principal of, premium, if
any, and any installment of interest on such Securities on the respective
Stated Maturities thereof, in accordance with the terms of this Indenture
and such Securities. As used herein, "U.S. Government Obligation" means
(x) any security which is (i) a direct obligation of the United States of
America for the payment of which the full faith and credit of the United
States of America is pledged or (ii) an obligation of a Person controlled
or supervised by and acting as an agency or instrumentality of the United
States of America the payment of which is unconditionally guaranteed as a
full faith and credit obligation by the United States of America, which, in
either case (i) or (ii), is not callable or redeemable at the option of the
issuer thereof, and (y) any depositary receipt issued by a bank (as defined
in Section 3(a)(2) of the Securities Act) as custodian with respect to any
U.S. Government Obligation which is specified in Clause (x) above and held
by such bank for the account of the holder of such depositary receipt, or
with respect to any specific payment of principal of or interest on any
U.S. Government Obligation which is so specified and held, provided that
--------
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depositary receipt
from any amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal or interest evidenced by
such depositary receipt.
<PAGE>
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(2) In the event of an election to have Section 12.2 apply to the
Outstanding Securities, the Company shall have delivered to the Trustee an
Opinion of Counsel stating that (A) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or (B) since
the date of this instrument, there has been a change in the applicable
Federal income tax law, in either case to the effect that, and based
thereon such opinion shall confirm that, the Holders of such Securities
will not recognize gain or loss for Federal income tax purposes as a result
of the deposit, Defeasance and discharge to be effected with respect to
such Securities and will be subject to Federal income tax on the same
amount, in the same manner and at the same times as would be the case if
such deposit, Defeasance and discharge were not to occur.
(3) In the event of an election to have Section 12.3 apply to the
Outstanding Securities, the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that the Holders of such Securities will
not recognize gain or loss for Federal income tax purposes as a result of
the deposit and Covenant Defeasance to be effected with respect to such
Securities and will be subject to Federal income tax on the same amount, in
the same manner and at the same times as would be the case if such deposit
and Covenant Defeasance were not to occur.
(4) No Default or Event of Default with respect to the Outstanding
Securities shall have occurred and be continuing at the time of such
deposit.
(5) Such Defeasance or Covenant Defeasance shall not cause the Trustee
to have a conflicting interest with respect to any securities of the
Company.
(6) Such Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any other agreement
or instrument to which the Company or any Subsidiary is a party or by which
it is bound.
(7) The Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that (A) the trust funds will not be subject to any
rights of holders of Indebtedness, including, without limitation, those
arising under this Indenture, after the 121st day following the deposit and
(B) after the 121st day following the deposit, the trust funds will not be
subject to the effect of any
<PAGE>
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applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally.
(8) The Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of the Securities over the other creditors
of the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others.
(9) No event or condition shall exist that would prevent the Company
from making payments of the principal of, premium, if any, and interest on
the Securities on the date of such deposit or at any time ending on the
121st day after the date of such deposit.
(10) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent under this Indenture to either Defeasance or Covenant Defeasance,
as the case may be, have been complied with.
SECTION 12.5. Deposited Money and U.S. Government
Obligations to Be Held in Trust;
Miscellaneous Provisions.
-----------------------------------
Subject to the provisions of the last paragraph of Section 10.3, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee or other qualifying trustee (solely for purposes of this
Section and Section 12.6, the Trustee and any such other trustee are referred to
collectively as the "Trustee") pursuant to Section 12.4 in respect of the
Outstanding Securities shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any such Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Securities, of all sums due and to become due thereon in respect of
principal and any premium and interest, but money so held in trust need not be
segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 12.4 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by
<PAGE>
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law is for the account of the Holders of Outstanding Securities.
Anything in this Article to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in Section 12.4
which, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, are in excess of the amount thereof which would then be required to be
deposited to effect the Defeasance or Covenant Defeasance, as the case may be,
with respect to the Outstanding Securities.
SECTION 12.6. Reinstatement.
-------------
If the Trustee or the Paying Agent is unable to apply any money in
accordance with this Article with respect to any Securities by reason of any
order or judgment of any court or governmental authority enjoining, restraining,
or otherwise prohibiting such application, then the obligations under this
Indenture and such Securities from which the Company has been discharged or
released pursuant to Section 12.2 or 12.3 shall be revived and reinstated
(commencing with the date such order or judgment becomes final and binding and
not subject to further appeal) as though no deposit had occurred pursuant to
this Article with respect to such Securities, until such time as the Trustee or
Paying Agent is permitted to apply all money held in trust pursuant to Section
12.5 with respect to such Securities in accordance with this Article; provided,
--------
however, that if the Company makes any payment of principal of or any premium or
- -------
interest on any such Security following such reinstatement of its obligations,
the Company shall be subrogated to the rights (if any) of the Holders of such
Securities to receive such payment from the money so held in trust. No action
taken or omitted to be taken by the Company, or any Subsidiary of the Company
subsequent to compliance with the provisions of Section 12.4 hereof and prior to
any order or judgment of a court or governmental authority described in the
immediately preceding sentence shall cause an Event of Default under this
Indenture (other than under Section 5.1(1) or 5.1(2) hereof), unless such order
or judgment was obtained by or on behalf of, or with the cooperation of, the
Company, or a Subsidiary of the Company.
<PAGE>
-115-
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed and attested as of the day and year first above written.
FOX KIDS WORLDWIDE, INC.
By: /s/ Mel Woods
--------------------------------
Name: Mel Woods
Title: President
Attest:
/s/ Bill Josey
- ------------------------------
Name:
Title:
THE BANK OF NEW YORK
as Trustee
By: /s/ Mary La Gumina
--------------------------------
Name: Mary La Gumina
Title: Assistant Vice President
<PAGE>
EXHIBIT A-1
-----------
[FORM OF SERIES A SECURITY]
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN
AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S, (2) AGREES THAT
IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF
TIME AS PERMITTED BY RULE 144(K) UNDER THE SECURITIES ACT OR ANY SUCCESSOR
PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF
ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY OR ANY PREDECESSOR OF
THIS SECURITY AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE
LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES TO NON-US PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING
OF REGULATION S UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3)
AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY,
THE TRUSTEE, THE TRANSFER AGENT AND THE REGISTRAR SHALL HAVE THE RIGHT PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE
THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO
REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE
OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.
THIS LEGEND WILL
A-1-1
<PAGE>
BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
A-1-2
<PAGE>
FOX KIDS WORLDWIDE, INC.
9 1/4% Senior Note due 2007, Series A
No. $__________
CUSIP NO. 351383AA2-144A
U34599AA5-Reg S
Fox Kids Worldwide, Inc., a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company," which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to Cede & Co. or registered assigns, the
principal sum of Dollars on November 1, 2007 and to pay
interest thereon from October 28, 1997 or from the most recent Interest Payment
Date to which interest has been paid or duly provided for, semi-annually on May
1 and November 1 in each year, commencing May 1, 1998 at the rate of 9 1/4% per
annum, until the principal hereof is paid or duly provided for, provided that
--------
any principal and premium, and any such installment of interest, which is
overdue shall bear interest at the rate of 9 1/4% per annum (to the extent that
the payment of such interest shall be legally enforceable), from the dates such
amounts are due until they are paid or duly provided for. The interest so
payable and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in such Indenture, be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest, which shall be the April
15 or October 15 (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. Any such interest not so punctually paid
or duly provided for will forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of securities
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such notice
as may be required by such exchange, all as more fully provided in said
Indenture.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the Borough of
A-1-3
<PAGE>
Manhattan, The City of New York, in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that, at the option of the Company, payment of
-------- -------
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
A-1-4
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed and attested.
FOX KIDS WORLDWIDE, INC.
By:
------------------------------
Name:
Title:
Attest:
- ---------------------------
Name:
Title:
Trustee's Certificate of Authentication
- ---------------------------------------
This is one of the Securities referred to in the within mentioned
Indenture.
The Bank of New York,
as Trustee
Dated: By:
------------------------------
Authorized Signatory
A-1-5
<PAGE>
Form of Reverse of Security
---------------------------
This Security is one of a duly authorized issue of Securities of the
Company designated as 9 1/4% Senior Notes due 2007, Series A (herein called the
"Initial Securities"), limited in aggregate principal amount at Stated Maturity
to $475,000,000 issued and to be issued under an Indenture, dated as of October
28, 1997 (herein called the "Indenture," which term shall have the meaning
assigned to it in such instrument), among the Company, and The Bank of New York,
as Trustee (herein called the "Trustee," which term includes any successor
trustee under the Indenture), and reference is hereby made to the Indenture for
a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee and the Holders of the
Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. The Securities include the Initial Securities, the
Private Exchange Securities and the Exchange Securities, issued in exchange for
the Initial Securities pursuant to the Registration Rights Agreement. The
Initial Securities, the Private Exchange Securities and the Exchange Securities
are treated as a single class of securities under the Indenture.
The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. (S)(S) 7aaa - 77bbbb (the "TIA")), as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein, the Securities are
subject to all such terms, and Holders of Securities are referred to the
Indenture and the TIA for a statement of such terms.
This Security is redeemable at the option of the Company, in whole or
in part, at any time on or after November 1, 2002, at the Redemption Prices
(expressed as percentages of principal amount at maturity) set forth below, plus
accrued and unpaid interest, if any, to the Redemption Date, if redeemed during
the 12-month period beginning on November 1 of the years indicated below:
Redemption
Year Price
---- ----------
2002............................ 104.625%
2003............................ 103.083%
2004............................ 101.542%
2005 and thereafter............. 100.000%
In addition, at any time, or from time to time, on or prior to,
November 1, 2000, the Company may, at its option, use
A-1-6
<PAGE>
the net cash proceeds of (a) one or more Public Equity offerings or (b) sales of
Qualified Equity Interests of the Company to Strategic Equity Investors
resulting in gross cash proceeds to the Company of at least $100,000,000 in the
aggregate to redeem up to 35% of the originally issued principal amount of the
Securities, at a redemption price equal to 9 1/4% of the principal amount
thereof plus accrued and unpaid interest, if any, to the Redemption Date;
provided that at least 65% of the originally issued principal amount of
- --------
Securities remains outstanding immediately after the occurrence of such
redemption. In order to effect the foregoing redemption with the proceeds of any
Public Equity Offering or sale of Qualified Equity Interests to Strategic Equity
Investors, the Company shall send the redemption notice not later than 60 days
after the consummation of such Public Equity Offering or sale of Qualified
Equity Interests to Strategic Equity Investors.
The Securities are not subject to any sinking fund.
The Indenture provides that the Company is obligated (a) upon the
occurrence of a Change in Control, to make an offer to purchase all outstanding
Securities at a purchase price of 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of purchase and (b) to make an
offer to purchase Securities with a portion of the net cash proceeds of certain
sales or other dispositions of assets at a purchase price of 100% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase.
In the event of redemption or purchase of this Security in part only
pursuant to a Change of Control Offer or an Asset Sale Offer or a Deposit Offer,
a new Security or Securities for the unredeemed or unpurchased portion hereof
will be issued in the name of the Holder hereof upon the cancellation hereof.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Security or certain restrictive covenants and Events
of Default with respect to this Security, in each case upon compliance with
certain conditions set forth in the Indenture.
If an Event of Default shall occur and be continuing, there may be
declared due and payable the Default Amount on all of the outstanding
Securities, in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the
A-1-7
<PAGE>
Holders of the Securities under the Indenture at any time by the Company and the
Trustee with the consent of the Holders of a majority in aggregate principal
amount of the Securities at the time Outstanding. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
at Stated Maturity of the Securities at the time Outstanding, on behalf of the
Holders of all the Securities, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities, the Holders of not less than 25% in principal amount of the
Securities at the time Outstanding shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default as Trustee
and offered the Trustee reasonable indemnity and the Trustee shall not have
received from the Holders of a majority in principal amount of Securities at the
time outstanding a direction inconsistent with such request, and shall have
failed to institute any such proceeding for 15 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not apply to
certain suits described in the Indenture, including any suit instituted by the
Holder of this Security for the enforcement of any payment of principal hereof
or any premium or interest hereon on or after the respective due dates expressed
herein (or, in the case of redemption, on or after the Redemption Date or, in
the case of any purchase of this Security required to be made pursuant to a
Change of Control Offer or an Asset Sale Offer or a Deposit Offer, on or after
the relevant purchase date).
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
A-1-8
<PAGE>
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Security Registrar duly executed by,
the Holder hereof or his attorney duly authorized in writing, and thereupon one
or more new Securities, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
This Security is issuable only in registered form without coupons in
denominations of $1,000 principal amount at maturity and any integral multiple
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Securities are exchangeable for a like aggregate principal
amount of Securities of like tenor of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company, or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
Pursuant to the Registration Rights Agreement by and among the
Company, and the Initial Purchasers, the Company will be obligated to consummate
an exchange offer pursuant to which the Holder of this Security shall have the
right to exchange this Security for 9 1/4% Senior Notes due 2007, Series B, of
the Company (herein called the "Exchange Notes"), which have been registered
under the Securities Act, in like principal amount and having identical terms as
the Initial Securities (other than as set forth in this paragraph). The Holders
of Initial Securities shall be entitled to receive certain additional interest
payments in the event such exchange offer is not consummated and upon certain
other conditions, all pursuant to and in accordance with the terms of the
Registration Rights Agreement.
A-1-9
<PAGE>
Interest on this Security shall be computed on the basis of a 360-day
year of twelve 30-day months.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
The Indenture and this Security shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflicts of laws principles thereof.
A-1-10
<PAGE>
ASSIGNMENT FORM
If you, the Holder, want to assign this Security, fill in the form below and
have your signature guaranteed:
I (or we) assign and transfer this Security to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax ID number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code) and irrevocably appoint
- --------------------------------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for such agent.
In connection with any transfer of this Security occurring prior to
the date which is the earlier of (i) the date of the declaration by the
Commission of the effectiveness of a registration settlement under the
Securities Act of 1933, as amended (the "Securities Act"), covering resales of
--------------
this Security (which effectiveness shall not have been suspended or terminated
at the date of the transfer) and (ii) the date two years (or such shorter period
of time as permitted by Rule 144(k) under the Securities Act or any successor
provision thereunder) after the later of the original issuance date appearing on
the face of this Security (or any predecessor thereto) or the last date on which
the Company or any affiliate of the Company was the owner of this Security (or
any predecessor thereto), the undersigned confirms that it has not utilized any
general solicitation or general advertising in connection with the transfer and
that:
[Check One]
----------
[_] (a) this Security is being transferred in compliance with the
exemption from registration under the Securities Act provided by
Rule 144A thereunder.
[_] (b) this Security is being transferred other than in accordance with
(a) above and documents, including a transferor certificate
substantially in the form of Exhibit D to the Indenture in the
---------
A-1-11
<PAGE>
case of a transfer pursuant to Regulation S, are being furnished
which comply with the conditions of transfer set forth in this
Security and the Indenture.
If none of the foregoing boxes is checked and, in the case of (b) above, if the
appropriate document is not attached or otherwise furnished to the Trustee, the
Trustee or Registrar shall not be obliged to register this Security in the name
of any Person other than the Holder hereof unless and until the conditions to
any such transfer of registration set forth herein and in Section 3.14 of the
Indenture shall have been satisfied.
- --------------------------------------------------------------------------------
Date: Your signature
-------------- -----------------------------
(Sign exactly as your name ap-
pears on the other side of
this Security)
By:
---------------------------------------
NOTICE: To be executed by
an executive officer
Signature Guarantee:
-----------------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A (including the information
specified in Rule 144A(d)(4)) or has determined not to request such information
and that it is aware that the transferor is relying upon the undersigned's
foregoing representations in order to claim the exemption from registration
provided by Rule 144A.
Dated: --------------------- ------------------------------------
NOTICE: To be executed by an
executive officer
A-1-12
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased in its entirety
by the Company pursuant to Section 10.13 or 10.14 of the Indenture, check the
box:
[_]
If you want to elect to have only a part of the principal amount at
maturity of this Security purchased by the Company pursuant to Section 10.13 or
10.14 of the Indenture, state the portion of such amount: $_____________.
Dated: Your Signature:
------------------ ----------------------------------
(Sign exactly as name appears on
the other side of this Security)
Signature Guarantee:
-----------------------------------------------------------
(Signature must be guaranteed by a financial institution that is a member
of the Securities Transfer Agent Medallion Program ("STAMP"), the Stock
Exchange Medallion Program ("SEMP"), the New York Stock Exchange, Inc.
Medallion Signature Program ("MSP") or such other signature guarantee
program as may be determined by the Security Registrar in addition to, or
in substitution for, STAMP, SEMP or MSP, all in accordance with the
Securities Exchange Act of 1934, as amended.)
A-1-13
<PAGE>
Exhibit A-2
-----------
FOX KIDS WORLDWIDE, INC.
9 1/4% Senior Note due 2007, Series B
No. _____ $______
CUSIP NO. 351383AA2-144A
U34599AA5-Reg S
Fox Kids Worldwide, Inc., a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company," which term
includes any successor Person under the Indenture hereinafter referred to)
promises to pay to Cede & Co. or registered assigns, the principal sum of
Dollars on November 1, 2007 and to pay interest thereon, at the rate of 9 1/4%
per annum, until the principal hereof is paid or duly provided for, provided
--------
that any principal and premium, and any such installment of interest, which is
overdue shall bear interest at the rate of 9 1/4% per annum (to the extent that
the payment of such interest shall be legally enforceable), from the dates such
amounts are due until they are paid or duly provided for. The interest so
payable and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in such Indenture, be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest, which shall be the April
15 or October 15 (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. Any such interest not so punctually paid
or duly provided for will forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of securities
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such notice
as may be required by such exchange, all as more fully provided in said
Indenture.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan, The City of New York, in such coin or
currency of the United States of America as at the time of payment is legal
A-2-1
<PAGE>
tender for payment of public and private debts; provided, however, that, at the
-------- -------
option of the Company, payment of interest may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
A-2-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed and
FOX KIDS WORLDWIDE, INC.
By:
-------------------------------
Name:
Title:
Attest:
- ---------------------------
Name:
Title:
Trustee's Certificate of Authentication
- ---------------------------------------
This is one of the Securities referred to in the within mentioned
Indenture.
The Bank of New York,
as Trustee
Dated: By:
-------------------------------
Authorized Signatory
A-2-3
<PAGE>
Form of Reverse of Security
---------------------------
This Security is one of a duly authorized issue of Securities of the
Company and designated as 9 1/4% Senior Notes due 2007, Series B (herein called
the "Initial Securities"), limited in aggregate principal amount at Stated
Maturity to $475,000,000 issued and to be issued under an Indenture, dated as of
October 28, 1997 (herein called the "Indenture," which term shall have the
meaning assigned to it in such instrument), among the Company, and The Bank of
New York, as Trustee (herein called the "Trustee," which term includes any
successor trustee under the Indenture), and reference is hereby made to the
Indenture for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, , the Trustee and the Holders
of the Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. The Securities include the Initial Securities, the
Private Exchange Securities and the Exchange Securities, issued in exchange for
the Initial Securities pursuant to the Registration Rights Agreement. The
Initial Securities, the Private Exchange Securities and the Exchange Securities
are treated as a single class of securities under the Indenture.
The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. (S)(S) 7aaa - 77bbbb (the "TIA")), as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein, the Securities are
subject to all such terms, and Holders of Securities are referred to the
Indenture and the TIA for a statement of such terms.
This Security is redeemable at the option of the Company, in whole or
in part, at any time on or after November 1, 2002 at the Redemption Prices
(expressed as percentages of principal amount at maturity) set forth below, plus
accrued and unpaid interest, if any, to the Redemption Date, if redeemed during
the 12-month period beginning on November 1 of the years indicated below:
Redemption
Year Price
---- ----------
2002............................. 104.625%
2003............................. 103.083%
2004............................. 101.542%
2005 and thereafter.............. 100.000%
A-2-4
<PAGE>
In addition, at any time, or from time to time, on or prior to
November 1, 2000, the Company may, at its option, use the net cash proceeds of
(a) one or more Public Equity Offerings or (b) sales of Qualified Equity
Interests of the Company to Strategic Equity Investors resulting in gross cash
proceeds to the Company of at least $100,000,000 in the aggregate to redeem up
to 35% of the originally issued principal amount of the Securities, at a
redemption price equal to 109.25% of the principal amount thereof plus accrued
and unpaid interest, if any, to the Redemption Date; provided that at least 65%
--------
of the originally issued principal face amount of Securities remains outstanding
immediately after the occurrence of such redemption. In order to effect the
foregoing redemption with the proceeds of any Public Equity Offering or sale of
Qualified Equity Interests to Strategic Equity Investors, the Company shall send
the redemption notice not later than 60 days after the consummation of such
Public Equity Offering or sale of Qualified Equity Interests to Strategic Equity
Investors.
The Securities are not subject to any sinking fund.
The Indenture provides that the Company is obligated (a) upon the
occurrence of a Change in Control, to make an offer to purchase all outstanding
Securities at a purchase price of 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of purchase and (b) to make an
offer to purchase Securities with a portion of the net cash proceeds of certain
sales or other dispositions of assets at a purchase price of 100% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase, unless the Purchase Date is on or after the earlier to occur of
November 1, 2002 and the Cash Interest Election Date, in which case such
purchase price shall be equal to 100% of the principal amount at maturity
thereof plus accrued and unpaid interest, if any, to the date of purchase.
In the event of redemption or purchase of this Security in part only
pursuant to a Change of Control Offer or an Asset Sale Offer or a Deposit Offer,
a new Security or Securities for the unredeemed or unpurchased portion hereof
will be issued in the name of the Holder hereof upon the cancellation hereof.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Security or certain restrictive covenants and Events
of Default with respect to this Security, in each case upon compliance with
certain conditions set forth in the Indenture.
A-2-5
<PAGE>
If an Event of Default shall occur and be continuing, there may be
declared due and payable the Default Amount on all of the outstanding
Securities, in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and and the rights of the Holders of the Securities under the Indenture
at any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount at Stated Maturity of the
Securities at the time Outstanding, on behalf of the Holders of all the
Securities, to waive compliance by the Company and with certain provisions of
the Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Holder of this Security shall
be conclusive and binding upon such Holder and upon all future Holders of this
Security and of any Security issued upon the registration of transfer hereof or
in exchange herefor or in lieu hereof, whether or not notation of such consent
or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities, the Holders of not less than 25% in principal amount of the
Securities at the time Outstanding shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default as Trustee
and offered the Trustee reasonable indemnity and the Trustee shall not have
received from the Holders of a majority in principal amount of Securities at the
time Outstanding a direction inconsistent with such request, and shall have
failed to institute any such proceeding for 15 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not apply to
certain suits described in the Indenture, including any suit instituted by the
Holder of this Security for the enforcement of any payment of principal hereof
or any premium or interest hereon on or after the respective due dates expressed
herein (or, in the case of redemption, on or after the Redemption Date or, in
the case of any purchase of this Security required to be made pursuant to a
Change of Control Offer or an Asset Sale Offer or a Deposit Offer, on or after
the relevant purchase date).
A-2-6
<PAGE>
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Security Registrar duly executed by,
the Holder hereof or his attorney duly authorized in writing, and thereupon one
or more new Securities, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
This Security is issuable only in registered form without coupons in
denominations of $1,000 principal amount and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities are exchangeable for a like aggregate principal amount at maturity of
Securities of like tenor of a different authorized denomination, as requested by
the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, , the Trustee and any agent of the Company, or the
Trustee may treat the Person in whose name this Security is registered as the
owner hereof for all purposes, whether or not this Security be overdue, and
neither the Company, , the Trustee nor any such agent shall be affected by
notice to the contrary.
Interest on this Security shall be computed on the basis of a 360-day
year of twelve 30-day months.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
The Indenture and this Security shall be governed by and construed in
accordance with the laws of the State of New
A-2-7
<PAGE>
York, without regard to the conflicts of laws principles thereof.
A-2-8
<PAGE>
ASSIGNMENT FORM
If you, the Holder, want to assign this Security, fill in the form
below and have your signature guaranteed:
I (or we) assign and transfer this Security to
- -------------------------------------------------------------------------------
(Insert assignee's social security or tax ID number)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code) and irrevocably appoint
- -------------------------------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for such agent.
Date: Your signature
--------------- --------------------------------------
(Sign exactly as your name ap-
pears on the other side of this
Security)
By:
---------------------------------
NOTICE: To be executed by
an executive officer
Signature Guarantee:
---------------------------------------------------------
A-2-9
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased in its entirety
by the Company pursuant to Section 10.13, or 10.14 of the Indenture, check the
box:
[_]
If you want to elect to have only a part of the principal amount at
maturity of this Security purchased by the Company pursuant to Section 10.13 or
10.14 of the Indenture, state the portion of such amount: $_____________.
Dated: Your Signature:
-------------------------------------
(Sign exactly as name appears on the
other side of this Security)
Signature Guarantee:
---------------------------------------------------------
(Signature must be guaranteed by a financial institution that is a member
of the Securities Transfer Agent Medallion Program ("STAMP"), the Stock
Exchange Medallion Program ("SEMP"), the New York Stock Exchange, Inc.
Medallion Signature Program ("MSP") or such other signature guarantee
program as may be determined by the Security Registrar in addition to, or
in substitution for, STAMP, SEMP or MSP, all in accordance with the
Securities Exchange Act of 1934, as amended.)
A-2-10
<PAGE>
EXHIBIT B
---------
FORM OF LEGEND FOR BOOK-ENTRY SECURITIES
Any Global Security authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS
SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A
NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
B-1
<PAGE>
EXHIBIT C
---------
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
-----------------------------------
The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: Fox Kids Worldwide, Inc. (the "Company")
9 1/4% Senior Notes due 2007 (the "Securities")
-----------------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $475,000,000 aggregate
principal amount of the Securities, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
--------------
(1) the offer of the Securities was not made to a Person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any Person acting on our
behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated offshore securities market described in Rule
902(a) of Regulation S and neither we nor any Person acting on our behalf
knows that the transaction has been pre-arranged with a buyer in the United
States;
(3) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act;
(5) we have advised the transferee of the transfer restrictions
applicable to the Securities;
(6) if the circumstances set forth in rule 904(c) under the Securities
Act are applicable, we have complied with the additional conditions
therein, including (if applicable) sending a confirmation or other notice
stating
C-1
<PAGE>
that the Securities may be offered and sold during the restricted
period specified in Rule 903(c)(2) or (3), as applicable, only in
accordance with the provisions of Regulation S; pursuant to registration of
the Securities under the Securities Act; or pursuant to another available
exemption from the registration requirements under the Securities Act; and
(7) if the sale is made during a restricted period and the provisions
of Rule 903(c)(3) are applicable thereto, we confirm that such sale has
been made in accordance with such provisions.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
---------------------------
Authorized Signature
C-2
<PAGE>
EXHIBIT D
---------
FORM OF CERTIFICATE TO BE DELIVERED
IN CONNECTION WITH TRANSFERS TO
NON-QIB INSTITUTIONAL ACCREDITED INVESTORS
------------------------------------------
The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: Fox Kids Worldwide, Inc. (the
"Company") 9 1/4% Senior
Notes due 2007
-----------------------------
Ladies and Gentlemen:
We are delivering this letter in connection with our proposed purchase
of 9 1/4% Senior Notes due 2007 (the "Notes") of Fox Kids Worldwide, Inc., a
Delaware corporation (the "Company").
We hereby confirm that:
(i) we are an institutional "accredited investor" within the meaning
of Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended (the "Securities Act") (an "Accredited Investor"), or a "qualified
institutional buyer" as defined in Rule 144A under the Securities Act (a
"QIB") purchasing Notes for the account of one or more Accredited
Investors;
(ii) any purchase of Notes by us will be for our own account or for
an account with respect to which we exercise sole investment discretion and
that we are and any such account are (a) a QIB, and aware that the sale is
being made in reliance on Rule 144A under the Securities Act, (b) an
Accredited Investor, or (c) a person other than a U.S. person ("foreign
purchasers", which term shall include dealers or other professional
fiduciaries in the United States acting on a discretionary basis for
foreign beneficial owners (other than an estate or trust)) in offshore
transactions meeting the requirements of Rule 903 or 904 of Regulation S
under the Securities Act;
D-1
<PAGE>
(iii) we have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risk of purchasing
Notes and we and any accounts for which we are acting are able to bear the
economic risks of and an entire loss of our or their investment in the
Notes;
(iv) we are not acquiring Notes with a view to any distribution of
Notes in a transaction that would violate the Securities Act or the
securities laws of any state of the United States or any other applicable
jurisdiction; provided that the disposition of our property and the
property of any accounts for which we are acting as fiduciary shall remain
at all times within our and their control;
(v) we have had access to such financial and other information, and
have been afforded the opportunity to ask such questions of representatives
of the Company and receive answers thereto, as we deem necessary in order
to evaluate our proposed investment in the Notes; and
(vi) we acknowledge that the Notes have not been registered under the
Securities Act and that none of the Notes may be offered or sold within the
United States or to, or for the account or benefit of, U.S. persons except
as set forth below.
We agree, on our own behalf and on behalf of each account for which we
acquire any Notes, that, prior to (x) the date which is two years (or such
shorter period of time as permitted by Rule 144(k) under the Securities Act or
any successor provision thereunder) after the later of the date of original
issuance of the Notes and the last date on which the Company or any affiliate of
the Company was the owner of such Notes, or any predecessors thereto and (y)
such later date, if any, as may be required by applicable laws, the Notes may be
offered, resold, pledged or otherwise transferred only (a) to Multicanal or any
of its subsidiaries, (b) inside the United States to a QIB in compliance with
Rule 144A under the Securities Act, (c) inside the United States to an
Accredited Investor that, prior to such transfer, furnishes to the trustee under
the Indenture relating to the Notes (the "Trustee") a signed letter
substantially in the form of this letter, (d) outside the United States to
foreign purchasers in offshore transactions meeting the requirements of Rule
903 or Rule 904 of Regulation S under the Securities Act, (e) pursuant to the
exemption from registration provided by Rule 144 under the Securities Act (if
D-2
<PAGE>
available), (f) pursuant to an effective registration statement under the
Securities Act or (g) pursuant to another available exemption from the
registration requirements of the Securities Act.
We understand that the Trustee will not be required to accept for
registration of transfer any Notes acquired by us, except upon presentation of
evidence satisfactory to the Company and the Trustee that the foregoing
restrictions on transfer have been complied with. We further understand that
the Notes purchased by us will be in the form of definitive physical
certificates and that such certificates will bear a legend reflecting the
substance of this paragraph. We further agree to provide to any person
acquiring any of the Notes from us a notice advising such person that transfers
of such Notes are restricted as stated herein and that certificates representing
such Notes will bear a legend to that effect.
We acknowledge that the Company and the Trustee and others will rely
upon the truth and accuracy of our acknowledgments, representations and
agreements set forth herein, and we agree to notify you promptly in writing if
any of our acknowledgments, representations or agreements herein cease to be
accurate and complete.
We represent to you that we have full power to make the foregoing
acknowledgments, representations and agreements on our own behalf and on behalf
of any investor account for which we are acting as a fiduciary or agent.
As used herein, the terms "offshore transaction," "United States" and
"U.S. person" have the respective meanings given to them in Regulation S under
the Securities Act.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
D-3
<PAGE>
EXHIBIT E-1
-----------
THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO THE PRIOR
PAYMENT IN FULL IN CASH OF ALL OF THE SENIOR INDEBTEDNESS (AS DEFINED BELOW)
PURSUANT TO THE TERMS OF THIS SUBORDINATED NOTE AND TO THE EXTENT PROVIDED
HEREIN.
FORM OF SUBORDINATED NOTE
Dated: ________ __, ____
FOR VALUE RECEIVED, the undersigned FOX KIDS WORLDWIDE, INC., a
Delaware corporation ("Fox Kids"), HEREBY PROMISES TO PAY TO THE ORDER OF
______________, ____________ [lender] or its permitted registered assigns (the
"SUBORDINATED LENDER"), the principal amount of [SPECIFY PRINCIPAL AMOUNT
EVIDENCED BY THIS NOTE IN WORDS] DOLLARS ($____________) on __________ __,
____/1/. Interest shall accrue on the principal amount outstanding from time to
time under this Subordinated Note, from and including the date of issuance
hereof until such principal amount is paid in full, at a rate per annum
(computed on the basis of a 365/366-day year) equal to ___%. Accrued and unpaid
interest shall be added automatically to the principal amount outstanding under
this Subordinated Note and shall become a part thereof unless, at any time, Fox
Kids elects to pay all or a portion of such interest in cash and is permitted to
make such payment in cash under Section 8(d)(i)(D) of Fox Kids Guarantee dated
October 28, 1997 made by Fox Kids in favor of the Secured Parties referred to in
the Credit Agreement (as hereinafter defined) and under Sections 10.8 and 10.9
of the Indentures (as hereinafter defined). Capitalized terms not otherwise
defined in this Subordinated Note shall have the same meanings as specified
therefor in the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to the Subordinated Lender, at its offices at _______________,
________, ________ _____ (or at such other location as shall be designated by
the Subordinated Lender in a written notice to Fox Kids and the Senior
Representative (as hereinafter defined)), in same day
- ------------------------
/1/ The stated maturity date of each of the Subordinated Notes shall be no
earlier than the later of (a) May 1, 1998 and (b) the payment in full cash
of all Senior Notes. None of the Subordinated Notes shall have any other
scheduled or mandatory redemption or repurchase dates.
E-1-1
<PAGE>
funds. The loan made by the Subordinated Lender to Fox Kids hereunder, and all
payments and prepayments made on account of principal hereof, shall be recorded
by the Subordinated Lender and, prior to any transfer hereof, endorsed on the
grid attached hereto that is part of this Subordinated Note; provided that the
failure of the Subordinated Lender to make any such recordation or endorsement
shall not affect the obligations of Fox Kids under this Subordinated Note.
Subject to the provisions of the Credit Agreement, the Fox Kids
Guarantee and the Indentures, the principal amount outstanding under this
Affiliate Subordinated Shareholder Note may, at the option of Fox Kids, be
prepaid at any time, in whole or in part, without penalty or premium.
The aggregate principal amount owing to the Subordinated Lender from
time to time under this Subordinated Note, all accrued and unpaid interest
thereon, and any other indebtedness evidenced by or otherwise owing in respect
of this Subordinated Note (collectively, the "Subordinated Indebtedness") is and
shall be subordinate and junior in right of payment and otherwise, to the extent
and in the manner hereinafter set forth, to the prior payment in full of all of
the Senior Indebtedness (as hereinafter defined), whether now or hereafter
existing. For all purposes of this Subordinated Note, the following terms shall
have the following meanings (such meanings to be equally applicable to both the
singular and the plural forms of the terms defined):
"Administrative Agent" means Citicorp USA, Inc., as the administrative
agent and the collateral agent for the Senior Lenders and the other Secured
Parties, together with any successor thereto appointed pursuant to Article
VIII of the Credit Agreement.
"Credit Agreement" means the Second Amended and Restated Credit
Agreement dated as of October 28, 1997 among FCN Holding, Inc.,
International Family Entertainment, Inc. and Saban Entertainment, Inc., as
the Borrowers thereunder, Fox Kids Holdings, LLC, as a guarantor
thereunder, the Senior Lenders, Citicorp Securities, Inc., Chase
Securities, Inc. and BankBoston, N.A., as the Co-Arrangers for the
Facilities referred to therein, and the Administrative Agent, as such
agreement may be amended, supplemented or otherwise modified from time to
time.
"Indentures" means, collectively, (a) the Indenture dated as of
October 28, 1997 between Fox Kids and The Bank of New York, as Trustee,
relating to the 9- 1/4% Senior Notes due 2007, and the Indenture dated as
of October 28, 1997 between Fox Kids and The Bank of New York, as Trustee,
re-
E-1-2
<PAGE>
lating to the 10- 1/4% Senior Discount Notes due 2007, as such agreements
may be amended, supplemented or otherwise modified from time to time.
"Senior Creditors" means, collectively, the Senior Secured Creditors,
the Senior Notes Creditors and the other holders, if any, of any of the
Senior Indebtedness.
"Senior Indebtedness" means, collectively, the Senior Secured
Indebtedness and the Senior Notes Indebtedness.
"Senior Lenders" means the banks, financial institutions and other
institutional lenders from time to time party to the Credit Agreement.
"Senior Notes" means, collectively, the 9- 1/4% Senior Notes due 2007
and the 10- 1/4% Senior Discount Notes due 2007 issued under the
Indentures, in each case may be amended, supplemented or otherwise modified
from time to time.
"Senior Notes Creditors" means, collectively, the trustees under each
of the Indentures and the holders from time to time of Senior Notes
Indebtedness.
"Senior Notes Indebtedness" means (i) all Obligations of Fox Kids,
whether now or hereafter existing, under or in respect of the Indentures
and the Senior Notes, whether direct or indirect, absolute or contingent,
and whether for principal, interest (including, without limitation,
interest accruing after the filing of a petition initiating any Insolvency
Proceeding (as hereinafter defined), whether or not such interest accrues
after the filing of such petition for purposes of any applicable Insolvency
Laws (as hereinafter defined), or is an allowed claim in such Insolvency
Proceeding), premium, fees, indemnification payments, contract causes of
action, costs, expenses or otherwise and (ii) any and all extensions,
modifications, substitutions, amendments, renewals, refinancings,
replacements and refundings of any or all of the Obligations referred to in
clause (i) of this definition, and any instrument or agreement evidencing
or otherwise setting forth the terms of any Indebtedness or other
Obligations incurred in any such extension, modification, substitution,
amendment, renewal, refinancing, replacement or refunding.
"Senior Representative" means (i) the Administrative Agent or (ii)
after the payment in full of all of the Senior Secured Obligations and the
termination or expiration
E-1-3
<PAGE>
of all of the commitments of the Senior Secured Creditors in respect
thereof, either of the trustees for the Senior Notes or the holders of a
majority in aggregate principal amount of the outstanding Senior Notes of
either issue.
"Senior Secured Creditors" means, collectively, the Administrative
Agent, the Senior Lenders and the other Secured Parties and any other
holder of any of the Senior Secured Indebtedness.
"Senior Secured Indebtedness" means (i) all Obligations of Fox Kids,
whether now or hereafter existing, under or in respect of the Credit
Agreement, the Notes and the other Loan Documents, whether direct or
indirect, absolute or contingent, and whether for principal, interest
(including, without limitation, interest accruing after the filing of a
petition initiating any Insolvency Proceeding, whether or not such interest
accrues after the filing of such petition for purposes of any applicable
Insolvency Laws, or is an allowed claim in such Insolvency Proceeding),
premium, fees, indemnification payments, contract causes of action, costs,
expenses or otherwise and (ii) any and all extensions, modifications,
substitutions, amendments, renewals, refinancings, replacements and
refundings of any or all of the Obligations referred to in clause (i) of
this definition, and any instrument or agreement evidencing or otherwise
setting forth the terms of any Indebtedness or other Obligations incurred
in any such extension, modification, substitution, amendment, renewal,
refinancing, replacement or refunding.
Furthermore, for all purposes of this Subordinated Note, the Senior Indebtedness
shall not be deemed to have been paid in full until the latest of (A) the
payment in full in cash of all of the Senior Indebtedness and the expiration or
termination of all of the commitments of the Secured Parties and the other
holders thereof, (B) the expiration or termination of all of the Bank Hedge
Agreements and (C) the Termination Date.
In the event of any dissolution, winding up, liquidation, arrangement,
reorganization, adjustment, protection, relief or composition of Fox Kids or its
debts, whether voluntary or involuntary, in any bankruptcy, insolvency,
arrangement, reorganization, receivership, relief or other similar action or
proceeding under the United States Federal Bankruptcy Code or any other federal
or state bankruptcy or insolvency laws or any similar Requirements of Law of any
other jurisdiction covering the protection of creditors' rights or the relief of
debtors (collectively, the "INSOLVENCY LAWS"), or upon an assignment for the
benefit of creditors or any other marshalling of the property, assets and
liabilities of Fox Kids or otherwise
E-1-4
<PAGE>
(each, an "INSOLVENCY PROCEEDING"), the Senior Creditors shall be
entitled to receive payment in full of all of the Senior Indebtedness before the
Subordinated Lender is entitled to receive any payment or distribution of any
kind or character on account of all or any of the Subordinated Indebtedness,
and, to that end, any payment or distribution of any kind or character (whether
in cash, property or securities) that otherwise would be payable or deliverable
upon or with respect to the Subordinated Indebtedness in any such Insolvency
Proceeding (including, without limitation, any payment that may be payable by
reason of any other Indebtedness of Fox Kids being subordinated to payment of
the Subordinated Indebtedness) shall be paid or delivered forthwith directly to
the Senior Representative, for the ratable account of the Senior Secured
Creditors and the Senior Notes Creditors, in the same form as so received (with
any necessary endorsement or assignment), for application (in the case of cash)
to, or to be held as collateral (in the case of noncash property or securities)
for, the payment or prepayment of the Senior Indebtedness until all of the
Senior Indebtedness shall have been paid in full.
No payment or distribution of any property or assets of Fox Kids of
any kind or character (including, without limitation, any payment that may be
payable by reason of any other Indebtedness of Fox Kids being subordinated to
payment of the Subordinated Indebtedness) shall be made by or on behalf of Fox
Kids for or on account of any Subordinated Indebtedness, unless and until all of
the Senior Indebtedness shall have been paid in full or unless such payment is
expressly permitted to be made under Section 8(d)(i)(D) of the Fox Kids
Guarantee and Sections 10.8 and 10.9 of the Indentures. Furthermore, so long as
the Senior Indebtedness shall not have been paid in full, the Subordinated
Lender shall not (a) ask, demand, sue for, take or receive from Fox Kids,
directly or indirectly, in cash or other property or by setoff or in any manner
(including, without limitation, from or by way of collateral), payment of all or
any of the Subordinated Indebtedness, except to the extent that such payment is
expressly permitted to be made under Section 8(d)(i)(D) of the Fox Kids
Guarantee and Sections 10.8 and 10.9 of the Indentures, (b) commence, or join
with any creditor other than the Senior Representative in commencing, or
directly or indirectly cause Fox Kids to commence, or assist Fox Kids in
commencing, any Insolvency Proceeding, or (c) request or accept any collateral
or other security for the Subordinated Indebtedness. If the Subordinated
Lender, in contravention hereof, shall commence, prosecute or participate in any
Insolvency Proceeding, then the Senior Representative may intervene and
interpose as a defense or plea the terms of this Subordinated Note in its own
name or in the name of the Subordinated Lender.
E-1-5
<PAGE>
Until such time as all of the Senior Indebtedness has been paid in
full, if any Insolvency Proceeding is commenced by or against Fox Kids:
the Senior Representative is hereby irrevocably authorized and
empowered (in its own name or in the name of the Subordinated Lender or
otherwise), but shall have no obligation, to demand, sue for, collect and
receive every payment or distribution otherwise payable to the Subordinated
Lender in respect of this Subordinated Note and give acquittance therefor,
and to file claims and proofs of claim and take such other actions
(including, without limitation, voting the Subordinated Indebtedness or
enforcing any security interest or other lien securing payment of the
Subordinated Indebtedness) as it may deem necessary or advisable for the
exercise or enforcement of any of the rights or interests of the Senior
Representative or any of the other Senior Creditors under this Subordinated
Note; and
the Subordinated Lender shall duly and promptly take such action as
the Senior Representative may reasonably request (i) to collect the
Subordinated Indebtedness for the account of the Senior Representative, for
the ratable benefit of the Senior Secured Creditors and the Senior Notes
Creditors, and to file appropriate claims or proofs of claim in respect of
the Subordinated Indebtedness, (ii) to execute and deliver to the Senior
Representative such powers of attorney, assignments or other instruments as
the Senior Representative may reasonably request in order to enable the
Senior Representative to enforce any and all claims with respect to, and
any security interests and other liens securing payment of, the
Subordinated Indebtedness and (iii) to collect and receive any and all
payments or distributions that may be payable or deliverable upon or with
respect to the Subordinated Indebtedness.
All payments or distributions upon or with respect to the Subordinated
Indebtedness that are received by the Subordinated Lender contrary to the
provisions of this Subordinated Note shall be received in trust for the benefit
of the Senior Representative and the Senior Creditors, shall be segregated from
other property or funds of the Subordinated Lender and shall be paid or
delivered forthwith directly to the Senior Representative, for the account of
the Senior Secured Creditors and the Senior Notes Creditors, in the same form as
so received (with any necessary endorsement or assignment), to be applied (in
the case of cash) to, or held as collateral (in the case of noncash property or
securities) for, the payment or prepayment of the Senior Indebtedness until all
of the Senior Indebtedness shall have been paid in full.
E-1-6
<PAGE>
To the extent that Fox Kids, the Subordinated Lender or any of their
respective Subsidiaries or any other guarantor of or provider of collateral for
the Senior Indebtedness shall make any payment on the Senior Indebtedness that
is subsequently invalidated, declared to be fraudulent or preferential or set
aside or is required to be repaid to a trustee, receiver or any other party
under any applicable Insolvency Law or equitable cause (any such payment being a
"Voided Payment"), then to the extent of such Voided Payment, that portion of
the Senior Indebtedness that had been previously satisfied by such Voided
Payment shall be reinstated and continue in full force and effect as if such
Voided Payment had never been made. To the extent that the Subordinated Lender
shall have received any payments subsequent to the date of the initial receipt
of such Voided Payment by the Senior Representative or any of the other Senior
Creditors and such payments have not been invalidated, declared to be fraudulent
or preferential or set aside or required to be repaid to a trustee, receiver or
any other party under any applicable Insolvency Law or equitable cause, the
Subordinated Lender shall be obligated and hereby agrees that any such payment
so made or received shall be deemed to have been received in trust for the
benefit of the Senior Representative and the other Senior Creditors, and the
Subordinated Lender hereby agrees to pay to the Senior Representative, upon
demand, the full amount so received by the Subordinated Lender during such
period of time to the extent necessary to fully restore to the Senior
Representative and the other Senior Creditors the amount of such Voided Payment,
which amount shall be applied as set forth in the immediately preceding
paragraph.
The Senior Representative is hereby authorized to demand specific
performance of the subordination provisions of this Subordinated Note, whether
or not Fox Kids shall have complied with any of the provisions hereof applicable
to it, at any time when the Subordinated Lender shall have failed to comply with
any of the subordination provisions of this Deeply Subordinated Shareholder
Note. The Subordinated Lender hereby irrevocably waives any defense based on
the adequacy of a remedy at law which might be asserted as a bar to such remedy
of specific performance.
The Subordinated Lender will not:
(i) Cancel or otherwise discharge any of the Subordinated
Indebtedness (except upon payment in full of all of the Senior Indebtedness
or, at any time and from time to time prior thereto, to the extent that
such payment is
E-1-7
<PAGE>
expressly permitted to be made under Section 8(d)(i)(D) of the Fox Kids
Guarantee and under Sections 10.8 and 10.9 of the Indentures), (ii) convert
or exchange any of the Subordinated Indebtedness into or for any other
Indebtedness (except to the extent expressly permitted by the Indentures),
(iii) convert or exchange any of the Subordinated Indebtedness into or for
any Equity Interest in Fox Kids or otherwise (except to the extent
expressly permitted by the Indentures) or (iv) subordinate any of the
Subordinated Indebtedness to any Indebtedness of Fox Kids other than the
Senior Indebtedness (except that no consent of the holders of the Senior
Notes or either of the trustees for the Senior Notes shall be required to
subordinate any of the Subordinated Indebtedness to any other Indebtedness
of Fox Kids (although nothing herein shall limit the obligation of any
holder of Indebtedness of Fox Kids to turn over or otherwise subordinate
itself to any or all of the Senior Creditors in accordance with any
subordination provisions applicable to such Indebtedness);
Sell, assign, pledge, encumber or otherwise dispose of any of the
Subordinated Indebtedness; or
Permit the terms of any of the Subordinated Indebtedness to be
amended, waived, supplemented or otherwise modified in such a manner as
could have an adverse effect upon the rights or interests of the Senior
Representative or any of the other Senior Creditors under this Subordinated
Note, any of the Loan Documents, either of the Indentures or any of the
other agreements, instruments or other documents evidencing or otherwise
setting forth the terms of any of the Senior Indebtedness.
No payment or distribution to the Senior Representative or any of the
other Senior Creditors pursuant to the provisions of this Subordinated Note
shall entitle the Subordinated Lender to exercise any rights of subrogation in
respect thereof, nor shall the Subordinated Lender have any right of
reimbursement, restitution, exoneration, contribution or indemnification
whatsoever from any property or assets of Fox Kids or any of the other
guarantors, sureties or providers of collateral security for the Senior
Indebtedness, or any right to participate in any claim or remedy of the Senior
Representative or any of the other Senior Creditors against Fox Kids or any of
the Collateral, whether or not such claim, remedy or right arises in equity or
under contract, statute or common law (including, without limitation, the right
to take or receive
E-1-8
<PAGE>
from Fox Kids, directly or indirectly, in cash or other property or by setoff or
in any other manner, payment or security on account of such claim, remedy or
right), until (i) all of the Senior Indebtedness shall have been paid in full
and all of the commitments of the Secured Parties and the other holders thereof
shall have expired or been terminated, (ii) all of the Bank Hedge Agreements
shall have expired or been terminated and (iii) the Termination Date shall have
occurred.
The holders of the Senior Indebtedness may, at any time and from time
to time, without any consent of or notice to the Subordinated Lender or any
other holder of the Subordinated Indebtedness and without impairing or releasing
the obligations of the Subordinated Lender hereunder:
E-1-9
<PAGE>
change the manner, place or terms of payment of, or change or extend
the time of payment of, or renew payment or change or extend the time or
payment of, or renew or alter, the Senior Indebtedness (including any
change in the rate of interest thereon), or amend, supplement or otherwise
modify in any manner any instrument, agreement or other document under
which any of the Senior Indebtedness is outstanding;
sell, exchange, release, not perfect and otherwise deal with any of
the property or assets of any Person at any time pledged, assigned or
mortgaged to secure the Senior Indebtedness;
release any Person liable in any manner under or in respect of the
Senior Indebtedness;
exercise or refrain from exercising any rights against Fox Kids, any
of the other Loan Parties or any of their respective Subsidiaries or any
other Person;
apply to the Senior Indebtedness any sums from time to time received
by or on behalf of the Senior Representative or any of the other Senior
Creditors; and
sell, assign, transfer or exchange any of the Senior Indebtedness.
Each of Fox Kids and the Subordinated Lender will, if reasonably
requested by the Senior Representative or either of the trustees for the Senior
Notes, further mark their respective books of account in such a manner as shall
be effective to give proper notice of the effect of the subordination provisions
of this Subordinated Note. Each of Fox Kids and the Subordinated Lender will,
at its sole expense and at any time and from time to time, promptly execute and
deliver all further instruments and documents, and take all further actions,
that may be necessary or that the Senior Representative or either of the
trustees for the Senior Notes may reasonably deem desirable and may request in
order to protect any right or interest granted or purported to be granted under
the subordination provisions of this Subordinated Note or to enable the Senior
Representative or any of the other Senior Creditors to exercise and enforce its
rights and remedies hereunder.
The foregoing provisions regarding subordination are and are intended
solely for the purpose of defining the relative rights of the holders of the
Senior Indebtedness, on the
E-1-10
<PAGE>
one hand, and the holders of the Subordinated Indebtedness, on the other hand.
Such provisions are for the benefit of the holders of the Senior Indebtedness
and shall inure to the benefit of, and shall be enforceable by, the Senior
Representative, on behalf of itself and the other Senior Creditors, directly
against the holders of the Subordinated Indebtedness, and no holder of the
Senior Indebtedness shall be prejudiced in its right to enforce the
subordination of any of the Subordinated Indebtedness by any act or failure to
act by Fox Kids or any Person in custody of its property or assets. The
subordination provisions herein shall constitute a continuing offer to each and
every holder of Senior Indebtedness from time to time and such holders are
intended third party beneficiaries hereof. Nothing contained in the foregoing
provisions is intended to or shall impair, as between Fox Kids and the holders
of the Subordinated Indebtedness, the obligations of Fox Kids to such holders.
Fox Kids agrees to pay, upon demand therefor, all of the reasonable
and properly documented out-of-pocket costs and expenses (including, without
limitation, reasonable fees and expenses of counsel) incurred by the Senior
Representative or any of the other Senior Creditors in enforcing the provisions
of this Subordinated Note.
Fox Kids hereby waives promptness, diligence, presentment for payment,
demand, notice of dishonor and protest and any other notice with respect to this
Subordinated Note.
None of the rights or interests of the Subordinated Lender in this
Subordinated Note may be assigned or otherwise transferred thereby to any Person
other than a member of the TNCL Group or the Saban Group (each as defined in the
Credit Agreement on the Effective Date) without the prior written consent of Fox
Kids and the Senior Representative.
No amendment, waiver or modification of this Subordinated Note
(including, without limitation, the subordination provisions hereof), and no
consent to any departure herefrom, shall be effective unless the same shall be
in writing and signed by the Subordinated Lender and, if any such amendment,
waiver or modification of this Subordinated Note (including, without limitation,
the subordination provisions hereof) could adversely affect the rights or
interests of the Senior Representative or any of the other Senior Creditors
under or in respect of this Subordinated Note, any of the Loan Documents, either
of these Indentures or any of the other agreements, in-
E-1-11
<PAGE>
struments or other documents evidencing or otherwise setting forth the terms of
any of the Senior Indebtedness in any manner, signed by the Senior
Representative and/or each of the trustees for the Senior Notes, and then, in
each case, such waiver, modification or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided that
neither of the trustees for the Senior Notes shall be required to consent to any
such amendment, waiver or modification that would not adversely affect the
rights or interests of any of the Senior Notes Creditors.
No failure on the part of the Subordinated Lender or the Senior
Representative or any of the other Senior Creditors to exercise, and no delay in
exercising, any right, power or privilege hereunder shall operate as a waiver
thereof or a consent thereto; nor shall a single or partial exercise of any such
right, power or privilege preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The remedies provided herein
are cumulative and are not exclusive of any remedies provided by applicable law.
This Subordinated Note shall be governed by, and construed in
accordance with, the laws of the State of New York, excluding (to the fullest
extent a New York court would permit) any rule of law that would cause
application of the laws of any jurisdiction other than the State of New York.
FOX KIDS WORLDWIDE, INC.
By
-------------------------------
Name:
Title:
E-1-12
<PAGE>
LOAN AND PAYMENTS AND PREPAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Amount of
Principal Paid Unpaid Principal
Date Amount of or Prepaid Balance Notation
Loan Made by
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
</TABLE>
E-1-13
<PAGE>
EXHIBIT E-2
-----------
Form of Opinion of Counsel Relating to
Subordinated Loan/2/
--------------------------------------
Each of Fox Kids and the Subordinated Lender has all requisite power
and authority to execute, deliver and perform its respective obligations under
the subordination terms of the Subordinated Loan, and the Subordinated Loan
(including the subordination terms thereof) has been duly and validly
authorized, executed and delivered by Fox Kids and the subordination terms of
the Subordinated Loan constitute the valid and binding agreement of each of Fox
Kids and each Subordinated Lender enforceable against each of Fox Kids and the
Subordinated Lender in accordance with the terms thereof, except that (a) the
enforceability thereof against such person may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally in the case of
a bankruptcy or insolvency involving such person and (b) the availability of
equitable remedies may be limited by equitable principles of general
applicability [Note: language in clauses (a) and (b) may be varied on a basis
consistent with such language and the opinions delivered to the Underwriters in
connection with the issuance of the Securities depending upon actual
jurisdictions involved].
- -------------------------
/2/ May take the form of one or more opinions.
E-2-1
<PAGE>
EXHIBIT 4.2
________________________________________________________________________________
FOX KIDS WORLDWIDE, INC.
and
The Bank of New York
as Trustee
___________________
INDENTURE
Dated as of October 28, 1997
___________________
$618,670,000 10 1/4% Senior Discount Notes due 2007, Series A
$618,670,000 10 1/4% Senior Discount Notes due 2007, Series B
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
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ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1. Definitions............................................ 1
Accreted Value................................................. 2
Acquired Indebtedness.......................................... 3
Act............................................................ 3
Affiliate...................................................... 4
Asset Acquisition.............................................. 4
Asset Sale..................................................... 4
Asset Sale Offer............................................... 5
Asset Sale Offer Price......................................... 5
Asset Sale Purchase Date....................................... 5
Asset Sale Purchase Price...................................... 5
Attributable Value............................................. 5
Authenticating Agent........................................... 5
Average Life to Stated Maturity................................ 5
Bank Facility.................................................. 6
Board of Directors............................................. 6
Board Resolution............................................... 6
Business Day................................................... 6
Capital Stock.................................................. 6
Capitalized Lease Obligation................................... 7
Cash Equivalents............................................... 7
Cash Interest Election......................................... 7
Cash Interest Election Date.................................... 7
Cedel.......................................................... 7
Change of Control.............................................. 8
Change of Control Offer........................................ 8
Change of Control Purchase Date................................ 8
Change of Control Purchase Price............................... 8
Code........................................................... 8
Commission..................................................... 9
Common Stock................................................... 9
Company........................................................ 9
Company Request................................................ 9
Consolidated Cash Flow......................................... 9
Consolidated Income Tax Expense................................ 9
Consolidated Interest Expense.................................. 10
Consolidated Net Income........................................ 10
Consolidated Net Tangible Assets............................... 11
Consolidated Non-cash Charges.................................. 11
control........................................................ 11
</TABLE>
___________________
Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
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Corporate Trust Office......................................... 11
Corporation.................................................... 11
Covenant Defeasance............................................ 11
Currency Agreement............................................. 12
Deeply Subordinated Shareholder Loans.......................... 12
Default........................................................ 12
Default Amount................................................. 12
Defeasance..................................................... 12
Depository..................................................... 12
Disinterested Member of the Board of Directors of the Company.. 12
Entertainment/Programming Business............................. 13
Euroclear...................................................... 13
Event of Default............................................... 13
Excess Proceeds................................................ 13
Exchange Act................................................... 13
Existing Preferred............................................. 13
Existing Subordinated Notes.................................... 13
Existing Subordinated Note Refinancing Debt.................... 13
Fair Market Value.............................................. 13
GAAP........................................................... 14
Global Securities.............................................. 14
Government Securities.......................................... 14
guarantee...................................................... 14
Holder......................................................... 14
Indebtedness................................................... 14
Indenture...................................................... 16
Independent Financial Advisor.................................. 16
Initial Purchasers............................................. 16
Initial Securities............................................. 16
Interest Payment Date.......................................... 16
Interest Rate Protection Agreement............................. 16
Interest Rate Protection Obligations........................... 16
Investment..................................................... 16
Issue Date..................................................... 17
Lien........................................................... 17
Marketable Securities.......................................... 17
Maturity Date.................................................. 17
Merrill Lynch.................................................. 17
Moody's........................................................ 17
Murdoch Family................................................. 17
Net Cash Proceeds.............................................. 17
News Corp...................................................... 18
Non-U.S. Person................................................ 18
Notice of Default.............................................. 18
NPAL........................................................... 18
Offer.......................................................... 18
Offer to Purchase.............................................. 18
Offering Memorandum............................................ 21
</TABLE>
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<S> <C>
Officers' Certificate.......................................... 21
144A Global Security........................................... 21
Opinion of Counsel............................................. 21
Other Senior Debt Pro Rata Share............................... 21
Outstanding.................................................... 22
Paying Agent................................................... 23
Permitted Holder............................................... 23
Permitted Indebtedness......................................... 23
Permitted Investments.......................................... 26
Permitted Liens................................................ 27
Person......................................................... 30
Preferred Stock................................................ 30
principal amount at maturity................................... 30
Private Exchange Securities.................................... 30
Private Placement Legend....................................... 30
Public Equity Offering......................................... 31
Purchase Amount................................................ 31
Purchase Date.................................................. 31
Qualified Equity Interest...................................... 31
Qualified Institutional Buyer.................................. 31
Record Expiration Date......................................... 31
Redeemable Capital Stock....................................... 31
Redemption Date................................................ 31
Redemption Price............................................... 31
Registrable Securities......................................... 31
Registration Rights Agreement.................................. 31
Regular Record Date............................................ 32
Regulation S................................................... 32
Regulation S Global Security................................... 32
Replacement Assets............................................. 32
Required Filing Dates.......................................... 32
Responsible Officer............................................ 32
Restricted Payments............................................ 32
Restricted Period.............................................. 32
Restricted Security............................................ 32
Restricted Subsidiary.......................................... 33
Restricted Subsidiary Indebtedness............................. 33
Revocation..................................................... 33
Rule 144A...................................................... 33
Sale-Leaseback Transaction..................................... 33
S&P............................................................ 33
Securities..................................................... 33
Securities Act................................................. 33
Security Register.............................................. 33
Senior Notes................................................... 33
Series A Preferred Stock....................................... 33
Significant Subsidiary......................................... 34
Special Purpose Vehicle........................................ 34
Special Record Date............................................ 34
</TABLE>
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Stated Maturity................................................ 34
Strategic Equity Investor...................................... 34
Subordinated Indebtedness...................................... 34
Subsidiary..................................................... 34
Trustee........................................................ 35
Trust Indenture Act............................................ 35
Unrestricted Securities........................................ 35
Unrestricted Subsidiary........................................ 35
U.S. Government Obligation..................................... 35
Vice President................................................. 35
Voting Stock................................................... 35
SECTION 1.2. Compliance Certificates and Opinions................... 36
SECTION 1.3. Form of Documents Delivered to Trustee................. 36
SECTION 1.4. Acts of Holders; Record Dates.......................... 37
SECTION 1.5. Notices to Trustee and Company......................... 40
SECTION 1.6. Notice to Holders; Waiver.............................. 41
SECTION 1.7. Conflict with Trust Indenture Act...................... 41
SECTION 1.8. Effect of Headings and Table of Contents............... 41
SECTION 1.9. Successors and Assigns................................. 42
SECTION 1.10. Separability Clause................................... 42
SECTION 1.11. Benefits of Indenture................................. 42
SECTION 1.12. Governing Law......................................... 42
SECTION 1.13. Legal Holidays........................................ 42
ARTICLE II
SECURITY FORMS
SECTION 2.1. Forms Generally........................................ 43
ARTICLE III
THE SECURITIES
SECTION 3.1. Title and Terms....................................... 43
SECTION 3.2. Denominations......................................... 44
SECTION 3.3. Execution, Authentication, Delivery and Dating........ 45
SECTION 3.4. Temporary Securities.................................. 46
SECTION 3.5. Registration, Registration of Transfer and Exchange... 47
SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Securities...... 48
SECTION 3.7. Payment of Interest; Rights Preserved................. 49
SECTION 3.8. Persons Deemed Owners................................. 50
SECTION 3.9. Cancellation.......................................... 51
SECTION 3.10. Computation of Interest.............................. 51
SECTION 3.11. CUSIP and CINS Numbers............................... 51
SECTION 3.12. Deposits of Monies................................... 52
SECTION 3.13. Book-Entry Provisions for Global Securities.......... 52
</TABLE>
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SECTION 3.14. Special Transfer Provisions.......................... 53
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture................ 57
SECTION 4.2. Application of Trust Money............................. 58
ARTICLE V
REMEDIES
SECTION 5.1. Events of Default...................................... 59
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment..... 61
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement
by Trustee............................................ 62
SECTION 5.4. Trustee May File Proofs of Claim....................... 63
SECTION 5.5. Trustee May Enforce Claims Without Possession of
Securities............................................ 64
SECTION 5.6. Application of Money Collected......................... 64
SECTION 5.7. Limitation on Suits.................................... 65
SECTION 5.8. Unconditional Right of Holders to Receive Principal,
Premium and Interest.................................. 66
SECTION 5.9. Restoration of Rights and Remedies..................... 66
SECTION 5.10. Rights and Remedies Cumulative........................ 66
SECTION 5.11. Delay or Omission Not Waiver.......................... 67
SECTION 5.12. Control by Holders.................................... 67
SECTION 5.13. Waiver of Past Defaults............................... 67
SECTION 5.14. Undertaking for Costs................................. 68
SECTION 5.15. Waiver of Stay or Extension Laws...................... 68
ARTICLE VI
THE TRUSTEE
SECTION 6.1. Certain Duties and Responsibilities.................... 69
SECTION 6.2. Notice of Defaults..................................... 70
SECTION 6.3. Certain Rights of Trustee.............................. 70
SECTION 6.4. Not Responsible for Recitals or Issuance of Securities. 72
SECTION 6.5. May Hold Securities.................................... 73
SECTION 6.6. Money Held in Trust.................................... 73
SECTION 6.7. Compensation and Reimbursement......................... 73
SECTION 6.8. Conflicting Interests.................................. 74
SECTION 6.9. Corporate Trustee Required; Eligibility................ 74
SECTION 6.10. Resignation and Removal; Appointment of Successor..... 75
SECTION 6.11. Acceptance of Appointment by Successor................ 77
SECTION 6.12. Merger, Conversion, Consolidation or Succession to
Business............................................. 77
</TABLE>
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SECTION 6.13. Preferential Collection of Claims Against Company..................................................... 78
SECTION 6.14. Appointment of Authenticating Agent................................................................... 78
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.1. Company to Furnish Trustee Names and Addresses of Holders............................................. 80
SECTION 7.2. Preservation of Information; Communications to Holders................................................ 80
SECTION 7.3. Reports by Trustee.................................................................................... 81
SECTION 7.4. Reports by Company.................................................................................... 81
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.1. Company May Consolidate, Etc. Only on Certain Terms................................................... 81
SECTION 8.2. Successor Substituted................................................................................. 83
ARTICLE IX
AMENDMENTS; WAIVERS; SUPPLEMENTAL INDENTURES
SECTION 9.1. Amendments, Waivers and Supplemental Indentures Without Consent of Holders............................ 83
SECTION 9.2. Modifications, Amendments and Supplemental Indentures with Consent of Holders......................... 84
SECTION 9.3. Execution of Supplemental Indentures.................................................................. 85
SECTION 9.4. Effect of Supplemental Indentures..................................................................... 86
SECTION 9.5. Conformity with Trust Indenture Act................................................................... 86
SECTION 9.6. Reference in Securities to Supplemental Indentures.................................................... 86
ARTICLE X
COVENANTS
SECTION 10.1. Payment of Principal, Premium and Interest............................................................ 86
SECTION 10.2. Maintenance of Office or Agency....................................................................... 86
SECTION 10.3. Money for Security Payments to be Held in Trust....................................................... 87
SECTION 10.4. Existence............................................................................................. 88
SECTION 10.5. Maintenance of Properties............................................................................. 89
SECTION 10.6. Payment of Taxes and Other Claims..................................................................... 89
SECTION 10.7. Maintenance of Insurance.............................................................................. 89
SECTION 10.8. Limitation on Indebtedness............................................................................ 90
SECTION 10.9. Limitation on Restricted Payments..................................................................... 90
</TABLE>
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SECTION 10.10. Limitation on Preferred Stock of Restricted Subsidiaries.............................................. 95
SECTION 10.11. Limitation on Transactions with Affiliates............................................................ 95
SECTION 10.12. Limitations on Liens.................................................................................. 96
SECTION 10.13. Change of Control..................................................................................... 97
SECTION 10.14. Disposition of Proceeds of Asset Sales................................................................ 98
SECTION 10.15. Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries.............. 101
SECTION 10.16. Limitations on Sale-Leaseback Transactions............................................................ 103
SECTION 10.17. Limitations on Designation of Unrestricted Subsidiaries............................................... 103
SECTION 10.18. Provision of Financial Information.................................................................... 105
SECTION 10.19. Statement by Officers as to Default; Compliance Certificates.......................................... 106
SECTION 10.20. Waiver of Certain Covenants........................................................................... 106
SECTION 10.21. Calculation of Original Issue Discount................................................................ 107
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.1. Right of Redemption................................................................................... 107
SECTION 11.2. Applicability of Article.............................................................................. 107
SECTION 11.3. Election to Redeem; Notice to Trustee................................................................. 108
SECTION 11.4. Selection by Trustee of Securities to Be Redeemed..................................................... 108
SECTION 11.5. Notice of Redemption.................................................................................. 108
SECTION 11.6. Deposit of Redemption Price........................................................................... 109
SECTION 11.7. Securities Payable on Redemption Date................................................................. 110
SECTION 11.8. Securities Redeemed in Part........................................................................... 110
ARTICLE XII
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 12.1. Company's Option to Effect Defeasance or Covenant Defeasance.......................................... 111
SECTION 12.2. Defeasance and Discharge.............................................................................. 111
SECTION 12.3. Covenant Defeasance................................................................................... 111
SECTION 12.4. Conditions to Defeasance or Covenant Defeasance....................................................... 112
SECTION 12.5. Deposited Money and U.S. Government Obligations to Be Held in Trust; Miscellaneous Provisions......... 115
SECTION 12.6. Reinstatement......................................................................................... 115
</TABLE>
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Page
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Exhibit A-1 Form of Series A Security
Exhibit A-2 Form of Series B Security
Exhibit B Form of Legend for Book-entry Securities
Exhibit C Form of Certificate
Exhibit D Form of Subordination Agreement
-viii-
<PAGE>
INDENTURE, dated as of October 28, 1997, between Fox Kids Worldwide,
Inc., a corporation duly organized and existing under the laws of the State of
Delaware (herein called the "Company"), having its principal office at 10960
Wilshire Boulevard, Los Angeles, California 90024, and The Bank of New York, a
New York banking corporation, having its principal corporate trust office
located at 101 Barclay Street, New York New York 10286, as Trustee (herein
called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of 10 1/4%
Senior Discount Notes due 2007, Series A, and 10 1/4% Senior Discount Notes due
2007, Series B (the "Securities"), of substantially the tenor and amount
hereinafter set forth, and to provide therefor the Company has duly authorized
the execution and delivery of this Indenture.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the Company
the valid obligations of the Company, and to make this Indenture a valid
agreement of the Company, in accordance with their and its terms, have been
done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders (as defined herein) thereof, it is mutually covenanted
and agreed, for the equal and proportionate benefit of all Holders of the
Securities, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1. Definitions.
-----------
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
<PAGE>
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(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP (whether or not such is
indicated herein);
(4) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or Section, as the case may
be, of this Indenture;
(5) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision; and
(6) each reference herein to a rule or form of the Commission shall
mean such rule or form and any rule or form successor thereto, in each case
as amended from time to time.
Certain terms, used principally in Article VI, are defined in that
Article.
Whenever this Indenture requires that a particular ratio or amount be
calculated with respect to a specified period after giving effect to certain
transactions or events on a pro forma basis, such calculation shall be made as
--- -----
if the transactions or events occurred on the first day of such period, unless
otherwise specified.
"Accreted Value" means (a) as of any date prior to the Cash Interest
Election Date, if any (the "Specified Date"), with respect to each $1,000
principal face amount at maturity of Securities
(i) if the Specified Date is one of the following dates (each a
"Semi-Annual Accrual Date"), the amount set forth opposite such date below:
<PAGE>
-3-
<TABLE>
<CAPTION>
Semi-Annual Accreted
Accrual Date Value
------------ ----------
<S> <C>
Issue Date................................. $ 606.14
November 1, 1997........................... $ 606.65
May 1, 1998................................ $ 637.74
November 1, 1998........................... $ 670.43
May 1, 1999................................ $ 704.79
November 1, 1999........................... $ 740.91
May 1, 2000................................ $ 778.88
November 1, 2000........................... $ 818.80
May 1, 2001................................ $ 860.76
November 1, 2001........................... $ 904.87
May 1, 2002................................ $ 951.25
November 1, 2002........................... $ 1,000.00;
</TABLE>
(ii) if the Specified Date occurs between two Semi-Annual Accrual
dates, the sum of (a) the Accreted Value for the Semi-Annual Accrual Date
immediately preceding the Specified Date and (b) an amount equal to the
product of (x) the Accreted Value for the Semi-Annual Accrual Date
immediately following the Specified Date less the Accreted Value for the
Semi-Annual Accrual Date immediately preceding the Specified Date and (y) a
fraction, the numerator of which is the number of days actually elapsed
from the immediately preceding Semi-Annual Accrual Date to the Specified
Date, using a 360-day year of twelve 30-day months, and the denominator of
which is 180; and
(iii) if the Specified Date is on or after November 1, 2002,
$1,000.00; and
(b) on and after the Cash Interest Election Date, with respect to
each $1,000 principal amount at maturity of Securities, the Accreted Value
determined in accordance with the foregoing as of such Cash Interest Election
Date (without any further accretion).
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in
connection with an Asset Acquisition from such Person or (b) existing at the
time such Person becomes a Subsidiary of any other Person and not incurred in
connection with, or in contemplation of, such Asset Acquisition or such Person
becoming a Subsidiary.
"Act," when used with respect to any Holder, has the meaning specified
in Section 1.4.
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"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person, (ii) any other Person that
owns, directly or indirectly, 10% or more of such specified Person's Capital
Stock, (iii) any officer or director of (A) any such specified Person, (B) any
Subsidiary of such specified Person or (C) any Person described in clauses (i)
or (ii) above or (iv) the spouse of any natural Person described in clauses (i),
(ii) or (iii) above or any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with such spouse.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person which
constitute all or substantially all of the assets of such Person, any division
or line of business of such Person or any other properties or assets of such
Person other than in the ordinary course of business.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or
other disposition by the Company or any Restricted Subsidiary of the Company to
any Person other than the Company or a Restricted Subsidiary of the Company, in
one or a series of related transactions for an aggregate consideration of more
than $1,000,000, of (a) any Capital Stock of any Subsidiary of the Company; (b)
all or substantially all of the properties and assets of any division or line of
business of the Company or any Restricted Subsidiary of the Company; or (c) any
other properties or assets of the Company or any Restricted Subsidiary of the
Company other than in the ordinary course of business (any disposition of
obsolete or worn-out assets shall be deemed to be in the ordinary course of
business). For purposes of Section 10.14, the following shall not be deemed an
Asset Sale: (i) any sale or other disposition by the Company or a Restricted
Subsidiary of the Company of the assets held for disposition or discontinuance
of International Family Entertainment, Inc. ("IFE") identified in the Offering
Memorandum for Fair Market Value or (ii) an Investment of cash not prohibited by
this Indenture. For the purposes of this definition, the term "Asset Sale"
shall not include any sale, issuance, conveyance, transfer, lease or other
disposition of properties
<PAGE>
-5-
or assets that is governed by the provisions described under Article VIII.
"Asset Sale Offer" has the meaning specified in Section 10.14.
"Asset Sale Offer Price" has the meaning specified in Section 10.14.
"Asset Sale Purchase Date" has the meaning specified in Section 10.14.
"Asset Sale Purchase Price" has the meaning specified in Section
10.14.
"Attributable Value" means, as to any particular lease under which any
Person is at the time liable other than a Capitalized Lease Obligation, and at
any date as of which the amount thereof is to be determined, the total net
amount of rent required to be paid by such Person under such lease during the
remaining term thereof (whether or not such lease is terminable at the option of
the lessee prior to the end of such term), including any period for which such
lease has been, or may, at the option of the lessor, be extended, discounted
from the last date of such term to the date of determination at a rate per annum
equal to the discount rate which would be applicable to a Capitalized Lease
Obligation with like term in accordance with GAAP. The net amount of rent
required to be paid under any lease for any such period shall be the aggregate
amount of rent payable by the lessee with respect to such period after excluding
amounts required to be paid on account of insurance, taxes, assessments,
utility, operating and labor costs and similar charges. "Attributable Value"
means, as to a Capitalized Lease Obligation under which any Person is at the
time liable and at any date as of which the amount thereof is to be determined,
the capitalized amount thereof that would appear on the face of a balance sheet
of such Person in accordance with GAAP.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 6.14 hereof to act on behalf of the Trustee to authenticate
Securities.
"Average Life to Stated Maturity" means, with respect to any
Indebtedness, as at any date of determination, the quotient obtained by dividing
(i) the sum of the products of (a) the number of years from such date to the
date or dates of each successive scheduled principal payment (including, without
<PAGE>
-6-
limitation, any sinking fund requirements) of such Indebtedness and (b) the
amount of each such principal payment by (ii) the sum of all such principal
payments.
"Bank Facility" means the Amended and Restated Credit Agreement dated
September 4, 1997 among the Company and certain of its Subsidiaries, the lenders
named therein, and Citicorp USA, Inc., as Administrative Agent, and Citicorp
Securities, Inc., as Arranger, including any initial or successive deferrals,
renewals, waivers, extensions, replacements, refinancings (in whole or in part)
or refundings thereof, or any amendments, modifications, restatements or
supplements thereto and including any related notes, guarantees, security
agreements, pledge agreements, mortgages and other collateral documents and
other instruments and agreements executed in connection therewith.
"Board of Directors" means the board of directors of a company or its
equivalent, including managers of a limited liability company (or members of a
member managed limited liability company), general partners of a partnership or
trustees of a business trust, or any duly authorized committee thereof.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in the Borough of
Manhattan, The City of New York are authorized or obligated by law or executive
order to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such Person's capital stock or equity participations, and any rights (other
than debt securities convertible into capital stock), warrants or options
exchangeable for or convertible into such capital stock and, including, without
limitation, with respect to partnerships, limited liability companies or
business trusts, ownership interests (whether general or limited) and any other
interest or participation that confers on a Person the right to receive a share
of the profits and losses of, or distributions of assets of, such partnerships,
limited liability companies or business trusts.
<PAGE>
-7-
"Capitalized Lease Obligation" means any obligation under a lease of
(or other agreement conveying the right to use) any property (whether real,
personal or mixed) that is required to be classified and accounted for as a
capital lease obligation under GAAP, and, for the purpose of this Indenture, the
amount of such obligation at any date shall be the capitalized amount thereof at
such date, determined in accordance with GAAP.
"Cash Equivalents" means, at any time, (i) any evidence of
Indebtedness with a maturity of 365 days or less issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof); (ii) certificates of deposit
or acceptances with a maturity of 365 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500,000,000, whose debt is rated
at least A-1 by S&P or at least P-1 by Moody's or at least an equivalent rating
category of another nationally recognized rating agency; (iii) commercial paper
with a maturity of 365 days or less issued by a corporation that is not an
Affiliate of the Company organized under the laws of any state of the United
States or the District of Columbia and rated at least A-1 by S&P or at least P-1
by Moody's or at least an equivalent rating category of another nationally
recognized securities rating agency; (iv) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations issued or
unconditionally guaranteed by the government of the United States of America or
issued by any agency thereof and backed by the full faith and credit of the
United States of America, in each case maturing within 365 days from the date of
acquisition; and (v) money market instruments which are principally invested in
Cash Equivalents referred to in the preceding clauses (i) through (iv).
"Cash Interest Election" means the election of the Company on any
Interest Payment Date to commence the accrual of cash interest from and after
the Cash Interest Election Date.
"Cash Interest Election Date" means the Interest Payment Date as of
which the Company makes a Cash Interest Election.
"Cedel" means Cedel Bank, Societe anonyme.
---------------
<PAGE>
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"Change of Control" means the occurrence of any of the following
events: (a)(i) the Permitted Holders cease to own at least 50% of the total
Voting Stock of the Company or (ii) The News Corporation Limited, the Murdoch
Family, or any of their respective Affiliates cease to own at least 30% of the
total Voting Stock of the Company; (b) the Company consolidates with, or merges
with or into, another Person or sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets to any Person, or
any Person consolidates with, or merges with or into, the Company, in any such
event pursuant to a transaction in which the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other property,
other than any such transaction where (i) the outstanding Voting Stock of the
Company is converted into or exchanged for Voting Stock (other than Redeemable
Capital Stock) of the surviving or transferee corporation and immediately after
such transaction, (ii) the Permitted Holders own at least 50% of the total
Voting Stock of the surviving or transferee corporation and (iii) The News
Corporation Limited, the Murdoch Family or any of their respective Affiliates
own at least 30% of the total Voting Stock of the surviving or transferee
corporation; (c) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the stockholders of the Company was approved by
a vote of 66-2/3% of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute at least
50% of the Board of Directors of the Company then in office; or (d) the Company
is liquidated or dissolved or adopts a plan of liquidation or any order,
judgment or decree shall be entered against the Company decreeing the
dissolution or splitup of the Company and such order shall remain undischarged
or unstayed for a period in excess of 60 days.
"Change of Control Offer" has the meaning specified in Section 10.13.
"Change of Control Purchase Date" has the meaning specified in Section
10.13.
"Change of Control Purchase Price" has the meaning specified in
Section 10.13.
"Code" means the Internal Revenue Code, as amended from time to time,
and the rules and regulations thereunder.
<PAGE>
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"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Stock" means, with respect to any Person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or nonvoting) of, such Person's common stock, whether
outstanding at the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture and thereafter "Company"
shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Chief
Executive Officer, its President or a Vice President, and by its Treasurer, an
Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to
the Trustee.
"Consolidated Cash Flow" means, with respect to any Person for any
period, (i) the sum of, without duplication, the amounts for such period, taken
as a single accounting period, of (a) Consolidated Net Income, (b) Consolidated
Non-cash Charges, (c) Consolidated Interest Expense, (d) Consolidated Income Tax
Expense (other than income tax expense (either positive or negative)
attributable to extraordinary and nonrecurring gains or losses) and (e) an
amount equal to any extraordinary and nonrecurring losses (to the extent such
losses were deducted in computing Consolidated Net Income), less (ii) non-cash
items increasing Consolidated Net Income; provided, however, that if, during
-------- -------
such period, such Person or any of its Restricted Subsidiaries shall have made
any Asset Sales or Asset Acquisitions, Consolidated Cash Flow for such Person
and its Restricted Subsidiaries for such period shall be adjusted to give pro
---
forma effect to the Consolidated Cash Flow directly attributable to the assets
- -----
which are the subject of such Asset Sales or Asset Acquisitions during such
period.
"Consolidated Income Tax Expense" means, with respect to any Person
for any period, the provision for federal, state,
<PAGE>
-10-
local and foreign income taxes of such Person and its Restricted Subsidiaries
for such period as determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for
any period, without duplication, the sum of (i) the interest expense of such
Person and its Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP, including, without limitation, (a)
any amortization of debt discount, (b) the net cost under Interest Rate
Protection Obligations (including any amortization of discounts), (c) the
interest portion of any deferred payment obligation, excluding accretion
recorded based upon liabilities arising from purchase accounting adjustments
from the acquisition of IFE, (d) all commissions, discounts and other fees and
charges owed with respect to letters of credit, bankers' acceptance financing or
similar facilities and (e) all capitalized and accrued interest and (ii) the
interest component of Capitalized Lease Obligations paid, accrued and/or
scheduled to be paid or accrued by such Person and its Restricted Subsidiaries
during such period and (iii) the aggregate amount of dividends and other
distributions paid or accrued during such period in respect of Redeemable
Capital Stock (other than payments made in respect of the redemption of such
Redeemable Capital Stock (other than accrued and unpaid dividends thereon)) of
such Person and its Restricted Subsidiaries on a consolidated basis, as
determined on a consolidated basis in accordance with GAAP. In no event shall
Consolidated Interest Expense include interest expense associated with Deeply
Subordinated Shareholder Loans.
"Consolidated Net Income" means, with respect to any Person for any
period, the consolidated net income (or loss) of such Person and its Restricted
Subsidiaries for such period as determined in accordance with GAAP, adjusted, to
the extent included in calculating such net income, by excluding, without
duplication, (i) all extraordinary gains or losses (net of fees and expenses
relating to the transaction giving rise thereto), (ii) the portion of net income
of such Person and its Restricted Subsidiaries derived from or in respect of
Investments in Persons other than Restricted Subsidiaries except to the extent
that cash dividends or distributions have not actually been received by such
Person or one of its Restricted Subsidiaries, (iii) net income (or loss) of any
Person combined with such Person or one of its Restricted Subsidiaries on a
"pooling of interests" basis attributable to any period prior to the date of
combination, (iv) gains or losses in respect of any Asset Sales by such Person
or one of its Restricted Subsidiaries (net of fees and expenses relating to the
transaction giving
<PAGE>
-11-
rise thereto), on an after-tax basis, (v) the net income of any Restricted
Subsidiary of such Person to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is not at the
time permitted, directly or indirectly, by operation of the terms of its charter
or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulations applicable to that Restricted Subsidiary or its
stockholders and (vi) any gain or loss realized as a result of the cumulative
effect of a change in accounting principles.
"Consolidated Net Tangible Assets" of any person means, as of any
date, (a) all amounts that would be shown as assets on a consolidated balance
sheet of such Person and its Restricted Subsidiaries prepared in accordance with
GAAP, less (b) the amount thereof constituting goodwill and other intangible
assets as calculated in accordance with GAAP.
"Consolidated Non-cash Charges" means, with respect to any Person for
any period, the aggregate depreciation, amortization (excluding amortization of
programming costs) and other non-cash expenses of such Person and its Restricted
Subsidiaries reducing Consolidated Net Income of such Person and its Restricted
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP (excluding any such charges constituting an extraordinary item or loss
or any such charge which requires an accrual of or a reserve for cash charges
for any future period).
"control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered,
which address as of the date of this Indenture is located at 101 Barclay Street,
Floor 21 West, New York, NY 10286.
"Corporation" means a corporation, association, company, joint-stock
company or business trust.
"Covenant Defeasance" has the meaning specified in Section 12.3.
<PAGE>
-12-
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Company or any of its Restricted Subsidiaries against fluctuations in currency
values.
"Deeply Subordinated Shareholder Loans" means any unsecured
Indebtedness of the Company for money borrowed from and held by either (x) a
Permitted Holder or (y) another person whose obligations have been guaranteed by
a Permitted Holder, provided that, except to the extent expressly permitted by
--------
the covenant in Section 10.9, such Indebtedness of the Company (i) has been
expressly subordinated in right of payment as to all payments of interest and
principal to the Securities, (ii) provides for no payments of interest (other
than payments in-kind) or principal prior to the earlier of (a) the end of the
sixth month after final maturity of the Securities and (b) the payment in full
cash of all Securities (or due provision therefor which results in the discharge
of all obligations under this Indenture); provided, further, that the terms of
-------- -------
any such Indebtedness shall be evidenced by a note in the form annexed hereto as
Exhibit E and the Company shall have delivered the specified Opinions of Counsel
as to the validity and enforceability of the subordination terms thereof.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Default Amount" means, (i) as of any date prior to the earlier of
November 1, 2002 and the Cash Interest Election Date, the Accreted Value of all
outstanding Securities as of such date and (ii) as of any date on or after the
earlier of November 1 2002 and the Cash Interest Election Date, the principal
amount at maturity of all Outstanding Securities, plus accrued and unpaid
interest, if any, thereon.
"Defeasance" has the meaning specified in Section 12.2.
"Depository" means The Depository Trust Company or its successor.
"Disinterested Member of the Board of Directors of the Company" means,
with respect to any transaction or series of transactions, a member of the Board
of Directors of the Company other than a member who has any material direct or
indirect financial
<PAGE>
-13-
interest in or with respect to such transaction or series of transactions or who
is an officer, director or an employee of any Person who has any direct or
indirect financial interest in or with respect to such transaction or series of
transactions (other than the Company or a Restricted Subsidiary of the Company).
"Entertainment/Programming Business" means a business engaged
primarily in the ownership, operation, acquisition, development, production,
distribution or syndication of general entertainment or children's programming
including, without limitation, any business engaged in by the Company and its
Restricted Subsidiaries on the Issue Date.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
Office, as operator of the Euroclear System.
"Event of Default" has the meaning specified in Section 5.1.
"Excess Proceeds" has the meaning specified in Section 10.14.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Preferred" means the Series A Preferred Stock outstanding on
the Issue Date.
"Existing Subordinated Notes" means (i) the Subordinated Note of the
Company issued to News America Holdings Incorporated in the principal amount
(excluding accreted interest) of approximately $345.5 million outstanding on the
Issue Date (before giving effect to the use of proceeds from the Offering and
the Flextech Transaction (as defined in the Offering Memorandum) and (ii) the
Subordinated Notes of the Company to Fox Broadcasting Company issued in the
principal amount (excluding accreted interest) of approximately $108.6 million
and which is to be repaid in May 2008 (before giving effect to the use of
proceeds from the Offering). Notwithstanding anything herein to the contrary,
the Company may amend the term of the Existing Subordinated Notes to make them
Deeply Subordinated Shareholder Loans.
"Existing Subordinated Note Refinancing Debt" means Indebtedness the
proceeds of which is to purchase, redeem, acquire or retire all of the Existing
Subordinated Securities.
"Fair Market Value" means, with respect to any asset, the price which
could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a
<PAGE>
-14-
willing buyer, neither of which is under pressure or compulsion to complete the
transaction; provided, however, that, except with respect to any Asset Sale
-------- -------
which involves an asset or assets constituting less than $25,000,000, the
determination of the Fair Market Value of any asset or assets shall be approved
by the Board of Directors of the Company, acting in good faith and shall be
evidenced by resolutions of the Board of Directors of the Company delivered to
the Trustee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States of America, which are applicable at the date of
this Indenture.
"Global Securities" means one or more Regulation S Global Securities
and 144A Global Securities.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"guarantee" means, as applied to any obligation, (i) a guarantee
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner, of any part or
all of such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of nonperformance) of all or any
part of such obligation, including, without limiting the foregoing, the payment
of amounts available to be drawn down under letters of credit of another Person.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indebtedness" means, with respect to any Person, without duplication,
(a) all liabilities of such Person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payables and other
accrued current liabilities and liabilities for entertainment programming,
participations or residuals incurred in the ordinary course of business, but
including, without limitation, all ob-
<PAGE>
-15-
ligations, contingent or otherwise, of such Person in connection with any
letters of credit, banker's acceptance or other similar credit transaction, (b)
all obligations of such Person evidenced by bonds, notes, debentures or other
similar instruments, (c) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even if the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or sale
of such property), but excluding trade accounts payable arising in the ordinary
course of business, (d) all Capitalized Lease Obligations of such Person, (e)
all Indebtedness referred to in the preceding clauses of other Persons and all
dividends of other Persons, the payment of which is secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien upon property (including, without limitation, accounts
and contract rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness, (f) all
guarantees of Indebtedness referred to in this definition by such Person, (g)
all Redeemable Capital Stock of such Person valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus accrued dividends,
(h) all obligations under or in respect of Interest Rate Protection Obligations
of such Person, and (i) any amendment, supplement, modification, deferral,
renewal, extension, refinancing or refunding of any liability of the types
referred to in clauses (a) through (h) above. For purposes hereof, the "maximum
fixed repurchase price" of any Redeemable Capital Stock which does not have a
fixed repurchase price shall be calculated in accordance with the terms of such
Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on
any date on which Indebtedness shall be required to be determined pursuant to
this Indenture, and if such price is based upon, or measured by, the fair market
value of such Redeemable Capital Stock, such fair market value shall be approved
in good faith by the Board of Directors of the issuer of such Redeemable Capital
Stock. In the case of Indebtedness of other Persons, the payment of which is
secured by a Lien on property owned by a Person as referred to in clause (e)
above, the amount of the Indebtedness of such Person attributable to such Lien
at any date shall be the lesser of the Fair Market Value at such date of any
asset subject to such Lien and the amount of the Indebtedness secured. In no
event shall "Indebtedness" include (i) Deeply Subordinated Shareholder Loans so
long as they are issued to and held by a Permitted Holder or (ii) the Existing
Preferred to the extent the terms thereof are as in effect on the Issue Date.
<PAGE>
-16-
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Independent Financial Advisor" means a nationally recognized
accounting, appraisal or investment banking firm (i) which does not, and whose
directors, officers and employees or Affiliates do not have, a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"Initial Purchasers" means Merrill Lynch, Citicorp Securities, Inc.,
Bear Stearns & Co. Inc., Donaldson, Lufkin & Jenrette Securities Corporation,
and Morgan Stanley & Co. Incorporated.
"Initial Securities" means the 10 1/4% Senior Discount Notes due 2007,
Series A, of the Company.
"Interest Payment Date" means May 1 and November 1 of each year,
provided that no cash interest shall be paid on any Interest Payment Date,
- --------
except as provided in this Indenture and in the Securities.
"Interest Rate Protection Agreement" means, with respect to any
Person, any arrangement with any other Person whereby, directly or indirectly,
such Person is entitled to receive from time to time periodic payments
calculated by applying either a floating or a fixed rate of interest on a stated
notional amount in exchange for periodic payments made by such Person calculated
by applying a fixed or a floating rate of interest on the same notional amount
and shall include, without limitation, interest rate swaps, caps, floors,
collars and similar agreements.
"Interest Rate Protection Obligations" means the obligations of any
Person pursuant to any Interest Rate Protection Agreements.
"Investment" means, with respect to any Person, any direct or indirect
loan or other extension of credit (including, without limitation, a guarantee)
or capital contri-
<PAGE>
-17-
bution to (by means of any transfer of cash or other property to others or any
payment for property or services for the account or use of others), or any
purchase or acquisition by such Person of any Capital Stock, bonds, notes,
debentures or other securities or evidences of Indebtedness issued by, any other
Person.
"Issue Date" means the original date of issuance of the Securities.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or preference
or priority or other encumbrance upon or with respect to any property of any
kind. A Person shall be deemed to own subject to a Lien any property which such
Person has acquired or holds subject to the interest of a vendor or lessor under
any conditional sale agreement, capital lease or other title retention
agreement.
"Marketable Securities" means Government Securities maturing no later
than 30 days after the date of acquisition.
"Maturity Date" means November 1, 2007.
"Merrill Lynch" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Murdoch Family" means one or more of (a) K. Rupert Murdoch, his wife,
parents, children or more remote issue, or brothers or sisters or children or
more remote issue of a brother or sister, (b) any person directly or indirectly
controlled by one or more of the persons referred to in clause (a) or (b) of
this definition or can be removed or replaced by one or more of the persons
referred to in clause (a) or (b) of this definition.
"Net Cash Proceeds" means, with respect to an Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to the Company or any Restricted Subsidiary of the Company) net of
(i) brokerage commissions and other fees and expenses (including, without
limitation, fees and expenses of legal counsel and investment bankers) related
to such Asset
<PAGE>
-18-
Sale, (ii) provisions for all taxes payable as a result of such Asset Sale and
relocation costs, (iii) amounts required to be paid to any Person (other than
the Company or any Restricted Subsidiary of the Company) owning a beneficial
interest in or a Lien upon the assets subject to the Asset Sale, (iv) payments
made to retire Indebtedness where payment of such Indebtedness is secured by the
assets or property the subject of such Asset Sale, and (v) appropriate amounts
to be provided by the Company or any Restricted Subsidiary of the Company, as
the case may be, as a reserve required in accordance with GAAP against any
liabilities associated with such Asset Sale and retained by the Company or any
Restricted Subsidiary of the Company, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale, all as
reflected in an officers' certificate delivered to the Trustee.
"News Corp." means The News Corporation Limited.
"Non-U.S. Person" has the meaning assigned to such term in Regulation
S.
"Notice of Default" means a written notice of the kind specified in
Section 5.2.
"NPAL" means News Publishing Australia Limited.
"Offer" has the meaning set forth in "Offer to Purchase" below.
"Offer to Purchase" means a written offer (the "Offer") sent by or on
behalf of the Company by first-class mail, postage prepaid, to each Holder of
Securities at his address appearing in the register for the Securities on the
date of the Offer offering to purchase up to the principal amount or Accreted
Value of Securities specified in such Offer at the purchase price specified in
such Offer (as determined pursuant to this Indenture). Unless otherwise
provided in Section 10.13 or 10.14 or otherwise required by applicable law, the
Offer shall specify an expiration date (the "Expiration Date") of the Offer to
Purchase, which shall be not less than 20 Business Days nor more than 60 days
after the date of such Offer, and a settlement date (the "Purchase Date") for
purchase of Securities to occur no later than five Business Days after the
Expiration Date. The Company shall notify the Trustee at least 15 Business Days
(or such shorter period as is acceptable to the
<PAGE>
-19-
Trustee) prior to the mailing of the Offer of the Company's obligation to make
an Offer to Purchase, and the Offer shall be mailed by the Company or, at the
Company's request, by the Trustee in the name and at the expense of the Company.
The Offer shall contain all the information required by applicable law to be
included therein. The Offer shall also contain information concerning the
business of the Company and its Subsidiaries which the Company in good faith
believes will enable such Holders to make an informed decision with respect to
the Offer to Purchase (which at a minimum will include (i) the most recent
annual and quarterly financial statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained in the
document required to be filed with the Trustee pursuant to this Indenture (which
requirements may be satisfied by delivery of such documents together with the
Offer), (ii) a description of material developments in the Company's business
subsequent to the date of the latest of such financial statements referred to in
clause (i) (including a description of the events requiring the Company to make
the Offer to Purchase), (iii) if applicable, appropriate pro forma financial
--- -----
information concerning the Offer to Purchase and the events requiring the
Company to make the Offer to Purchase and (iv) any other information required by
applicable law to be included therein). The Offer shall contain all instructions
and materials necessary to enable such Holders to tender Securities pursuant to
the Offer to Purchase. The Offer shall also state:
(1) the Section of this Indenture pursuant to which the Offer to
Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the Outstanding Securities
offered to be purchased by the Company pursuant to the Offer to Purchase
(including, if less than 100%, the manner by which such amount has been
determined pursuant to the Section of this Indenture requiring the Offer to
Purchase) (the "Purchase Amount");
(4) the purchase price to be paid by the Company for each $1,000 of
Accreted Value (if the Purchase Date is prior to the earlier of November 1,
2002 or the Cash Interest Election Date) or $1,000 aggregate principal
amount at maturity (if the Purchase Date is on or after such earlier date)
of Securities accepted for payment (as specified pursuant to this
Indenture) (the "Purchase Price");
<PAGE>
-20-
(5) that the Holder may tender all or any portion of the Securities
registered in the name of such Holder and that any portion of a Security
tendered must be tendered in an integral multiple of $1,000 principal face
amount;
(6) the place or places where Securities are to be surrendered for
tender pursuant to the Offer to Purchase;
(7) that interest on any Security not tendered or tendered but not
purchased by the Company pursuant to the Offer to Purchase will continue to
accrue;
(8) that on the Purchase Date the Purchase Price will become due and
payable upon each Security being accepted for payment pursuant to the Offer
to Purchase and that interest thereon shall cease to accrue on and after
the Purchase Date;
(9) that each Holder electing to tender all or any portion of a
Security pursuant to the Offer to Purchase will be required to surrender
such Security at the place or places specified in the Offer prior to the
close of business on the Expiration Date (such Security being, if the
Company or the Trustee so requires, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or his attorney duly
authorized in writing);
(10) that Holders will be entitled to withdraw all or any portion of
Securities tendered if the Company (or its Paying Agent) receives, not
later than the close of business on the fifth Business Day next preceding
the Expiration Date, a facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Security the Holder
tendered, the certificate number of the Security the Holder tendered and a
statement that such Holder is withdrawing all or a portion of his tender;
(11) that (a) if Securities in an aggregate principal amount less than
or equal to the Purchase Amount are duly tendered and not withdrawn
pursuant to the Offer to Purchase, the Company shall purchase all such
Securities and (b) if Securities in an aggregate principal amount in excess
of the Purchase Amount are tendered and not withdrawn pursuant to the Offer
to Purchase, the Company shall purchase Securities having an aggregate
principal amount equal to the Purchase Amount on a pro rata basis (with
--- ----
<PAGE>
-21-
such adjustments as may be deemed appropriate so that only Securities in
denominations of $1,000 principal amount at maturity or integral multiples
thereof shall be purchased); and
(12) that in the case of a Holder whose Security is purchased only in
part, the Company shall execute and the Trustee shall authenticate and
deliver to the Holder of such Security without service charge, a new
Security or Securities, of any authorized denomination as requested by such
Holder, in an aggregate principal amount equal to and in exchange for the
unpurchased portion of the Security so tendered.
An Offer to Purchase shall be governed by and effected in accordance with the
provisions pertaining to the type of Offer to which it relates. References
above to principal amount shall mean and refer to principal amount at maturity
unless the context otherwise requires.
"Offering Memorandum" means the Offering Memorandum dated October 22,
1997 pursuant to which the Securities were offered.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the Chief Executive Officer, the President or a Vice President, and
by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Company, and delivered to the Trustee. One of the officers
signing an Officers' Certificate given pursuant to Section 10.20 shall be the
principal executive, financial or accounting officer of the Company.
"144A Global Security" means a permanent global security in registered
form representing the aggregate principal amount at maturity of Securities sold
in reliance on Rule 144A under the Securities Act.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be reasonably acceptable to the Trustee.
"Other Senior Debt Pro Rata Share" means under this Indenture the
amount of the applicable Excess Proceeds obtained by multiplying the amount of
such Excess Proceeds by a fraction, (i) the numerator of which is the aggregate
accreted value and/or principal amount, as the case may be, of all Indebtedness
(other than (x) the Securities and (y) Subordinated
<PAGE>
-22-
Indebtedness) of the Company outstanding at the time of the applicable Asset
Sale with respect to which the Company is required to use Excess Proceeds to
repay or make an offer to purchase or repay and (ii) the denominator of which is
the sum of (a) the aggregate principal amount of all Securities that are
outstanding at the time of the offer to purchase or repay with respect to the
applicable Asset Sale and (b) the aggregate principal amount or the aggregate
accreted value, as the case may be, of all other Indebtedness (other than
Subordinated Indebtedness) of the Company outstanding at the time of the
applicable Asset Sale Offer with respect to which the Company is required to use
the applicable Excess Proceeds to offer to repay or make an offer to purchase or
repay.
"Outstanding," when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
------
(i) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust by
the Company (if the Company shall act as its own Paying Agent) for the
Holders of such Securities; provided that, if such Securities are to be
--------
redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee, has been made;
(iii) Securities which have been paid pursuant to Section 3.6 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Company; and
(iv) Securities as to which Defeasance has been effected pursuant to
Section 12.2;
provided, however, that in determining whether the Holders of the requisite
- -------- -------
principal amount at maturity of the Outstanding Securities have given, made or
taken any request, demand, authorization, direction, notice, consent, waiver or
other action hereunder as of any date, Securities owned by the Company
<PAGE>
-23-
or any other obligor upon the Securities or any Affiliate of the Company or of
such other obligor shall be disregarded and deemed not to be Outstanding, except
that, in determining whether the Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent, waiver or other
action, only Securities which a Responsible Officer of the Trustee actually
knows to be so owned shall be so disregarded. Securities so owned which have
been pledged in good faith may be regarded as outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company or any
other obligor upon the Securities or any Affiliate of the Company or of such
other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company.
"Permitted Holder" means any member of the Murdoch Family, The News
Corporation Limited, Haim Saban and their respective Affiliates.
"Permitted Indebtedness" means, without duplication:
(a) Indebtedness of the Company evidenced by the Securities;
(b) Indebtedness of the Company and its Restricted Subsidiaries under
the Bank Facility in an aggregate principal amount at any one time
outstanding not to exceed $725 million, less any amounts permanently repaid
in accordance with Section 10.14;
(c) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the Issue Date;
(d) Indebtedness to third parties for the production of television
programming by one or more special purpose partnerships, corporations,
joint ventures or similar structures (in which any interest of the Company
is held through a Special Purpose Vehicle), the production decisions in
respect of which are controlled by the Company or a Restricted Subsidiary;
(e) Indebtedness consisting of the liabilities and obligations,
contingent or otherwise, incurred by the Company or its Restricted
Subsidiaries in the ordinary course
<PAGE>
-24-
of business (other than for borrowed money) to acquire, produce, license or
distribute television programming;
(f) Indebtedness of the Company or any Restricted Subsidiary of the
Company incurred in respect of performance bonds, bankers' acceptances and
letters of credit in the ordinary course of business, including
Indebtedness evidenced by letters of credit issued in the ordinary course
of business to support the insurance or self-insurance obligations of the
Company or any of its Restricted Subsidiaries (including to secure workers'
compensation and other similar insurance coverages), in the aggregate
amount not to exceed $10 million at any time; but excluding letters of
credit issued to secure money borrowed;
(g) (i) Interest Rate Protection Obligations of the Company covering
Indebtedness of the Company and (ii) Interest Rate Protection Obligations
of any Restricted Subsidiary of the Company covering Indebtedness of such
Restricted Subsidiary; provided that in the case of either clause (i) or
--------
(ii) the notional principal amount of any such Interest Rate Protection
Obligations that exceeds the principal amount of the Indebtedness to which
such Interest Rate Protection Obligations relate is otherwise permitted to
be incurred under this Indenture;
(h) Indebtedness of the Company or any Restricted Subsidiaries under
Currency Agreements; provided that (x) such Currency Agreements relate to
--------
Indebtedness or the purchase price of goods purchased or sold by the
Company or any Restricted Subsidiary in the ordinary course of its business
and (y) such Currency Agreements do not increase the Indebtedness or other
obligations of the Company or a Restricted Subsidiary outstanding other
than as a result of fluctuations in foreign currency exchange rates or by
reason of fees, indemnities and compensation payable thereunder;
(i) Indebtedness of a Restricted Subsidiary owed to and held by the
Company or another Restricted Subsidiary, except that (i) any transfer of
such Indebtedness by the Company or a Restricted Subsidiary (other than to
the Company or another Restricted Subsidiary) and (ii) the sale, transfer
or other disposition by the Company or any Restricted Subsidiary of the
Company of Capital Stock of a Restricted Subsidiary (other than to the
Company or a Restricted Subsidiary) which is owed Indebtedness of another
<PAGE>
-25-
Restricted Subsidiary shall, in each case, be an incurrence of Indebtedness
by such Restricted Subsidiary subject to the other provisions of this
Indenture;
(j) Indebtedness of the Company owed to and held by a Restricted
Subsidiary which is unsecured and subordinated in right of payment to the
payment and performance of the obligations of the Company under this
Indenture and the Securities, except that (i) any transfer of such
Indebtedness by the Company or a Restricted Subsidiary (other than to
another Restricted Subsidiary) and (ii) the sale, transfer or other
disposition by the Company or any Restricted Subsidiary of the Company of
Capital Stock of a Restricted Subsidiary (other than to the Company or a
Restricted Subsidiary) which is owed Indebtedness of the Company shall, in
each case, be an incurrence of Indebtedness by the Company, subject to the
other provisions of this Indenture;
(k) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
-------- -------
Indebtedness is extinguished within five Business Days of incurrence;
(l) Indebtedness of the Company, in addition to that described in
clauses (a) through (k) of this definition, in an aggregate principal
amount outstanding at any time not to exceed $150 million;
(m) Indebtedness represented by obligations to purchase Capital Stock
of the Company pursuant to agreements, as in effect on the Issue Date, with
employees of the Company and its Restricted Subsidiaries upon the
termination of their employment in an aggregate principal amount not to
exceed $30 million during the term of this Indenture; and
(n) (i) Indebtedness of the Company the proceeds of which are used
solely to refinance (whether by amendment, renewal, extension or refunding)
Indebtedness of the Company or any of its Restricted Subsidiaries and (ii)
Indebtedness of any Restricted Subsidiary of the Company the proceeds of
which are used solely to refinance (whether by amendment, renewal,
extension or refunding) Indebtedness of any Restricted Subsidiary (in each
case other than the
<PAGE>
-26-
Indebtedness to be refinanced, redeemed or retired as described under "Use
of Proceeds" in the Offering Memorandum, and Indebtedness under clause (b)
or (g) through (m) of this definition); provided, however, that (x) the
-------- -------
principal amount of Indebtedness incurred pursuant to this clause (n) (or,
if such Indebtedness provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration of the
maturity thereof, the original issue price of such Indebtedness) shall not
exceed the sum of the principal amount of Indebtedness so refinanced, plus
the amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of such Indebtedness or the amount of any
premium reasonably determined by the Company as necessary to accomplish
such refinancing by means of a tender offer or privately negotiated
purchase, plus the amount of expenses in connection therewith, and (y) in
the case of Indebtedness incurred pursuant to this clause (n) to refinance
Subordinated Indebtedness, such Indebtedness (A) has no scheduled principal
payment prior to the 91st day after the Maturity Date, (B) has an Average
Life to Stated Maturity greater than the remaining Average Life to Stated
Maturity of the Securities and (C) is subordinated to the Securities in the
same manner and to the same extent that the Subordinated Indebtedness being
refinanced is subordinated to the Securities. Nothing in this clause (n)
shall restrict the ability of the Company or any Restricted Subsidiary to
refinance any Indebtedness pursuant to the terms of any other clause or
provision of this Indenture, such as any refinancing contemplated by the
definition "Bank Facility."
"Permitted Investments" means any of the following: (i) Investments in
the Company or in a Restricted Subsidiary; (ii) Investments in another Person,
if as a result of such Investment (A) such other Person becomes a Restricted
Subsidiary or (B) such other Person is merged or consolidated with or into, or
transfers or conveys all or substantially all of its assets to the Company or a
Restricted Subsidiary; (iii) Investments representing Capital Stock or
obligations issued to the Company or any of its Restricted Subsidiaries in
settlement of claims against any other Person by reason of a composition or
readjustment of debt or a reorganization of any debtor of the Company or such
Restricted Subsidiary; (iv) Investments in Interest Rate Protection Agreements
on commercially reasonable terms entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business in connection with
the operations of the business of the Company or its Restricted
<PAGE>
-27-
Subsidiaries to hedge against fluctuations in interest rates on its outstanding
Indebtedness; (v) Investments in the Securities; (vi) Investments in Cash
Equivalents; (vii) Investments acquired by the Company or any Restricted
Subsidiary in connection with an Asset Sale permitted under Section 10.14 to the
extent such Investments are non-cash proceeds as permitted under such covenant;
(viii) advances to employees or officers of the Company in the ordinary course
of business; (ix) any Investment to the extent that the consideration therefor
is Capital Stock (other than Redeemable Capital Stock) of the Company; and (x)
Investments in any Person engaged in the Entertainment/Programming Business not
to exceed $65,000,000 at any time outstanding.
"Permitted Liens" means the following types of Liens:
(a) any Lien existing as of the date of this Indenture;
(b) Liens securing Indebtedness and other amounts owing under the
Bank Facility;
(c) any Lien securing Acquired Indebtedness created prior to (and not
created in connection with, or in contemplation of) the incurrence of such
Indebtedness by the Company or any Restricted Subsidiary, if such Lien does
not attach to any property or assets of the Company or any Restricted
Subsidiary other than the property or assets subject to the Lien prior to
such incurrence;
(d) Liens in favor of the Company or a Restricted Subsidiary;
(e) Liens on and pledges of the Capital Stock of any Unrestricted
Subsidiary securing any Indebtedness of such Unrestricted Subsidiary;
(f) Liens for taxes, assessments or governmental charges or claims
either (i) not delinquent for 90 days or more or (ii) contested in good
faith by appropriate proceedings and as to which the Company or its
Restricted Subsidiaries shall have set aside on its books such reserves as
may be required pursuant to GAAP;
(g) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent for
<PAGE>
-28-
90 days of more or being contested in good faith and as to which reserves
or other appropriate provisions, if any, as shall be required by GAAP shall
have been made in respect thereof;
(h) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money);
(i) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(j) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Restricted Subsidiaries;
(k) any interest or title of a lessor or sublessor and any
restriction or encumbrance to which the interest or title of such lessor or
sublessor may be subject;
(l) purchase money Liens to finance property or assets of the Company
or any Restricted Subsidiary of the Company acquired in the ordinary course
of business; provided, however, that (i) the related purchase money
-------- -------
Indebtedness shall not be secured by any property or assets of the Company
other than the property and assets so acquired and (ii) the Lien securing
such Indebtedness shall be created within 180 days of such acquisition;
(m) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(n) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Company or any of its Re-
<PAGE>
-29-
stricted Subsidiaries, including rights of offset and set-off;
(o) Liens securing Interest Rate Protection Obligations which
Interest Rate Protection Obligations relate to Indebtedness that is secured
by Liens otherwise permitted under this Indenture;
(p) Liens on assets of Unrestricted Subsidiaries;
(q) Liens securing Capitalized Lease Obligations or incurred in
connection with Sale-Leaseback Transactions;
(r) Liens securing other Indebtedness in an aggregate amount not to
exceed 10% of the Company's Consolidated Net Tangible Assets as of the last
day of the Company's most recently completed fiscal period for which
financial information is available;
(s) Liens in favor of the Screen Actors Guild, the Writers Guild of
America, the Directors Guild of America or any other unions, guilds or
collective bargaining units under the collective bargaining agreements,
which Liens are incurred in the ordinary course of business solely to
secure the payment of residuals and other collective bargaining obligations
required to be paid by the Company or any of its Restricted Subsidiaries
under any such collective bargaining agreement;
(t) Liens arising in connection with completion guarantees entered
into in the ordinary course of business and consistent with then current
industry practices, securing obligations (other than Indebtedness for
borrowed money) of the Company or any of its Restricted Subsidiaries not
yet due and payable;
(u) Liens in favor of suppliers and/or producers of any programming
that are incurred in the ordinary course of business solely to secure the
purchase price of such programming and such directly related rights or the
rendering of services necessary for the production of such programming;
provided, however, that no such Lien shall extend to or cover any property
-------- -------
or assets other than the programming and the rights directly related
thereto being so acquired or produced; and provided, further, that any
-------- -------
payment obligations secured by such Liens shall be their terms by payable
solely from the revenues that are derived directly from the exhibition,
syndication, exploitation,
<PAGE>
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distribution or disposition of such item of programming and/or such
directly related rights;
(v) Liens upon any item of programming and rights directly related
thereto in favor of distributors of such item of programming that are
incurred in each case in the ordinary course of business solely to secure
delivery of such item of programming and the licensing of the rights in
such item of programming directly related thereto; provided, however, that
-------- -------
no such Lien shall extend to or cover any property or assets other than the
item of programming being so delivered and the rights directly related
thereto; and provided, further, that any payment obligations secured by
-------- -------
such Liens shall by their terms by payable solely from the revenues that
are derived directly from the exhibition, syndication, exploitation,
distribution or disposition of such item of Product and/or such directly
related rights; and
(w) Liens on assets or Capital Stock of a Special Purpose Vehicle.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock," as applied to any Person, means Capital Stock of
any class or classes (however designated) which is preferred as to the payment
of dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person.
"principal amount at maturity" means, with respect to the Securities,
$1,000 per $1,000 face amount of Securities; provided, however, that if the
-------- -------
Company shall have made a Cash Interest Election, the principal amount at
maturity with respect to each Security shall be the Accreted Value of such
Security as of the Cash Interest Election Date.
"Private Exchange Securities" has the meaning set forth in the
Registration Rights Agreement.
"Private Placement Legend" shall mean the legend initially set forth
on the Securities in the form set forth on Exhibit B-1.
<PAGE>
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"Public Equity Offering" means an underwritten public offering of
Capital Stock (other than Redeemable Capital Stock) for the Company pursuant to
a registration statement filed with the Commission in accordance with the
Securities Act, which public equity offering results in net cash proceeds to the
Company of not less than $100 million.
"Purchase Amount," when used with respect to an Offer to Purchase,
shall mean the aggregate principal amount of the Outstanding Securities offered
to be purchased by the Company pursuant to the Offer to Purchase.
"Purchase Date" shall have the meaning set forth in the definition of
"Offer to Purchase."
"Qualified Equity Interest" in a Person means any interest in Capital
Stock of such Person, other than Redeemable Capital Stock.
"Qualified Institutional Buyer" or "QIB" has the meaning specified in
Rule 144A under the Securities Act.
"Record Expiration Date" has the meaning specified in Section 1.4.
"Redeemable Capital Stock" means any class or series of Capital Stock
that, either by its terms, by the terms of any security into which it is
convertible or exchangeable or by contract or otherwise, is or upon the
happening of an event or passage of time would be, required to be redeemed prior
to the Maturity Date or is redeemable at the option of the Holder thereof at any
time prior to the Maturity Date, or is convertible into or exchangeable for debt
securities at any time prior to the Maturity Date.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registrable Securities" has the meaning set forth in the Registration
Rights Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement with respect to the Securities dated as
<PAGE>
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of October 28, 1997 by and among the Company and the Initial Purchasers, as the
same may be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the April 15 or October 15 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Security" means a permanent global Security in
registered form representing the aggregate principal amount at maturity of
Securities sold in reliance on Regulation S under the Securities Act.
"Replacement Assets" has the meaning specified in Section 10.14.
"Required Filing Dates" has the meaning specified in Section 10.19.
"Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Office, including, any vice president,
any assistant vice president, any assistant secretary, any assistant treasurer,
or any other officer of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.
"Restricted Payments" has the meaning specified in Section 10.9.
"Restricted Period" has the meaning set forth in Section 3.14.
"Restricted Security" means a Security that constitutes a "restricted
security" within the meaning of Rule 144(a)(3) under the Securities Act;
provided, however, that the Trustee shall be entitled to request and
- -------- -------
conclusively rely on an Opinion of Counsel with respect to whether any Security
constitutes a Restricted Security.
<PAGE>
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"Restricted Subsidiary" means any Subsidiary of the Company that is
not an Unrestricted Subsidiary.
"Restricted Subsidiary Indebtedness" means Indebtedness of any
Restricted Subsidiary (i) which is not subordinated to any other Indebtedness of
such Restricted Subsidiary and (ii) in respect of which the Company is not also
obligated (by means of a guarantee or otherwise) other than, in the case of this
clause (ii), Indebtedness under the Bank Facility.
"Revocation" has the meaning set forth in Section 10.18.
"Rule 144A" means Rule 144A under the Securities Act.
"Sale-Leaseback Transaction" of any Person means an arrangement with
any lender or investor or to which such lender or investor is a party providing
for the leasing by such Person of any property or asset of such Person which has
been or is being sold or transferred by such Person after the acquisition
thereof or the completion of construction or commencement of operation thereof
to such lender or investor or to any Person to whom funds have been or are to be
advanced by such lender or investor on the security of such property or asset.
The stated maturity of such arrangement shall be the date of the last payment of
rent or any other amount due under such arrangement prior to the first date on
which such arrangement may be terminated by the lessee without payment of a
penalty.
"S&P" means Standard & Poor's Ratings Group, and its successors.
"Securities" means securities designated in the first paragraph of the
RECITALS OF THE COMPANY.
"Securities Act" means the Securities Act of 1933 and any statute
successor thereto, in each case as amended from time to time.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.5.
"Senior Notes" means the 9 1/4% Senior Notes due 2007 issued by the
Company, pursuant to an indenture dated as of the date hereof.
"Series A Preferred Stock" means the Series A Preferred Stock of the
Company.
<PAGE>
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"Significant Subsidiary" of any Person means a Restricted Subsidiary
of such Person which would be a significant subsidiary of such Person as
determined in accordance with the definition in Section 210.1-02(w) of
Regulation S-X promulgated by the Commission and as in effect on the date of
this Indenture.
"Special Purpose Vehicle" means a Person which is, or was,
established: (i) with separate legal identity and limited liability; (ii) as an
Affiliate of the Company; and (iii) for the sole purpose of a single
transaction, or series of related transactions, and which has no assets and
liabilities other than those directly acquired or incurred in connection with
such transaction(s).
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 3.7.
"Stated Maturity" means, when used with respect to any Security or any
installment of interest thereon, the date specified in such Security as the
fixed date on which the principal of such Security or such installment of
interest is due and payable, and when used with respect to any other
Indebtedness, means the date specified in the instrument governing such
Indebtedness as the fixed date on which the principal of such Indebtedness, or
any installment of interest thereon, is due and payable.
"Strategic Equity Investor" means a corporation or entity with an
equity market capitalization, a net asset value or annual revenues of at least
$1.0 billion that primarily owns and operates businesses in the entertainment,
cable television, programming or similar or related industries.
"Subordinated Indebtedness" means, with respect to the Company,
Indebtedness of the Company which is expressly subordinated in right of payment
to the Securities.
"Subsidiary" means, with respect to any Person, (i) a corporation at
least 50% of whose Voting Stock is at the time, directly or indirectly, owned by
such Person, by one or more Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof and (ii) any other Person (other than a
corporation), including, without limitation, a partnership, limited liability
company, business trust or a joint venture, in which such Person, one or more
Subsidiaries thereof or such Person and one or more Subsidiaries thereof,
directly or indi-
<PAGE>
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rectly, at the date of determination thereof, has at least a 50% ownership
interest entitled to vote in the election of directors, managers or trustees
thereof (or other Person performing similar functions). For purposes of this
definition, any directors' qualifying shares or investments by foreign nationals
mandated by applicable law shall be disregarded in determining the ownership of
a Subsidiary.
"Trustee" means the Person named as the "Trustee, in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided, however,
-------- -------
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"Unrestricted Securities" means one or more Securities that do not and
are not required to bear the Private Placement Legend in the form set forth in
Exhibit A, including, without limitation, the Exchange Securities.
- ---------
"Unrestricted Subsidiary" means each Subsidiary of the Company
designated as such pursuant to and in compliance with the covenant described
under Section 10.18.
"U.S. Government Obligation" has the meaning specified in Section
12.4.
"Vice President," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president."
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least 50% of the board of directors, managers or
trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes shall have, or might have, voting power by reason of
the happening of any contingency).
<PAGE>
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SECTION 1.2. Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of
an Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirement set forth in
this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 1.3. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
<PAGE>
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Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.4. Acts of Holders; Record Dates.
-----------------------------
Any request, demand, authorization, direction, notice, consent, waiver
or other action provided or permitted by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof.
<PAGE>
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Where such execution is by a signer acting in a capacity other than his
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority. The fact and date of the execution of any
such instrument or writing, or the authority of the Person executing the same,
may also be proved in any other manner which the Trustee deems sufficient.
The ownership of Securities shall be proved by the Security Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to give or take any
request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Indenture to be given or taken by Holders
of Securities, provided that the Company may not set a record date for, and the
--------
provisions of this paragraph shall not apply with respect to, the giving or
making of any notice, declaration, request or direction referred to in the next
paragraph. If any record date is set pursuant to this paragraph, the Holders of
Outstanding Securities on such record date, and no other Holders, shall be
entitled to take the relevant action, whether or not such Holders remain Holders
after such record date; provided that no such action shall be effective
--------
hereunder unless taken on or prior to the applicable Record Expiration Date by
Holders of the requisite principal amount at maturity of Outstanding Securities
on such record date; and provided, further, that for the purpose of determining
-------- -------
whether Holders of the requisite principal amount at maturity of such Securities
have taken such action, no Security shall be deemed to have been Outstanding on
such record date unless it is also Outstanding on the date such action is to
become effective. Nothing in this paragraph shall prevent the Company from
setting a new record date for any action for which a record date has previously
been set pursuant to this paragraph (whereupon the record date previously set
shall automatically and with no action by any Person be cancelled and of no
effect), nor shall anything in this paragraph be construed to render ineffective
any action
<PAGE>
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taken pursuant to or in accordance with any other provision of this Indenture by
Holders of the requisite principal amount at maturity of Outstanding Securities
on the date such action is taken. Promptly after any record date is set pursuant
to this paragraph, the Company, at its own expense, shall cause notice of such
record date, the proposed action by Holders and the applicable Record Expiration
Date to be given to the Trustee in writing and to each Holder of Securities in
the manner set forth in Section 1.6.
The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to join in the giving
or making of (i) any Notice of Default, (ii) any declaration of acceleration
referred to in Section 5.2, (iii) any request to institute proceedings referred
to in Section 5.7(2) or (iv) any direction referred to in Section 5.12. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities on such record date, and no other Holders, shall be entitled to join
in such notice, declaration, request or direction, whether or not such Holders
remain Holders after such record date; provided that no such action shall be
--------
effective hereunder unless taken on or prior to the applicable Record Expiration
Date by Holders of the requisite principal amount at maturity of Outstanding
Securities on such record date; and provided, further, that for the purpose of
-------- -------
determining whether Holders of the requisite principal amount at maturity of
such Securities have taken such action, no Security shall be deemed to have been
Outstanding on such record date unless it is also Outstanding on the date such
action is to become effective. Nothing in this paragraph shall be construed to
prevent the Trustee from setting a new record date for any action (whereupon the
record date previously set shall automatically and without any action by any
Person be cancelled and of no effect), nor shall anything in this paragraph be
construed to render ineffective any action taken pursuant to or in accordance
with any other provision of this Indenture by Holders of the requisite principal
amount at maturity of Outstanding Securities on the date such action is taken.
Promptly after any record date is set pursuant to this paragraph, the Trustee,
at the Company's expense, shall cause notice of such record date, the matter(s)
to be submitted for potential action by Holders and the applicable Record
Expiration Date to be given to the Company in writing and to each Holder of
Securities in the manner set forth in Section 1.6.
With respect to any record date set pursuant to this Section, the
party hereto that sets such record date may designate any day as the "Record
Expiration Date" and from time to
<PAGE>
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time may change the Record Expiration Date to any earlier or later day, provided
--------
that no such change shall be effective unless notice of the proposed new Record
Expiration Date is given to the other party hereto in writing, and to each
Holder of Securities in the manner set forth in Section 1.6, on or before the
existing Record Expiration Date. If a Record Expiration Date is not designated
with respect to any record date set pursuant to this Section, the party hereto
that set such record date shall be deemed to have initially designated the 180th
day after such record date as the Record Expiration Date with respect thereto,
subject to its right to change the Record Expiration Date as provided in this
paragraph. Notwithstanding the foregoing, no Record Expiration Date shall be
later than the 180th day after the applicable record date.
Without limiting the foregoing, a Holder entitled hereunder to take
any action hereunder with regard to any particular Security may do so with
regard to all or any part of the principal amount at maturity of such Security
or by one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such principal amount at maturity.
SECTION 1.5. Notices to Trustee and Company.
------------------------------
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
and mailed, first-class postage prepaid, to or with the Trustee at its
Corporate Trust Office, Attention: Corporate Trust Trustee Administration;
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this instrument, with a copy to The News Corporation
Limited at 1211 Avenue of the Americas, 3rd Floor, New York, NY 10036,
Attention: Arthur M. Siskind, Esq., or at any other address previously
furnished in writing to the Trustee by the Company.
<PAGE>
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SECTION 1.6. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice.
In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 1.7. Conflict with Trust Indenture Act.
---------------------------------
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be part
of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be.
SECTION 1.8. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
<PAGE>
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SECTION 1.9. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by each of the Company
shall bind its successors and assigns, whether so expressed or not.
SECTION 1.10. Separability Clause.
-------------------
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 1.11. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders of Securities, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
SECTION 1.12. Governing Law.
-------------
This Indenture and the Securities shall be governed by and construed
in accordance with the laws of the State of New York, without regard to the
conflicts of laws principles thereof.
SECTION 1.13. Legal Holidays.
--------------
In any case where any Interest Payment Date, Redemption Date, Purchase
Date or Stated Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal (and premium, if any) need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect (including with respect to the accrual of interest) as if made on the
Interest Payment Date, Redemption Date or Purchase Date, or at the Stated
Maturity.
<PAGE>
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ARTICLE II
SECURITY FORMS
SECTION 2.1. Forms Generally.
---------------
The Securities and the Trustee's certificates of authentication shall
be in substantially the forms set forth or referenced in Exhibit B-1 and Exhibit
B-2 annexed hereto, with such appropriate insertions, omissions, substitutions
and other variations as are required or permitted by this Indenture, and may
have such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such Securities, as evidenced by their execution thereof.
The definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these methods on steel engraved borders or may
be produced in any other manner permitted by the rules of any securities
exchange on which the Securities may be listed, all as determined by the
officers executing such Securities, as evidenced by their execution of such
Securities.
ARTICLE III
THE SECURITIES
SECTION 3.1. Title and Terms.
---------------
The aggregate principal amount at maturity of Securities which may be
authenticated and delivered under this Indenture is limited to $618,670,000
principal face amount at maturity of Initial Securities and up to $618,670,000
principal face amount at maturity of Securities exchanged therefor in accordance
with the Registration Rights Agreement, except for Securities authenticated and
delivered upon registration or transfer of, or in exchange for, or in lieu of,
other Securities pursuant to Section 3.4, 3.5, 3.6, 9.6 or 11.8 or in connection
with an Offer pursuant to Section 10.13 or 10.14.
The Securities shall be known and designated as the "10 1/4% Senior
Discount Notes due 2007" of the Company. Their
<PAGE>
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Stated Maturity shall be November 1, 2007. Cash interest on the Securities will
not accrue prior to November 1, 2002, except as provided below. Cash interest on
the Securities will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from November 1, 2002; provided, however,
-------- -------
that at any time prior to November 1, 2002, the Company may elect on any
Interest Payment Date to commence the accrual of cash interest from and after
the Cash Interest Election Date, in which case the principal amount at maturity
of each Security will on such Cash Interest Election Date be reduced to the
Accreted Value of such Security as of such Cash Interest Election Date, and cash
interest (accruing at a rate of 10 1/4% per annum from the Cash Interest
Election Date) shall be payable with respect to such Security on each Interest
Payment Date thereafter. The Company will pay interest semiannually in arrears
on each Interest Payment Date, commencing on the earlier of November 1, 2003 and
the May 1 or November 1 immediately after the Cash Interest Election Date (if
any). Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months.
The principal of (and premium, if any) and interest on the Securities
shall be payable at the office or agency of the Company in the Borough of
Manhattan, The City of New York maintained for such purpose and at any other
office or agency maintained by the Company for such purpose; provided, however,
-------- -------
that, at the option of the Company, payment of interest may be made by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register.
The Company may be required to make a Change of Control Offer as
provided in Section 10.13, or an Asset Sale Offer as provided in Section 10.14.
The Securities shall be redeemable as provided in Article II and
Article XI.
The Securities shall be subject to Defeasance and/or Covenant
Defeasance as provided in Article XII.
SECTION 3.2. Denominations.
-------------
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 principal face amount at maturity
and any integral multiple thereof.
<PAGE>
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SECTION 3.3. Execution, Authentication, Delivery and Dating.
-----------------------------------------------
The Initial Securities and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A-1 hereto. The Exchange
-----------
Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A-2 hereto.
-----------
The terms and provisions contained in the Securities annexed hereto as
Exhibits A-1 and A-2 shall constitute, and are hereby expressly made, a part of
- ------------ ---
this Indenture and, to the extent applicable, the Company and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
Securities offered and sold in reliance on Rule 144A and Securities
offered and sold in reliance on Regulation S shall be issued initially in the
form of one or more Global Securities, substantially in the form set forth in
Exhibit A-1, deposited with the Trustee, as custodian for the Depository, duly
- -----------
executed by the Company and authenticated by the Trustee as hereinafter provided
and shall bear the legend set forth in Exhibit B. The aggregate principal amount
---------
at maturity of the Global Securities may from time to time be increased or
decreased by adjustments made on the records of the Trustee, as custodian for
the Depository, as hereinafter provided.
All Securities shall remain in the form of a Global Security, except
as provided herein.
The Securities shall be executed on behalf of each of the Company by
its Chairman of the Board, its Chief Executive Officer, its President or one of
its Vice Presidents, attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Securities and the
seal may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication,
<PAGE>
-46-
together with a Company Order for the authentication and delivery of such
Securities; and the Trustee in accordance with such Company Order shall
authenticate and make available for delivery such Securities as in this
Indenture provided and not otherwise.
The Trustee shall have the right to decline to authenticate and make
available for delivery any Securities under this Section if the Trustee, being
advised by counsel, determines that such action may not lawfully be taken or if
the Trustee in good faith by its board of directors or trustees, executive
committee, or a trust committee of directors or trustees or vice presidents
shall determine that such action would expose the Trustee to personal liability
to existing Holders.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and made available for delivery hereunder.
SECTION 3.4. Temporary Securities.
--------------------
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and make
available for delivery, temporary Securities which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Company designated pursuant to Section 10.2, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities the Company shall exe-
<PAGE>
-47-
cute and the Trustee shall authenticate and make available for delivery in
exchange therefor a like principal amount at maturity of definitive Securities
of authorized denominations and of a like tenor. Until so exchanged the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
SECTION 3.5. Registration, Registration of Transfer and Exchange.
----------------------------------------------------
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 10.2 being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as the Company may prescribe, the Company shall provide
for the registration of Securities and of transfers of Securities. The Trustee
is hereby appointed "Security Registrar" for the purpose of registering
Securities and transfers of Securities as herein provided.
Subject to Sections 3.13 and 3.14 of this Indenture, upon surrender
for registration of transfer of any Security at an office or agency of the
Company designated pursuant to Section 10.2 for such purpose, the Company shall
execute, and the Trustee shall authenticate and make available for delivery, in
the name of the designated transferee or transferees, one more or more new
Securities of any authorized denominations and of a like aggregate principal
amount at maturity and tenor.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations and of a like aggregate principal
amount at maturity and tenor, upon surrender of the Securities to be exchanged
at such office or agency. Whenever any Securities are so surrendered for
exchange, the Company shall execute, and the Trustee shall authenticate and make
available for delivery, the Securities which the Holder making the exchange is
entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by
<PAGE>
-48-
a written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed, by the Holder thereof or his attorney duly
authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 3.4, 9.6 or 11.8 or in accordance with any Change
of Control Offer pursuant to Section 10.13 or any Asset Sale Offer pursuant to
Section 10.14 and in any such case not involving any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the day of the mailing of a notice of redemption of Securities
selected for redemption under Section 11.4 and ending at the close of business
on the day of such mailing, or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Securities.
-------------------------------------------------
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and make available for delivery
in exchange therefor a new Security of like tenor and principal amount at
maturity and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company, and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of each of them harmless, then, in the absence of actual
notice to the Company or the Trustee that such Security has been acquired by a
bona fide purchaser, the Company shall execute, and upon their request the
Trustee shall authenticate and make available for delivery, in lieu of any such
destroyed, lost or stolen Security, a new Security of like tenor and principal
amount at maturity and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the
<PAGE>
-49-
Company in its discretion may, instead of, issuing a new Security, pay such
Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.7. Payment of Interest; Rights Preserved.
-------------------------------------
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more predecessor securities) is registered
at the close of business on the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at their election in each case,
as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which shall
be fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Security and the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
<PAGE>
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aggregate amount proposed to be paid in respect of such Defaulted Interest
or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be
held in trust for the benefit of the Persons entitled to such Defaulted
Interest as in this clause provided. Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest which shall
be not more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date and, in the name and at the expense
of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be given to each
Holder in the manner specified in Section 1.6, not less than 10 days prior
to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons in whose names
the Securities (or their respective Predecessor Securities) are registered
at the close of business on such Special Record Date and shall no longer be
payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this Clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 3.8. Persons Deemed Owners.
---------------------
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of (and premium, if
<PAGE>
-51-
any) and (subject to Section 3.7) interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 3.9. Cancellation.
------------
All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any Change of Control Offer pursuant
to Section 10.13 or any Asset Sale Offer pursuant to Section 10.14 shall, if
surrendered to any Person other than the Trustee, be made available for delivery
to the Trustee and shall be promptly canceled by it. The Company may at any
time deliver to the Trustee for cancellation any Securities previously
authenticated and made available for delivery hereunder which the Company may
have acquired in any manner whatsoever, and all Securities so delivered shall be
promptly canceled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities canceled as provided in this Section,
except as expressly permitted by this Indenture. All canceled Securities held
by the Trustee shall be disposed of as directed by a Company Order; provided,
--------
however, that the Trustee shall not be required to destroy canceled Securities.
- -------
SECTION 3.10. Computation of Interest.
-----------------------
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
SECTION 3.11. CUSIP and CINS Numbers.
----------------------
The Company in issuing the Securities may use "CUSIP" and "CINS"
numbers (if then generally in use), and, if so, the Trustee shall use the CUSIP
or CINS numbers in notices of redemption or repurchase as a convenience to
Holders; provided that any such notice may state that no representation is made
--------
as to the correctness of such numbers either as printed on the Securities or as
contained in any notice of a redemption or repurchase and that reliance may be
placed only on the other identification numbers printed on the Securities, and
any such redemption or repurchase shall not be affected by any defect in or
omission of such numbers. The Company shall promptly notify the Trustee of any
change in the CUSIP or CINS numbers.
<PAGE>
-52-
SECTION 3.12. Deposits of Monies.
------------------
(a) The Company may from time to time appoint one or more Paying
Agents under this Indenture and the Securities.
(b) Unless the Company shall be acting as Paying Agent as provided in
Section 10.3 hereof, prior to 1:00 p.m. New York City time on each Interest
Payment Date on and after the first Interest Payment Date following the Cash
Interest Election Date or, if no Cash Interest Election shall occur, on and
after May 1, 2003, and each Redemption Date, Stated Maturity, and Purchase Date,
the Company shall deposit with the Paying Agent in immediately available funds
money sufficient to make cash payments, if any, due on such Interest Payment
Date, Redemption Date, Stated Maturity and Purchase Date, as the case may be, in
a timely manner which permits the Paying Agent to remit payment to the Holders
on such Interest Payment Date, Redemption Date, Stated Maturity, and Purchase
Date, as the case may be.
SECTION 3.13. Book-Entry Provisions for Global Securities.
-------------------------------------------
(a) The Global Securities initially shall (i) be registered in the
name of the Depository or the nominee of such Depository, (ii) be delivered to
the Trustee as custodian for such Depository and (iii) bear legends as set forth
in Exhibit C hereto.
---------
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository, or the Trustee as its custodian, or under any
Global Security, and the Depository may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of the Global
Securities for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company, or
the Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Security.
(b) Transfer of Global Securities shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Securities may not be
transferred or
<PAGE>
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exchanged for physical securities, except that physical securities shall be
transferred to all beneficial owners in exchange for their beneficial interests
in Global Securities if (i) the Depository notifies the Company that it is
unwilling or unable to continue as Depository for any Global Security, or that
it will cease to be a "Clearing Agency" under the Exchange Act, and in either
case a successor Depository is not appointed by the Company within 90 days of
such notice or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a written request from the Depository to issue physical
securities.
(c) the Holder of any Global Security may grant proxies and
otherwise authorize any Person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
SECTION 3.14. Special Transfer Provisions.
---------------------------
(a) Transfers to Non-U.S. Persons. The following additional
-----------------------------
provisions shall apply with respect to the registration of any proposed transfer
of an Initial Security to any Non-U.S. Person:
(i) the Registrar shall register the transfer of any Initial
Security, whether or not such Security bears the Private Placement Legend,
if (x) the requested transfer is after the second anniversary of the Issue
Date; provided, however, that neither the Company, nor any Affiliate of the
-------- -------
Company, has held any beneficial interest in such Security, or portion
thereof, at any time on or prior to the second anniversary of the Issue
Date and such transfer can otherwise be lawfully made under the Securities
Act without registering such Initial Security thereunder or (y) the
proposed transferor has delivered to the Registrar a certificate
substantially in the form of Exhibit D hereto;
---------
(ii) if the proposed transferor is an Agent Member seeking to
transfer an interest in a 144A Global Security, upon receipt by the
Registrar of (x) written instructions given in accordance with the
Depository's and the Registrar's procedures and (y) the appropriate
certificate, if any, required by clause (y) of paragraph (i) above,
together with any required legal opinions and certifications, the Registrar
shall register the transfer and reflect on its books and records the date
and (A) a decrease in the principal amount at maturity of the 144A Global
Se-
<PAGE>
-54-
curity from which such interests are to be transferred in an amount equal
to the principal amount at maturity of the Securities to be transferred and
(B) an increase in the principal amount at maturity of the Regulation S
Global Security in an amount equal to the principal amount at maturity of
the Global Security to be transferred; and
(iii) subject to Section 3.14(b), until the 41st day after the
Issue Date (the "Restricted Period"), an owner of a beneficial interest in
the Regulation S Global Security may not transfer such interest to a
transferee that is a U.S. Person or for the account or benefit of a U.S.
Person within the meaning of Rule 902(o) of the Securities Act. Subject to
Section 3.14(b), during the Restricted Period, all beneficial interests in
the Regulation S Global Security shall be transferred only through Cedel or
Euroclear, either directly if the transferor and transferee are
participants in such systems, or indirectly through organizations that are
participants therein.
(b) Transfers to QIBs. The following provisions shall apply with
-----------------
respect to the registration of any proposed transfer of an Initial Security to a
QIB (excluding Non-U.S. Persons):
(i) the Registrar shall register the transfer of any Initial
Security, whether or not such Security bears the Private Placement Legend,
if (x) the requested transfer is after the second anniversary of the Issue
Date; provided, however, that neither the Company nor any Affiliate of the
-------- -------
Company has held any beneficial interest in such Security, or portion
thereof, at any time on or prior to the second anniversary of the Issue
Date and such transfer can otherwise be lawfully made under the Securities
Act without registering such Initial Security thereunder or (y) such
transfer is being made by a proposed transferor who has checked the box
provided for on the form of Security stating, or has otherwise advised the
Company and the Registrar in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a transferee who has signed
the certification provided for on the form of Security stating, or has
otherwise advised the Company and the Registrar in writing, that it is
purchasing the Security for its own account or an account with respect to
which it exercises sole investment discretion and that it and any such
account is a QIB within the meaning of Rule 144A, and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges that it
has received such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such in
<PAGE>
-55-
formation and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from registration
provided by Rule 144A; and
(ii) if the proposed transferor is an Agent Member seeking to
transfer an interest in a Regulation S Global Security, upon receipt by the
Registrar of written instructions given in accordance with the Depository's
and the Registrar's procedures, the Registrar shall register the transfer
and reflect on its books and records the date and (A) a decrease in the
principal amount at maturity of the Regulation S Global Security from which
interests are to be transferred in an amount equal to the principal amount
at maturity of the Securities to be transferred and (B) an increase in the
principal amount at maturity of the 144A Global Security in an amount equal
to the principal amount at maturity of the Global Security to be
transferred.
(c) Transfers to Non-QIB Institutional Accredited Investors. The
-------------------------------------------------------
following provisions shall apply with respect to the registration of any
proposed transfer of an Initial Security to any Institutional Accredited
Investor that is not a QIB (excluding Non-U.S. persons):
(iii) The Registrar shall register the transfer of any Initial
Security, whether or not such Security bears the Private Placement Legend,
if (x) the requested transfer is subsequent to a date that is two years
after the later of the Issue Date and the last date on that the Company or
any of its Affiliates was the owner of such Security or (y) the proposed
transferee has delivered to the Security Registrar a certificate
substantially in the form of Exhibit D hereto.
(iv) If the proposed transferor is an Agent Member holding a
beneficial interest in a Global Security seeking to transfer a Physical
Security to another person, upon receipt by the Registrar of (x) the
documents, if any, required by paragraph (i) and (y) instructions given in
accordance with the Depository's and the Registrar's procedures therefor,
the Registrar shall reflect on its books and records the date and a
decrease in the principal amount of such Global Security in an amount equal
to the principal amount of the beneficial interest in such Global Security
to be transferred, and the Company shall execute,
<PAGE>
-56-
and the Trustee shall authenticate and deliver, one or more Physical
Certificates of like tenor and amount.
(d) Private Placement Legend. Upon the registration of transfer,
------------------------
exchange or replacement of Securities not bearing the Private Placement Legend,
the Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the registration of transfer, exchange or replacement of
Securities bearing the Private Placement Legend, the Registrar shall deliver
only Securities that bear the Private Placement Legend unless (i) the
circumstances contemplated by paragraph (a)(i)(x) of this Section 3.14 exists,
(ii) there is delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act or (iii) such
Security has been sold pursuant to an effective registration statement under the
Securities Act.
(e) Other Transfers. If a Holder proposes to transfer a Security
---------------
constituting a Restricted Security pursuant to any exemption from the
registration requirements of the Securities Act other than as provided for by
Section 3.14(a), (b), (c) and (d), the Registrar shall only register such
transfer or exchange if such transferor delivers an Opinion of Counsel
satisfactory to the Company and the Registrar that such transfer is in
compliance with the Securities Act and the terms of this Indenture.
(f) General. By its acceptance of any Security bearing the
-------
Private Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture and in the
Private Placement Legend and agrees that it will transfer such Security only as
provided in this Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 3.13 or this Section 3.14.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable prior written notice to the Registrar.
<PAGE>
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ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Securities herein
expressly provided for), and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or stolen
and which have been replaced or repaid as provided in Section 3.6 and
(ii) Securities for whose payment money has theretofore been deposited
in trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided in
Section 10.3) have been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee
for cancellation (other than Securities which have been destroyed,
lost or stolen and which have been replaced or repaid as provided in
Section 3.6),
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of
the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be deposited with the Trustee as
trust funds in trust for the purpose an amount sufficient to pay and
discharge
<PAGE>
-58-
the entire Indebtedness on such Securities not theretofore delivered
to the Trustee for cancellation, for principal (and premium, if any)
and interest on the Securities to the date of such deposit (in the
case of Securities which have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be, together with
irrevocable instructions from the Company directing the Trustee to
apply such funds to the payment thereof at maturity or redemption, as
the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture pursuant to
this Article IV, the obligations of the Company to the Trustee under Section
6.7, the obligations of the Company to any Authenticating Agent under Section
6.14 and, if money shall have been deposited with the Trustee pursuant to
subclause (B) of clause (1) of this Section, the obligations of the Trustee
under Section 4.2 and the last paragraph of Section 10.3 shall survive.
SECTION 4.2. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 10.3, all
money deposited with the Trustee pursuant to Section 4.1 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee.
<PAGE>
-59-
ARTICLE V
REMEDIES
SECTION 5.1. Events of Default.
-----------------
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) default in the payment of the principal of or premium, if any,
when due and payable, on any of the Securities (at Stated Maturity, upon
optional redemption, required purchase or otherwise); or
(2) default in the payment of an installment of interest on any of
the Securities, when due and payable, for 30 days; or
(3) (a) default in the performance, or breach, of any covenant or
agreement of the Company under the Indenture (other than a default in the
performance or breach of a covenant or agreement which is specifically
dealt with in clauses (1) or (2) or subclauses (b), (c) or (d) of this
clause (3)) and such default or breach shall continue for a period of 45
days after written notice has been given, by certified mail, (x) to the
Company by the Trustee or (y) to the Company and the Trustee by the Holders
of at least 25% in aggregate principal amount at maturity of the
Outstanding Securities; (b) there shall be a default in the performance or
breach of the provisions of Article VIII; (c) the Company shall have failed
to make or consummate a Change of Control Offer in accordance with the
provisions of the Indenture described under Section 10.13; or (d) the
Company shall have failed to make or consummate an Asset Sale Offer in
accordance with the provisions of this Indenture described under Section
10.14; or
(4) default or defaults under one or more agreements, instruments,
mortgages, bonds, debentures or other evidences of Indebtedness under which
the Company or any Significant Subsidiary of the Company then has
outstanding Indebtedness in excess of $20,000,000, individually or in
<PAGE>
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the aggregate, and either (a) such Indebtedness is already due and payable
in full or (b) such default or defaults have resulted in the acceleration
of the maturity of such Indebtedness; or
(5) one or more judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the
payment of money in excess of $20,000,000 (net of any amounts covered by
insurance therefor of which the insurance provider has been notified and
not challenged coverage) either individually or in the aggregate, shall be
entered against the Company or any Significant Subsidiary of the Company or
any of their respective properties and shall not be discharged and there
shall have been a period of 60 days after the date on which any period for
appeal has expired and during which a stay of enforcement of such judgment,
order or decree, shall not be in effect; or
(6) the entry of a decree or order by a court having jurisdiction in
the premises (A) for relief in respect of the Company or any Significant
Subsidiary in an involuntary case or proceeding under the Federal
Bankruptcy Code or any other federal, state or foreign bankruptcy,
insolvency, reorganization or similar law or (B) adjudging the Company or
any Significant Subsidiary bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment or composition of or in respect of
the Company or any Significant Subsidiary under the Federal Bankruptcy Code
or any other similar federal, state or foreign law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Company or any Significant Subsidiary or of any
substantial part of any of their properties, or ordering the winding up or
liquidation of any of their affairs, and the continuance of any such decree
or order unstayed and in effect for a period of 60 consecutive days; or
(7) the institution by the Company or any Significant Subsidiary of a
voluntary case or proceeding under the Federal Bankruptcy Code or any other
similar federal, state or foreign law or any other case or proceedings to
be adjudicated a bankrupt or insolvent, or the consent by the Company or
any Significant Subsidiary to the entry of a decree or order for relief in
respect of the Company or any Significant Subsidiary in any involuntary
case or proceeding under the Federal Bankruptcy Code or any other similar
federal, state or foreign law or to the institu-
<PAGE>
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tion of bankruptcy or insolvency proceedings against the Company or any
Significant Subsidiary, or the filing by the Company or any Significant
Subsidiary of a petition or answer or consent seeking reorganization or
relief under the Federal Bankruptcy Code or any other similar federal,
state or foreign law, or the consent by it to the filing of any such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or other similar
official) of any of the Company or any Significant Subsidiary or of any
substantial part of its property, or the making by it of an assignment for
the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due or the taking of
corporate action by the Company or any Significant Subsidiary in
furtherance of any such action.
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
If an Event of Default (other than those covered by clause (6) or (7)
of Section 5.1 with respect to the Company) shall occur and be continuing, the
Trustee, by notice to the Company, or the Holders of at least 25% in aggregate
principal amount at maturity of the Securities then Outstanding, by notice to
the Trustee and the Company, may declare the Default Amount to be due and
payable immediately, upon which declaration, the Default Amount shall be
immediately due and payable, provided, however, that so long as the Bank
-------- -------
Facility shall be in full force and effect, any acceleration arising from any
Event of Default (other than an Event of Default with respect to the Company
described in clause (6) or (7) of the preceding paragraph) shall not become
effective until the earlier of (x) five Business Days following delivery of
written notice of such acceleration of the Securities to the agent under the
Bank Facility and (y) the acceleration (ipso facto or otherwise) of any
---- -----
Indebtedness under the Bank Facility. If an Event of Default specified in
clause (6) or (7) of Section 5.1 with respect to the Company occurs and is
continuing, then the Default Amount shall ipso facto become and be immediately
due and payable without any declaration or other act on the part of the Trustee
or any Holder of Securities.
After a declaration of acceleration under the Indenture, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the Holders of a majority in aggregate principal amount at maturity of
the Outstanding
<PAGE>
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Securities, by written notice to the Company and the Trustee, may rescind such
declaration if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all sums paid or advanced by the Trustee under this
Indenture and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel,
(B) all overdue interest on all Securities,
(C) the principal of and premium, if any, on any Securities
which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Securities,
and
(D) to the extent that payment of such interest is lawful,
interest upon overdue interest and overdue principal at the rate borne
by the Securities which has become due otherwise than by such
declaration of acceleration;
(2) the rescission would not conflict with any judgment or decree of
a court of competent jurisdiction; and
(3) all Events of Default, other than the nonpayment of principal of,
premium, if any, and interest on the Securities that has become due solely
by such declaration of acceleration, have been cured or waived.
No such rescission shall affect any subsequent default or impair any
right consequent thereto.
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee.
---------------------------------------------------------------
The Company covenants that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or premium,
if any, on) any Security at the Maturity thereof or, with respect to any
Security required to have been purchased pursuant to a Change of Control
Offer or an
<PAGE>
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Asset Sale Offer made by the Company, at the purchase date thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and, to the extent
that payment of such interest shall be legally enforceable, interest on any
overdue principal (and premium, if any) and on any overdue interest, at the rate
provided by the Securities, and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
In addition to the rights and powers set forth in Section 317(a) of
the Trust Indenture Act, the Trustee shall be entitled to file such other papers
or documents as may be necessary or advisable in order to have the claims of the
Trustee and of the Holders of the Securities allowed in any judicial proceeding
relative to the Company or other obligor upon the Securities, its creditors, or
its property, and to collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute the same after the deduction
of its charges and expenses; and any receiver, assignee or trustee in bankruptcy
or reorganization is hereby authorized by each of the Holders to make such
payments to the Trustee, and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for compensation and expenses, including counsel fees and expenses
incurred by it up to the date of such distribution.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 5.4. Trustee May File Proofs of Claim.
--------------------------------
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take
<PAGE>
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any and all actions authorized under the Trust Indenture Act in order to have
claims of the Holders and the Trustee allowed in any such proceeding. In
particular, the Trustee shall be authorized to collect and receive any moneys or
other property payable or deliverable on any such claims and to distribute the
same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator
or other similar official in any such judicial proceeding is hereby authorized
by each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 6.7.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding; provided,
--------
however, that the Trustee may, on behalf of the Holders, vote for the election
- -------
of a trustee in bankruptcy or similar official and be a member of a creditors'
or other similar committee.
SECTION 5.5. Trustee May Enforce Claims Without Possession of Securities.
------------------------------------------------------------
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
distributions and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 5.6. Application of Money Collected.
------------------------------
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal (or premium,
if any) or interest, upon presentation of the Securities and the notation
<PAGE>
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thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
6.7; and
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal (and premium, if
any) and interest, respectively.
SECTION 5.7. Limitation on Suits.
-------------------
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount at maturity
of the Outstanding Securities shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its
own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 15 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 15-day period by the Holders of a majority in
principal amount at maturity of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or
<PAGE>
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to seek to obtain priority or preference over any other Holders or to enforce
any right under this Indenture, except in the manner herein provided and for the
equal and ratable benefit of all the Holders.
SECTION 5.8. Unconditional Right of Holders to Receive Principal, Premium and
----------------------------------------------------------------
Interest.
---------
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Section 3.7) interest on such Security on the respective Stated Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date or in the case of a Change of Control Offer or an Asset Sale Offer made by
the Company and required to be accepted as to such Security, on the relevant
purchase date) and to institute suit for the enforcement of any such payment,
and such rights shall not be impaired without the consent of such Holder.
SECTION 5.9. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 3.6, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
<PAGE>
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SECTION 5.11. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 5.12. Control by Holders.
------------------
The Holders of a majority in principal amount at maturity of the
Outstanding Securities shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, provided that
--------
(1) such direction shall not be in conflict with any rule of law or
with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 5.13. Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in principal amount at
maturity of the Outstanding Securities may on behalf of the Holders of all the
Securities waive any past default hereunder and its consequences, except a
default
(1) in the payment of the principal of (or premium, if any) or
interest on any Security (including any Security which is required to have
been purchased pursuant to a Change of Control Offer or an Asset Sale Offer
which has been made by the Company), or
(2) in respect of a covenant or provision hereof which under Article
IX cannot be modified or amended without the consent of the Holder of each
Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no
<PAGE>
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such waiver shall extend to any subsequent or other default or impair any right
consequent thereon.
SECTION 5.14. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, including reasonable attorneys' fees and expenses, in
the manner and to the extent provided in the Trust Indenture Act; provided, that
--------
neither this Section nor the Trust Indenture Act shall be deemed to authorize
any court to require such an undertaking or to make such an assessment in any
suit instituted by the Company, in any suit instituted by the Trustee, in any
suit instituted by any Holder, or group of Holders, holding in the aggregate
more than 10% in principal amount at maturity of the Outstanding Securities, or
in any suit instituted by any Holder for the enforcement of the payment of the
principal of (or premium, if any) or interest on any Security on or after the
Stated Maturity expressed in such Security (or, in the case of redemption, on or
after the Redemption Date or, in the case of a Change of Control Offer or an
Asset Sale Offer, made by the Company and required to be accepted as to such
Security, on the Change of Control Purchase Date or the Asset Sale Offer date,
as the case may be).
SECTION 5.15. Waiver of Stay or Extension Laws.
--------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
<PAGE>
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ARTICLE VI
THE TRUSTEE
SECTION 6.1. Certain Duties and Responsibilities.
-----------------------------------
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by the provisions
hereof are specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture (but need not
confirm or investigate the accuracy of mathematical calculations or other
facts stated therein).
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent misconduct, except that
(1) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any
of its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it;
<PAGE>
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(2) this subsection (c) shall not be construed to limit the effect of
Subsection (a) of this Section 6.1;
(3) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(4) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the Holders of a majority in principal amount at maturity of the
Outstanding Securities determined as provided in Sections 1.1, 1.4 and
5.12, relating to the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Indenture with respect to the
Securities.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section 6.1.
SECTION 6.2. Notice of Defaults.
------------------
Within 90 days after the occurrence of any Default, the Trustee shall
transmit by mail to all Holders, as their names and addresses appear in the
Security Register, notice of such Default hereunder known to the Trustee, unless
such Default shall have been cured or waived; provided, however, that, except in
-------- -------
the case of a Default in the payment of the principal of, premium, if any, or
interest on any Security, the Trustee shall be protected in withholding such
notice if and so long as a trust committee of Responsible Officers of the
Trustee in good faith determines that the withholding of such notice is in the
interest of the Holders and provided, further, that in the case of any Default
-------- -------
of the character specified in Section 5.1(4), no such notice to Holders shall be
given until at least 30 days after the occurrence thereof.
SECTION 6.3. Certain Rights of Trustee.
-------------------------
Subject to the provisions of Section 6.1:
(a) the Trustee may conclusively rely as to the truth of the
statements and correctness of the opinions expressed therein and shall be
fully protected in acting
<PAGE>
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or refraining from acting upon any resolution, Officers' Certificate,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the
proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled (subject to reasonable confidentiality arrangements as
may be proposed by the Company) to ex-
<PAGE>
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amine the books, records and premises of the Company, personally or by
agent or attorney at the sole expense of the Company and, in the absence of
negligence and bad faith, shall incur no liability or additional liability
of any kind by reason of such inquiry or investigation;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or custodians or nominees and the Trustee shall not be
responsible for the supervision of, or any misconduct or negligence on the
part of any agent or attorney appointed with due care by it hereunder;
(h) the Trustee shall not be liable for any action taken, suffered,
or omitted to be taken by it in good faith and reasonably believed by it to
be authorized or within the discretion or rights or powers conferred upon
it by this Indenture;
(i) in the event that the Trustee is also acting as Authenticating
Agent, Paying Agent or Security Registrar hereunder, the rights and
protections afforded to the Trustee pursuant to this Article VI shall also
be afforded to such Authenticating Agent, Paying Agent and Security
Registrar; and
(j) the Trustee shall not be deemed to have notice of any Default or
Event of Default unless a Responsible Officer of the Trustee has actual
knowledge thereof or unless written notice of any event which is in fact
such a Default is received by the Trustee at the Corporate Trust Office of
the Trustee, and such notice references the Securities.
SECTION 6.4. Not Responsible for Recitals or Issuance of Securities.
-------------------------------------------------------
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee or any Authenticating Agent assumes no
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or of the Securities. The
Trustee shall not be accountable for the use or application by the Company of
Securities or the proceeds thereof.
<PAGE>
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SECTION 6.5. May Hold Securities.
-------------------
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company or, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
6.8 and 6.13, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Security
Registrar or such other agent.
SECTION 6.6. Money Held in Trust.
-------------------
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
SECTION 6.7. Compensation and Reimbursement.
------------------------------
The Company agrees
(1) to pay to the Trustee from time to time such reasonable
compensation as the Company and the Trustee shall from time to time agree
in writing for all services rendered by it hereunder (which compensation
shall not be limited by any provision of law in regard to the compensation
of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(3) to indemnify each of the Trustee or any predecessor trustee, its
directors, officers, agents and employees for, and to hold them harmless
against, any and all loss, damage, claim, liability or expense incurred
without negligence or bad faith on its part, including taxes (other than
taxes based upon, measured by or determined by the revenue or income of the
Trustee), arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of defending
itself against any claim or liability in connec-
<PAGE>
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tion with the exercise or performance of any of its powers or duties
hereunder.
The Trustee shall have a lien prior to the Securities as to all
property and funds held by it hereunder for any amount owing to it or any
predecessor trustee pursuant to this Section 6.7, except with respect to funds
held in trust for the benefit of the Holders of particular Securities.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 5.1(6) or Section 5.1(7), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or State bankruptcy, insolvency or
other similar law.
The provisions of this Section shall survive any termination of this
Indenture.
SECTION 6.8. Conflicting Interests.
---------------------
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 6.9. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $100,000,000 and its Corporate
Trust Office in the Borough of Manhattan, The City of New York. If such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section and to the extent permitted by the Trust Indenture Act, the
combined capital and surplus of such Person shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
<PAGE>
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SECTION 6.10. Resignation and Removal; Appointment of Successor.
-------------------------------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 6.11.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
in accordance with the applicable requirements of Section 6.11 shall not have
been delivered to the Trustee within 30 days after the giving of such notice of
resignation, at the expense of the Company the resigning Trustee may petition
any court of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount at maturity at Stated Maturity of the Outstanding
Securities, delivered to the Trustee and to the Company. If an instrument of
acceptance by a successor Trustee in accordance with the applicable requirements
of Section 6.11 shall not have been delivered to the Trustee within 30 days
after the giving of notice of such removal, at the expense of the Company the
removed Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.8 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 6.9 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
<PAGE>
-76-
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 5.14, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount at maturity at Stated Maturity of the
Outstanding Securities delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment in accordance with the applicable requirements of Section 6.11,
become the successor Trustee and supersede the successor Trustee appointed by
the Company. If no successor Trustee shall have been so appointed by the
Company or the Holders and accepted appointment in accordance with the
applicable requirements of Section 6.11, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 1.6. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
(g) The resignation or removal of the Trustee pursuant to this
Section 6.10 shall not affect the obligation of the Company to indemnify the
Trustee pursuant to Section 6.7(3) in connection with the exercise or
performance by the Trustee prior to its resignation or removal of any of its
powers or duties hereunder.
(h) No Trustee under this Indenture shall be liable for any action or
omission of any successor Trustee.
<PAGE>
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SECTION 6.11. Acceptance of Appointment by Successor.
--------------------------------------
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee,
the Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 6.12. Merger, Conversion, Consolidation or Succession to Business.
------------------------------------------------------------
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
<PAGE>
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SECTION 6.13. Preferential Collection of Claims Against Company.
-------------------------------------------------
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
SECTION 6.14. Appointment of Authenticating Agent.
-----------------------------------
The Trustee may appoint an Authenticating Agent or Agents which shall
be authorized to act on behalf of the Trustee to authenticate Securities issued
upon original issue and upon exchange, registration of transfer or partial
redemption or partial purchase or pursuant to Section 3.6, and Securities so
authenticated shall be entitled to the benefits of this Indenture and shall be
valid and obligatory for all purposes as if authenticated by the Trustee
hereunder. Wherever reference is made in this Indenture to the authentication
and delivery of Securities by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication and
delivery on behalf of the Trustee by an Authenticating Agent and a certificate
of authentication executed on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent shall be acceptable to the Company and shall at all
times be a corporation organized and doing business under the laws of the United
States of America, any State thereof or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus of not less than $100,000,000 and subject to supervision or examination
by Federal or State authority. If such Authenticating Agent publishes reports
of condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Authenticating Agent shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent shall cease to
be eligible in accordance with the provisions of this Section, such
Authenticating Agent shall resign immediately in the manner and with the effect
specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially
<PAGE>
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all of the corporate agency or corporate trust business of an Authenticating
Agent, shall continue to be an Authenticating Agent, provided such corporation
shall be otherwise eligible under this Section, without the execution or filing
of any paper or any further act on the part of the Trustee or the Authenticating
Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice
of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give notice of such
appointment in the manner provided in Section 1.6, to all Holders as their names
and addresses appear in the Security Register. Any successor Authenticating
Agent upon acceptance of its appointment hereunder shall become vested with all
the rights, powers and duties of its predecessor hereunder, with like effect as
if originally named as an Authenticating Agent. No successor Authenticating
Agent shall be appointed unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
If an appointment is made pursuant to this Section, the Securities may
have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:
This is one of the Securities described in the within-mentioned
Indenture.
Dated:
The Bank of New York,
As Trustee
By _______________________________
As Authenticating Agent
By:_______________________________
Authorized Signatory
<PAGE>
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ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.1. Company to Furnish Trustee Names and Addresses of Holders.
----------------------------------------------------------
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 days after each May 1 and
November 1, commencing May 1, 1998, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders as of such
Regular Record Date, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
- ---------
capacity as Security Registrar.
SECTION 7.2. Preservation of Information; Communications to Holders.
-------------------------------------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar, if so acting. The Trustee may destroy any list furnished to it as
provided in Section 7.1 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of
<PAGE>
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information as to the names and addresses of Holders made pursuant to the Trust
Indenture Act.
SECTION 7.3. Reports by Trustee.
------------------
(a) Within 60 days after May 1 of each year commencing May 1, 1998,
the Trustee shall transmit to Holders such reports concerning the Trustee and
its actions under this Indenture to the extent required pursuant to the Trust
Indenture Act at the times and in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the Commission and with the Company. The
Company will promptly notify the Trustee in writing when the Securities are
listed on any stock exchange or any delisting thereof.
SECTION 7.4. Reports by Company.
------------------
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; provided that any such
information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the same is so required to be filed with the
Commission. Delivery of such reports, information and documents to the Trustee
is for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.1. Company May Consolidate, Etc. Only on Certain Terms.
---------------------------------------------------
The Company (x) shall not, in any transaction or series of
transactions, merge or consolidate with or into, or
<PAGE>
-82-
sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets as an entirety to, any Person or
Persons, and (y) shall not permit any of its Restricted Subsidiaries to enter
into any such transaction or series of transactions if such transaction or
series of transactions, in the aggregate, would result in a sale, assignment,
conveyance, transfer, lease or other disposition of all or substantially all of
the properties and assets of the Company or the Company and its Restricted
Subsidiaries, taken as a whole, to any other Person or Persons, unless, in each
case (x) or (y), at the time and after giving effect thereto
(1) either:
(A) if the transaction or transactions is a merger or
consolidation, the Company or such Restricted Subsidiary, as the case
may be, shall be the surviving Person of such merger or consolidation,
or
(B) the Person formed by such consolidation or into which the
Company or such Restricted Subsidiary, as the case may be, is merged
or to which the properties and assets of the Company or such
Restricted Subsidiary, as the case may be, substantially as an
entirety, are transferred (any such surviving Person or transferee
Person being the "Surviving Entity") shall be a corporation organized
and existing under the laws of the United States of America, any state
thereof or the District of Columbia and shall expressly assume by a
supplemental indenture executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of the Company, under
the Securities and this Indenture and the Registration Rights
Agreement, and in each case, this Indenture shall remain in full force
and effect;
(2) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (including,
--- -----
without limitation, any Indebtedness incurred or anticipated to be incurred
in connection with or in respect of such transaction or series of
transactions), no Default or Event of Default shall have occurred and be
continuing; and
(3) the Company or the Surviving Entity, as the case may be, after
giving effect to such transaction or series of transactions on a pro forma
--- -----
basis (including, without limitation, any Indebtedness incurred or
anticipated to be
<PAGE>
-83-
incurred in connection with or in respect of such transaction or series of
transactions), could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under Section 10.8.
In connection with any consolidation, merger, sale, assignment,
conveyance, transfer, lease or other disposition contemplated by the foregoing
provisions of this Section 8.1, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger, sale, assignment, conveyance, transfer, lease or
other disposition and the indenture supplemental hereto in respect thereof
(required under clause (1)(B) of this Section 8.1) comply with the requirements
of this Indenture. Each such Officers' Certificate shall set forth the manner
of determination of the ability to Incur Debt in accordance with clause (3) of
this Section 8.1.
SECTION 8.2. Successor Substituted.
---------------------
Upon any transaction or series of transactions that are of the type
described in clause (x) or (y) of, and are effected in accordance with, Section
8.1, the Surviving Entity shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Securities, this
Indenture and/or the Registration Rights Agreement with the same effect as if
such Surviving Entity had been named as the Company herein, and thereafter,
except in the case of a lease, the predecessor Person shall be relieved of all
obligations and covenants under this Indenture and the Securities.
ARTICLE IX
AMENDMENTS; WAIVERS; SUPPLEMENTAL INDENTURES
SECTION 9.1. Amendments, Waivers and Supplemental Indentures Without Consent
---------------------------------------------------------------
of Holders.
----------
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may amend,
waive or supplement this Indenture, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of
<PAGE>
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the covenants of the Company herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
(3) to secure the Securities pursuant to the requirements of Section
10.12 or otherwise; or
(4) to comply with any requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act; or
(5) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture which shall not be inconsistent with
the provisions of this Indenture,
provided that the Company shall have delivered to the Trustee an Opinion of
- --------
Counsel stating that such action pursuant to clauses (1), (2), (3), (4) or (5)
above does not adversely affect the rights of any Holder of Securities.
SECTION 9.2. Modifications, Amendments and Supplemental Indentures with
----------------------------------------------------------
Consent of Holders.
-------------------
With the consent of the Holders of not less than a majority in
principal amount at maturity of the Outstanding Securities, by Act of said
Holders delivered to the Company, and the Trustee, the Company, when authorized
by a Board Resolution, and the Trustee may modify, amend or supplement this
Indenture for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Indenture or of modifying in any
manner the rights of the Holders under this Indenture; provided, however, that
-------- -------
no such modification, amendment or supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby,
(1) reduce the principal amount at maturity of, extend the Stated
Maturity of or alter the Redemption provisions of, the Securities,
(2) change the currency in which any Securities or any premium or the
interest thereon is payable,
<PAGE>
-85-
(3) reduce the percentage in principal amount at maturity of
Outstanding Securities that must consent to an amendment, supplement or
waiver or consent to take any action under the Indenture or the Securities,
(4) impair the right to institute suit for the enforcement of any
payment on or with respect to the Securities,
(5) waive a default in payment with respect to the Securities,
(6) amend, change or modify the obligation of the Company to make and
consummate a Change of Control Offer in the event of a Change of Control or
make and consummate the offer with respect to any Asset Sale or modify any
of the provisions or definitions with respect thereto,
(7) reduce or change the rate or time for payment of interest on the
Securities, or amend or modify the definition of Accreted Value; or
(8) modify or change any provision of this Indenture affecting the
ranking of the Securities in a manner adverse to the Holders of the
Securities.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed amendment or supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof. The
Company may, but shall not be obligated to, fix a record date for the purpose of
determining the Persons entitled to consent to any indenture supplemental hereto
in accordance with Section 1.4 hereof.
SECTION 9.3. Execution of Supplemental Indentures.
------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 6.1) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
<PAGE>
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SECTION 9.4. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 9.5. Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 9.6. Reference in Securities to Supplemental Indentures.
--------------------------------------------------
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
ARTICLE X
COVENANTS
SECTION 10.1. Payment of Principal, Premium and Interest.
------------------------------------------
The Company will duly and punctually pay the principal of (and
premium, if any) and interest on the Securities in accordance with the terms of
the Securities and this Indenture.
SECTION 10.2. Maintenance of Office or Agency.
-------------------------------
The Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency where Securities may be presented or surrendered for
payment, where Securities may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of
<PAGE>
-87-
the Securities and this Indenture may be served. The Company will give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office of the Trustee, and the Company hereby
appoints the Trustee as its agent to receive all such presentations, surrenders,
notices and demands. In the event any such notice or demands are so made or
served on the Trustee, the Trustee will promptly forward copies thereof to the
Company.
The Company may also from time to time designate one or more other
offices or agencies (in or outside the Borough of Manhattan, The City of New
York) where the Securities may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
-------- -------
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
The City of New York, for such purposes. The Company will give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
SECTION 10.3. Money for Security Payments to be Held in Trust.
-----------------------------------------------
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of (and premium, if any) or interest
on any of the Securities, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal (and premium, if
any) or interest so becoming due until such sums shall be paid to such Persons
or otherwise disposed of as herein provided and will promptly notify the Trustee
of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, the Company
will, prior to 1:00 p.m. New York City time on each due date of the principal of
(and premium, if any) or interest on any Securities, deposit with a Paying Agent
a sum sufficient to pay the principal (and premium, if any) or interest so
becoming due, such sum to be held as provided by the Trust Indenture Act, and
(unless such Paying Agent is the Trustee) the Company will promptly notify the
Trustee of its action or failure so to act.
<PAGE>
-88-
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will: (i) comply with the provisions of the Trust Indenture
Act applicable to it as Paying Agent and (ii) during the continuance of any
default by the Company (or any other obligor upon the Securities) in the making
of any payment in respect of the Securities, upon the written request of the
Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent as such.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by such Paying Agent; and, upon
such payment by any Paying Agent (other than the Company) to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any) or interest on any Security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
-------- -------
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in The City of New York, notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such publication, any unclaimed balance of such money then
remaining will be repaid to the Company.
SECTION 10.4. Existence.
---------
Subject to Article VIII, the Company will do or cause to be done all
things necessary to preserve and keep in full
<PAGE>
-89-
force and effect its existence, rights (charter and statutory) and material
franchises; provided, however, that the Company shall not be required to
-------- -------
preserve any such right or franchise if the Board of Directors in good faith
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company and that the loss thereof is not
disadvantageous in any material respect to the Holders.
SECTION 10.5. Maintenance of Properties.
-------------------------
The Company will cause all material properties used or useful in the
conduct of its business or the business of any Restricted Subsidiary to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section shall prevent the Company from
- -------- -------
discontinuing the operation or maintenance of any of such material properties if
such discontinuance is desirable in the conduct of its business or the business
of any Restricted Subsidiary and not disadvantageous in any material respect to
the Holders.
SECTION 10.6. Payment of Taxes and Other Claims.
---------------------------------
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any of its Restricted
Subsidiaries or upon the income, profits or property of the Company or any of
its Restricted Subsidiaries, and (2) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of the
Company or any of its Restricted Subsidiaries; provided, however, that the
-------- -------
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings.
SECTION 10.7. Maintenance of Insurance.
------------------------
The Company shall, and shall cause its Restricted Subsidiaries to,
keep at all times all of their properties which are of an insurable nature
insured against loss or damage with insurers believed by the Company to be
responsible to the extent that property of similar character is usually so
insured
<PAGE>
-90-
by corporations similarly situated and owning like properties in accordance with
good business practice. Subject to the terms of any agreement relating to
Indebtedness of the Company, including the Bank Facility, the Company shall, and
shall cause its Restricted Subsidiaries to, use the proceeds from any such
insurance policy to repair, replace or otherwise restore all material properties
to which such proceeds relate, provided, however, that the Company shall not be
-------- -------
required to repair, replace or otherwise restore any such material property if
such inaction is desirable in the conduct of the business of the Company or any
Restricted Subsidiary and not disadvantageous in any material respect to the
Holders.
SECTION 10.8. Limitation on Indebtedness.
--------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or in any manner become directly or indirectly liable, contingently or otherwise
(in each case, to "incur"), for the payment of any Indebtedness (including any
Acquired Indebtedness) other than Permitted Indebtedness unless the ratio of (i)
the aggregate consolidated principal amount of Indebtedness of the Company and
its Restricted Subsidiaries outstanding as reflected on the most recent
available quarterly or annual balance sheet, after giving pro forma effect to
--- -----
the incurrence of such Indebtedness and any other Indebtedness incurred since
such balance sheet date and the receipt and application of the proceeds thereof,
to (ii) Consolidated Cash Flow of the Company and its Restricted Subsidiaries
for the four full fiscal quarters next preceding the incurrence of such
Indebtedness for which consolidated financial statements are available,
determined on a pro forma basis as if any such Indebtedness had been incurred
--- -----
and the proceeds thereof had been applied at the beginning of such four fiscal
quarters, would be less than 6.0 to 1.
SECTION 10.9. Limitation on Restricted Payments.
---------------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other distribution or
payment on or in respect of Capital Stock of the Company or any of its
Restricted Subsidiaries or make any payment to the direct or indirect
holders (in their capacities as such) of Capital Stock of the Company or
any of its Restricted Subsidiaries (other than dividends or distributions
payable solely in Capital Stock of the Company (other than Redeemable
Capital Stock) or in options, warrants or other rights to purchase Capital
Stock of
<PAGE>
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the Company (other than Redeemable Capital Stock)) (other than the
declaration or payment of dividends or other distributions to the extent
declared or paid to the Company or any Restricted Subsidiary),
(2) purchase, redeem, defease or otherwise acquire or retire for value
any Capital Stock (other than Redeemable Capital Stock) of the Company (or
of any Restricted Subsidiaries of the Company if such Capital Stock is
owned by an Affiliate of the Company) or any options, warrants, or other
rights to purchase any such Capital Stock (other than any such securities
owned by a Restricted Subsidiary),
(3) make any principal payments on, or purchase, defease, repurchase,
redeem or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment, scheduled sinking fund payment or other
Stated Maturity, any Redeemable Capital Stock or Subordinated Indebtedness
of the Company (other than any such Redeemable Capital Stock or
Subordinated Indebtedness owned by the Company or a Restricted Subsidiary),
(4) make any Investment (other than any Permitted Investment) in any
Person
(5) (i) make any principal, interest or other payments on or in
respect of Deeply Subordinated Shareholder Loans or (ii) make any
principal, interest (other than interest payments after November 1, 2002)
or other payments on or in respect of the Existing Subordinated Securities
or any Existing Subordinated Note Refinancing Debt
(such payments or Investments described in the preceding clauses (1), (2),
(3),(4) and (5) are collectively referred to as "Restricted Payments"), unless,
at the time of and after giving effect to the proposed Restricted Payment (the
amount of any such Restricted Payment, if other than cash, shall be the Fair
Market Value of the asset(s) proposed to be transferred by the Company or such
Restricted Subsidiary, as the case may be, pursuant to such Restricted Payment),
(A) no Default or Event of Default shall have occurred and be continuing, (B)
immediately prior to and after giving effect to such Restricted Payment, the
Company would be able to incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) and (C) the
<PAGE>
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aggregate amount of all Restricted Payments declared or made from and after the
Issue Date would not exceed the sum of:
(i) the excess of the aggregate Consolidated Cash Flow of the
Company minus the product of 1.5 times the Consolidated Interest Expense of
the Company accrued on a cumulative basis during the period beginning on
the Issue Date and ending on the last day of the fiscal quarter of the
Company immediately preceding the date of such proposed Restricted Payment;
(ii) the aggregate net cash proceeds received by the Company as
capital contributions to the Company after the Issue Date and which
constitute shareholders' equity of the Company in accordance with GAAP;
(iii) the aggregate net cash proceeds received by the Company from
the issuance or sale of Capital Stock (excluding Redeemable Capital Stock)
of the Company to any Person (other than to a Subsidiary of the Company)
after the Issue Date;
(iv) the aggregate net cash proceeds received by the Company from
any Person (other than a Subsidiary of the Company) upon the exercise of
any options, warrants or rights to purchase shares of Capital Stock (other
than Redeemable Capital Stock) of the Company after the Issue Date;
(v) the aggregate net cash proceeds received after the Issue Date
by the Company from any Person (other than a Subsidiary of the Company) for
debt securities that have been converted or exchanged into or for Capital
Stock of the Company (other than Redeemable Capital Stock) (to the extent
such debt securities were originally sold for cash) plus the aggregate
amount of cash received by the Company (other than from a Subsidiary of the
Company) in connection with such conversion or exchange;
(vi) the aggregate net cash proceeds received after the Issue Date
by the Company from the issuance of Deeply Subordinated Shareholder Loans
to a Permitted Holder (other than a Subsidiary of the Company);
(vii) in the case of the disposition or repayment of any Investment
constituting a Restricted Payment after the Issue Date, an amount equal to
the lesser of the return of capital with respect to such Investment and the
initial
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amount of such Investment, in either case, less the cost of the disposition
of such Investment; and
(viii) so long as the Designation thereof was treated as a
Restricted Payment made after the Issue Date, with respect to any
Unrestricted Subsidiary that has been redesignated as a Restricted
Subsidiary after the Issue Date in accordance with Section 10.18 of this
Indenture, the Fair Market Value of the Company's interest in such
Subsidiary calculated in accordance with GAAP, provided that such amount
shall not in any case exceed the Designation Amount with respect to such
Restricted Subsidiary upon its Designation,
minus:
-----
the Designation Amount (measured as of the date of Designation) with
respect to any Subsidiary of the Company which has been designated as an
Unrestricted Subsidiary after the Issue Date in accordance with Section
10.18 of this Indenture.
For purposes of the preceding clause (C)(iv), the value of the
aggregate net proceeds received by the Company upon the issuance of Capital
Stock upon the exercise of options, warrants or rights will be the net cash
proceeds received upon the issuance of such options, warrants or rights plus the
incremental amount received by the Company upon the exercise thereof.
None of the foregoing provisions in this Section 10.9 will prohibit,
so long, in the case of clauses (2) to (5) and (8) below, as there is no Default
or Event of Default continuing, (1) the payment of any dividend or distribution
within 60 days after the date of its declaration, if at the date of declaration
such payment would be permitted by the foregoing paragraph; (2) the redemption,
repurchase or other acquisition or retirement of any shares of any class of
Capital Stock of the Company in exchange for, or out of the net cash proceeds
of, a substantially concurrent issue and sale of other shares of Capital Stock
(other than Redeemable Capital Stock) of the Company to any Person (other than
to a Subsidiary of the Company); provided, however, that such net cash proceeds
-------- -------
are excluded from clause (C) of the second preceding paragraph; (3) any
redemption, repurchase or other acquisition or retirement of Subordinated
Indebtedness by exchange for, or out of the net cash proceeds of, a
substantially concurrent issue and sale of (A) Capital Stock (other than
Redeemable Capital Stock) of the Com-
<PAGE>
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pany to any Person (other than to a Subsidiary of the Company); provided,
--------
however, that any such net cash proceeds are excluded from clause (C) of the
- -------
second preceding paragraph; or (B) Indebtedness of the Company so long as such
Indebtedness is Subordinated Indebtedness which (w) has no Stated Maturity
earlier than the 91st day after the Maturity Date, (x) has an Average Life to
Stated Maturity greater than the remaining Average Life to Stated Maturity of
the Securities and (y) is subordinated to the Securities in the same manner and
to the same extent as the Subordinated Indebtedness so purchased, exchanged,
redeemed, acquired or retired and (z) if the proceeds of such Indebtedness is to
purchase, redeem, acquire or retire all of the Existing Subordinated Notes
("Existing Subordinated Note Refinancing Debt"), such Existing Subordinated Note
Refinance Debt provides for no cash payments of interest prior to November 1,
2002 other than cash payments otherwise permitted by this covenant; (4) any
redemption, repurchase or other acquisition or retirement of Deeply Subordinated
Shareholder Loans by exchange for, or out of the net cash proceeds of, a
substantially concurrent issue and sale of (1) Capital Stock (other than
Redeemable Capital Stock) of the Company to any person (other than a Subsidiary
of the Company) or (2) other Deeply Subordinated Shareholder Loans to any
Permitted Holder; provided, however, that, in either case, such net cash
-------- -------
proceeds are excluded from clause (C) of the preceding paragraph; (5)
Investments constituting Restricted Payments made as a result of the receipt of
non-cash consideration from any Asset Sale made pursuant to and in compliance
with this Indenture; (6) payments to purchase Capital Stock from management or
employees of the Company or any of its Subsidiaries, or their authorized
representatives, upon the happening of an event which provides for payment under
any applicable plan, or upon the death, disability or termination of employment
of such employees, in aggregate amounts under this clause (6) not to exceed
$8,000,000 in any fiscal year of the Company; (7) the payment of pro rata
dividends to holders of Capital Stock of Restricted Subsidiaries; (8) the
payment of dividends on the Existing Preferred in accordance with its terms as
in effect on the Issue Date (or payments in comparable amounts to such dividends
and at comparable times in respect of claims by The News Corporation Limited
("News Corp.") or News Publishing Australia Limited ("NPAL") arising from News
Corp. or NPAL having cured or avoided a default by the Company in respect of the
Existing Preferred or the Company's Wilshire Boulevard lease; provided amounts
--------
contributed to the Company by News Corp. or NPAL for such purpose shall not be
included in the calculation of clause (C) above; (9) the payment of in-kind
interest in respect of Deeply Subordinated Shareholder Loans and in respect of
Existing Subordinated Notes; (10) the repay-
<PAGE>
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ment of the Existing Subordinated Notes contemplated under "Use of Proceeds" in
the Offering Memorandum. Any payments made pursuant to clauses (1), (5) and (7)
of this paragraph shall, without duplication, be taken into account in
calculating the amount of Restricted Payments made from and after the Issue
Date.
SECTION 10.10. Limitation on Preferred Stock of Restricted Subsidiaries.
--------------------------------------------------------
The Company shall not permit any Restricted Subsidiary to issue any
Preferred Stock other than Preferred Stock issued to the Company or a Restricted
Subsidiary. The Company shall not sell, transfer or otherwise dispose of
Preferred Stock issued by a Restricted Subsidiary of the Company or permit a
Restricted Subsidiary to sell, transfer or otherwise dispose of Preferred Stock
issued by a Restricted Subsidiary, other than to the Company or a Restricted
Subsidiary. Notwithstanding the foregoing, nothing in such covenant will
prohibit the ownership of Preferred Stock issued by a Person prior to the time
(A) such Person becomes a Restricted Subsidiary of the Company, (B) such Person
merges with or into a Restricted Subsidiary of the Company or (C) a Restricted
Subsidiary of the Company merges with or into such Person; provided, further,
-------- -------
that such Preferred Stock was not issued or incurred by such Person in
anticipation of a transaction contemplated by subclause (A), (B) or (C) above.
SECTION 10.11. Limitation on Transactions with Affiliates.
------------------------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into any transaction or series of
related transactions (including, without limitation, the sale, transfer,
disposition, purchase, exchange or lease of assets, property or services) with,
or for the benefit of, any of its Affiliates (other than Restricted
Subsidiaries), except (a) on terms that are no less favorable to the Company or
such Restricted Subsidiary, as the case may be, than those which could have been
obtained in a comparable transaction at such time from Persons who are not
Affiliates of the Company, (b) with respect to a transaction or series of
related transactions involving aggregate payments or value equal to or greater
than $25,000,000, the Company shall have delivered an Officers' Certificate to
the Trustee certifying that such transaction or transactions comply with the
preceding clause (a) and that such transaction or transactions have been
approved by a majority of the Disinterested Members
<PAGE>
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of the Board of Directors of the Company and (c) with respect to a transaction
or series of related transactions involving aggregate payments or value equal to
or greater than $50,000,000 (other than agreements whereby the Company or a
Restricted Subsidiary of the Company obtains or grants a license or other rights
to syndicated entertainment programs in the ordinary course of business), the
Company shall have obtained a written opinion from an Independent Financial
Advisor stating that the terms of such transaction or series of transactions are
fair, from a financial point of view, to the Company or the Restricted
Subsidiary involved, as the case may be.
Notwithstanding the foregoing, the restrictions set forth in this
covenant shall not apply to (i) transactions with or among the Company and the
Restricted Subsidiaries, (ii) customary directors' fees, indemnification and
similar arrangements, consulting fees, employee salaries, bonuses or employment
agreements, compensation or employee benefit arrangements and incentive
arrangements with any officer, director or employee of the Company or any
Restricted Subsidiary entered into in the ordinary course of business, (iii) any
dividends made in compliance with Section 10.9 of this Indenture, (iv) Permitted
Investments, (v) loans and advances to officers, directors and employees of the
Company or any Restricted Subsidiary for travel, entertainment, moving and other
relocation expenses, in each case made in the ordinary course of business, (vi)
transactions pursuant to agreements existing on the date of this Indenture or
amendment thereto so long as not disadvantageous to the Holders of Securities,
(vii) Deeply Subordinated Shareholder Loans and loans and advances on the same
terms as the Existing Subordinated Notes or (viii) the incurrence of
intercompany Indebtedness which constitutes Permitted Indebtedness.
SECTION 10.12. Limitations on Liens.
--------------------
The Company shall not, and shall not permit any of its Subsidiaries
to, create, incur, assume or suffer to exist any Liens of any kind against or
upon any of its property or assets, or any proceeds therefrom, unless the
Securities are equally and ratably secured (except that Liens securing
Subordinated Indebtedness shall not be permitted in any circumstances), except
for (a) Liens securing the Securities; (b) Liens securing Indebtedness which is
(i) incurred to refinance Indebtedness which has been secured by a Lien
permitted under this Indenture and (ii) incurred in accordance with the
provisions of this Indenture; provided, however, that such Liens do not extend
-------- -------
to or cover any property or assets of the Company or
<PAGE>
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any of its Restricted Subsidiaries not securing the Indebtedness so refinanced;
and (c) Permitted Liens.
SECTION 10.13. Change of Control.
-----------------
Upon the occurrence of a Change of Control (the "Change of Control
Date"), the Company shall make an Offer to Purchase (a "Change of Control
Offer") on a business day (the "Change of Control Purchase Date") not more than
60 nor less than 30 days following the occurrence of the Change of Control all
of the then Outstanding Securities tendered at a purchase price in cash (the
"Change of Control Purchase Price") equal to 101% of the Accreted Value on the
Change of Control Purchase Date, unless the Change of Control Purchase Date is
on or after the earlier to occur of November 1, 2002 and the Cash Interest
Election Date, in which case such Change of Control Purchase Price shall be
equal to 101% of the aggregate principal amount at maturity thereof, plus
accrued and unpaid interest thereon, if any, to the Change of Control Purchase
Date. The Company shall be required to purchase all Securities tendered into
the Change of Control Offer and not withdrawn. The Change of Control offer is
required to remain open for at least 20 business days and until the close of
business on the Change of Control Purchase Date.
In order to effect such Change of Control Offer, the Company shall,
not later than the 30th day after the Change of Control, mail to each holder of
Securities notice of the Change of Control Offer, which notice shall govern the
terms of the Change of Control Offer and shall state, among other things, the
procedures that holders of Securities must follow to accept the Change of
Control Offer. Prior to mailing a notice of a Change of Control Offer, but in
any event within 30 days following a Change of Control, the Company shall either
permanently repay all outstanding amounts under the Bank Facility and terminate
all commitments of the lenders thereunder or offer to permanently repay in full
all outstanding amounts under the Bank Facility and permanently repay the
Obligations held by each lender who has accepted such offer or obtain the
requisite consents, if any, under the Bank Facility to permit the repurchase of
the Securities required hereby. The failure to mail notice of the Change of
Control Offer when required will nonetheless constitute a Default hereunder.
On the Change of Control Purchase Date, the Company shall (i) accept
for payment Securities or portions thereof tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent money, in immediately
available funds,
<PAGE>
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sufficient to pay the purchase price of all Securities or portions thereof so
tendered and accepted and (iii) deliver to the Trustee the Securities so
accepted together with an Officers' Certificate setting forth the Securities or
portions thereof tendered to and accepted for payment by the Company. The Paying
Agent shall promptly mail or deliver to the Holders of Securities so accepted
payment in an amount equal to the purchase price, and the Trustee shall promptly
authenticate and make available for delivery to such Holders a new Security of
like tenor equal in principal amount at maturity to any unpurchased portion of
the Security surrendered. Any Securities not so accepted shall be promptly
mailed or delivered by the Company to the Holder thereof. The Company shall
publicly announce the results of the Change of Control Offer not later than the
first Business Day following the Change of Control Purchase Date.
The Company shall not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements
applicable to a Change of Control Offer made by the Company and purchases all
Securities validly tendered and not withdrawn under such Change of Control
Offer.
The Company shall comply with Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder, to the extent such laws or
regulations are applicable, in the event that a Change of Control occurs and the
Company is required to purchase Securities as described above.
SECTION 10.14. Disposition of Proceeds of Asset Sales.
--------------------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any Asset Sale unless (a) the Company or such Restricted
Subsidiary, as the case may be, receives consideration at the time of such Asset
Sale at least equal to the Fair Market Value of the shares or assets sold or
otherwise disposed of and (b) at least 75% of such consideration consists of
cash or Cash Equivalents or properties or assets that will be used in the
business of the Company and its Restricted Subsidiaries; provided that the
--------
amount of any liabilities (other than Subordinated Indebtedness or Indebtedness
of a Restricted Subsidiary that would not constitute Restricted Subsidiary
Indebtedness) that are assumed by the transferee of any such assets pursuant to
an agreement that unconditionally releases the Company or such Restricted
Subsidiary, as the case may be, from further liability shall be treated as cash
for purposes of clause (b) above. The Company or the applicable
<PAGE>
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Restricted Subsidiary, as the case may be, shall, at the Company's option, (i)
apply the Net Cash Proceeds from any such Asset Sale within 365 days of the
receipt thereof to repay Indebtedness under the Bank Facility and elect to
permanently reduce the commitments thereunder by the amount of Indebtedness so
repaid, (ii) apply the Net Cash Proceeds from any such Asset Sale within 365
days of the receipt thereof to repay an amount of other Indebtedness (other than
Subordinated Indebtedness) of the Company in an amount not exceeding the Other
Senior Debt Pro Rata Share and, in such case, elect to permanently reduce the
amount of the commitments thereunder by the amount of the Indebtedness so
repaid, (iii) apply the Net Cash Proceeds from any such Asset Sale by the
Company or a Restricted Subsidiary to repay any Restricted Subsidiary
Indebtedness and elect to permanently reduce the commitments thereunder by the
amount of the Indebtedness so repaid and/or (iv) apply the Net Cash Proceeds
from any Asset Sale by the Company or a Restricted Subsidiary, (x) to repay
Indebtedness incurred not more than 90 days before such Asset Sale to purchase,
or (y) to the purchase price for any acquisition consummated not more than 90
days before such Asset Sale of, or (z) within 365 days after such Asset Sale to
an investment in, properties and assets that replace the properties and assets
that were the subject of such Asset Sale or in properties and assets that will
be used in the business of the Company and its Restricted Subsidiaries existing
on the Issue Date or in businesses reasonably related thereto ("Replacement
Assets"). Pending the final application of any such Net Cash Proceeds, the
Company or such Restricted Subsidiary may temporarily reduce Indebtedness under
a revolving credit facility, if any, or otherwise invest such Net Cash Proceeds
in Cash Equivalents. Any Net Cash Proceeds from any Asset Sale that are neither
used to repay, and permanently reduce the commitments under, any Restricted
Subsidiary Indebtedness as set forth in clause (iii) of the second preceding
sentence or invested in Replacement Assets within the 365-day period as set
forth in clause (iii) and (iv) shall constitute "Excess Proceeds." Any Excess
Proceeds not used as set forth in clause (i) or (ii) of the third preceding
sentence shall constitute "Offer Excess Proceeds" subject to disposition as
provided below.
When the aggregate amount of Offer Excess Proceeds equals or exceeds
$15,000,000, the Company shall make an Offer to Purchase (an "Asset Sale
Offer"), from all Holders of the Securities, an aggregate principal amount of
Securities equal to such Offer Excess Proceeds, at a price (the "Asset Sale
Purchase Price") in cash equal to 100% of the Accreted Value on the purchase
date, unless the purchase date is on or after the
<PAGE>
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earlier to occur of November 1, 2002 and the Cash Interest Election Date, in
which case such purchase price shall be equal to 100% of the principal amount at
maturity thereof, plus accrued and unpaid interest, if any, to the purchase
date, and from all Holders of the Company's Senior Notes, 100% of the
outstanding principal amount thereof plus accrued and unpaid interest, if any,
to the purchase date (and at a price in cash for the Senior Notes as provided in
the Senior Notes). To the extent that the aggregate principal amount of
Securities tendered pursuant to an Asset Sale Offer is less than the Offer
Excess Proceeds, the Company may use such deficiency for any purpose not
prohibited hereunder. The Securities shall be purchased by the Company, at the
option of the Holder thereof, in whole or in part in integral multiples of
$1,000 principal amount, on a date that is not earlier than 30 days and not
later than 60 days from the date the notice is given to holders, or such later
date as may be necessary for the Company to comply with the requirements under
the Exchange Act. If the aggregate purchase price of Securities validly tendered
and not withdrawn by holders thereof exceeds the Offer Excess Proceeds,
Securities to be purchased will be selected on a pro rata basis, based on the
Asset Sale Purchase Price. Upon completion of such Asset Sale Offer, the amount
of Excess Proceeds shall be reset to zero.
Notwithstanding the two immediately preceding paragraphs, the Company
and its Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent (i) at least 75% of the
consideration of such Asset Sale constitutes Replacement Assets, cash or Cash
Equivalents (including obligations deemed to be cash under this covenant) and
(ii) such Asset Sale is for Fair Market Value; provided that (i) any
--------
consideration constituting (or deemed to constitute) Cash Equivalents received
by the Company or any of its Restricted Subsidiaries in connection with any
Asset Sale permitted to be consummated under this paragraph shall constitute Net
Cash Proceeds subject to the provisions of the two preceding paragraphs and (ii)
to the extent such replacement Assets include any Capital Stock of any Person,
such Person becomes a Restricted Subsidiary.
On the Asset Sale Offer Purchase Date, the Company shall (i) accept
for payment (subject to proration as described in the Offer to Purchase)
Securities or portions thereof tendered pursuant to the Asset Sale Offer, (ii)
deposit with the Paying Agent money, in immediately available funds, sufficient
to pay the purchase price of all Securities or portions thereof so tendered and
accepted and (iii) deliver to the Trustee the
<PAGE>
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Securities so accepted together with an Officers' Certificate setting forth the
Securities or portions thereof tendered to and accepted for payment by the
Company. The Paying Agent shall promptly mail or deliver to the Holders of
Securities so accepted payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and make available for delivery to such
Holders a new Security of like tenor equal in principal amount at maturity to
any unpurchased portion of the Security surrendered. Any Securities not so
accepted shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company shall publicly announce the results of the Asset Sale Offer
not later than the first Business Day following the Asset Sale Offer Purchase
Date.
The Company shall not, and shall not permit any Restricted Subsidiary
of the Company to, create or permit to exist or become effective any restriction
(other than restrictions existing under Indebtedness outstanding on the date of
this Indenture and in the Bank Facility as of the date of its execution) that
would materially impair the ability of the Company to make an Asset Sale Offer
or, if such an offer is made, to pay for the Securities tendered for purchase.
The Company shall comply with Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder, to the extent such laws
and regulations are applicable, in the event that an Asset Sale occurs and the
Company is required to purchase Securities as described above.
SECTION 10.15. Limitation on Dividends and Other Payment Restrictions Affecting
----------------------------------------------------------------
Restricted Subsidiaries.
- ------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to
(1) pay dividends, in cash or otherwise, or make any other
distributions on or in respect of its Capital Stock or any other interest
or participation in, or measured by, its profits,
(2) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary of the Company,
<PAGE>
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(3) make loans or advances to the Company or any other Restricted
Subsidiary of the Company,
(4) transfer any of its properties or assets to the Company or any
other Restricted Subsidiary of the Company or
(5) guarantee any Indebtedness of the Company or any other Restricted
Subsidiary of the Company,
except for such encumbrances or restrictions existing under or by reason of
(A) applicable law,
(B) customary non-subletting, non-assignment or other non-transfer
provisions of any license, contract, or any lease governing a leasehold
interest of the Company or any Restricted Subsidiary of the Company,
(C) customary restrictions on transfers of property subject to a Lien
permitted under the Indenture,
(D) the Bank Facility, but only if the Bank Facility permits payments
to the Company by its Restricted Subsidiaries in amounts sufficient to make
interest payments on the Securities unless there is a continuing default
under the Bank Facility or the making of any such interest payment would
(with or without the giving of notice or passage of time or both) result in
a default under the Bank Facility,
(E) any agreement or other instrument of a Person acquired by the
Company or any Restricted Subsidiary of the Company in existence at the
time of such acquisition (but not created in contemplation thereof), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person or any of its
Subsidiaries, or the property or assets of the Person or any of its
Subsidiaries, so acquired,
(F) an agreement entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of a Restricted Subsidiary
or an agreement entered into for the sale of specified assets (in either
case, so long as such encumbrance or restriction, by its terms, terminates
on the earlier of the termination of such
<PAGE>
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agreement or the consummation of such agreement and so long as such
restriction applies only to the Capital Stock or assets to be sold),
(G) any encumbrance or restriction in effect on the Issue Date, and
(H) any agreement that amends, extends, refinances, renews or replaces
any agreement described in the foregoing clauses, provided that the terms
--------
and conditions of any such agreement are not materially less favorable to
the Holders of the Securities than those under or pursuant to the agreement
amended, extended, refinanced, renewed or replaced.
SECTION 10.16. Limitations on Sale-Leaseback Transactions.
------------------------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any Sale-Leaseback Transaction with respect to any
property of the Company or any of its Restricted Subsidiaries. Notwithstanding
the foregoing, the Company and its Restricted Subsidiaries may enter into Sale-
Leaseback Transactions, provided, that (a) the Attributable Value of such Sale-
--------
Leaseback Transaction shall be deemed to be Indebtedness of the Company or a
Restricted Subsidiary and (b) after giving pro forma effect to any such Sale-
--- -----
Leaseback Transaction and the foregoing clause (a), the Company or a Restricted
Subsidiary would be able to incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to Section 10.8 of this Indenture.
SECTION 10.17. Limitations on Designation of Unrestricted Subsidiaries.
-------------------------------------------------------
(a) The Company may designate after the Issue Date any Restricted
Subsidiary as an "Unrestricted Subsidiary" under this Indenture (a
"Designation") only if:
(i) no Default shall have occurred and be continuing at the time of
or after giving effect to such Designation;
(ii) the Company would be permitted to make an Investment (other
than a Permitted Investment) at the time of Designation (assuming the
effectiveness of such Designation) pursuant to the first paragraph of
Section 10.9 in an amount (the "Designation Amount") equal to the Fair
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Market Value of the Company's interest in such Subsidiary on such date
calculated in accordance with GAAP; and
(iii) the Company would be permitted under the Indenture to incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to Section 10.8 at the time of such Designation (assuming the
effectiveness of such Designation).
In the event of any such Designation, the Company shall be deemed to
have made an Investment constituting a Restricted Payment pursuant to Section
10.9 for all purposes of this Indenture in the Designation Amount. Each of the
Subsidiaries conducting the business identified as assets held for disposition
or discontinuance in the Offering Memorandum shall constitute "Unrestricted
Subsidiaries" on the Issue Date.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, at any time (x) provide credit support other than guarantees or
pledges under the Bank Facility for or subject any of its property or assets
(other than the Capital Stock of any Unrestricted Subsidiary) to the
satisfaction of, any Indebtedness of any Unrestricted Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness), (y) be
directly or indirectly liable for any Indebtedness of any Unrestricted
Subsidiary or (z) be directly or indirectly liable for any Indebtedness which
provides that the holder thereof may (upon notice, lapse of time or both)
declare a default thereon or cause the payment thereof to be accelerated or
payable prior to its final scheduled maturity upon the occurrence of a default
with respect to any Indebtedness of any Unrestricted Subsidiary (including any
right to take enforcement action against such Unrestricted Subsidiary), except
any non-recourse guarantee given solely to support the pledge by the Company or
any Restricted Subsidiary of the Capital Stock of an Unrestricted Subsidiary.
No Unrestricted Subsidiary shall at any time guarantee or otherwise provide
credit support for any obligation of the Company or any Restricted Subsidiary,
except as provided in the Bank Facility. All Subsidiaries of Unrestricted
Subsidiaries shall automatically be deemed to be Unrestricted Subsidiaries.
(b) The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") if:
(i) no Default shall have occurred and be continuing at the time of
and after giving effect to such Revocation;
<PAGE>
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(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time by a Restricted Subsidiary, have been permitted to be incurred
for all purposes of this Indenture; and
(iii) any transaction (or series of related transactions) between
such Subsidiary and any of its Affiliates that occurred on or after the
Issue Date while such Subsidiary was an Unrestricted Subsidiary would be
permitted by Section 10.11 as if such transaction (or series of related
transactions) had occurred at the time of such Revocation.
(c) In the event the Company or a Restricted Subsidiary makes any
Investment in any Person which was not previously a Subsidiary and such Person
thereby becomes a Subsidiary, such Person shall automatically be an Unrestricted
Subsidiary and the Company may designate such Subsidiary as a Restricted
Subsidiary only if it meets the foregoing requirements of clauses (i) and (ii)
of paragraph (b).
(d) All Designations and Revocations must be evidenced by Board
Resolutions of the Company delivered to the Trustee certifying compliance with
the foregoing provisions.
SECTION 10.18. Provision of Financial Information.
----------------------------------
For as long as the Securities are outstanding whether or not the
Company is subject to Section 13(a) or 15(d) of the Exchange Act, or any
successor provision thereto, the Company shall file with the Commission the
annual reports, quarterly reports and other documents which the Company would
have been required to file with the Commission (if permitted by Commission
practice and applicable law and regulations) pursuant to such Section 13(a) or
15(d) or any successor provision thereto if the Company were subject thereto,
such documents to be filed with the Commission on or prior to the respective
dates (the "Required Filing Dates") by which the Company would have been
required to file them. The Company shall also in any event (a) within 15 days
after each Required Filing Date (i) transmit, or cause to be transmitted, by
mail to all Holders, as their names and addresses appear in the Security
Register, without cost to such Holders, and (ii) file with the Trustee copies of
the annual reports, quarterly reports and other documents which the Company is
required to file with the Commission pursuant to the preceding sentence or, if
such filing is not so permitted, information of a similar nature and (b) if
filing such documents
<PAGE>
-106-
by the Company with the Commission is not permitted by Commission practice and
applicable law and regulations, promptly upon written request supply copies of
such documents to any prospective Holder. In addition, for so long as any
Securities remain outstanding, the Company will furnish to the Holders of
Securities and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act, and, to any beneficial Holder of Securities, if not
obtainable from the Commission, information of the type that would be filed with
the Commission pursuant to the foregoing provisions upon the request of any such
Holder.
SECTION 10.19. Statement by Officers as to Default; Compliance Certificates.
------------------------------------------------------------
(a) The Company shall deliver to the Trustee, prior to May 1 in each
year, an Officers' Certificate, stating whether or not to the best knowledge of
the signers thereof the Company is in default in the performance and observance
of any of the terms, provisions and conditions of this Indenture (without regard
to any period of grace or requirement of notice provided hereunder) and if the
Company shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge.
(b) The Company shall deliver to the Trustee, as soon as possible and
in any event within five days after the Company becomes aware of the occurrence
of a Default or an Event of Default, an Officers' Certificate setting forth the
details of such Default or Event of Default, and the action which the Company
proposes to take with respect thereto.
SECTION 10.20. Waiver of Certain Covenants.
---------------------------
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Section 8.1, provided pursuant to Section
9.1(2) and set forth in Sections 10.4 to 10.12 and 10.15 to 10.17, inclusive, if
before the time for such compliance the Holders of at least a majority in
principal amount at maturity of the Outstanding Securities shall, by Act of such
Holders, either waive such compliance in such instance or generally waive
compliance with such covenant or condition, but no such waiver shall extend to
or affect such covenant or condition except to the extent so expressly waived,
and, until such waiver shall become effective, the obligations of the Company
and the duties of the Trustee in respect of any such covenant or condition shall
remain in full force and ef-
<PAGE>
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fect; provided, however, with respect to an Offer as to which an Offer to
-------- -------
Purchase has been mailed, no such waiver may be made or shall be effective
against any Holder tendering Securities pursuant to such Offer, and the Company
may not omit to comply with the terms of such Offer as to such Holder.
Notwithstanding anything set forth in this Indenture to the contrary,
if no Default shall have occurred and be continuing on any day when the
Securities are rated by both Moody's and S&P in one of its generic rating
categories which signifies investment grade (which at the date of this Indenture
are the four highest rating categories (within which there are sub-categories
indicating relative standing)), the limitations set forth in Sections 10.4 to
10.11 and 10.14 to 10.17, inclusive and clause (c) in Section 8.1 shall no
longer be applicable.
SECTION 10.21. Calculation of Original Issue Discount.
--------------------------------------
The Company shall file with the Trustee promptly at the end of each
calendar year (i) a written notice specifying the amount of original issue
discount (including daily rates and accrual periods) accrued on Outstanding
Securities as of the end of such year and (ii) such other specific information
relating to such original issue discount as may then be relevant under the
Internal Revenue Code of 1986, as amended from time to time.
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.1. Right of Redemption.
-------------------
The Securities may be redeemed at the election of the Company, in the
amounts, at the times, at the Redemption Prices (together with any applicable
accrued and unpaid interest to the Redemption Date), and subject to the
conditions specified in the form of Security hereinafter set forth.
SECTION 11.2. Applicability of Article.
------------------------
Redemption of Securities at the election of the Company, as permitted
by this Indenture and the provisions of the Securities, shall be made in
accordance with such provisions and this Article.
<PAGE>
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SECTION 11.3. Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Securities pursuant to
Section 11.1, shall be evidenced by a Board Resolution. In the event of any
redemption at the election of the Company pursuant to Section 11.1, the Company
shall notify the Trustee, in case of a redemption of less than all the
Securities, at least 60 days, and in the case of a redemption of all the
Securities, at least 40 days, prior to the Redemption Date fixed by the Company
(in each case, unless a shorter notice shall be satisfactory to the Trustee)of
such Redemption Date and of the principal amount at maturity of Securities to be
redeemed.
SECTION 11.4. Selection by Trustee of Securities to Be Redeemed.
-------------------------------------------------
In the event that less than all of the Securities are to be redeemed
at any time, selection of such Securities for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which the Securities are listed or, if the Securities are
not then listed on a national securities exchange, on a pro rata basis, by lot
--- ----
or by such method as the Trustee shall deem fair and appropriate; provided,
--------
however, that Securities shall only be redeemable in amounts of $1,000 principal
- -------
amount at maturity or an integral multiple of $1,000.
The Trustee shall promptly notify the Company and each Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected for partial redemption, the principal amount at
maturity thereof to be redeemed.
For all purposes of this Indenture and of the Securities, unless the
context otherwise requires, all provisions relating to the redemption of
Securities shall relate, in the case of any Securities redeemed or to be
redeemed only in part, to the portion of the principal amount at maturity of
such Securities which has been or is to be redeemed.
SECTION 11.5. Notice of Redemption.
--------------------
Notice of redemption shall be given by first class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
<PAGE>
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All notices of redemption shall identify the Securities to be redeemed
(including, if used, CUSIP or CINS numbers) and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities are to be redeemed,
the identification (and, in the case of partial redemption, the principal
amount at maturity) of the particular Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and that interest
thereon will cease to accrue on and after such Redemption Date,
(5) the place or places where such Securities are to be surrendered
for payment of the Redemption Price, and
(6) if the redemption is being made pursuant to the provisions of the
Securities regarding a Public Equity Offering or a sale of Qualified Equity
Interests of the Company to Strategic Equity Investors, a brief description
of the transaction or transactions giving rise to such redemption, the
nature and amount of Qualified Equity Interests sold by the Company thereto
in such transaction or transactions, the aggregate purchase price thereof
and the net cash proceeds therefrom available for such redemption, the date
or dates on which such transaction or transactions were completed and the
percentage of the aggregate principal amount at maturity of Outstanding
Securities being redeemed.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall be irrevocable.
SECTION 11.6. Deposit of Redemption Price.
---------------------------
Prior to 1:00 p.m., New York City time, on any Redemption Date, the
Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 10.3) an amount of money sufficient to pay the Redemption
Price of, and (except if the Redemption Date shall be an Inter-
<PAGE>
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est Payment Date) any applicable accrued interest on, all the Securities which
are to be redeemed on that date.
SECTION 11.7. Securities Payable on Redemption Date.
-------------------------------------
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and any applicable
accrued interest) such Securities shall not bear interest. Upon surrender of
any such Security for redemption in accordance with said notice, such Security
shall be paid by the Company at the Redemption Price, together with any
applicable accrued and unpaid interest to the Redemption Date; provided,
--------
however, that installments of interest whose Stated Maturity is on or prior to
- -------
the Redemption Date shall be payable to the Holders of such Securities, or one
or more predecessor securities, registered as such at the close of business on
the relevant Record Dates according to their terms and the provisions of Section
3.7.
If any Security called for redemption in accordance with the election
of the Company made pursuant to Section 11.1 shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
bear interest from the Redemption Date at the rate provided by the Security.
SECTION 11.8. Securities Redeemed in Part.
---------------------------
Any Security which is to be redeemed only in part shall be surrendered
at an office or agency of the Company designated for that purpose pursuant to
Section 10.2 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney duly authorized
in writing), and the Company and shall execute, and the Trustee shall
authenticate and make available for delivery to the Holder of such Security
without service charge, a new Security or Securities, of any authorized
denomination as requested by such Holder, in aggregate principal amount at
maturity equal to and in exchange for the unredeemed portion of the principal
amount at maturity of the Security so surrendered.
<PAGE>
-111-
ARTICLE XII
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 12.1. Company's Option to Effect Defeasance or Covenant Defeasance.
-------------------------------------------------------------
The Company may elect, at its option at any time, to have Section 12.2
or Section 12.3 applied to the Outstanding Securities (as a whole and not in
part) upon compliance with the conditions set forth below in this Article. Any
such election shall be evidenced by a Board Resolution.
SECTION 12.2. Defeasance and Discharge.
------------------------
Upon the Company's exercise of its option to have this Section applied
to the Outstanding Securities (as a whole and not in part), the Company shall be
deemed to have been discharged from its obligations with respect to such
Securities as provided in this Section on and after the date the conditions set
forth in Section 12.4 are satisfied (hereinafter called "Defeasance"). For this
purpose, such Defeasance means that the Company shall be deemed to have paid and
discharged the entire Indebtedness represented by such Securities and to have
satisfied all its other obligations under such Securities and this Indenture
insofar as such Securities are concerned (and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same), subject to
the following which shall survive until otherwise terminated or discharged
hereunder: (1) the rights of Holders of Outstanding Securities to receive,
solely from the trust fund described in Section 12.4 and as more fully set forth
in such Section, payments in respect of the principal of, premium, if any, and
interest on such Securities when payments are due, (2) the Company's obligations
with respect to such Securities under Sections 3.4, 3.5, 3.6, 10.2 and 10.3, (3)
the rights, powers, trusts, duties and immunities of the Trustee hereunder and
(4) this Article. Subject to compliance with this Article, the Company may
exercise its option to have this Section applied to the Outstanding Securities
(as a whole and not in part) notwithstanding the prior exercise of its option to
have Section 12.3 applied to such Securities.
SECTION 12.3. Covenant Defeasance.
-------------------
Upon the Company's exercise of its option to have this Section applied
to the Outstanding Securities (as a whole
<PAGE>
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and not in part), (i) the Company shall be released from its obligations under
Section 8.1(3), Sections 10.5 through 10.19, inclusive, and any covenant
provided pursuant to Section 9.1(2) and (ii) the occurrence of any event
specified in Section 5.1(3) (with respect to Section 8.1(3) and any of Sections
10.5 through 10.18, inclusive, and any such covenants provided pursuant to
Section 9.1(2)), shall be deemed not to be or result in an Event of Default, in
each case with respect to such Securities as provided in this Section on and
after the date the conditions set forth in Section 12.4 are satisfied
(hereinafter called "Covenant Defeasance"). For this purpose, such Covenant
Defeasance means that, with respect to such Securities, the Company may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such specified Section (to the extent so specified
in the case of Section 5.1(3)), whether directly or indirectly, by reason of any
reference elsewhere herein to any such Section or by reason of any reference in
any such Section to any other provision herein or in any other document, but the
remainder of this Indenture and such Securities shall be unaffected thereby.
SECTION 12.4. Conditions to Defeasance or Covenant Defeasance.
------------------------------------------------
The following shall be the conditions to the application of Section
12.2 or Section 12.3 to the Outstanding Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee which satisfies the
requirements contemplated by Section 6.9 and agrees to comply with the
provisions of this Article applicable to it) as trust funds in trust for
the purpose of making the following payments, specifically pledged as
security for, and dedicated solely to, the benefits of the Holders of such
Securities, (A) money in an amount, or (B) U.S. Government obligations
which through the scheduled payment of principal and interest in respect
thereof in accordance with their terms will provide, not later than one day
before the due date of any payment, money in an amount, or (C) a
combination thereof, in each case sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge, and which shall be applied by the Trustee (or any such other
qualifying trustee) to pay and discharge, the principal of, premium, if
any, and any installment of interest on such Securities on
<PAGE>
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the respective Stated Maturities thereof, in accordance with the terms of
this Indenture and such Securities. As used herein, "U.S. Government
Obligation" means (x) any security which is (i) a direct obligation of the
United States of America for the payment of which the full faith and credit
of the United States of America is pledged or (ii) an obligation of a
Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the
United States of America, which, in either case (i) or (ii), is not
callable or redeemable at the option of the issuer thereof, and (y) any
depositary receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities Act) as custodian with respect to any U.S. Government Obligation
which is specified in Clause (x) above and held by such bank for the
account of the holder of such depositary receipt, or with respect to any
specific payment of principal of or interest on any U.S. Government
Obligation which is so specified and held, provided that (except as
--------
required by law) such custodian is not authorized to make any deduction
from the amount payable to the holder of such depositary receipt from any
amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal or interest evidenced by
such depositary receipt.
(2) In the event of an election to have Section 12.2 apply to the
Outstanding Securities, the Company shall have delivered to the Trustee an
Opinion of Counsel stating that (A) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or (B) since
the date of this instrument, there has been a change in the applicable
Federal income tax law, in either case to the effect that, and based
thereon such opinion shall confirm that, the Holders of such Securities
will not recognize gain or loss for Federal income tax purposes as a result
of the deposit, Defeasance and discharge to be effected with respect to
such Securities and will be subject to Federal income tax on the same
amount, in the same manner and at the same times as would be the case if
such deposit, Defeasance and discharge were not to occur.
(3) In the event of an election to have Section 12.3 apply to the
Outstanding Securities, the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that the Holders of such Securities will
not recognize gain or loss for Federal income tax purposes as a re-
<PAGE>
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sult of the deposit and Covenant Defeasance to be effected with respect to
such Securities and will be subject to Federal income tax on the same
amount, in the same manner and at the same times as would be the case if
such deposit and Covenant Defeasance were not to occur.
(4) No Default or Event of Default with respect to the Outstanding
Securities shall have occurred and be continuing at the time of such
deposit.
(5) Such Defeasance or Covenant Defeasance shall not cause the
Trustee to have a conflicting interest with respect to any securities of
the Company.
(6) Such Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any other agreement
or instrument to which the Company or any Subsidiary is a party or by which
it is bound.
(7) The Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that (A) the trust funds will not be subject to any
rights of holders of Indebtedness, including, without limitation, those
arising under this Indenture, after the 121st day following the deposit and
(B) after the 121st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally.
(8) The Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of the Securities over the other creditors
of the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others.
(9) No event or condition shall exist that would prevent the Company
from making payments of the principal of, premium, if any, and interest on
the Securities on the date of such deposit or at any time ending on the
121st day after the date of such deposit.
(10) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent under this Indenture to either Defeasance or Covenant Defeasance,
as the case may be, have been complied with.
<PAGE>
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SECTION 12.5. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Miscellaneous Provisions.
--------------------------------------------------------------
Subject to the provisions of the last paragraph of Section 10.3, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee or other qualifying trustee (solely for purposes of this
Section and Section 12.6, the Trustee and any such other trustee are referred to
collectively as the "Trustee") pursuant to Section 12.4 in respect of the
Outstanding Securities shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any such Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Securities, of all sums due and to become due thereon in respect of
principal and any premium and interest, but money so held in trust need not be
segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 12.4 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of Outstanding Securities.
Anything in this Article to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in Section 12.4
which, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, are in excess of the amount thereof which would then be required to be
deposited to effect the Defeasance or Covenant Defeasance, as the case may be,
with respect to the Outstanding Securities.
SECTION 12.6. Reinstatement.
-------------
If the Trustee or the Paying Agent is unable to apply any money in
accordance with this Article with respect to any Securities by reason of any
order or judgment of any court or governmental authority enjoining, restraining,
or otherwise prohibiting such application, then the obligations under this
Indenture and such Securities from which the Company has been discharged or
released pursuant to Section 12.2 or 12.3 shall
<PAGE>
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be revived and reinstated (commencing with the date such order or judgment
becomes final and binding and not subject to further appeal) as though no
deposit had occurred pursuant to this Article with respect to such Securities,
until such time as the Trustee or Paying Agent is permitted to apply all money
held in trust pursuant to Section 12.5 with respect to such Securities in
accordance with this Article; provided, however, that if the Company makes any
-------- -------
payment of principal of or any premium or interest on any such Security
following such reinstatement of its obligations, the Company shall be subrogated
to the rights (if any) of the Holders of such Securities to receive such payment
from the money so held in trust. No action taken or omitted to be taken by the
Company, or any Subsidiary of the Company subsequent to compliance with the
provisions of Section 12.4 hereof and prior to any order or judgment of a court
or governmental authority described in the immediately preceding sentence shall
cause an Event of Default under this Indenture (other than under Section 5.1(1)
or 5.1(2) hereof), unless such order or judgment was obtained by or on behalf
of, or with the cooperation of, the Company, or a Subsidiary of the Company.
<PAGE>
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed and attested as of the day and year first above written.
FOX KIDS WORLDWIDE, INC.
By: /s/ Mel Woods
_____________________________________
Name: Mel Woods
Title: President
Attest:
/s/ William Josey
______________________________
Name:
Title:
THE BANK OF NEW YORK
as Trustee
By: /s/ Mary La Gumina
_____________________________________
Name: Mary La Gumina
Title: Assistant Vice President
<PAGE>
EXHIBIT A-1
[FORM OF SERIES A SECURITY]
---------------------------
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN
AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S, (2) AGREES THAT
IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF
TIME AS PERMITTED BY RULE 144(K) UNDER THE SECURITIES ACT OR ANY SUCCESSOR
PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF
ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY OR ANY PREDECESSOR OF
THIS SECURITY AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE
LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES TO NON-US PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING
OF REGULATION S UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3)
AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY,
THE TRUSTEE, THE TRANSFER AGENT AND THE REGISTRAR SHALL HAVE THE RIGHT PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE
THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SAT-
A-1-1
<PAGE>
-2-
ISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO
REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE
OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.
THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
A-1-2
<PAGE>
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FOX KIDS WORLDWIDE, INC.
10 1/4% Senior Discount Note due 2007, Series A
No. $__________
CUSIP NO. 351383AB0-144A
U34599AB3-Reg S
Fox Kids Worldwide, Inc., a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company," which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to Cede & Co. or registered assigns, the
principal sum of Dollars (or, if the Cash Interest Election
has been made, the Accreted Value of this Security as of the Cash Interest
Election Date) on November 1, 2007 and to pay cash interest thereon semi-
annually on May 1 and November 1 in each year, commencing on the earlier of May
1, 2003 and the May 1 or November 1 immediately after the Cash Interest Election
Date (if any) at the rate of 10 1/4% per annum, until the principal hereof is
paid or duly provided for, provided that any principal and premium, and any such
--------
installment of interest, which is overdue shall bear interest at the rate of 10
1/4% per annum (to the extent that the payment of such interest shall be legally
enforceable), from the dates such amounts are due until they are paid or duly
provided for. Cash interest on the Securities will not accrue until the earlier
of the Cash Interest Election Date or November 1, 2002. The interest so payable
and punctually paid or duly provided for, on any Interest Payment Date will, as
provided in such Indenture, be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at the close of business
on the Regular Record Date for such interest, which shall be the April 15 or
October 15 (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date. Any such interest not so punctually paid or duly
provided for will forthwith cease to be payable to the Holder on such Regular
Record Date and may either be paid to the Person in whose name this Security (or
one or more Predecessor Securities) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to be fixed by
the Trustee, notice whereof shall be given to Holders of securities not less
than 10 days prior to such Special Record Date, or be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on
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which the Securities may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan, The City of New York, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that, at the
-------- -------
option of the Company, payment of interest may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed and attested.
FOX KIDS WORLDWIDE, INC.
By:_________________________________
Name:
Title:
Attest:
________________________
Name:
Title:
Trustee's Certificate of Authentication
- ---------------------------------------
This is one of the Securities referred to in the within mentioned
Indenture.
The Bank of New York,
as Trustee
Dated: By:_________________________________
Authorized Signatory
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Form of Reverse of Security
---------------------------
This Security is one of a duly authorized issue of Securities of the
Company designated as 10 1/4% Senior Discount Notes due 2007, Series A (herein
called the "Initial Securities"), limited in aggregate principal amount at
maturity to $618,670,000 issued and to be issued under an Indenture, dated as of
October 28, 1997 (herein called the "Indenture," which term shall have the
meaning assigned to it in such instrument), among the Company, and The Bank of
New York, as Trustee (herein called the "Trustee," which term includes any
successor trustee under the Indenture), and reference is hereby made to the
Indenture for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Trustee and the Holders of
the Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. The Securities include the Initial Securities, the
Private Exchange Securities and the Exchange Securities, issued in exchange for
the Initial Securities pursuant to the Registration Rights Agreement. The
Initial Securities, the Private Exchange Securities and the Exchange Securities
are treated as a single class of securities under the Indenture.
The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. (S)(S) 7aaa - 77bbbb (the "TIA")), as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein, the Securities are
subject to all such terms, and Holders of Securities are referred to the
Indenture and the TIA for a statement of such terms.
This Security is redeemable at the option of the Company, in whole or
in part, at any time on or after November 1, 2002, at the Redemption Prices
(expressed as percentages of principal amount at maturity) set forth below, plus
accrued and unpaid interest, if any, to the Redemption Date, if redeemed during
the 12-month period beginning on November 1 of the years indicated below:
Redemption
Year Price
---- ----------
2002.............................. 105.125%
2003.............................. 103.417%
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2004.............................. 101.708%
2005 and thereafter............... 100.000%
In addition, at any time, or from time to time, on or prior to,
November 1, 2000, the Company may, at its option, use the net cash proceeds of
(a) one or more Public Equity offerings or (b) sales of Qualified Equity
Interests of the Company to Strategic Equity Investors resulting in gross cash
proceeds to the Company of at least $100,000,000 in the aggregate to redeem up
to 35% of the originally issued principal amount at maturity of the Securities,
at a redemption price equal to 110.25% of the Accreted Value thereof or, if a
Cash Interest election has been made, 110.25% of the principal amount at
maturity thereof plus accrued and unpaid interest, if any, to the Redemption
Date; provided that at least 65% of the originally issued principal amount at
--------
maturity of Securities remains outstanding immediately after the occurrence of
such redemption. In order to effect the foregoing redemption with the proceeds
of any Public Equity Offering or sale of Qualified Equity Interests to Strategic
Equity Investors, the Company shall send the redemption notice not later than 60
days after the consummation of such Public Equity Offering or sale of Qualified
Equity Interests to Strategic Equity Investors.
The Securities are not subject to any sinking fund.
The Indenture provides that the Company is obligated (a) upon the
occurrence of a Change in Control, to make an offer to purchase all outstanding
Securities at a purchase price of 101% of the Accreted Value on the Change of
Control Purchase Date, unless the Change of Control Purchase Date is on or after
the earlier to occur of November 1, 2002 and the Cash Interest Election Date, in
which case such purchase price shall be equal to 101% of the aggregate principal
amount at maturity thereof, plus accrued and unpaid interest, if any, to the
date of purchase and (b) to make an offer to purchase Securities with a portion
of the net cash proceeds of certain sales or other dispositions of assets at a
purchase price of 100% of the Accreted Value on the Purchase Date, unless the
Purchase Date is on or after the earlier to occur of November 1, 2002 and the
Cash Interest Election Date, in which case such purchase price shall be equal to
100% of the principal amount at maturity thereof plus accrued and unpaid
interest, if any, to the date of purchase.
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In the event of redemption or purchase of this Security in part only
pursuant to a Change of Control Offer or an Asset Sale Offer or a Deposit Offer,
a new Security or Securities for the unredeemed or unpurchased portion hereof
will be issued in the name of the Holder hereof upon the cancellation hereof.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Security or certain restrictive covenants and Events
of Default with respect to this Security, in each case upon compliance with
certain conditions set forth in the Indenture.
If an Event of Default shall occur and be continuing, there may be
declared due and payable the Default Amount on all of the outstanding
Securities, in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount at maturity of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount at maturity at Stated
Maturity of the Securities at the time Outstanding, on behalf of the Holders of
all the Securities, to waive compliance by the Company with certain provisions
of the Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Holder of this Security shall
be conclusive and binding upon such Holder and upon all future Holders of this
Security and of any Security issued upon the registration of transfer hereof or
in exchange herefor or in lieu hereof, whether or not notation of such consent
or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities, the Holders of not less
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than 25% in principal amount at maturity of the Securities at the time
Outstanding shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default as Trustee and offered the
Trustee reasonable indemnity and the Trustee shall not have received from the
Holders of a majority in principal amount at maturity of Securities at the time
outstanding a direction inconsistent with such request, and shall have failed to
institute any such proceeding for 15 days after receipt of such notice, request
and offer of indemnity. The foregoing shall not apply to certain suits described
in the Indenture, including any suit instituted by the Holder of this Security
for the enforcement of any payment of principal hereof or any premium or
interest hereon on or after the respective due dates expressed herein (or, in
the case of redemption, on or after the Redemption Date or, in the case of any
purchase of this Security required to be made pursuant to a Change of Control
Offer or an Asset Sale Offer or a Deposit Offer, on or after the relevant
purchase date).
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Security Registrar duly executed by,
the Holder hereof or his attorney duly authorized in writing, and thereupon one
or more new Securities, of authorized denominations and for the same aggregate
principal amount at maturity, will be issued to the designated transferee or
transferees.
This Security is issuable only in registered form without coupons in
denominations of $1,000 principal amount at maturity and any integral multiple
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Securities are exchangeable for a like aggregate principal
amount at maturity of Securities of like tenor of a different
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authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company, or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
Pursuant to the Registration Rights Agreement by and among the
Company, and the Initial Purchasers, the Company will be obligated to consummate
an exchange offer pursuant to which the Holder of this Security shall have the
right to exchange this Security for 10 1/4% Senior Discount Notes due 2007,
Series B, of the Company (herein called the "Exchange Notes"), which have been
registered under the Securities Act, in like principal amount at maturity and
having identical terms as the Initial Securities (other than as set forth in
this paragraph). The Holders of Initial Securities shall be entitled to receive
certain additional interest payments in the event such exchange offer is not
consummated and upon certain other conditions, all pursuant to and in accordance
with the terms of the Registration Rights Agreement.
Interest on this Security shall be computed on the basis of a 360-day
year of twelve 30-day months.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
The Indenture and this Security shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflicts of laws principles thereof.
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ASSIGNMENT FORM
If you, the Holder, want to assign this Security, fill in the form below and
have your signature guaranteed:
I (or we) assign and transfer this Security to
________________________________________________________________________________
(Insert assignee's social security or tax ID number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code) and irrevocably appoint
________________________________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for such agent.
In connection with any transfer of this Security occurring prior to
the date which is the earlier of (i) the date of the declaration by the
Commission of the effectiveness of a registration settlement under the
Securities Act of 1933, as amended (the "Securities Act"), covering resales of
--------------
this Security (which effectiveness shall not have been suspended or terminated
at the date of the transfer) and (ii) the date two years (or such shorter period
of time as permitted by Rule 144(k) under the Securities Act or any successor
provision thereunder) after the later of the original issuance date appearing on
the face of this Security (or any predecessor thereto) or the last date on which
the Company or any affiliate of the Company was the owner of this Security (or
any predecessor thereto), the undersigned confirms that it has not utilized any
general solicitation or general advertising in connection with the transfer and
that:
[Check One]
----------
[_] (a) this Security is being transferred in compliance with the
exemption from registration under the Securities Act provided by
Rule 144A thereunder.
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[_] (b) this Security is being transferred other than in accordance with
(a) above and documents, including a transferor certificate
substantially in the form of Exhibit D to the Indenture in the
---------
case of a transfer pursuant to Regulation S, are being furnished
which comply with the conditions of transfer set forth in this
Security and the Indenture.
If none of the foregoing boxes is checked and, in the case of (b) above, if the
appropriate document is not attached or otherwise furnished to the Trustee, the
Trustee or Registrar shall not be obliged to register this Security in the name
of any Person other than the Holder hereof unless and until the conditions to
any such transfer of registration set forth herein and in Section 3.14 of the
Indenture shall have been satisfied.
________________________________________________________________________________
Date: __________ Your signature _____________________________________________
(Sign exactly as your name appears on the
other side of this Security)
By: _________________________________________
NOTICE: To be executed by an executive
officer
Signature Guarantee: __________________________________________________________
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A (including the information
specified in Rule 144A(d)(4)) or has determined not to request such information
and that it is aware that the transferor is relying upon
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the undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: ________________ _______________________________________________
NOTICE: To be executed by an executive officer
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OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased in its entirety
by the Company pursuant to Section 10.13 or 10.14 of the Indenture, check the
box:
[_]
If you want to elect to have only a part of the principal amount at
maturity of this Security purchased by the Company pursuant to Section 10.13 or
10.14 of the Indenture, state the portion of such amount: $_____________.
Dated: ________________ Your Signature:_________________________________
(Sign exactly as name appears on the other
side of this Security)
Signature Guarantee: ___________________________________________________________
(Signature must be guaranteed by a financial institution that is a member
of the Securities Transfer Agent Medallion Program ("STAMP"), the Stock
Exchange Medallion Program ("SEMP"), the New York Stock Exchange, Inc.
Medallion Signature Program ("MSP") or such other signature guarantee
program as may be determined by the Security Registrar in addition to, or
in substitution for, STAMP, SEMP or MSP, all in accordance with the
Securities Exchange Act of 1934, as amended.)
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<PAGE>
EXHIBIT A-2
FOR KIDS WORLDWIDE, INC.
10 1/4% Senior Discount Note due 2007, Series B
No. _____ $_____________
CUSIP NO. 351383ABO-144A
U34599AB3-Reg S
Fox Kids Worldwide, Inc., a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company," which term
includes any successor Person under the Indenture hereinafter referred to)
promises to pay to Cede & Co. or registered assigns, the principal sum of
Dollars (or, if the Cash Interest Election has been made, the Accreted Value of
this Security as of the Cash Interest Election Date) on November 1, 2007 and to
pay cash interest thereon semi-annually on May 1 and November 1 in each year,
commencing on the earlier of May 1, 2003 and the May 1 or November 1 immediately
after the Cash Interest Election Date (if any), at the rate of 10 1/4% per
annum, until the principal hereof is paid or duly provided for, provided that
--------
any principal and premium, and any such installment of interest, which is
overdue shall bear interest at the rate of 10 1/4% per annum (to the extent that
the payment of such interest shall be legally enforceable), from the dates such
amounts are due until they are paid or duly provided for. The interest so
payable and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in such Indenture, be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest, which shall be the April
15 or October 15 (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. Any such interest not so punctually paid
or duly provided for will forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of securities
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the re-
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quirements of any securities exchange on which the Securities may be listed, and
upon such notice as may be required by such exchange, all as more fully provided
in said Indenture.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan, The City of New York, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that, at the
-------- -------
option of the Company, payment of interest may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed and
FOX KIDS WORLDWIDE, INC.
By: _________________________________________
Name:
Title:
Attest:
____________________________________
Name:
Title:
Trustee's Certificate of Authentication
- ---------------------------------------
This is one of the Securities referred to in the within mentioned
Indenture.
The Bank of New York,
as Trustee
Dated: By: _________________________________________
Authorized Signatory
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Form of Reverse of Security
---------------------------
This Security is one of a duly authorized issue of Securities of the
Company and designated as 10 1/4% Senior Discount Notes due 2007, Series B
(herein called the "Initial Securities"), limited in aggregate principal amount
at maturity to $618,670,000 issued and to be issued under an Indenture, dated as
of October 28, 1997 (herein called the "Indenture," which term shall have the
meaning assigned to it in such instrument), among the Company, and The Bank of
New York, as Trustee (herein called the "Trustee," which term includes any
successor trustee under the Indenture), and reference is hereby made to the
Indenture for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, , the Trustee and the Holders
of the Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. The Securities include the Initial Securities, the
Private Exchange Securities and the Exchange Securities, issued in exchange for
the Initial Securities pursuant to the Registration Rights Agreement. The
Initial Securities, the Private Exchange Securities and the Exchange Securities
are treated as a single class of securities under the Indenture.
The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. (S)(S) 7aaa - 77bbbb (the "TIA")), as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein, the Securities are
subject to all such terms, and Holders of Securities are referred to the
Indenture and the TIA for a statement of such terms.
This Security is redeemable at the option of the Company, in whole or
in part, at any time on or after November 1, 2002, at the Redemption Prices
(expressed as percentages of principal amount at maturity) set forth below, plus
accrued and unpaid interest, if any, to the Redemption Date, if redeemed during
the 12-month period beginning on November 1 of the years indicated below:
Redemption
Year Price
---- ----------
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2002............................. 105.125%
2003............................. 103.417%
2004............................. 101.708%
2005 and thereafter.............. 100.000%
In addition, at any time, or from time to time, on or prior to
November 1, 2000, the Company may, at its option, use the net cash proceeds of
(a) one or more Public Equity Offerings or (b) sales of Qualified Equity
Interests of the Company to Strategic Equity Investors resulting in gross cash
proceeds to the Company of at least $100,000,000 in the aggregate to redeem up
to 35% of the originally issued principal amount at maturity of the Securities,
at a redemption price equal to 110.25% of the Accreted Value thereof or, if a
Cash Interest election has been made, 110.25% of the principal amount at
maturity thereof plus accrued and unpaid interest, if any, to the Redemption
Date; provided that at least 65% of the originally issued principal face amount
--------
at maturity of Securities remains outstanding immediately after the occurrence
of such redemption. In order to effect the foregoing redemption with the
proceeds of any Public Equity Offering or sale of Qualified Equity Interests to
Strategic Equity Investors, the Company shall send the redemption notice not
later than 60 days after the consummation of such Public Equity Offering or sale
of Qualified Equity Interests to Strategic Equity Investors.
The Securities are not subject to any sinking fund.
The Indenture provides that the Company is obligated (a) upon the
occurrence of a Change in Control, to make an offer to purchase all outstanding
Securities at a purchase price of 101% of the Accreted Value on the Change of
Control Purchase Date, unless the Change of Control Purchase Date is on or after
the earlier to occur of November 1, 2002 and the Cash Interest Election Date, in
which case such purchase price shall be equal to 101% of the aggregate principal
amount at maturity thereof, plus accrued and unpaid interest, if any, to the
date of purchase and (b) to make an offer to purchase Securities with a portion
of the net cash proceeds of certain sales or other dispositions of assets at a
purchase price of 100% of the Accreted Value on the Purchase Date, unless the
Purchase Date is on or after the earlier to occur of November 1, 2002 and the
Cash Interest Election Date, in which case such purchase price shall be equal to
100% of the principal amount at maturity thereof
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plus accrued and unpaid interest, if any, to the date of purchase.
In the event of redemption or purchase of this Security in part only
pursuant to a Change of Control Offer or an Asset Sale Offer or a Deposit Offer,
a new Security or Securities for the unredeemed or unpurchased portion hereof
will be issued in the name of the Holder hereof upon the cancellation hereof.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Security or certain restrictive covenants and Events
of Default with respect to this Security, in each case upon compliance with
certain conditions set forth in the Indenture.
If an Event of Default shall occur and be continuing, there may be
declared due and payable the Default Amount on all of the outstanding
Securities, in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount at maturity of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount at maturity at Stated
Maturity of the Securities at the time Outstanding, on behalf of the Holders of
all the Securities, to waive compliance by the Company and with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other
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remedy thereunder, unless such Holder shall have previously given the Trustee
written notice of a continuing Event of Default with respect to the Securities,
the Holders of not less than 25% in principal amount at maturity of the
Securities at the time Outstanding shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default as Trustee
and offered the Trustee reasonable indemnity and the Trustee shall not have
received from the Holders of a majority in principal amount at maturity of
Securities at the time Outstanding a direction inconsistent with such request,
and shall have failed to institute any such proceeding for 15 days after receipt
of such notice, request and offer of indemnity. The foregoing shall not apply to
certain suits described in the Indenture, including any suit instituted by the
Holder of this Security for the enforcement of any payment of principal hereof
or any premium or interest hereon on or after the respective due dates expressed
herein (or, in the case of redemption, on or after the Redemption Date or, in
the case of any purchase of this Security required to be made pursuant to a
Change of Control Offer or an Asset Sale Offer or a Deposit Offer, on or after
the relevant purchase date).
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Security Registrar duly executed by,
the Holder hereof or his attorney duly authorized in writing, and thereupon one
or more new Securities, of authorized denominations and for the same aggregate
principal amount at maturity, will be issued to the designated transferee or
transferees.
This Security is issuable only in registered form without coupons in
denominations of $1,000 principal amount at maturity and any integral multiple
thereof. As provided in the
A-2-7
<PAGE>
-8-
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like aggregate principal amount at maturity of Securities of
like tenor of a different authorized denomination, as requested by the Holder
surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, , the Trustee and any agent of the Company, or the
Trustee may treat the Person in whose name this Security is registered as the
owner hereof for all purposes, whether or not this Security be overdue, and
neither the Company, , the Trustee nor any such agent shall be affected by
notice to the contrary.
Interest on this Security shall be computed on the basis of a 360-day
year of twelve 30-day months.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
The Indenture and this Security shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflicts of laws principles thereof.
A-2-8
<PAGE>
-9-
ASSIGNMENT FORM
If you, the Holder, want to assign this Security, fill in the form
below and have your signature guaranteed:
I (or we) assign and transfer this Security to
________________________________________________________________________________
(Insert assignee's social security or tax ID number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code) and irrevocably appoint
________________________________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for such agent.
Date: ___________ Your signature ____________________________________________
(Sign exactly as your name appears on the
other side of this Security)
By: _________________________________________
NOTICE: To be executed by
an executive officer
Signature Guarantee: ___________________________________________________________
A-2-9
<PAGE>
-10-
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased in its entirety
by the Company pursuant to Section 10.13, or 10.14 of the Indenture, check the
box:
[_]
If you want to elect to have only a part of the principal amount at
maturity of this Security purchased by the Company pursuant to Section 10.13 or
10.14 of the Indenture, state the portion of such amount: $_____________.
Dated: Your Signature: __________________________________
(Sign exactly as name appears on
the other side of this Security)
Signature Guarantee: ___________________________________________________________
(Signature must be guaranteed by a financial institution that is a member
of the Securities Transfer Agent Medallion Program ("STAMP"), the Stock
Exchange Medallion Program ("SEMP"), the New York Stock Exchange, Inc.
Medallion Signature Program ("MSP") or such other signature guarantee
program as may be determined by the Security Registrar in addition to, or
in substitution for, STAMP, SEMP or MSP, all in accordance with the
Securities Exchange Act of 1934, as amended.)
A-2-10
<PAGE>
EXHIBIT B
---------
FORM OF LEGEND FOR BOOK-ENTRY SECURITIES
Any Global Security authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS
SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A
NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
FOR PURPOSES OF SECTIONS 1272, 1273, AND 1275 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER, THIS
SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT; FOR EACH $1,000 PRINCIPAL
AMOUNT OF THIS SECURITY, (1) THE ISSUE PRICE IS $606.14; (2) THE AMOUNT OF
ORIGINAL ISSUE DISCOUNT IS $393.86; (3) THE ISSUE DATE IS OCTOBER 28, 1997; AND
(4) THE YIELD TO MATURITY (COMPOUNDED SEMI-ANNUALLY) IS 10-1/4%.
B-1
<PAGE>
EXHIBIT C
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
----------------------------------
The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: Fox Kids Worldwide, Inc. (the "Company")
10 1/4% Senior Discount Notes due 2007 (the "Securities")
---------------------------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $618,670,000 aggregate
principal amount at maturity of the Securities, we confirm that such sale has
been effected pursuant to and in accordance with Regulation S under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we
--------------
represent that:
(1) the offer of the Securities was not made to a Person in the United
States;
(1) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any Person acting on our
behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated offshore securities market described in Rule
902(a) of Regulation S and neither we nor any Person acting on our behalf
knows that the transaction has been pre-arranged with a buyer in the United
States;
(2) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(3) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act;
C-1
<PAGE>
(4) we have advised the transferee of the transfer restrictions
applicable to the Securities;
(5) if the circumstances set forth in rule 904(c) under the Securities
Act are applicable, we have complied with the additional conditions
therein, including (if applicable) sending a confirmation or other notice
stating that the Securities may be offered and sold during the restricted
period specified in Rule 903(c)(2) or (3), as applicable, only in
accordance with the provisions of Regulation S; pursuant to registration of
the Securities under the Securities Act; or pursuant to another available
exemption from the registration requirements under the Securities Act; and
(6) if the sale is made during a restricted period and the provisions
of Rule 903(c)(3) are applicable thereto, we confirm that such sale has
been made in accordance with such provisions.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By: ___________________________
Authorized Signature
C-2
<PAGE>
EXHIBIT D
---------
FORM OF CERTIFICATE TO BE DELIVERED
IN CONNECTION WITH TRANSFERS TO
NON-QIB INSTITUTIONAL ACCREDITED INVESTORS
------------------------------------------
The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: Fox Kids Worldwide, Inc. (the
"Company") 10 1/4% Senior
Discount Notes due 2007
-----------------------
Ladies and Gentlemen:
We are delivering this letter in connection with our proposed purchase
of 10 1/4% Senior Discount Notes due 2007 (the "Notes") of Fox Kids Worldwide,
Inc., a Delaware corporation (the "Company").
We hereby confirm that:
(i) we are an institutional "accredited investor" within the meaning
of Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended (the "Securities Act") (an "Accredited Investor"), or a "qualified
institutional buyer" as defined in Rule 144A under the Securities Act (a
"QIB") purchasing Notes for the account of one or more Accredited
Investors;
(ii) any purchase of Notes by us will be for our own account or for
an account with respect to which we exercise sole investment discretion and
that we are and any such account are (a) a QIB, and aware that the sale is
being made in reliance on Rule 144A under the Securities Act, (b) an
Accredited Investor, or (c) a person other than a U.S. person ("foreign
purchasers", which term shall include dealers or other professional
fiduciaries in the United States acting on a discretionary basis for
foreign beneficial owners (other than an estate or trust)) in off-
D-1
<PAGE>
shore transactions meeting the requirements of Rule 903 or 904 of
Regulation S under the Securities Act;
(iii) we have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risk of purchasing
Notes and we and any accounts for which we are acting are able to bear the
economic risks of and an entire loss of our or their investment in the
Notes;
(iv) we are not acquiring Notes with a view to any distribution of
Notes in a transaction that would violate the Securities Act or the
securities laws of any state of the United States or any other applicable
jurisdiction; provided that the disposition of our property and the
property of any accounts for which we are acting as fiduciary shall remain
at all times within our and their control;
(v) we have had access to such financial and other information, and
have been afforded the opportunity to ask such questions of representatives
of the Company and receive answers thereto, as we deem necessary in order
to evaluate our proposed investment in the Notes; and
(vi) we acknowledge that the Notes have not been registered under
the Securities Act and that none of the Notes may be offered or sold within
the United States or to, or for the account or benefit of, U.S. persons
except as set forth below.
We agree, on our own behalf and on behalf of each account for which we
acquire any Notes, that, prior to (x) the date which is two years (or such
shorter period of time as permitted by Rule 144(k) under the Securities Act or
any successor provision thereunder) after the later of the date of original
issuance of the Notes and the last date on which the Company or any affiliate of
the Company was the owner of such Notes, or any predecessors thereto and (y)
such later date, if any, as may be required by applicable laws, the Notes may be
offered, resold, pledged or otherwise transferred only (a) to Multicanal or any
of its subsidiaries, (b) inside the United States to a QIB in compliance with
Rule 144A under the Securities Act, (c) inside the United States to an
Accredited Investor that, prior to such transfer, furnishes to the trustee under
the Indenture relating to the Notes (the "Trustee") a signed letter
D-2
<PAGE>
substantially in the form of this letter, (d) outside the United States to
foreign purchasers in offshore transactions meeting the requirements of Rule
903 or Rule 904 of Regulation S under the Securities Act, (e) pursuant to the
exemption from registration provided by Rule 144 under the Securities Act (if
available), (f) pursuant to an effective registration statement under the
Securities Act or (g) pursuant to another available exemption from the
registration requirements of the Securities Act.
We understand that the Trustee will not be required to accept for
registration of transfer any Notes acquired by us, except upon presentation of
evidence satisfactory to the Company and the Trustee that the foregoing
restrictions on transfer have been complied with. We further understand that
the Notes purchased by us will be in the form of definitive physical
certificates and that such certificates will bear a legend reflecting the
substance of this paragraph. We further agree to provide to any person
acquiring any of the Notes from us a notice advising such person that transfers
of such Notes are restricted as stated herein and that certificates representing
such Notes will bear a legend to that effect.
We acknowledge that the Company and the Trustee and others will rely
upon the truth and accuracy of our acknowledgments, representations and
agreements set forth herein, and we agree to notify you promptly in writing if
any of our acknowledgments, representations or agreements herein cease to be
accurate and complete.
We represent to you that we have full power to make the foregoing
acknowledgments, representations and agreements on our own behalf and on behalf
of any investor account for which we are acting as a fiduciary or agent.
As used herein, the terms "offshore transaction," "United States" and
"U.S. person" have the respective meanings given to them in Regulation S under
the Securities Act.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
D-3
<PAGE>
EXHIBIT E-1
-----------
THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO THE PRIOR
PAYMENT IN FULL IN CASH OF ALL OF THE SENIOR INDEBTEDNESS (AS DEFINED BELOW)
PURSUANT TO THE TERMS OF THIS SUBORDINATED NOTE AND TO THE EXTENT PROVIDED
HEREIN.
FORM OF SUBORDINATED NOTE
Dated: ________ __, ____
FOR VALUE RECEIVED, the undersigned FOX KIDS WORLDWIDE, INC., a
Delaware corporation ("FOX KIDS"), HEREBY PROMISES TO PAY TO THE ORDER OF
______________, ____________ [lender] or its permitted registered assigns (the
"SUBORDINATED LENDER"), the principal amount of [SPECIFY PRINCIPAL AMOUNT
EVIDENCED BY THIS NOTE IN WORDS] DOLLARS ($____________) on __________ __,
____/1/. Interest shall accrue on the principal amount outstanding from time to
time under this Subordinated Note, from and including the date of issuance
hereof until such principal amount is paid in full, at a rate per annum
(computed on the basis of a 365/366-day year) equal to ___%. Accrued and unpaid
interest shall be added automatically to the principal amount outstanding under
this Subordinated Note and shall become a part thereof unless, at any time, Fox
Kids elects to pay all or a portion of such interest in cash and is permitted to
make such payment in cash under Section 8(d)(i)(D) of Fox Kids Guarantee dated
October 28, 1997 made by Fox Kids in favor of the Secured Parties referred to in
the Credit Agreement (as hereinafter defined) and under Sections 10.8 and 10.9
of the Indentures (as hereinafter defined). Capitalized terms not otherwise
defined in this Subordinated Note shall have the same meanings as specified
therefor in the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to the Subordinated Lender, at its offices at _______________,
________, _____________ (or at such other location as shall be designated by
the Subordinated Lender in a written notice to Fox Kids and the Senior
Representative (as hereinafter defined)), in same day funds. The loan made by
the Subordinated Lender to Fox Kids
__________________________
/1/ The stated maturity date of each of the Subordinated Notes shall be no
earlier than the later of (a) May 1, 1998 and (b) the payment in full cash
of all Senior Notes. None of the Subordinated Notes shall have any other
scheduled or mandatory redemption or repurchase dates.
E-1-1
<PAGE>
hereunder, and all payments and prepayments made on account of principal hereof,
shall be recorded by the Subordinated Lender and, prior to any transfer hereof,
endorsed on the grid attached hereto that is part of this Subordinated Note;
provided that the failure of the Subordinated Lender to make any such
recordation or endorsement shall not affect the obligations of Fox Kids under
this Subordinated Note.
Subject to the provisions of the Credit Agreement, the Fox Kids
Guarantee and the Indentures, the principal amount outstanding under this
Subordinated Shareholder Note may, at the option of Fox Kids, be prepaid at any
time, in whole or in part, without penalty or premium.
The aggregate principal amount owing to the Subordinated Lender from
time to time under this Subordinated Note, all accrued and unpaid interest
thereon, and any other indebtedness evidenced by or otherwise owing in respect
of this Subordinated Note (collectively, the "Subordinated Indebtedness") is and
shall be subordinate and junior in right of payment and otherwise, to the extent
and in the manner hereinafter set forth, to the prior payment in full of all of
the Senior Indebtedness (as hereinafter defined), whether now or hereafter
existing. For all purposes of this Subordinated Note, the following terms shall
have the following meanings (such meanings to be equally applicable to both the
singular and the plural forms of the terms defined):
(a) "Administrative Agent" means Citicorp USA, Inc., as the
administrative agent and the collateral agent for the Senior Lenders and
the other Secured Parties, together with any successor thereto appointed
pursuant to Article VIII of the Credit Agreement.
(b) "Credit Agreement" means the Second Amended and Restated Credit
Agreement dated as of October 28, 1997 among FCN Holding, Inc.,
International Family Entertainment, Inc. and Saban Entertainment, Inc., as
the Borrowers thereunder, Fox Kids Holdings, LLC, as a guarantor
thereunder, the Senior Lenders, Citicorp Securities, Inc., Chase
Securities, Inc. and BankBoston, N.A., as the Co-Arrangers for the
Facilities referred to therein, and the Administrative Agent, as such
agreement may be amended, supplemented or otherwise modified from time to
time.
(c) "Indentures" means, collectively, (a) the Indenture dated as of
October 28, 1997 between Fox Kids and The Bank of New York, as Trustee,
relating to the 9- 1/4% Senior Notes due 2007, and the Indenture dated as
of October 28, 1997 between Fox Kids and The Bank of New York, as Trustee,
relating to the 10- 1/4% Senior Discount Notes due
E-1-2
<PAGE>
2007, as such agreements may be amended, supplemented or otherwise modified
from time to time.
(d) "Senior Creditors" means, collectively, the Senior Secured
Creditors, the Senior Notes Creditors and the other holders, if any, of any
of the Senior Indebtedness.
(e) "Senior Indebtedness" means, collectively, the Senior Secured
Indebtedness and the Senior Notes Indebtedness.
(f) "Senior Lenders" means the banks, financial institutions and other
institutional lenders from time to time party to the Credit Agreement.
(g) "Senior Notes" means, collectively, the 9- 1/4% Senior Notes due
2007 and the 10- 1/4% Senior Discount Notes due 2007 issued under the
Indentures, in each case may be amended, supplemented or otherwise modified
from time to time.
(h) "Senior Notes Creditors" means, collectively, the trustees under
each of the Indentures and the holders from time to time of Senior Notes
Indebtedness.
(i) "Senior Notes Indebtedness" means (i) all Obligations of Fox
Kids, whether now or hereafter existing, under or in respect of the
Indentures and the Senior Notes, whether direct or indirect, absolute or
contingent, and whether for principal, interest (including, without
limitation, interest accruing after the filing of a petition initiating any
Insolvency Proceeding (as hereinafter defined), whether or not such
interest accrues after the filing of such petition for purposes of any
applicable Insolvency Laws (as hereinafter defined), or is an allowed claim
in such Insolvency Proceeding), premium, fees, indemnification payments,
contract causes of action, costs, expenses or otherwise and (ii) any and
all extensions, modifications, substitutions, amendments, renewals,
refinancings, replacements and refundings of any or all of the Obligations
referred to in clause (i) of this definition, and any instrument or
agreement evidencing or otherwise setting forth the terms of any
Indebtedness or other Obligations incurred in any such extension,
modification, substitution, amendment, renewal, refinancing, replacement or
refunding.
(j) "Senior Representative" means (i) the Administrative Agent or (ii)
after the payment in full of all of the Senior Secured Obligations and the
termination or ex-
E-1-3
<PAGE>
piration of all of the commitments of the Senior Secured Creditors in
respect thereof, either of the trustees for the Senior Notes or the holders
of a majority in aggregate principal amount of the outstanding Senior Notes
of either issue.
(k) "Senior Secured Creditors" means, collectively, the Administrative
Agent, the Senior Lenders and the other Secured Parties and any other
holder of any of the Senior Secured Indebtedness.
(l) "Senior Secured Indebtedness" means (i) all Obligations of Fox
Kids, whether now or hereafter existing, under or in respect of the Credit
Agreement, the Notes and the other Loan Documents, whether direct or
indirect, absolute or contingent, and whether for principal, interest
(including, without limitation, interest accruing after the filing of a
petition initiating any Insolvency Proceeding, whether or not such interest
accrues after the filing of such petition for purposes of any applicable
Insolvency Laws, or is an allowed claim in such Insolvency Proceeding),
premium, fees, indemnification payments, contract causes of action, costs,
expenses or otherwise and (ii) any and all extensions, modifications,
substitutions, amendments, renewals, refinancings, replacements and
refundings of any or all of the Obligations referred to in clause (i) of
this definition, and any instrument or agreement evidencing or otherwise
setting forth the terms of any Indebtedness or other Obligations incurred
in any such extension, modification, substitution, amendment, renewal,
refinancing, replacement or refunding.
Furthermore, for all purposes of this Subordinated Note, the Senior Indebtedness
shall not be deemed to have been paid in full until the latest of (A) the
payment in full in cash of all of the Senior Indebtedness and the expiration or
termination of all of the commitments of the Secured Parties and the other
holders thereof, (B) the expiration or termination of all of the Bank Hedge
Agreements and (C) the Termination Date.
In the event of any dissolution, winding up, liquidation, arrangement,
reorganization, adjustment, protection, relief or composition of Fox Kids or its
debts, whether voluntary or involuntary, in any bankruptcy, insolvency,
arrangement, reorganization, receivership, relief or other similar action or
proceeding under the United States Federal Bankruptcy Code or any other federal
or state bankruptcy or insolvency laws or any similar Requirements of Law of any
other jurisdiction covering the protection of creditors' rights or the relief of
debtors (collectively, the "INSOLVENCY LAWS"), or upon an assignment for the
benefit of creditors or any other marshalling of the
E-1-4
<PAGE>
property, assets and liabilities of Fox Kids or otherwise (each, an "Insolvency
Proceeding"), the Senior Creditors shall be entitled to receive payment in full
of all of the Senior Indebtedness before the Subordinated Lender is entitled to
receive any payment or distribution of any kind or character on account of all
or any of the Subordinated Indebtedness, and, to that end, any payment or
distribution of any kind or character (whether in cash, property or securities)
that otherwise would be payable or deliverable upon or with respect to the
Subordinated Indebtedness in any such Insolvency Proceeding (including, without
limitation, any payment that may be payable by reason of any other Indebtedness
of Fox Kids being subordinated to payment of the Subordinated Indebtedness)
shall be paid or delivered forthwith directly to the Senior Representative, for
the ratable account of the Senior Secured Creditors and the Senior Notes
Creditors, in the same form as so received (with any necessary endorsement or
assignment), for application (in the case of cash) to, or to be held as
collateral (in the case of noncash property or securities) for, the payment or
prepayment of the Senior Indebtedness until all of the Senior Indebtedness shall
have been paid in full.
No payment or distribution of any property or assets of Fox Kids of
any kind or character (including, without limitation, any payment that may be
payable by reason of any other Indebtedness of Fox Kids being subordinated to
payment of the Subordinated Indebtedness) shall be made by or on behalf of Fox
Kids for or on account of any Subordinated Indebtedness, unless and until all of
the Senior Indebtedness shall have been paid in full or unless such payment is
expressly permitted to be made under Section 8(d)(i)(D) of the Fox Kids
Guarantee and Sections 10.8 and 10.9 of the Indentures. Furthermore, so long as
the Senior Indebtedness shall not have been paid in full, the Subordinated
Lender shall not (a) ask, demand, sue for, take or receive from Fox Kids,
directly or indirectly, in cash or other property or by setoff or in any manner
(including, without limitation, from or by way of collateral), payment of all or
any of the Subordinated Indebtedness, except to the extent that such payment is
expressly permitted to be made under Section 8(d)(i)(D) of the Fox Kids
Guarantee and Sections 10.8 and 10.9 of the Indentures, (b) commence, or join
with any creditor other than the Senior Representative in commencing, or
directly or indirectly cause Fox Kids to commence, or assist Fox Kids in
commencing, any Insolvency Proceeding, or (c) request or accept any collateral
or other security for the Subordinated Indebtedness. If the Subordinated
Lender, in contravention hereof, shall commence, prosecute or participate in any
Insolvency Proceeding, then the Senior Representative may intervene and
interpose as a defense or plea the terms of this Subordinated Note in its own
name or in the name of the Subordinated Lender.
E-1-5
<PAGE>
Until such time as all of the Senior Indebtedness has been paid in
full, if any Insolvency Proceeding is commenced by or against Fox Kids:
(a) the Senior Representative is hereby irrevocably authorized and
empowered (in its own name or in the name of the Subordinated Lender or
otherwise), but shall have no obligation, to demand, sue for, collect and
receive every payment or distribution otherwise payable to the Subordinated
Lender in respect of this Subordinated Note and give acquittance therefor,
and to file claims and proofs of claim and take such other actions
(including, without limitation, voting the Subordinated Indebtedness or
enforcing any security interest or other lien securing payment of the
Subordinated Indebtedness) as it may deem necessary or advisable for the
exercise or enforcement of any of the rights or interests of the Senior
Representative or any of the other Senior Creditors under this Subordinated
Note; and
(b) the Subordinated Lender shall duly and promptly take such action
as the Senior Representative may reasonably request (i) to collect the
Subordinated Indebtedness for the account of the Senior Representative, for
the ratable benefit of the Senior Secured Creditors and the Senior Notes
Creditors, and to file appropriate claims or proofs of claim in respect of
the Subordinated Indebtedness, (ii) to execute and deliver to the Senior
Representative such powers of attorney, assignments or other instruments as
the Senior Representative may reasonably request in order to enable the
Senior Representative to enforce any and all claims with respect to, and
any security interests and other liens securing payment of, the
Subordinated Indebtedness and (iii) to collect and receive any and all
payments or distributions that may be payable or deliverable upon or with
respect to the Subordinated Indebtedness.
All payments or distributions upon or with respect to the Subordinated
Indebtedness that are received by the Subordinated Lender contrary to the
provisions of this Subordinated Note shall be received in trust for the benefit
of the Senior Representative and the Senior Creditors, shall be segregated from
other property or funds of the Subordinated Lender and shall be paid or
delivered forthwith directly to the Senior Representative, for the account of
the Senior Secured Creditors and the Senior Notes Creditors, in the same form as
so received (with any necessary endorsement or assignment), to be applied (in
the case of cash) to, or held as collateral (in the case of noncash property or
securities) for, the payment or prepayment
E-1-6
<PAGE>
of the Senior Indebtedness until all of the Senior Indebtedness shall have been
paid in full.
To the extent that Fox Kids, the Subordinated Lender or any of their
respective Subsidiaries or any other guarantor of or provider of collateral for
the Senior Indebtedness shall make any payment on the Senior Indebtedness that
is subsequently invalidated, declared to be fraudulent or preferential or set
aside or is required to be repaid to a trustee, receiver or any other party
under any applicable Insolvency Law or equitable cause (any such payment being a
"VOIDED PAYMENT"), then to the extent of such Voided Payment, that portion of
the Senior Indebtedness that had been previously satisfied by such Voided
Payment shall be reinstated and continue in full force and effect as if such
Voided Payment had never been made. To the extent that the Subordinated Lender
shall have received any payments subsequent to the date of the initial receipt
of such Voided Payment by the Senior Representative or any of the other Senior
Creditors and such payments have not been invalidated, declared to be fraudulent
or preferential or set aside or required to be repaid to a trustee, receiver or
any other party under any applicable Insolvency Law or equitable cause, the
Subordinated Lender shall be obligated and hereby agrees that any such payment
so made or received shall be deemed to have been received in trust for the
benefit of the Senior Representative and the other Senior Creditors, and the
Subordinated Lender hereby agrees to pay to the Senior Representative, upon
demand, the full amount so received by the Subordinated Lender during such
period of time to the extent necessary to fully restore to the Senior
Representative and the other Senior Creditors the amount of such Voided Payment,
which amount shall be applied as set forth in the immediately preceding
paragraph.
The Senior Representative is hereby authorized to demand specific
performance of the subordination provisions of this Subordinated Note, whether
or not Fox Kids shall have complied with any of the provisions hereof applicable
to it, at any time when the Subordinated Lender shall have failed to comply with
any of the subordination provisions of this Subordinated Note. The Subordinated
Lender hereby irrevocably waives any defense based on the adequacy of a remedy
at law which might be asserted as a bar to such remedy of specific performance.
The Subordinated Lender will not:
(a) (i) Cancel or otherwise discharge any of the Subordinated
Indebtedness (except upon payment in full of all of the Senior Indebtedness
or, at any time and from time to time prior thereto, to the extent that
such payment is expressly permitted to be made under Sec-
E-1-7
<PAGE>
tion 8 (d) (i) (D) of the Fox Kids Guarantee and under Sections 10.8 and
10.9 of the Indentures), (ii) convert or exchange any of the Subordinated
Indebtedness into or for any other Indebtedness (except to the extent
expressly permitted by the Indentures), (iii) convert or exchange any of
the Subordinated Indebtedness into or for any Equity Interest in Fox Kids
or otherwise (except to the extent expressly permitted by the Indentures)
or (iv) subordinate any of the Subordinated Indebtedness to any
Indebtedness of Fox Kids other than the Senior Indebtedness (except that no
consent of the holders of the Senior Notes or either of the trustees for
the Senior Notes shall be required to subordinate any of the Subordinated
Indebtedness to any other Indebtedness of Fox Kids (although nothing herein
shall limit the obligation of any holder of Indebtedness of Fox Kids to
turn over or otherwise subordinate itself to any or all of the Senior
Creditors in accordance with any subordination provisions applicable to
such Indebtedness);
(b) Sell, assign, pledge, encumber or otherwise dispose of any of the
Subordinated Indebtedness; or
(c) Permit the terms of any of the Subordinated Indebtedness to be
amended, waived, supplemented or otherwise modified in such a manner as
could have an adverse effect upon the rights or interests of the Senior
Representative or any of the other Senior Creditors under this Subordinated
Note, any of the Loan Documents, either of the Indentures or any of the
other agreements, instruments or other documents evidencing or otherwise
setting forth the terms of any of the Senior Indebtedness.
No payment or distribution to the Senior Representative or any of the
other Senior Creditors pursuant to the provisions of this Subordinated Note
shall entitle the Subordinated Lender to exercise any rights of subrogation in
respect thereof, nor shall the Subordinated Lender have any right of
reimbursement, restitution, exoneration, contribution or indemnification
whatsoever from any property or assets of Fox Kids or any of the other
guarantors, sureties or providers of collateral security for the Senior
Indebtedness, or any right to participate in any claim or remedy of the Senior
Representative or any of the other Senior Creditors against Fox Kids or any of
the Collateral, whether or not such claim, remedy or right arises in equity or
under contract, statute or common law (including, without limitation, the right
to take or receive from Fox Kids, directly or indirectly, in cash or other
property or by setoff or in any other manner, payment or security on account of
such claim, remedy or right), until (i) all of the Senior Indebtedness shall
have been paid in full and all of
E-1-8
<PAGE>
the commitments of the Secured Parties and the other holders thereof shall have
expired or been terminated, (ii) all of the Bank Hedge Agreements shall have
expired or been terminated and (iii) the Termination Date shall have occurred.
The holders of the Senior Indebtedness may, at any time and from time
to time, without any consent of or notice to the Subordinated Lender or any
other holder of the Subordinated Indebtedness and without impairing or releasing
the obligations of the Subordinated Lender hereunder:
(a) change the manner, place or terms of payment of, or change or
extend the time of payment of, or renew payment or change or extend the
time or payment of, or renew or alter, the Senior Indebtedness (including
any change in the rate of interest thereon), or amend, supplement or
otherwise modify in any manner any instrument, agreement or other document
under which any of the Senior Indebtedness is outstanding;
(b) sell, exchange, release, not perfect and otherwise deal with any
of the property or assets of any Person at any time pledged, assigned or
mortgaged to secure the Senior Indebtedness;
(c) release any Person liable in any manner under or in respect of the
Senior Indebtedness;
(d) exercise or refrain from exercising any rights against Fox Kids,
any of the other Loan Parties or any of their respective Subsidiaries or
any other Person;
(e) apply to the Senior Indebtedness any sums from time to time
received by or on behalf of the Senior Representative or any of the other
Senior Creditors; and
(f) sell, assign, transfer or exchange any of the Senior Indebtedness.
Each of Fox Kids and the Subordinated Lender will, if reasonably
requested by the Senior Representative or either of the trustees for the Senior
Notes, further mark their respective books of account in such a manner as shall
be effective to give proper notice of the effect of the subordination provisions
of this Subordinated Note. Each of Fox Kids and the Subordinated Lender will,
at its sole expense and at any time and from time to time, promptly execute and
deliver all further instruments and documents, and take all further actions,
that may be necessary or that the Senior Representative or either of the
trustees for the Senior Notes may reasonably deem desirable and may request in
order to protect any right or interest granted
E-1-9
<PAGE>
or purported to be granted under the subordination provisions of this
Subordinated Note or to enable the Senior Representative or any of the other
Senior Creditors to exercise and enforce its rights and remedies hereunder.
The foregoing provisions regarding subordination are and are intended
solely for the purpose of defining the relative rights of the holders of the
Senior Indebtedness, on the one hand, and the holders of the Subordinated
Indebtedness, on the other hand. Such provisions are for the benefit of the
holders of the Senior Indebtedness and shall inure to the benefit of, and shall
be enforceable by, the Senior Representative, on behalf of itself and the other
Senior Creditors, directly against the holders of the Subordinated Indebtedness,
and no holder of the Senior Indebtedness shall be prejudiced in its right to
enforce the subordination of any of the Subordinated Indebtedness by any act or
failure to act by Fox Kids or any Person in custody of its property or assets.
The subordination provisions herein shall constitute a continuing offer to each
and every holder of Senior Indebtedness from time to time and such holders are
intended third party beneficiaries hereof. Nothing contained in the foregoing
provisions is intended to or shall impair, as between Fox Kids and the holders
of the Subordinated Indebtedness, the obligations of Fox Kids to such holders.
Fox Kids agrees to pay, upon demand therefor, all of the reasonable
and properly documented out-of-pocket costs and expenses (including, without
limitation, reasonable fees and expenses of counsel) incurred by the Senior
Representative or any of the other Senior Creditors in enforcing the provisions
of this Subordinated Note.
Fox Kids hereby waives promptness, diligence, presentment for payment,
demand, notice of dishonor and protest and any other notice with respect to this
Subordinated Note.
None of the rights or interests of the Subordinated Lender in this
Subordinated Note may be assigned or otherwise transferred thereby to any Person
other than a member of the TNCL Group or the Saban Group (each as defined in the
Credit Agreement on the Effective Date) without the prior written consent of Fox
Kids and the Senior Representative.
No amendment, waiver or modification of this Subordinated Note
(including, without limitation, the subordination provisions hereof), and no
consent to any departure herefrom, shall be effective unless the same shall be
in writing and signed by the Subordinated Lender and, if any such amendment,
waiver or modification of this Subordinated Note (including, without limitation,
the subordination provisions hereof) could
E-1-10
<PAGE>
adversely affect the rights or interests of the Senior Representative or any of
the other Senior Creditors under or in respect of this Subordinated Note, any of
the Loan Documents, either of these Indentures or any of the other agreements,
instruments or other documents evidencing or otherwise setting forth the terms
of any of the Senior Indebtedness in any manner, signed by the Senior
Representative and/or each of the trustees for the Senior Notes, and then, in
each case, such waiver, modification or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided that
neither of the trustees for the Senior Notes shall be required to consent to any
such amendment, waiver or modification that would not adversely affect the
rights or interests of any of the Senior Notes Creditors.
No failure on the part of the Subordinated Lender or the Senior
Representative or any of the other Senior Creditors to exercise, and no delay in
exercising, any right, power or privilege hereunder shall operate as a waiver
thereof or a consent thereto; nor shall a single or partial exercise of any such
right, power or privilege preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The remedies provided herein
are cumulative and are not exclusive of any remedies provided by applicable law.
This Subordinated Note shall be governed by, and construed in
accordance with, the laws of the State of New York, excluding (to the fullest
extent a New York court would permit) any rule of law that would cause
application of the laws of any jurisdiction other than the State of New York.
FOX KIDS WORLDWIDE, INC.
By __________________________________
Name:
Title:
E-1-11
<PAGE>
LOAN AND PAYMENTS AND PREPAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
___________________________________________________________________________________________________
Amount of
Date Amount of Principal Paid Unpaid Principal Notation
Loan or Prepaid Balance Made by
___________________________________________________________________________________________________
<S> <C> <C> <C> <C>
___________________________________________________________________________________________________
___________________________________________________________________________________________________
___________________________________________________________________________________________________
___________________________________________________________________________________________________
___________________________________________________________________________________________________
___________________________________________________________________________________________________
___________________________________________________________________________________________________
___________________________________________________________________________________________________
___________________________________________________________________________________________________
___________________________________________________________________________________________________
___________________________________________________________________________________________________
___________________________________________________________________________________________________
___________________________________________________________________________________________________
___________________________________________________________________________________________________
___________________________________________________________________________________________________
___________________________________________________________________________________________________
___________________________________________________________________________________________________
___________________________________________________________________________________________________
___________________________________________________________________________________________________
___________________________________________________________________________________________________
___________________________________________________________________________________________________
___________________________________________________________________________________________________
___________________________________________________________________________________________________
___________________________________________________________________________________________________
___________________________________________________________________________________________________
</TABLE>
E-1-12
<PAGE>
EXHIBIT E-2
-----------
Form of Opinion of Counsel Relating to
--------------------------------------
Subordinated Loan/2/
--------------------
Each of Fox Kids and the Subordinated Lender has all requisite power
and authority to execute, deliver and perform its respective obligations under
the subordination terms of the Subordinated Loan, and the Subordinated Loan
(including the subordination terms thereof) has been duly and validly
authorized, executed and delivered by Fox Kids and the subordination terms of
the Subordinated Loan constitute the valid and binding agreement of each of Fox
Kids and each Subordinated Lender enforceable against each of Fox Kids and the
Subordinated Lender in accordance with the terms thereof, except that (a) the
enforceability thereof against such person may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally in the case of
a bankruptcy or insolvency involving such person and (b) the availability of
equitable remedies may be limited by equitable principles of general
applicability [Note: language in clauses (a) and (b) may be varied on a basis
consistent with such language and the opinions delivered to the Underwriters in
connection with the issuance of the Securities depending upon actual
jurisdictions involved].
___________________________
/2/ May take the form of one or more opinions.
E-2-1
<PAGE>
EXHIBIT 4.3
================================================================================
9 1/4% SENIOR NOTES due 2007
REGISTRATION RIGHTS AGREEMENT
Dated as of October 28, 1997
by and among
FOX KIDS WORLDWIDE, INC.,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED,
CITICORP SECURITIES, INC.,
BEAR, STEARNS & CO. INC.,
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
and
MORGAN STANLEY & CO.
as Initial Purchasers
================================================================================
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
---------
entered into as of October 28, 1997 by and among FOX KIDS WORLDWIDE, INC., a
Delaware corporation (the "Company"), MERRILL LYNCH, PIERCE, FENNER & SMITH
-------
INCORPORATED ("Merrill Lynch"), CITICORP SECURITIES, INC. ("Citicorp") and BEAR,
------------- --------
STEARNS & CO. INC., DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION and
MORGAN STANLEY & CO., collectively, the "Initial Purchasers").
------------------
This Agreement is made pursuant to the Purchase Agreement dated as of
October 22, 1997 by and among the Company and the Initial Purchasers (the
"Purchase Agreement"), which provides for, among other things, the sale by the
------------------
Company to the Initial Purchasers of an aggregate of $475,000,000 principal
amount of the Company's 9 1/4% Senior Notes Due 2007 (the "Securities"). In
order to induce the Initial Purchasers to enter into the Purchase Agreement, the
Company has agreed to provide to the Initial Purchasers and their direct and
indirect transferees the registration rights set forth in this Agreement. The
execution and delivery of this Agreement is a condition to the closing under the
Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following capitalized
-----------
defined terms shall have the following meanings:
"Additional Interest" shall have the meaning set forth in Section 2(e)
-------------------
hereof.
"Advice" shall have the meaning set forth in the last paragraph of
------
Section 3 hereof.
"Applicable Period" shall have the meaning set forth in Section 3(t)
-----------------
hereof.
"Business Day" shall mean a day that is not a Saturday, a Sunday, or a
------------
day on which banking institutions in New York, New York are required to be
closed.
"Closing Time" shall mean the Closing Time as defined in the Purchase
------------
Agreement.
<PAGE>
-2-
"Company" shall have the meaning set forth in the preamble to this
-------
Agreement and also includes the Company's successors and permitted assigns.
"Depositary" shall mean The Depository Trust Company, or any other
----------
depositary appointed by the Company; provided, however, that such depositary
-------- -------
must have an address in the Borough of Manhattan in The City of New York.
"Effectiveness Period" shall have the meaning set forth in Section
--------------------
2(b) hereof.
"Event Date" shall have the meaning set forth in Section 2(e) hereof.
----------
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
"Exchange Offer" shall mean the exchange offer by the Company of
--------------
Exchange Securities for Securities pursuant to Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration under the
---------------------------
Securities Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer
-------------------------------------
registration statement on Form S-1 or S-4 (or, if applicable, on another
appropriate form), and all amendments and supplements to such registration
statement, in each case including the Prospectus contained therein, all exhibits
thereto and all material incorporated by reference therein.
"Exchange Period" shall have the meaning set forth in Section 2(a)
---------------
hereof.
"Exchange Securities" shall mean the senior debt securities issued by
-------------------
the Company under the Indenture containing terms identical to the Securities
(except that (i) interest thereon shall accrue from the last date on which
interest was paid on the Securities or, if no such interest has been paid, from
, 1997 and (ii) the transfer restrictions thereon shall be eliminated) to be
offered to Holders of Securities in exchange for Securities pursuant to the
Exchange Offer.
"Guarantors" shall have the meaning set forth in Section 7(c) hereof.
----------
<PAGE>
-3-
"Holder" shall mean the Initial Purchasers, for so long as they own
------
any Registrable Securities, and each of their successors, assigns and direct and
indirect transferees who become registered owners of + Securities under the
Indenture.
"Indenture" shall mean the Indenture relating to the Securities dated
---------
as of October 28, 1997 between the Company and The Bank of New York, as trustee,
as the same may be amended from time to time in accordance with the terms
thereof.
"Initial Purchasers" shall have the meaning set forth in the preamble
-------
to this Agreement.
"Inspectors" shall have the meaning set forth in Section 3(n) hereof.
----------
"Majority Holders" shall mean the Holders of a majority of the
----------------
aggregate principal amount of outstanding Registrable Securities.
"Participating Broker-Dealer" shall have the meaning set forth in
---------------------------
Section 3(t) hereof.
"Person" shall mean an individual, partnership, corporation, limited
------
liability company, trust or unincorporated organization, or a government or
agency or political subdivision thereof.
"Private Exchange" shall have the meaning set forth in Section 2(a)
----------------
hereof.
"Private Exchange Securities" shall have the meaning set forth in
---------------------------
Section 2(a) hereof.
"Prospectus" shall mean the prospectus included in a Registration
----------
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Securities covered by a Shelf Registration Statement, and by all
other amendments and supplements to a prospectus, including post-effective
amendments, and in each case including all material incorporated by reference
therein.
"Purchase Agreement" shall have the meaning set forth in the preamble
------------------
to this Agreement.
<PAGE>
-4-
"Records" shall have the meaning set forth in Section 3(n) hereof.
-------
"Registrable Securities" shall mean each Security and, if issued, each
----------------------
Private Exchange Security until (i) the date on which such Security has been
exchanged by a Person other than a Participating Broker-Dealer for an Exchange
Security in the Exchange Offer, (ii) following the exchange by a Participating
Broker-Dealer in the Exchange Offer of a Security for an Exchange Security, the
date on which such Exchange Security is sold to a purchaser who receives from
such Participating Broker-Dealer on or prior to the date of such sale a copy of
the Prospectus contained in the Exchange Offer Registration Statement, as
amended or supplemented, (iii) the date on which such Security or Private
Exchange Security, as the case may be, has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement, (iv) the date on which such Security or Private Exchange Security, as
the case may be, is eligible for distribution to the public pursuant to Rule
144(k) under the Securities Act (or any similar provision then in force, but not
Rule 144A under the Securities Act), (v) the date such Security or Private
Exchange Security, as the case may be, shall have been otherwise transferred by
the holder thereof and a new Security not bearing a legend restricting further
transfer shall have been delivered by the Company and subsequent disposition of
such Security shall not require registration or qualification under the
Securities Act or any similar state law then in force or (vi) such Security or
Private Exchange Security, as the case may be, ceases to be outstanding.
"Registration Expenses" shall mean any and all expenses incident to
---------------------
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. (the "NASD") registration and filing fees, including,
----
if applicable, the reasonable fees and expenses of any "qualified independent
underwriter" (and its counsel) that is required to be retained by any Initial
Purchaser holding Registrable Securities in accordance with the rules and
regulations of the NASD, (ii) all reasonable fees and expenses incurred in
connection with compliance with state securities or blue sky laws (including
reasonable fees and disbursements of counsel for any underwriters or any Holder
that was an Initial Purchaser in connection with blue sky qualification of any
of the Exchange Securities or Registrable Securities) and compliance with the
rules of the NASD, (iii) all reasonable expenses of any Persons (other than the
Holders or Persons acting on the request of the
<PAGE>
-5-
Holders) in preparing or assisting in preparing, word processing, printing and
distributing any Registration Statement, any Prospectus and any amendments or
supplements thereto, and in preparing or assisting in preparing, printing and
distributing any underwriting agreements and other documents relating to the
performance of and compliance with this Agreement, (iv) all rating agency fees,
(v) the reasonable fees and disbursements of counsel for the Company and of the
independent certified public accountants of the Company, including the expenses
of any "cold comfort" letters required by or incident to such performance and
compliance, (vi) the reasonable fees and expenses of the Trustee, and any
exchange agent or custodian, (vii) any reasonable fees and disbursements of any
underwriter customarily required to be paid by the Company or sellers of
securities and the reasonable fees and expenses of any special experts retained
by the Company in connection with any Registration Statement and (viii) all
reasonable fees of any one counsel designated in writing by the Majority Holders
to act as counsel to the Holders of the Registrable Securities in connection
with a Shelf Registration Statement, but excluding fees of counsel to the
underwriters and underwriting discounts and commissions and transfer taxes, if
any, relating to the sale or disposition of Registrable Securities by a Holder.
"Registration Statement" shall mean any registration statement of the
----------------------
Company which covers any of the Exchange Securities or Registrable Securities
pursuant to the provisions of this Agreement, and all amendments and supplements
to any such Registration Statement, including post-effective amendments, in each
case including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
---
"Securities" shall have the meaning set forth in the preamble to this
----------
Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
--------------
"Shelf Registration" shall mean a registration effected pursuant to
------------------
Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
----------------------------
statement of the Company pursuant to the provisions of Section 2(b) hereof which
covers all of the Registra-
<PAGE>
-6-
ble Securities or all of the Private Exchange Securities, as the case may be, on
an appropriate form under Rule 415 under the Securities Act, or any similar rule
that may be adopted by the SEC, and all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"TIA" shall have the meaning set forth in Section 3(l) hereof.
---
"Trustee" shall mean the trustee with respect to the Securities under
-------
the Indenture.
2. Registration Under the Securities Act.
-------------------------------------
(a) Exchange Offer. To the extent not prohibited by any applicable
--------------
law or applicable SEC policy, the Company shall, for the benefit of the Holders,
at the Company's cost (i) file with the SEC within 90 days after the Closing
Time an Exchange Offer Registration Statement on an appropriate form under the
Securities Act covering the offer by the Company to the Holders to exchange all
of the Registrable Securities (other than Private Exchange Securities) for a
like principal amount of Exchange Securities, (ii) use its best efforts to cause
such Exchange Offer Registration Statement to be declared effective under the
Securities Act by the SEC not later than the date which is 150 days after the
Closing Time, (iii) use its commercially reasonable efforts to have such
Registration Statement remain effective until the closing of the Exchange Offer
and (iv) commence the Exchange Offer and use its best efforts to issue Exchange
Securities in exchange for all Registrable Securities (other than the Private
Exchange Securities) properly tendered prior thereto in the Exchange Offer not
later than 180 days after the date on which the Exchange Offer Registration
Statement was declared effective by the SEC. Upon the effectiveness of the
Exchange Offer Registration Statement, the Company shall promptly commence the
Exchange Offer, it being the objective of such Exchange Offer to enable each
Holder eligible and electing to exchange Registrable Securities (other than
Private Exchange Securities) for Exchange Securities (assuming that such Holder
is not an affiliate of the Company within the meaning of Rule 405 under the
Securities Act and is not a broker-dealer tendering Registrable Securities
acquired directly from the Company for its own account, acquires the Exchange
Securities in the ordinary course of such Holder's business and has no
arrangements or understandings with any Person to participate in the Exchange
Offer for the purpose of dis-
<PAGE>
-7-
tributing (within the meaning of the Securities Act) the Exchange Securities) to
transfer such Exchange Securities from and after their receipt without any
limitations or restrictions under the Securities Act and under state securities
or blue sky laws.
In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
(ii) keep the Exchange Offer open for acceptance for a period of not
less than 20 Business Days after the date notice thereof is mailed to the
Holders (or longer if required by applicable law) (such period referred to
herein as the "Exchange Period");
---------------
(iii) utilize the services of the Depositary for the Exchange Offer;
(iv) permit Holders to withdraw tendered Securities at any time
prior to the close of business, New York time, on the last Business Day of
the Exchange Period, by sending to the institution specified in the notice,
a telegram, telex, facsimile transmission or letter setting forth the name
of such Holder, the principal amount of Securities delivered for exchange,
and a statement that such Holder is withdrawing such Holder's election to
have such Securities exchanged;
(v) notify each Holder that any Security not tendered will remain
outsunder this Agreement (except in the case of the Initial Purchasers and
Participating Broker-Dealers as provided herein); and
(vi) otherwise comply in all respects with all applicable laws
relating to the Exchange Offer.
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Securities acquired by them and having the status of an
unsold allotment in the initial distribution, the Company upon the request of
any Initial Purchaser shall, simultaneously with the delivery of the Exchange
Securities in the Exchange Offer, issue and deliver to such Initial
<PAGE>
-8-
Purchaser in exchange (the "Private Exchange") for the Securities held by such
----------------
Initial Purchaser, a like principal amount of debt securities of the Company
that are identical (except that such securities shall bear appropriate transfer
restrictions) to the Exchange Securities (the "Private Exchange Securities").
---------------------------
The Exchange Securities and the Private Exchange Securities shall be
issued under (i) the Indenture or (ii) an indenture identical to the Indenture
in all material respects and which, in either case, has been qualified under the
TIA and shall provide that the Exchange Securities shall not be subject to the
transfer restrictions set forth in the Indenture. The Indenture or such
indenture shall provide that the Exchange Securities, the Private Exchange
Securities and the Securities shall vote and consent together on all matters as
one class and that none of the Exchange Securities, the Private Exchange
Securities or the Securities will have the right to vote or consent as a
separate class on any matter. The Private Exchange Securities shall be of the
same series as, and the Company shall use its commercially reasonable efforts to
have the Private Exchange Securities bear the same CUSIP number as, the Exchange
Securities.
As soon as practicable after the close of the Exchange Offer and/or
the Private Exchange, as the case may be, the Company shall:
(i) accept for exchange all Securities or portions thereof
tendered and not validly withdrawn pursuant to the Exchange Offer;
(ii) accept for exchange all Securities duly tendered pursuant
to the Private Exchange; and
(iii) deliver, or cause to be delivered, to the Trustee for
cancellation all Securities or portions thereof so accepted for exchange by
the Company, and issue, and cause the Trustee under the Indenture to
promptly authenticate and deliver to each Holder, a new Exchange Security
or Private Exchange Security, as the case may be, equal in principal amount
to the principal amount of the Securities surrendered by such Holder and
accepted for exchange.
To the extent not prohibited by any law or applicable interpretation
of the staff of the SEC, the Company shall use its commercially reasonable
efforts to complete the Exchange Offer as provided above, and shall comply with
the applicable requirements of the Securities Act, the Exchange Act and other
<PAGE>
-9-
applicable laws in connection with the Exchange Offer. The Exchange Offer shall
not be subject to any conditions, other than that the Exchange Offer does not
violate applicable law or any applicable interpretation of the staff of the SEC
and that the exchanging holder shall have delivered a validly completed and
executed letter of transmittal and such other documents required pursuant to
Section 2(a)(i) hereof, including the representations referred to in the next
sentence. Each Holder of Registrable Securities (other than Private Exchange
Securities) who wishes to exchange such Registrable Securities (other than
Private Exchange Securities) for Exchange Securities in the Exchange Offer will
be required to make in writing certain customary representations in connection
therewith, including representations that such Holder is not an affiliate of the
Company within the meaning of Rule 405 under the Securities Act, or if it is
such an affiliate it will comply with registration and prospectus delivery
requirements of the Securities Act to the extent applicable, that any Exchange
Securities to be received by it will be acquired in the ordinary course of
business and that at the time of the commencement of the Exchange Offer it has
no arrangement with any Person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Securities. The Company shall
inform the Initial Purchasers, after consultation with the Trustee and the
Initial Purchasers, of the names and addresses of the Holders to whom the
Exchange Offer is made, and the Initial Purchasers shall have the right to
contact such Holders and otherwise facilitate the tender of Registrable
Securities in the Exchange Offer.
Upon consummation of the Exchange Offer in accordance with this
Section 2(a), the provisions of this Agreement shall continue to apply, mutatis
-------
mutandis, solely with respect to Registrable Securities that are Private
- --------
Exchange Securities and Exchange Securities held by Participating Broker-
Dealers, and the Company shall have no further obligation to register
Registrable Securities (other than Private Exchange Securities) pursuant to
Section 2(b) hereof.
(b) Shelf Registration. To the extent not prohibited by any law or
------------------
applicable SEC policy, in the event that (i) the Company is not permitted to
file the Exchange Offer Registration Statement or to consummate the Exchange
Offer because the Exchange Offer is not permitted by applicable law or SEC
policy, (ii) the Exchange Offer is not for any other reason consummated within
180 days after the Closing Time, (iii) any holder of Securities notifies in
writing the Company within 30 days after the commencement of the Exchange Offer
that (a) due to a change in law or SEC policy it is not entitled to partici-
<PAGE>
-10-
pate in the Exchange Offer, (b) due to a change in law or SEC policy it may not
resell the Exchange Securities acquired by it in the Exchange Offer to the
public without delivering a prospectus and the prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such holder or (c) it is a broker-dealer and owns Securities acquired
directly from the Company or an affiliate of the Company or (iv) the holders of
a majority in aggregate principal amount at maturity of the Securities may not
resell the Exchange Securities acquired by them in the Exchange Offer to the
public without restriction under the Securities Act and without restriction
under applicable blue sky or state securities laws, then the Company shall, at
its cost, file as promptly as practicable after such determination or date, as
the case may be, and, in any event, prior to the later of (A) 60 days after the
Closing Time or (B) 30 days after such filing obligation arises (provided,
--------
however, that if the Company has not consummated the Exchange Offer within 180
- -------
days after the Closing Time, then the Company shall file the Shelf Registration
Statement with the SEC on or prior to the 180th day after the Closing Time,
unless the Company has consummated the Exchange Offer prior to the 180th day
after the Closing Time whereby the Company's obligation to file a Shelf
Registration Statement pursuant to clause (b)(ii) above shall be cancelled,
provided that such cancellation shall not relieve the Company of any obligation
- --------
to pay Additional Interest, if Additional Interest is otherwise due and
payable), a Shelf Registration Statement providing for the sale by the Holders
of all of the Registrable Securities affected thereby, and shall use its
commercially reasonable efforts to cause such Shelf Registration Statement to be
declared effective by the SEC as soon as practicable and, in any event, on or
prior to 60 days after the obligation to file the Shelf Registration Statement
arises. No Holder of Registrable Securities may include any of its Registrable
Securities in any Shelf Registration pursuant to this Agreement unless and until
such Holder furnishes to the Company in writing, within 10 days after receipt of
a request therefor, such information as the Company may, after conferring with
counsel with regard to information relating to Holders that would be required by
the SEC to be included in such Shelf Registration Statement or Prospectus
included therein, reasonably request for inclusion in any Shelf Registration
Statement or Prospectus included therein. Each Holder as to which any Shelf
Registration is being effected agrees to furnish to the Company all information
with respect to such Holder necessary to make any information previously
furnished to the Company by such Holder not materially misleading.
<PAGE>
-11-
The Company agrees to use its best efforts to keep the Shelf
Registration Statement continuously effective, supplemented and amended for a
period of two years (or such shorter period provided for in any amendment to
Rule 144(k) under the Securities Act (or any successor provision other than Rule
144A) upon the expiration of which securities are eligible for distribution to
the public) from the Closing Time or such shorter period that will terminate
when all the Registrable Securities covered by the Shelf Registration Statement
have been sold pursuant thereto (subject to extension pursuant to the last
paragraph of Section 3 hereof) (the "Effectiveness Period"), provided, however,
-------------------- -------- -------
that with respect to the Private Exchange Securities the Company shall only be
obligated to keep the Shelf Registration Statement effective, supplemented and
amended for a period of 60 days (subject to suspension pursuant to paragraph
three of Section 2(a)). The Company shall not permit any securities other than
Registrable Securities to be included in the Shelf Registration. The Company
further agrees, if necessary, to supplement or amend the Shelf Registration
Statement, if required by the rules, regulations or instructions applicable to
the registration form used by the Company for such Shelf Registration Statement
or by the Securities Act or by any other rules and regulations thereunder for
shelf registrations, and the Company agrees to furnish to the Holders of
Registrable Securities copies of any such supplement or amendment promptly after
its being used or filed with the SEC.
Notwithstanding the requirements contained in this Section 2(b),
solely with respect to the Private Exchange Securities, the Company shall have
no obligation to file or effect a Shelf Registration Statement registering such
Private Exchange Securities, if the aggregate principal amount of such Private
Exchange Securities does not exceed $5,000,000.
(c) Expenses. The Company shall pay all Registration Expenses in
--------
connection with the registration pursuant to Section 2(a) or 2(b) hereof.
Except as provided in the preceding sentence, each Holder shall pay all expenses
of its counsel, underwriting discounts and commissions and transfer taxes, if
any, relating to the sale or disposition of such Holder's Registrable Securities
pursuant to the Shelf Registration Statement.
(d) Effective Registration Statement. An Exchange Offer Registration
--------------------------------
Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement
pursuant to Section 2(b) hereof will not be deemed to have become effective
unless it has been declared effective by the SEC; provided, however, that if,
-------- -------
af-
<PAGE>
-12-
ter it has been declared effective, the offering of Registrable Securities
pursuant to a Shelf Registration Statement is interfered with by any stop order,
injunction or other order or requirement of the SEC or any other governmental
agency or court, such Registration Statement will be deemed not to have been
effective during the period of such interference, until the offering of
Registrable Securities may legally resume. The Company will be deemed not to
have used its commercially reasonable efforts to cause the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
to become, or to remain, effective during the requisite period if it voluntarily
takes any action that would result in any such Registration Statement not being
declared effective or in the Holders of Registrable Securities covered thereby
not being able to exchange or offer and sell such Registrable Securities during
that period unless such action is required by applicable law or SEC policy.
Notwithstanding the foregoing, the only remedy available under this Agreement
for the failure of the Company to satisfy the obligations set forth in Sections
2(a), 2(b) and 3 hereof shall be payment by the Company of the Additional
Interest as set forth in Section 2(e) hereof and the remedy of specific
enforcement provided by Section 2(f) hereof.
(e) Additional Interest. (1) If (i) the Company fails to file an
-------------------
Exchange Offer Registration Statement or the Shelf Registration Statement with
respect to the Registrable Securities (other than the Private Exchange
Securities) on or before the date specified herein for such filing, (ii) the
Exchange Offer Registration Statement or the Shelf Registration Statement is not
declared effective by the SEC or prior to the date specified herein for such
effectiveness (the "Effectiveness Target Date"), (iii) the Exchange Offer is
-------------------------
required to be consummated hereunder and the Company fails to issue Exchange
Securities in exchange for all Securities properly tendered and not withdrawn in
the Exchange Offer within 45 days of the Effectiveness Target Date with respect
to the Exchange Offer Registration Statement, or (iv) the Exchange Offer
Registration Statement or the Shelf Registration Statement required to be filed
and declared effective hereunder is declared effective but thereafter ceases to
be effective or usable in connection with the Exchange Offer or resales of
Securities, as the case may be, during the periods specified herein (each such
event referred to in clauses (i) through (iv) above, a "Registration Default"),
--------------------
then the interest rate borne by the Registrable Securities (other than the
Private Exchange Securities) as to which the Registration Default exists shall
be increased (the "Additional Interest"), with respect to the first 90-day
-------------------
period (or portion thereof) while a Registration Default
<PAGE>
-13-
is continuing immediately following the occurrence of such Registration Default,
by 0.25% per annum, such interest rate increasing by an additional 0.25 % per
annum at the beginning of each subsequent 90-day period (or portion thereof)
while a Registration Default is continuing until all Registration Defaults have
been cured, up to a maximum rate of Additional Interest of 1.00% per annum. Upon
(w) the filing the filing of the Exchange Offer Registration Statement or the
Shelf Registration Statement, as the case may be, required hereunder (in the
case of clause (i) of the preceding sentence), (x) the effectiveness of the
Exchange Offer Registration Statement or the Shelf Registration Statement, as
the case may be, required hereunder (in the case of clause (ii) of the preceding
sentence), (y) the issuance of Exchange Securities in exchange for all
Securities (other than the Private Exchange Securities) properly tendered and
not withdrawn in the Exchange Offer (in the case of clause (iii) of the
preceding sentence) or (z) the effectiveness of the Exchange Offer Registration
Statement or the Shelf Registration Statement, as the case may be, required
hereunder which had ceased to be effective (in the case of clause (iv) of the
preceding sentence), Additional Interest as a result of the Registration Default
described in such clause shall cease to accrue (but any accrued amount shall be
payable) and the interest rate on the Securities shall revert to the original
rate if no other Registration Default has occurred and is continuing.
The Company shall notify the Trustee within three Business Days after
each and every date on which an event occurs in respect of which Additional
Interest is required to be paid (an "Event Date"). Additional Interest shall be
----------
paid by depositing with the Trustee, in trust, for the benefit of the Holders of
Securities (other than Private Exchange Securities) on or before the applicable
semiannual interest payment date, immediately available funds in sums sufficient
to pay the Additional Interest then due. The Additional Interest due shall be
payable on each interest payment date to the record Holder of Securities
entitled to receive the interest payment to be paid on such date as set forth in
the Indenture. Each obligation to pay Additional Interest shall be deemed to
accrue from and including the day following the applicable Event Date.
Notwithstanding anything in the foregoing to the contrary, the Company
shall have no obligation to pay Additional Interest for a period not in excess
of 60 days in any twelve month period (the "Blackout Period") in respect of
Registrable Securities owned by an Initial Purchaser, if the Board of Directors
of the Company determines in its reasonable good faith judgment that the
registration and distribution of such Regis-
<PAGE>
-14-
trable Securities covered by the Shelf Registration Statement would materially
interfere with any pending acquisition or corporate reorganization or other
material transaction involving the Company or any of its Subsidiaries or would
require disclosure of any other material corporate development that the Company
is not otherwise required to disclose, which disclosure would materially
adversely affect the Company. The Company will promptly give each Initial
Purchaser written notice of such determination and an approximation of the
period of the anticipated delay. Each Holder agrees to cease all disposition
efforts under such Shelf Registration Statement with respect to Registrable
Securities held up by such Initial Purchaser upon receipt of notice of the
beginning of any Blackout Period. The Company shall provide prompt written
notice to the Initial Purchaser of the end of each Blackout Period.
(f) Specific Enforcement. Without limiting the remedies available to
--------------------
the Initial Purchasers and the Holders, the Company acknowledges that any
failure by the Company to comply with its obligations under Section 2(a) and
Section 2(b) hereof may result in material irreparable injury to the Initial
Purchasers or the Holders for which there is no adequate remedy at law, that it
would not be possible to measure damages for such injuries precisely and that,
in the event of any such failure, the Initial Purchasers or any Holder may
obtain such relief as may be required to specifically enforce the Company's
obligations under Section 2(a) and Section 2(b) hereof.
3. Registration Procedures. In connection with the obligations of
-----------------------
the Company with respect to the Registration Statements pursuant to Sections
2(a) and 2(b) hereof, the Company shall:
(a) prepare and file with the SEC a Registration Statement or
Registration Statements as prescribed by Sections 2(a) and 2(b) hereof
within the relevant time period specified in Section 2 hereof on the
appropriate form under the Securities Act, which form (i) shall be selected
by the Company, (ii) shall, in the case of a Shelf Registration, be
available for the sale of the Registrable Securities by the selling Holders
thereof and (iii) shall comply as to form in all material respects with the
requirements of the applicable form and include all financial statements
required by the SEC to be filed therewith; and use their commercially
reasonable efforts to cause such Registration Statement to become effective
and remain effective in accordance with Section 2 hereof; provided,
--------
however, that if (1) such filing is pursuant to Section
-------
<PAGE>
-15-
2(b), or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2(a) is required to be delivered under
the Securities Act by any Participating Broker Dealer who seeks to sell
Exchange Securities, before filing any Registration Statement or Prospectus
or any amendments or supplements thereto, the Company shall furnish to and
afford the Holders of the Registrable Securities and each such
Participating Broker-Dealer, as the case may be, covered by such
Registration Statement, their counsel and the managing underwriters, if
any, a reasonable opportunity to review copies of all such documents
(including copies of any documents to be incorporated by reference therein
and all exhibits thereto) proposed to be filed (at least 5 Business Days
prior to such filing). The Company shall not file any Registration
Statement or Prospectus or any amendments or supplements thereto in respect
of which the Holders must be afforded an opportunity to review prior to the
filing of such document if the Majority Holders or such Participating
Broker-Dealer, as the case may be, their counsel or the managing
underwriters, if any, shall reasonably object;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement effective for the Effectiveness Period or the
Applicable Period, as the case may be; and cause each Prospectus to be
supplemented by any required prospectus supplement and as so supplemented
to be filed pursuant to Rule 424 (or any similar provision then in force)
under the Securities Act, and comply with the provisions of the Securities
Act, the Exchange Act and the rules and regulations promulgated thereunder
applicable to it with respect to the disposition of all securities covered
by each Registration Statement during the Effectiveness Period or the
Applicable Period, as the case may be, in accordance with the intended
method or methods of distribution by the selling Holders thereof described
in this Agreement (including sales by any Participating Broker-Dealer);
(c) in the case of a Shelf Registration, (i) notify each Holder of
Registrable Securities, at least three Business Days prior to filing, that
a Shelf Registration Statement with respect to the Registrable Securities
is being filed and advising such Holder that the distribution of
Registrable Securities will be made in accordance with the method selected
by the Majority Holders; and (ii) furnish to each Holder of Registrable
Securities and to each
<PAGE>
-16-
underwriter of an underwritten offering of Registrable Securities, if any,
without charge, as many copies of each Prospectus, including each
preliminary prospectus, and any amendment or supplement thereto and such
other documents as such Holder or underwriter may reasonably request, in
order to facilitate the public sale or other disposition of the Registrable
Securities; and (iii) subject to the last paragraph of Section 3 hereof,
hereby consent to the use of the Prospectus or any amendment or supplement
thereto by each of the selling Holders of Registrable Securities in
connection with the offering and sale of the Registrable Securities covered
by the Prospectus or any amendment or supplement thereto;
(d) in the case of a Shelf Registration, use its best efforts to
register or qualify the Registrable Securities under all applicable state
securities or "blue sky" laws of such jurisdictions by the time the
applicable Registration Statement is declared effective by the SEC as any
Holder of Registrable Securities covered by a Registration Statement and
each underwriter of an underwritten offering of Registrable Securities
shall reasonably request in advance of such date of effectiveness, and do
any and all other acts and things which may be reasonably necessary or
advisable to enable such Holder and underwriter to consummate the
disposition in each such jurisdiction of such Registrable Securities owned
by such Holder; provided, however, that the Company shall not be required
-------- -------
to (i) qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (ii) file any general consent to service of process or
(iii) subject itself to taxation in any such jurisdiction if it is not so
subject;
(e) in the case of (1) a Shelf Registration or (2) Participating
Broker-Dealers who have notified the Company that they will be utilizing
the Prospectus contained in the Exchange Offer Registration Statement as
provided in Section 3(t) hereof, notify each Holder of Registrable
Securities, or such Participating Broker-Dealers, as the case may be, their
counsel and the managing underwriters, if any, promptly and confirm such
notice in writing (i) when a Registration Statement has become effective
and when any post-effective amendments and supplements thereto become
effective, (ii) of any request by the SEC or any state securities authority
for amendments and supplements to a Registration Statement or Prospectus or
for addi-
<PAGE>
-17-
tional information after the Registration Statement has become effective,
(iii) of the issuance by the SEC or any state securities authority of any
stop order suspending the effectiveness of, a Registration Statement or the
initiation of any proceedings for that purpose, (iv) if the Company
receives any notification with respect to the suspension of the
qualification of the Registrable Securities or the Exchange Securities to
be sold by any Participating Broker-Dealer for offer or sale in any
jurisdiction or the initiation of any proceeding for such purpose, (v) of
the happening of any event or the failure of any event to occur or the
discovery of any facts or otherwise during the Effectiveness Period or
Applicable Period, as the case may be, which makes any statement made in a
Registration Statement or the related Prospectus untrue in any material
respect or which causes such Registration Statement or Prospectus to omit
to state a material fact necessary to make the statements therein (in the
case of the Prospectus, in the light of the circumstances under which they
were made) not misleading and (vi) the Company's reasonable determination
that a post-effective amendment to the Registration Statement would be
appropriate;
(f) take reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement as soon as
practicable;
(g) in the case of a Shelf Registration, furnish to each Holder of
Registrable Securities, without charge, at least one conformed copy of each
Registration Statement relating to such Shelf Registration and any post-
effective amendment thereto (without documents incorporated therein by
reference or exhibits thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate with the selling
Holders of Registrable Securities to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and
not bearing any restrictive legends; and cause such Registrable Securities
to be in such denominations (consistent with the provisions of the
Indenture) and registered in such names as the selling Holders or the
underwriters may reasonably request at least two Business Days prior to the
closing of any sale of Registrable Securities;
(i) in the case of a Shelf Registration or an Exchange Offer
Registration, upon the occurrence of any circumstance contemplated by
Section 3(e)(ii), 3(e)(iii),
<PAGE>
-18-
3(e)(v), 3(e)(vi) or 3(e)(vii) hereof, use its best efforts to prepare a
supplement or post-effective amendment to a Registration Statement or the
related Prospectus or any document incorporated therein by reference or
file any other required document (subject to Section 3(a)) so that, as
thereafter delivered to the purchasers of the Registrable Securities or
Exchange Securities to whom a Prospectus is being delivered by a
Participating Broker-Dealer who has notified the Company that it will be
utilizing the Prospectus contained in the Exchange Offer Registration
Statement as provided in Section 3(t) hereof, such Prospectus will not
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and to notify
each Holder or Participating Broker-Dealer, as the case may be, to suspend
use of the Prospectus as promptly as practicable after the occurrence of
such an event, and each Holder and Participating Broker-Dealer hereby
agrees to suspend use of the Prospectus until the Company has amended or
supplemented the Prospectus to correct such misstatement or omission;
(j) in the case of a Shelf Registration, upon the filing of any
document which is to be incorporated by reference into a Registration
Statement or a Prospectus after the initial filing of a Registration
Statement, provide a reasonable number of copies of such document to the
Holders;
(k) obtain a CUSIP number for all Exchange Securities or Registrable
Securities, as the case may be, not later than the effective date of a
Registration Statement, and provide the Trustee with certificates for the
Exchange Securities or the Registrable Securities, as the case may be, in a
form eligible for deposit with the Depositary;
(l) cause the Indenture or the indenture provided for in Section 2(a)
to be qualified under the TIA in connection with the registration of the
Exchange Securities or Registrable Securities, as the case may be,
cooperate with the Trustee or any trustee under such indenture and the
Holders to effect such changes to the Indenture or such indenture as may be
required for the Indenture or such indenture to be so qualified in
accordance with the terms of the TIA and execute, and use their
commercially reasonable efforts to cause the Trustee or such trustee to
execute, all documents as may be required to effect such
<PAGE>
-19-
changes, and all other forms and documents required to be filed with the
SEC to enable the Indenture or such indenture to be so qualified in a
timely manner;
(m) in the case of a Shelf Registration, enter into such agreements
(including underwriting agreements) as are customary in underwritten
offerings and take all such other appropriate actions as are reasonably
requested in order to expedite or facilitate the registration or the
disposition of such Registrable Securities, and in such connection, whether
or not an underwriting agreement is entered into and whether or not the
registration is an underwritten registration, at the time of effectiveness
of such Shelf Registration: (i) make such representations and warranties to
Holders of such Registrable Securities and the underwriters (if any), with
respect to the business of the Company and its subsidiaries as then
conducted or proposed to be conducted and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be incorporated
by reference therein, in each case, in form and substance similar to the
representations and warranties given by the Company in the Purchase
Agreement and reasonably satisfactory to the managing underwriters (if any)
and the Holders of a majority in principal amount of the Registrable
Securities being sold, and confirm the same if and when requested; (ii)
obtain opinions of counsel to the Company and updates thereof, if
appropriate, in form and substance similar to the opinion given by counsel
to the Company pursuant to the Purchase Agreement and reasonably
satisfactory to the managing underwriters (if any) and the Holders of a
majority in principal amount of the Registrable Securities being sold,
addressed to each selling Holder and the underwriters (if any); (iii)
obtain "cold comfort" letters and updates thereof in form and substance
reasonably satisfactory to the managing underwriters (if any) from the
independent certified public accountants of the Company (and, if necessary,
any other independent certified public accountants of any subsidiary of the
Company or of any business acquired by the Company for which financial
statements and financial data are, or are required to be, included in the
Registration Statement), addressed to the selling Holders of Registrable
Securities (if appropriate) and to each of the underwriters (if any), such
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
underwritten offerings and such other matters as reasonably requested by
such selling Holders and underwriters; and (iv) if an under-
<PAGE>
-20-
writing agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable than those set forth in Section
4 hereof (or such other less favorable provisions and procedures acceptable
to Holders of a majority in aggregate principal amount of Registrable
Securities covered by such Registration Statement and the managing
underwriters or agents) with respect to all parties to be indemnified
pursuant to said Section (including, without limitation, such underwriters
and selling Holders). The above shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder;
(n) if (1) a Shelf Registration is filed pursuant to Section 2(b) or
(2) a Prospectus contained in an Exchange Offer Registration Statement
filed pursuant to Section 2(a) is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, make available for
inspection by any selling Holder of such Registrable Securities being sold,
or each such Participating Broker-Dealer, as the case may be, any
underwriter participating in any such disposition of Registrable
Securities, if any, and any attorney, accountant or other agent retained by
any such selling Holder or each such Participating Broker-Dealer, as the
case may be, or underwriter (collectively, the "Inspectors"), at the
----------
offices where normally kept, during reasonable business hours, all
financial and other records, pertinent corporate documents and properties
of the Company and its subsidiaries (collectively, the "Records") as shall
-------
be reasonably necessary to enable them to exercise any applicable due
diligence responsibilities, and cause the officers, directors and employees
of the Company and its subsidiaries to supply all information in each case
reasonably requested by any such Inspector in connection with such
Registration Statement. Records which the Company determines to be
confidential or any Records which it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is necessary in connection with the Inspectors'
assertion of any claims or actions or with their establishment of any
defense in an action then pending before a court of competent jurisdiction,
(ii) release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction or (iii) the information in
such Records has been made generally available to the public. Each selling
Holder of such Registrable Securities and
<PAGE>
-21-
each such Participating Broker-Dealer will be required to agree that
information obtained by it as a result of such inspections shall be deemed
confidential and shall not be used by it as the basis for any market
transactions in the securities of the Company unless and until such is made
generally available to the public. Each selling Holder of such Registrable
Securities and each such Participating Broker-Dealer will be required to
further agree that it will, prior to disclosure of such Records pursuant to
clause (i) or (ii) above, give prompt notice to the Company and allow the
Company at its expense to undertake appropriate action to prevent
disclosure to the public of the Records deemed confidential;
(o) comply with all applicable rules and regulations of the SEC and
make generally available to their securityholders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder (or any similar rule promulgated under the Securities Act)
no later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Securities
are sold to underwriters in a firm commitment or best efforts underwritten
offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Company
after the effective date of a Registration Statement, which statements
shall cover said 12-month periods;
(p) upon consummation of the Exchange Offer or the Private Exchange,
obtain an opinion of counsel to the Company addressed to the Trustee for
the benefit of all Holders of Registrable Securities participating in the
Exchange Offer or the Private Exchange, as the case may be, and which
includes an opinion that (i) the Company has duly authorized, executed and
delivered the Exchange Securities and Private Exchange Securities and the
Indenture, and (ii) each of the Exchange Securities or the Private Exchange
Securities, as the case may be, and the Indenture constitute a legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its respective terms (in each case, with customary
exceptions);
(q) if the Exchange Offer or the Private Exchange is to be
consummated, upon delivery of the Registrable Securities by Holders to the
Company (or to such other Person
<PAGE>
-22-
as directed by the Company) in exchange for the Exchange Securities or the
Private Exchange Securities, as the case may be, the Company shall mark, or
cause to be marked, on such Registrable Securities delivered by such
Holders that such Registrable Securities are being cancelled in exchange
for the Exchange Securities or the Private Exchange Securities, as the case
may be; in no event shall such Registrable Securities be marked as paid or
otherwise satisfied;
(r) cooperate with each seller of Registrable Securities covered by
any Registration Statement and each underwriter, if any, participating in
the disposition of such Registrable Securities and their respective counsel
in connection with any filings required to be made with the NASD;
(s) use its commercially reasonable efforts to take all other steps
necessary to effect the registration of the Registrable Securities covered
by a Registration Statement contemplated hereby; and
(t) (A) in the case of the Exchange Offer Registration Statement (i)
include in the Exchange Offer Registration Statement a section entitled
"Plan of Distribution," which section shall be reasonably acceptable to the
Initial Purchasers or another representative of the Participating Broker
Dealers, and which shall contain a summary statement of the positions taken
or policies made by the staff of the SEC with respect to the potential
"under-writer" status of any broker-dealer (a "Participating Broker-
--------------------
Dealer") that holds Registrable Securities acquired for its own account as
------
a result of market-making activities or other trading activities and that
will be the beneficial owner (as defined in Rule 13d-3 under the Exchange
Act) of Exchange Securities to be received by such broker-dealer in the
Exchange Offer, whether such positions or policies have been publicly
disseminated by the staff of the SEC or such positions or policies, in the
reasonable judgment of the Initial Purchasers or such other representative,
represent the prevailing views of the staff of the SEC, including a
statement that any such broker-dealer who receives Exchange Securities for
Registrable Securities pursuant to the Exchange Offer may be deemed a
statutory underwriter and must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Securities, (ii) furnish to each Participating Broker-Dealer who
has deliv-
<PAGE>
-23-
ered to the Company the notice referred to in Section 3(e), without charge,
as many copies of each Prospectus included in the Exchange Offer
Registration Statement, including any preliminary prospectus, and any
amendment or supplement thereto, as such Participating Broker-Dealer may
reasonably request, (iii) hereby consent to the use of the Prospectus
forming part of the Exchange Offer Registration Statement or any amendment
or supplement thereto, by any Person subject to the prospectus delivery
requirements of the SEC, including all Participating Broker-Dealers, in
connection with the sale or transfer of the Exchange Securities covered by
the Prospectus or any amendment or supplement thereto, (iv) use its
commercially reasonable efforts to keep the Exchange Offer Registration
Statement effective and to amend and supplement the Prospectus contained
therein in order to permit such Prospectus to be lawfully delivered by all
Persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such Persons must comply with such
requirements in order to resell the Exchange Securities; provided, however,
-------- -------
that such period shall not be required to exceed 210 days (or such longer
period if extended pursuant to the last sentence of Section 3 hereof) (the
"Applicable Period"), and (v) include in the transmittal letter or similar
-----------------
documentation to be executed by an exchange offeree in order to participate
in the Exchange Offer (x) the following provision:
"If the exchange offeree is a broker-dealer holding Registrable
Securities acquired for its own account as a result of market-
making activities or other trading activities, it will deliver a
prospectus meeting the requirements of the Securities Act in
connection with any resale of Exchange Securities received in
respect of such Registrable Securities pursuant to the Exchange
Offer";
and (y) a statement to the effect that by a Participating Broker-Dealer
making the acknowledgment described in clause (x) and by delivering a
Prospectus in connection with the exchange of Registrable Securities, such
Participating Broker-Dealer will not be deemed to admit that it is an
underwriter within the meaning of the Securities Act; and
(B) in the case of any Exchange Offer Registration Statement, the
Company agrees to deliver to the Initial
<PAGE>
-24-
Purchasers or to Participating Broker-Dealers upon consummation of the
Exchange Offer (i) an opinion of counsel substantially in the form attached
hereto as Exhibit A, and (ii) an officers' certificate containing
---------
certifications substantially similar to those set forth in Section 5(e) of
the Purchase Agreement and such additional certifications as are
customarily delivered in a public offering of debt securities.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding such seller and the proposed distribution of such
Registrable Securities, as the Company may from time to time reasonably request
in writing. The Company may exclude from such registration the Registrable
Securities of any seller who fails to furnish any such information which the
Company reasonably requires in order for the Shelf Registration Statement to
comply with applicable law and SEC policy within a reasonable time after
receiving such request (without the accrual of Additional Interest on such
excluded Registrable Securities) and shall be under no obligation to include the
Registrable Securities of such seller in the Shelf Registration Statement or to
compensate any such seller for any lost income, interest or other opportunity
foregone, or any liability incurred, as a result of the Company's decision to
exclude such seller.
In the case of (1) a Shelf Registration Statement or (2) Participating
Broker-Dealers who have notified the Company that they will be utilizing the
Prospectus contained in the Exchange Offer Registration Statement as provided in
Section 3(t) hereof that are seeking to sell Exchange Securities and are
required to deliver Prospectuses, each Holder or Participating Broker-Dealer, as
the case may be, agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(e)(ii), 3(e)(iii),
3(e)(v), 3(e)(vi) or 3(e)(vii) hereof, such Holder or Participating
Broker-Dealer, as the case may be, will forthwith discontinue disposition of
Registrable Securities pursuant to a Registration Statement or Exchange
Securities, as the case may be, until such Holder's or Participating
Broker-Dealer's, as the case may be, receipt of the copies of the supplemented
or amended Prospectus contemplated by Section 3(i) hereof or until it is advised
in writing (the "Advice") by the Company that the use of the applicable
------
Prospectus may be resumed, and, if so directed by the Company, such Holder or
Participating Broker-
<PAGE>
-25-
Dealer's, as the case may be, will deliver to the Company (at the Company's
expense) all copies in such Holder's or Participating Broker-Dealer's, as the
case may be, possession, other than permanent file copies then in such Holder's
or Participating Broker-Dealer's, as the case may be, possession, of the
Prospectus covering such Registrable Securities or Exchange Securities, as the
case may be, current at the time of receipt of such notice. If the Company
shall give any such notice to suspend the disposition of Registrable Securities
or Exchange Securities, as the case may be, pursuant to a Registration
Statement, (x) the Company shall use its commercially reasonable efforts to file
and have declared effective (if an amendment) as soon as practicable an
amendment or supplement to the Registration Statement and, in the case of an
amendment, have such amendment declared effective as soon as practicable;
provided, however, that the Company may postpone the filing of such amendment or
- -------- -------
supplement for a period not to extend beyond the earlier to occur of (I) 30 days
after the date of the determination of the Board of Directors referred to below
and (II) the day after the cessation of the circumstances described below upon
which such postponement is based, if the Members of the Company determine
reasonably and in good faith that such filing would require disclosure of
material information which the Company have a bona fide purpose for preserving
as confidential; provided, further, however, that the Company shall be entitled
-------- ------- -------
to such postponement only once during any 12-month period and the exercise by
the Company of its rights under this provision shall not relieve the Company of
any obligation to pay Additional Interest under Section 2(e); and (y) the
Company shall extend the period during which such Registration Statement shall
be maintained effective pursuant to this Agreement by the number of days in the
period from and including the date of the giving of such notice to and including
the date when the Company shall have made available to the Holders or
Participating Broker-Dealers, as the case may be, (x) copies of the supplemented
or amended Prospectus necessary to resume such dispositions or (y) the Advice.
4. Indemnification and Contribution. (a) The Company agrees to
--------------------------------
indemnify and hold harmless each Initial Purchaser, each Holder, each
Participating Broker-Dealer, each underwriter who participates in an offering of
Registrable Securities, their respective affiliates, each Person, if any, who
controls any of such parties within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act and each of their respective directors,
officers, employees and agents, as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, joint or several, as incurred,
<PAGE>
-26-
arising out of any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement (or any amendment or
supplement thereto), covering Registrable Securities or Exchange
Securities, including all documents incorporated therein by reference, or
the omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus (or any amendment
or supplement thereto) or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, joint or several, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, or any investigation
or proceeding by any court or governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue statement
or omission, or any such alleged untrue statement or omission, if such
settlement is effected with the prior written consent of the Company; and
(iii) against any and all expenses whatsoever, as incurred
(including reasonable fees and disbursements of counsel chosen by the
Initial Purchasers, such Holder, such Participating Broker-Dealer or any
underwriter (except to the extent otherwise expressly provided in Section
4(c) hereof)), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any court or
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense
is not paid under subparagraph (i) or (ii) of this Section 4(a);
provided, however, that this indemnity does not apply to any loss, liability,
- -------- -------
claim, damage or expense to the extent arising out of an untrue statement or
omission or alleged untrue statement or omission (i) made in reliance upon and
in conformity with information furnished in writing to the Company by such
Initial Purchaser, such Holder, such Participating Broker-Dealer or any
underwriter with respect to such Initial Purchaser, Holder, Participating
Broker-Dealer or underwriter, as the case may be, expressly for use in the
Registration State-
<PAGE>
-27-
ment (or any amendment or supplement thereto) or in any Prospectus (or any
amendment or supplement thereto) or (ii) contained in any preliminary prospectus
if such Initial Purchaser, such Holder, such Participating Broker-Dealer or such
underwriter failed to send or deliver a copy of the Prospectus (in the form it
was first provided to such parties for confirmation of sales or as amended or
supplemented pursuant to Section 3(i) prior to such confirmation of sales) to
the Person asserting such losses, claims, damages or liabilities on or prior to
the delivery of written confirmation of any sale of securities covered thereby
to such Person in any case where such delivery is required by the Securities Act
and a court of competent jurisdiction in a judgment not subject to appeal or
final review shall have determined that such Prospectus would have corrected
such untrue statement or omission. Any amounts advanced by the Company to an
indemnified party pursuant to this Section 4 as a result of such losses shall be
returned to the Company if it shall be finally determined by such a court in a
judgment not subject to appeal or final review that such indemnified party was
not entitled to indemnification by the Company.
(b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Company, each Initial Purchaser, each underwriter who
participates in an offering of Registrable Securities and the other selling
Holders and each of their respective directors, officers (including each officer
of the Company who signed the Registration Statement), employees and agents and
each Person, if any, who controls the Company, any Initial Purchaser, any
underwriter or any other selling Holder within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, against any and all loss, liability,
claim, damage and expense whatsoever described in the indemnity contained in
Section 4(a) hereof, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto) or in any Prospectus (or any amendment or
supplement thereto) in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such selling Holder with respect to
such Holder expressly for use in the Registration Statement (or any supplement
thereto), or in any such Prospectus (or any amendment thereto); provided,
--------
however, that, in the case of the Shelf Registration Statement, no such Holder
- -------
shall be liable for any claims hereunder in excess of the amount of net proceeds
received by such Holder from the sale or other disposition of Registrable
Securities pursuant to the Shelf Registration Statement.
<PAGE>
-28-
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure to
so notify an indemnifying party shall not relieve such indemnifying party from
any liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relieve it from any liability which it
may have otherwise than on account of this indemnity agreement. In the case of
parties indemnified pursuant to Section 4(a) above, counsel to the indemnified
parties shall be selected by Merrill Lynch, and, in the case of parties
indemnified pursuant to Section 4(b) above, counsel to the indemnified parties
shall be selected by the Company. An indemnifying party may participate at its
own expense in the defense of any such action; provided, however, that counsel
-------- -------
to the indemnifying party shall not (except with the consent of the indemnified
party) also be counsel to the indemnified party. If it so elects within a
reasonable time after receipt of such notice, an indemnifying party, jointly
with any other indemnifying parties receiving such notice, may assume the
defense of such action with counsel chosen by it and approved by the indemnified
parties defendant in such action, unless such indemnified parties reasonably
object to such assumption on the ground that there may be legal defenses
available to them which are different from or in addition to those available to
such indemnifying party. If an indemnifying party assumes the defense of such
action, the indemnifying parties shall not be liable for any fees and expenses
of counsel for the indemnified parties incurred thereafter in connection with
such action. In no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to any local counsel) separate
from their own counsel for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances. No indemnifying
party shall, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 4 (whether or
not the indemnified parties are actual or potential parties thereto), unless
such settlement, compromise or consent (i) includes an unconditional release of
each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of
<PAGE>
-29-
fault, culpability or a failure to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for reasonable fees and
expenses of counsel, such indemnifying party agrees that it shall be liable for
any settlement of the nature contemplated by Section 4(a)(ii) effected without
its written consent if (i) such settlement is entered into more than 45 days
after receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
Notwithstanding the immediately preceding sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
shall not be liable for any settlement of the nature contemplated by Section
7(a)(ii) effected without its prior written consent if such indemnifying party
(i) reimburses such indemnified party in accordance with such request to the
extent it considers such request to be reasonable and (ii) provides written
notice to the indemnified party substantiating the unpaid balance as
unreasonable, in each case prior to the date of such settlement.
(e) In order to provide for just and equitable contribution in
circumstances under which any of the indemnity provisions set forth in this
Section 4 is for any reason held to be unavailable to the indemnified parties
although applicable in accordance with its terms, the Company and the Holders
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement incurred by the
Company, the Initial Purchasers, the Holders and the Participating Broker-
Dealers; provided, however, that no Person guilty of fraudulent
-------- -------
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person that was not guilty of such
fraudulent misrepresentation. As between the Company and the Holders, such
parties shall contribute to such aggregate losses, liabilities, claims, damages
and expenses of the nature contemplated by such indemnity agreement in such
proportion as shall be appropriate to reflect the relative fault of the Company
on the one hand and of the Holder of Registrable Securities, the Participating
Broker-Dealer or Initial Purchaser, as the case may be, on the other hand in
connection with the statements or omissions which resulted in such losses,
<PAGE>
-30-
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative fault of the Company on the one hand and the Holder of
Registrable Securities, the Participating Broker-Dealer or the Initial
Purchasers, as the case may be, on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, or by the Holder of Registrable
Securities, the Participating Broker-Dealer or the Initial Purchasers, as the
case may be, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company and the Holders of the Registrable Securities and the
Initial Purchasers agree that it would not be just and equitable if contribution
pursuant to this Section 4 were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this Section 4.
For purposes of this Section 4, each affiliate of any Initial
Purchaser or Holder, and each director, officer, employee, agent and Person, if
any, who controls a Holder of Registrable Securities, an Initial Purchaser or a
Participating Broker-Dealer within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act shall have the same rights to contribution
as such other Person, and each member or director of the Company, each officer
of the Company who signed the Registration Statement, and each Person, if any,
who controls the Company within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act shall have the same rights to contribution as
the Company.
5. Participation in Underwritten Registrations. No Holder may
-------------------------------------------
participate in any underwritten registration hereunder unless such Holder (a)
agrees to sell such Holder's Registrable Securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all reasonable questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements. The
Company shall be under no obligation to compensate any Holder for lost income,
interest or other opportunity foregone, or other liability incurred, as a result
of the Company's decision to ex-
<PAGE>
-31-
clude such Holder from any underwritten registration if such Holder has not
complied with the provisions of this Section 5 in all material respects
following 5 business days' written notice of non-compliance and the Company's
decision to exclude such Holder.
6. Selection of Underwriters. The Holders of Registrable Securities
-------------------------
covered by the Shelf Registration Statement who desire to do so may sell the
securities covered by such Shelf Registration in an underwritten offering. In
any such underwritten offering, the underwriter or underwriters and manager or
managers that will administer the offering will be selected by the Holders of a
majority in aggregate principal amount of the Registrable Securities included in
such offering; provided, however, that such underwriters and managers must be
-------- -------
reasonably satisfactory to the Company.
7. Miscellaneous.
-------------
(a) Rule 144 and Rule 144A. For so long as the Company is subject to
----------------------
the reporting requirements of Section 13 or 15 of the Exchange Act and any
Registrable Securities remain outstanding, the Company covenants that it will
file the reports required to be filed by them under the Securities Act and
Section 13(a) or 15(d) of the Exchange Act and the rules and regulations adopted
by the SEC thereunder, that if it ceases to be so required to file such reports,
it will upon the request of any Holder of Registrable Securities (i) make
publicly available such information as is necessary to permit sales pursuant to
Rule 144 under the Securities Act, (ii) deliver such information to a
prospective purchaser as is necessary to permit sales pursuant to Rule 144A
under the Securities Act, and (iii) take such further action that is reasonable
in the circumstances, in each case, to the extent required from time to time to
enable such Holder to sell its Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by (a) Rule
144 under the Securities Act, as such rule may be amended from time to time, (b)
Rule 144A under the Securities Act, as such rule may be amended from time to
time, or (c) any similar rules or regulations hereafter adopted by the SEC.
Upon the reasonable request of any Holder of Registrable Securities, the Company
will deliver to such Holder a written statement as to whether it has complied
with such requirements.
(b) No Inconsistent Agreements. The Company has not entered into nor
--------------------------
will the Company on or after the date of this Agreement enter into any agreement
which is inconsistent with
<PAGE>
-32-
the rights granted to the Holders of Registrable Securities in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's other issued and outstanding
securities under any such agreements.
(c) Amendments and Waivers. The provisions of this Agreement,
----------------------
including provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, otherwise than with the prior written consent of the Company
and the Majority Holders; provided, however, that no amendment, modification, or
-------- -------
supplement or waiver or consent to the departure with respect to the provisions
of Section 4 hereof shall be effective as against any Holder of Registrable
Securities unless consented to in writing by such Holder of Registrable
Securities.
(d) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section 7(e), which address initially is, with respect to the Initial
Purchasers, the address set forth in the Purchase Agreement; and (ii) if to the
Company, initially at the Company's address set forth in the Purchase Agreement
and thereafter at such other address, notice of which is given in accordance
with the provisions of this Section 7(e).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the Person giving the same to the Trustee, at the
address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors, assigns and transferees of the
Initial Purchasers, including,
<PAGE>
-33-
without limitation and without the need for an express assignment, subsequent
Holders; provided, however, that nothing herein shall be deemed to permit any
-------- -------
assignment, transfer or other disposition of Registrable Securities in violation
of the terms of the Purchase Agreement or the Indenture. If any transferee of
any Holder shall acquire Registrable Securities, in any manner, whether by
operation of law or otherwise, such Registrable Securities shall be held subject
to all of the terms of this Agreement, and by taking and holding such
Registrable Securities, such Person shall be conclusively deemed to have agreed
to be bound by and to perform all of the terms and provisions of this Agreement
and such Person shall be entitled to receive the benefits hereof.
(f) Third Party Beneficiary. Each of the Initial Purchasers shall be
-----------------------
a third party beneficiary of the agreements made hereunder between the Company
on the one hand, and the Holders, on the other hand, and shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
ANY PROVISIONS RELATING TO CONFLICTS OF LAWS. Specified times of day refer to
New York City time.
(j) Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(k) Securities Held by the Company or Any of Its Affiliates.
-------------------------------------------------------
Whenever the consent or approval of Holders of a specified percentage of
Registrable Securities is required
<PAGE>
-34-
hereunder, Registrable Securities held by the Company or any of their affiliates
(as such term is defined in Rule 405 under the Securities Act) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
[Signature Pages Follow]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
FOX KIDS WORLDWIDE, INC.
By: /s/ Mel Woods
______________________________
Name: Mel Woods
Title: President
Confirmed and accepted as of
the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
CITICORP SECURITIES, INC.
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
MORGAN STANLEY & CO.
By: MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
By: /s/ David Weil
______________________________
Name: David Weil
Title: Vice President
<PAGE>
Exhibit A
---------
Form of Opinion of Counsel
--------------------------
1. Each of the Exchange Offer Registration Statement and the
Prospectus (other than the financial statements, notes or schedules thereto and
other financial and statistical information and supplemental schedules included
or referred to therein or omitted therefrom and the Form T-1, as to which such
counsel need express no opinion), complies as to form in all material respects
with the applicable requirements of the Securities Act and the applicable rules
and regulations promulgated under the Securities Act.
2. In the course of such counsel's review and discussion of the
contents of the Exchange Offer Registration Statement and the Prospectus with
certain officers and other representatives of the Company and representatives of
the independent certified public accountants of the Company, but without
independent check or verification or responsibility for the accuracy,
completeness or fairness of the statements contained therein, on the basis of
the foregoing (reasonably relying as to materiality upon representations and
opinions of officers and other representatives of the Company), no facts have
come to such counsel's attention which cause such counsel to believe that the
Exchange Offer Registration Statement (other than the financial statements,
notes and schedules thereto and other financial information contained or
referred to therein and the Form T-1, as to which such counsel need express no
belief), at the time the Exchange Offer Registration Statement became effective
and at the time of the consummation of the Exchange Offer, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading, or that the Prospectus (other than the financial statements, notes
and schedules thereto and other financial information contained or referred to
therein, as to which such counsel need express no belief) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained therein, in the light of the circumstances under which
they were made, not misleading.
<PAGE>
EXHIBIT 4.4
================================================================================
10 1/4% SENIOR DISCOUNT NOTES DUE 2007
REGISTRATION RIGHTS AGREEMENT
Dated as of October 28, 1997
by and among
FOX KIDS WORLDWIDE, INC.,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED,
CITICORP SECURITIES INC.
and
BEAR, STEARNS & CO. INC.,
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
and
MORGAN STANLEY & CO.
as Initial Purchasers
================================================================================
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
---------
entered into as of October 28, 1997 by and among FOX KIDS WORLDWIDE, INC., a
Delaware corporation (the "Company"), MERRILL LYNCH, PIERCE, FENNER & SMITH
-------
INCORPORATED ("Merrill Lynch"), CITICORP SECURITIES, INC. ("Citicorp") and BEAR,
------------- --------
STEARNS & CO. INC., DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION and
MORGAN STANLEY & CO. (collectively, "Bear, Stearns" and, together with Merrill
-------------
Lynch and Citicorp, the "Initial Purchasers").
------------------
This Agreement is made pursuant to the Purchase Agreement dated as of
October 22, 1997 by and among the Company and the Initial Purchasers (the
"Purchase Agreement"), which provides for, among other things, the sale by the
------------------
Company to the Initial Purchasers of an aggregate of $618,670,000 principal
amount at maturity of the Company's 10 1/4% Senior Discount Notes Due 2007 (the
"Securities"). In order to induce the Initial Purchasers to enter into the
----------
Purchase Agreement, the Company has agreed to provide to the Initial Purchasers
and their direct and indirect transferees the registration rights set forth in
this Agreement. The execution and delivery of this Agreement is a condition to
the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following capitalized
-----------
defined terms shall have the following meanings:
"Accreted Value" shall mean (a) as of any date prior to the Cash
--------------
Interest Election Date, if any (the "Specified Date"), with respect to each
--------------
$1,000 principal face amount at maturity of Securities:
(i) if the Specified Date is one of the following dates (each a "Semi-
----
Annual Accrual Date"), the amount set forth opposite such date below:
-------------------
Semi-Annual Accrual Date Accreted Value
------------------------ --------------
Issue Date..................................... $ 606.14
November 1, 1997............................... $ 606.65
<PAGE>
-2-
May 1, 1998.................................... $ 637.74
November 1, 1998............................... $ 670.43
May 1, 1999.................................... $ 704.79
November 1, 1999............................... $ 740.91
May 1, 2000.................................... $ 778.88
November 1, 2000............................... $ 818.80
May 1, 2001.................................... $ 860.76
November 1, 2001............................... $ 904.87
May 1, 2002.................................... $ 951.25
November 1, 2002............................... $1000.00
(ii) if the Specified Date occurs between two Semi-Annual Accrual
Dates, the sum of (a) the Accreted Value for the Semi-Annual Accrual Date
immediately preceding the Specified Date and (b) an amount equal to the
product of (x) the Accreted Value for the Semi-Annual Accrual Date
immediately following the Specified Date less the Accreted Value for the
Semi-Annual Accrual Date immediately preceding the Specified Date and (y) a
fraction, the numerator of which is the number of days actually elapsed
from the immediately preceding Semi-Annual Accrual Date to the Specified
Date, using a 360-day year of twelve 30-day months, and the denominator of
which is 180; and
(iii) if the Specified Date is after November 1, 2002, $1,000; and
(b) on or after the Cash Interest Election Date, with respect to
each $1,000 principal face amount of Securities, the Accreted Value determined
in accordance with the foregoing as of such Cash Interest Election Date (without
further accretion).
"Additional Interest" shall have the meaning set forth in Section 2(e)
-------------------
hereof.
"Advice" shall have the meaning set forth in the last paragraph of
------
Section 3 hereof.
"Applicable Period" shall have the meaning set forth in Section 3(t)
-----------------
hereof.
"Business Day" shall mean a day that is not a Saturday, a Sunday or a
------------
day on which banking institutions in New York, New York are required to be
closed.
<PAGE>
-3-
"Cash Interest Election" shall mean an election made by the Company at
----------------------
any time prior to November 1, 2002, to commence the accrual of cash interest
from and after the Cash Interest Election Date with respect to the Securities,
pursuant to the terms of the Indenture.
"Cash Interest Election Date" shall mean the interest payment date on
----------------------
which the Company makes a Cash Interest Election.
"Closing Time" shall mean the Closing Time as defined in the Purchase
------------
Agreement.
"Company" shall have the meaning set forth in the preamble to this
-------
Agreement and also includes the Company's successors and permitted assigns.
"Depositary" shall mean The Depository Trust Company, or any other
----------
depositary appointed by the Company; provided, however, that such depositary
-------- -------
must have an address in the Borough of Manhattan in The City of New York.
"Effectiveness Period" shall have the meaning set forth in Section
--------------------
2(b) hereof.
"Event Date" shall have the meaning set forth in Section 2(e) hereof.
----------
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
"Exchange Offer" shall mean the exchange offer by the Company of
--------------
Exchange Securities for Securities pursuant to Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration under the
---------------------------
Securities Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer
-------------------------------------
registration statement on Form S-1 or S-4 (or, if applicable, on another
appropriate form), and all amendments and supplements to such registration
statement, in each case including the Prospectus contained therein, all exhibits
thereto and all material incorporated by reference therein.
"Exchange Period" shall have the meaning set forth in Section 2(a)
---------------
hereof.
<PAGE>
-4-
"Exchange Securities" shall mean the senior debt securities issued by
-------------------
the Company under the Indenture containing terms identical to the Securities
(except that (i) interest thereon shall accrue from the last date on which
interest was paid on the Securities or, if no such interest has been paid, from
October 28, 1997 and (ii) the transfer restrictions thereon shall be eliminated)
to be offered to Holders of Securities in exchange for Securities pursuant to
the Exchange Offer.
"Guarantors" shall have the meaning set forth in Section 7(c) hereof.
----------
"Holder" shall mean the Initial Purchasers, for so long as they own
------
any Registrable Securities, and each of their successors, assigns and direct and
indirect transferees who become registered owners of Registrable Securities
under the Indenture.
"Indenture" shall mean the Indenture relating to the Securities dated
---------
as of October 28, 1997 between the Company and The Bank of New York, as trustee,
as the same may be amended from time to time in accordance with the terms
thereof.
"Initial Purchasers" shall have the meaning set forth in the preamble
------------------
to this Agreement.
"Inspectors" shall have the meaning set forth in Section 3(n) hereof.
----------
"Majority Holders" shall mean the Holders of a majority of the
----------------
aggregate principal amount at maturity of outstanding Registrable Securities.
"Participating Broker-Dealer" shall have the meaning set forth in
---------------------------
Section 3(t) hereof.
"Person" shall mean an individual, partnership, corporation, limited
------
liability company, trust or unincorporated organization, or a government or
agency or political subdivision thereof.
"Private Exchange" shall have the meaning set forth in Section 2(a)
----------------
hereof.
"Private Exchange Securities" shall have the meaning set forth in
---------------------------
Section 2(a) hereof.
<PAGE>
-5-
"Prospectus" shall mean the prospectus included in a Registration
----------
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Securities covered by a Shelf Registration Statement, and by all
other amendments and supplements to a prospectus, including post-effective
amendments, and in each case including all material incorporated by reference
therein.
"Purchase Agreement" shall have the meaning set forth in the preamble
------------------
to this Agreement.
"Records" shall have the meaning set forth in Section 3(n) hereof.
-------
"Registrable Securities" shall mean each Security and, if issued, each
----------------------
Private Exchange Security until (i) the date on which such Security has been
exchanged by a Person other than a Participating Broker-Dealer for an Exchange
Security in the Exchange Offer, (ii) following the exchange by a Participating
Broker-Dealer in the Exchange Offer of a Security for an Exchange Security, the
date on which such Exchange Security is sold to a purchaser who receives from
such Participating Broker-Dealer on or prior to the date of such sale a copy of
the Prospectus contained in the Exchange Offer Registration Statement, as
amended or supplemented, (iii) the date on which such Security or Private
Exchange Security, as the case may be, has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement, (iv) the date on which such Security or Private Exchange Security, as
the case may be, is eligible for distribution to the public pursuant to Rule
144(k) under the Securities Act (or any similar provision then in force, but not
Rule 144A under the Securities Act), (v) the date such Security or Private
Exchange Security, as the case may be, shall have been otherwise transferred by
the holder thereof and a new Security not bearing a legend restricting further
transfer shall have been delivered by the Company and subsequent disposition of
such Security shall not require registration or qualification under the
Securities Act or any similar state law then in force or (vi) such Security or
Private Exchange Security, as the case may be, ceases to be outstanding.
"Registration Expenses" shall mean any and all expenses incident to
---------------------
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC, stock exchange or National Association of
Securities Dealers,
<PAGE>
-6-
Inc. (the "NASD") registration and filing fees, including, if applicable, the
----
reasonable fees and expenses of any "qualified independent underwriter" (and its
counsel) that is required to be retained by any Initial Purchaser holding
Registrable Securities in accordance with the rules and regulations of the NASD,
(ii) all reasonable fees and expenses incurred in connection with compliance
with state securities or blue sky laws (including reasonable fees and
disbursements of counsel for any underwriters or any Holder that was an Initial
Purchaser in connection with blue sky qualification of any of the Exchange
Securities or Registrable Securities) and compliance with the rules of the NASD,
(iii) all reasonable expenses of any Persons (other than the Holders or Persons
acting at the request of the Holders) in preparing or assisting in preparing,
word processing, printing and distributing any Registration Statement, any
Prospectus and any amendments or supplements thereto, and in preparing or
assisting in preparing, printing and distributing any underwriting agreements
and other documents relating to the performance of and compliance with this
Agreement, (iv) all rating agency fees, (v) the reasonable fees and
disbursements of counsel for the Company and of the independent certified public
accountants of the Company, including the expenses of any "cold comfort" letters
required by or incident to such performance and compliance, (vi) the reasonable
fees and expenses of the Trustee, and any exchange agent or custodian, (vii) any
reasonable fees and disbursements of any underwriter customarily required to be
paid by the Company or sellers of securities and the reasonable fees and
expenses of any special experts retained by the Company in connection with any
Registration Statement and (viii) all reasonable fees of any one counsel
designated in writing by the Majority Holders to act as counsel to the Holders
of the Registrable Securities in connection with a Shelf Registration Statement,
but excluding fees of counsel to the underwriters and underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a Holder.
"Registration Statement" shall mean any registration statement of the
----------------------
Company which covers any of the Exchange Securities or Registrable Securities
pursuant to the provisions of this Agreement, and all amendments and supplements
to any such Registration Statement, including post-effective amendments, in each
case including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
---
<PAGE>
-7-
"Securities" shall have the meaning set forth in the preamble to this
----------
Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
--------------
"Shelf Registration" shall mean a registration effected pursuant to
------------------
Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
----------------------------
statement of the Company pursuant to the provisions of Section 2(b) hereof which
covers all of the Registrable Securities or all of the Private Exchange
Securities, as the case may be, on an appropriate form under Rule 415 under the
Securities Act, or any similar rule that may be adopted by the SEC, and all
amendments and supplements to such registration statement, including post-
effective amendments, in each case including the Prospectus contained therein,
all exhibits thereto and all material incorporated by reference therein.
"TIA" shall have the meaning set forth in [Section 3(l)] hereof.
---
"Trustee" shall mean the trustee with respect to the Securities under
-------
the Indenture.
2. Registration Under the Securities Act.
-------------------------------------
(a) Exchange Offer. To the extent not prohibited by any applicable
--------------
law or applicable SEC policy, the Company shall, for the benefit of the Holders,
at the Company's cost (i) file with the SEC within 90 days after the Closing
Time an Exchange Offer Registration Statement on an appropriate form under the
Securities Act covering the offer by the Company to the Holders to exchange all
of the Registrable Securities (other than Private Exchange Securities) for a
like principal amount of Exchange Securities, (ii) use its best efforts to cause
such Exchange Offer Registration Statement to be declared effective under the
Securities Act by the SEC not later than the date which is 150 days after the
Closing Time, (iii) use its commercially reasonable efforts to have such
Registration Statement remain effective until the closing of the Exchange Offer
and (iv) commence the Exchange Offer and use its best efforts to issue Exchange
Securities in exchange for all Registrable Securities (other than the Private
Exchange Securities) properly tendered prior thereto in the Exchange Offer not
later than 180 days after the date on which the Exchange Offer Registration
Statement was declared effective by the SEC. Upon the effec-
<PAGE>
-8-
tiveness of the Exchange Offer Registration Statement, the Company shall
promptly commence the Exchange Offer, it being the objective of such Exchange
Offer to enable each Holder eligible and electing to exchange Registrable
Securities (other than Private Exchange Securities) for Exchange Securities
(assuming that such Holder is not an affiliate of the Company within the meaning
of Rule 405 under the Securities Act and is not a broker-dealer tendering
Registrable Securities acquired directly from the Company for its own account,
acquires the Exchange Securities in the ordinary course of such Holder's
business and has no arrangements or understandings with any Person to
participate in the Exchange Offer for the purpose of distributing (within the
meaning of the Securities Act) the Exchange Securities) to transfer such
Exchange Securities from and after their receipt without any limitations or
restrictions under the Securities Act and under state securities or blue sky
laws.
In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(ii) keep the Exchange Offer open for acceptance for a period of not
less than 20 Business Days after the date notice thereof is mailed to the
Holders (or longer if required by applicable law) (such period referred to
herein as the "Exchange Period");
---------------
(iii) utilize the services of the Depositary for the Exchange Offer;
(iv) permit Holders to withdraw tendered Securities at any time
prior to the close of business, New York time, on the last Business Day of
the Exchange Period, by sending to the institution specified in the notice,
a telegram, telex, facsimile transmission or letter setting forth the name
of such Holder, the principal amount of Securities delivered for exchange,
and a statement that such Holder is withdrawing such Holder's election to
have such Securities exchanged;
(v) notify each Holder that any Security not tendered will remain
outstanding and continue to accrue interest, but will not retain any rights
under this Agree-
<PAGE>
-9-
ment (except in the case of the Initial Purchasers and Participating
Broker-Dealers as provided herein); and
(vi) otherwise comply in all respects with all applicable laws
relating to the Exchange Offer.
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Securities acquired by them and having the status of an
unsold allotment in the initial distribution, the Company upon the request of
any Initial Purchaser shall, simultaneously with the delivery of the Exchange
Securities in the Exchange Offer, issue and deliver to such Initial Purchaser in
exchange (the "Private Exchange") for the Securities held by such Initial
----------------
Purchaser, a like principal amount of debt securities of the Company that are
identical (except that such securities shall bear appropriate transfer
restrictions) to the Exchange Securities (the "Private Exchange Securities").
---------------------------
The Exchange Securities and the Private Exchange Securities shall be
issued under (i) the Indenture or (ii) an indenture identical to the Indenture
in all material respects and which, in either case, has been qualified under the
TIA and shall provide that the Exchange Securities shall not be subject to the
transfer restrictions set forth in the Indenture. The Indenture or such
indenture shall provide that the Exchange Securities, the Private Exchange
Securities and the Securities shall vote and consent together on all matters as
one class and that none of the Exchange Securities, the Private Exchange
Securities or the Securities will have the right to vote or consent as a
separate class on any matter. The Private Exchange Securities shall be of the
same series as, and the Company shall use its commercially reasonable efforts to
have the Private Exchange Securities bear the same CUSIP number as, the Exchange
Securities.
As soon as practicable after the close of the Exchange Offer and/or
the Private Exchange, as the case may be, the Company shall:
(i) accept for exchange all Securities or portions thereof
tendered and not validly withdrawn pursuant to the Exchange Offer;
(ii) accept for exchange all Securities duly tendered pursuant
to the Private Exchange; and
(iii) deliver, or cause to be delivered, to the Trustee for
cancellation all Securities or portions
<PAGE>
-10-
thereof so accepted for exchange by the Company, and issue, and cause the
Trustee under the Indenture to promptly authenticate and deliver to each
Holder, a new Exchange Security or Private Exchange Security, as the case
may be, equal in principal amount at maturity to the principal amount at
maturity of the Securities surrendered by such Holder and accepted for
exchange.
To the extent not prohibited by any law or applicable interpretation
of the staff of the SEC, the Company shall use its commercially reasonable
efforts to complete the Exchange Offer as provided above, and shall comply with
the applicable requirements of the Securities Act, the Exchange Act and other
applicable laws in connection with the Exchange Offer. The Exchange Offer shall
not be subject to any conditions, other than that the Exchange Offer does not
violate applicable law or any applicable interpretation of the staff of the SEC
and that the exchanging holder shall have delivered a validly completed and
executed letter of transmittal and such other documents required pursuant to
Section 2(a)(i) hereof, including the representations referred to in the next
sentence. Each Holder of Registrable Securities (other than Private Exchange
Securities) who wishes to exchange such Registrable Securities (other than
Private Exchange Securities) for Exchange Securities in the Exchange Offer will
be required to make in writing certain customary representations in connection
therewith, including representations that such Holder is not an affiliate of the
Company within the meaning of Rule 405 under the Securities Act, or if it is
such an affiliate, it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable, that any Exchange
Securities to be received by it will be acquired in the ordinary course of
business and that at the time of the commencement of the Exchange Offer it has
no arrangement with any Person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Securities. The Company shall
inform the Initial Purchasers, after consultation with the Trustee and the
Initial Purchasers, of the names and addresses of the Holders to whom the
Exchange Offer is made, and the Initial Purchasers shall have the right to
contact such Holders and otherwise facilitate the tender of Registrable
Securities in the Exchange Offer.
Upon consummation of the Exchange Offer in accordance with this
Section 2(a), the provisions of this Agreement shall continue to apply, mutatis
-------
mutandis, solely with respect to Registrable Securities that are Private
- --------
Exchange Securities and Exchange Securities held by Participating Broker-
Dealers, and
<PAGE>
-11-
the Company shall have no further obligation to register Registrable Securities
(other than Private Exchange Securities) pursuant to Section 2(b) hereof.
(b) Shelf Registration. To the extent not prohibited by any law or
------------------
applicable SEC policy, in the event that (i) the Company is not permitted to
file the Exchange Offer Registration Statement or to consummate the Exchange
Offer because the Exchange Offer is not permitted by applicable law or SEC
policy, (ii) the Exchange Offer is not for any other reason consummated within
180 days after the Closing Time, (iii) any holder of Securities notifies in
writing the Company within 30 days after the commencement of the Exchange Offer
that (a) due to a change in law or SEC policy it is not entitled to participate
in the Exchange Offer, (b) due to a change in law or SEC policy it may not
resell the Exchange Securities acquired by it in the Exchange Offer to the
public without delivering a prospectus and the prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such holder or (c) it is a broker-dealer and owns Securities acquired
directly from the Company or an affiliate of the Company or (iv) the holders of
a majority in aggregate principal amount at maturity of the Securities may not
resell the Exchange Securities acquired by them in the Exchange Offer to the
public without restriction under the Securities Act and without restriction
under applicable blue sky or state securities laws, then the Company shall, at
its cost, file as promptly as practicable after such determination or date, as
the case may be, and, in any event, prior to the later of (A) 90 days after the
Closing Time or (B) 30 days after such filing obligation arises (provided,
--------
however, that, if the Company has not consummated the Exchange Offer within 180
- -------
days after the Closing Time, then the Company shall file the Shelf Registration
Statement with the SEC on or prior to the 210th day after the Closing Time,
unless the Company has consummated the Exchange Offer prior to the 210th day
after the Closing Time, whereby the Company's obligation to file a Shelf
Registration Statement pursuant to clause (b)(ii) above shall be cancelled,
provided, that such cancellation shall not relieve the Company of any obligation
- --------
to pay Additional Interest, if Additional Interest is otherwise due and
payable), a Shelf Registration Statement providing for the sale by the Holders
of all of the Registrable Securities affected thereby, and shall use its
commercially reasonable efforts to cause such Shelf Registration Statement to be
declared effective by the SEC as soon as practicable and, in any event, on or
prior to 60 days after the obligation to file the Shelf Registration Statement
arises. No Holder of Registrable Securities may include any of its Regis-
<PAGE>
-12-
trable Securities in any Shelf Registration pursuant to this Agreement unless
and until such Holder furnishes to the Company in writing, within 10 days after
receipt of a request therefor, such information as the Company may, after
conferring with counsel with regard to information relating to Holders that
would be required by the SEC to be included in such Shelf Registration Statement
or Prospectus included therein, reasonably request for inclusion in any Shelf
Registration Statement or Prospectus included therein. Each Holder as to which
any Shelf Registration is being effected agrees to furnish to the Company all
information with respect to such Holder necessary to make any information
previously furnished to the Company by such Holder not materially misleading.
The Company agrees to use its best efforts to keep the Shelf
Registration Statement continuously effective, supplemented and amended for a
period of two years (or such shorter period provided for in any amendment to
Rule 144(k) under the Securities Act (or any successor provision other than Rule
144A) upon the expiration of which securities are eligible for distribution to
the public) from the Closing Time or such shorter period that will terminate
when all the Registrable Securities covered by the Shelf Registration Statement
have been sold pursuant thereto (subject to extension pursuant to the last
paragraph of Section 3 hereof) (the "Effectiveness Period"), provided, however,
-------------------- -------- -------
that with respect to the Private Exchange Securities the Company shall only be
obligated to keep the Shelf Registration Statement effective, supplemented and
amended for a period of 60 days (subject to suspension pursuant to paragraph
three of Section 2(e)). The Company shall not permit any securities other than
Registrable Securities to be included in the Shelf Registration. The Company
further agrees, if necessary, to supplement or amend the Shelf Registration
Statement, if required by the rules, regulations or instructions applicable to
the registration form used by the Company for such Shelf Registration Statement
or by the Securities Act or by any other rules and regulations thereunder for
shelf registrations, and the Company agrees to furnish to the Holders of
Registrable Securities copies of any such supplement or amendment promptly after
its being used or filed with the SEC.
Notwithstanding the requirements contained in this Section 2(b),
solely with respect to the Private Exchange Securities, the Company shall have
no obligation to file or effect a Shelf Registration Statement registering such
Private Exchange Securities, if the aggregate principal amount at maturity of
such Private Exchange Securities does not exceed $5,000,000.
<PAGE>
-13-
(c) Expenses. The Company shall pay all Registration Expenses in
--------
connection with the registration pursuant to Section 2(a) or 2(b) hereof.
Except as provided in the preceding sentence, each Holder shall pay all expenses
of its counsel, underwriting discounts and commissions and transfer taxes, if
any, relating to the sale or disposition of such Holder's Registrable Securities
pursuant to the Shelf Registration Statement.
(d) Effective Registration Statement. An Exchange Offer Registration
--------------------------------
Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement
pursuant to Section 2(b) hereof will not be deemed to have become effective
unless it has been declared effective by the SEC; provided, however, that if,
-------- -------
after it has been declared effective, the offering of Registrable Securities
pursuant to a Shelf Registration Statement is interfered with by any stop order,
injunction or other order or requirement of the SEC or any other governmental
agency or court, such Registration Statement will be deemed not to have been
effective during the period of such interference, until the offering of
Registrable Securities may legally resume. The Company will be deemed not to
have used its commercially reasonable efforts to cause the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
to become, or to remain, effective during the requisite period if its
voluntarily takes any action that would result in any such Registration
Statement not being declared effective or in the Holders of Registrable
Securities covered thereby not being able to exchange or offer and sell such
Registrable Securities during that period unless such action is required by
applicable law or SEC policy. Notwithstanding the foregoing, the only remedy
available under this Agreement for the failure of the Company to satisfy the
obligations set forth in Sections 2(a), 2(b) and 3 hereof shall be payment by
the Company of the Additional Interest as set forth in Section 2(e) hereof and
the remedy of specific enforcement provided by Section 2(f) hereof.
(e) Additional Interest. (1) If (i) the Company fails to file an
-------------------
Exchange Offer Registration Statement or the Shelf Registration Statement with
respect to the Registrable Securities (other than the Private Exchange
Securities) on or before the date specified herein for such filing, (ii) the
Exchange Offer Registration Statement or the Shelf Registration Statement is not
declared effective by the SEC on or prior to the date specified herein for such
effectiveness (the "Effectiveness Target Date"), (iii) the Exchange Offer is
-------------------------
required to be consummated hereunder and the Company fails to issue Exchange
Securities in exchange for all Securities properly
<PAGE>
-14-
tendered and not withdrawn in the Exchange Offer within 45 days of the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (iv) the Exchange Offer Registration Statement or the Shelf
Registration Statement required to be filed and declared effective hereunder is
declared effective but thereafter ceases to be effective or usable in connection
with the Exchange Offer or resales of Securities, as the case may be, during the
periods specified herein (each such event referred to in clauses (i) through
(iv) above, a "Registration Default"), then the interest rate borne by the
--------------------
Registrable Securities (other than the Private Exchange Securities) as to which
the Registration Default exists shall be increased (the "Additional Interest"),
-------------------
with respect to the first 90-day period (or portion thereof) while a
Registration Default is continuing immediately following the occurrence of such
Registration Default, by 0.25% per annum, such interest rate increasing by an
additional 0.25% per annum at the beginning of each subsequent 90-day period (or
portion thereof) while a Registration Default is continuing until all
Registration Defaults have been cured, up to a maximum rate of Additional
Interest of 1.00% per annum. If a Registration Default exists with respect to
the Securities prior to the Cash Interest Election Date, the Company will make
cash payments of Additional Interest on each interest payment date on the
Securities which are Transfer Restricted Securities at the rate set forth in the
preceding sentence multiplied by the Accreted Value of the Securities as of the
interest payment date on which such payment is made. Upon (w) the filing of the
Exchange Offer Registration Statement or the Shelf Registration Statement, as
the case may be, required hereunder (in the case of clause (i) of the preceding
sentence), (x) the effectiveness of the Exchange Offer Registration Statement or
the Shelf Registration Statement, as the case may be, required hereunder (in the
case of clause (ii) of the preceding sentence), (y) the issuance of Exchange
Securities in exchange for all Securities (other than the Private Exchange
Securities) properly tendered and not withdrawn in the Exchange Offer (in the
case of clause (iii) of the preceding sentence) or (z) the effectiveness of the
Exchange Offer Registration Statement or the Shelf Registration Statement, as
the case may be, required hereunder which had ceased to be effective (in the
case of clause (iv) of the preceding sentence), Additional Interest as a result
of the Registration Default described in such clause shall cease to accrue (but
any accrued amount shall be payable) and the interest rate on the Securities
shall revert to the original rate if no other Registration Default has occurred
and is continuing.
<PAGE>
-15-
The Company shall notify the Trustee within three Business Days after
each and every date on which an event occurs in respect of which Additional
Interest is required to be paid (an "Event Date"). Additional Interest shall be
----------
paid by depositing with the Trustee, in trust, for the benefit of the Holders of
Securities (other than the Private Exchange Securities) on or before the
applicable semiannual interest payment date, immediately available funds in sums
sufficient to pay the Additional Interest then due. The Additional Interest due
shall be payable on each interest payment date to the record Holder of
Securities entitled to receive the interest payment to be paid on such date as
set forth in the Indenture. Each obligation to pay Additional Interest shall be
deemed to accrue from and including the day following the applicable Event Date.
Notwithstanding anything in the foregoing to the contrary, the Company
shall have no obligation to pay Additional Interest for a period not in excess
of 60 days in any twelve month period (the "Blackout Period") in respect of
Registrable Securities owned by an Initial Purchaser, if the Board of Directors
of the Company determines in its reasonable good faith judgment that the
registration and distribution of such Registrable Securities covered by the
Shelf Registration Statement would materially interfere with any pending
acquisition or corporate reorganization or other material transaction involving
the Company or any of its Subsidiaries or would require disclosure of any other
material corporate development that the Company is not otherwise required to
disclose, which disclosure would materially adversely affect the Company. The
Company will promptly give each Initial Purchaser written notice of such
determination and an approximation of the period of the anticipated delay. Each
Holder agrees to cease all disposition efforts under such Shelf Registration
Statement with respect to Registrable Securities held up by such Initial
Purchaser upon receipt of notice of the beginning of any Blackout Period. The
Company shall provide prompt written notice to the Initial Purchaser of the end
of each Blackout Period.
(f) Specific Enforcement. Without limiting the remedies available to
--------------------
the Initial Purchasers and the Holders, the Company acknowledges that any
failure by the Company to comply with its obligations under Section 2(a) and
Section 2(b) hereof may result in material irreparable injury to the Initial
Purchasers or the Holders for which there is no adequate remedy at law, that it
would not be possible to measure damages for such injuries precisely and that,
in the event of any such failure, the Initial Purchasers or any Holder may
obtain such
<PAGE>
-16-
relief as may be required to specifically enforce the Company's obligations
under Section 2(a) and Section 2(b) hereof.
3. Registration Procedures. In connection with the obligations of
-----------------------
the Company with respect to the Registration Statements pursuant to Sections
2(a) and 2(b) hereof, the Company shall:
(a) prepare and file with the SEC a Registration Statement or
Registration Statements as prescribed by Sections 2(a) and 2(b) hereof
within the relevant time period specified in Section 2 hereof on the
appropriate form under the Securities Act, which form (i) shall be selected
by the Company, (ii) shall, in the case of a Shelf Registration, be
available for the sale of the Registrable Securities by the selling Holders
thereof and (iii) shall comply as to form in all material respects with the
requirements of the applicable form and include all financial statements
required by the SEC to be filed therewith; and use their commercially
reasonable efforts to cause such Registration Statement to become effective
and remain effective in accordance with Section 2 hereof; provided,
--------
however, that if (1) such filing is pursuant to Section 2(b), or (2) a
-------
Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2(a) is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities, before filing any Registration Statement or Prospectus or any
amendments or supplements thereto, the Company shall furnish to and afford
the Holders of the Registrable Securities and each such Participating
Broker-Dealer, as the case may be, covered by such Registration Statement,
their counsel and the managing underwriters, if any, a reasonable
opportunity to review copies of all such documents (including copies of any
documents to be incorporated by reference therein and all exhibits thereto)
proposed to be filed (at least 5 Business Days prior to such filing). The
Company shall not file any Registration Statement or Prospectus or any
amendments or supplements thereto in respect of which the Holders must be
afforded an opportunity to review prior to the filing of such document if
the Majority Holders or such Participating Broker-Dealer, as the case may
be, their counsel or the managing underwriters, if any, shall reasonably
object;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration State-
<PAGE>
-17-
ment effective for the Effectiveness Period or the Applicable Period, as
the case may be; and cause each Prospectus to be supplemented by any
required prospectus supplement and as so supplemented to be filed pursuant
to Rule 424 (or any similar provision then in force) under the Securities
Act, and comply with the provisions of the Securities Act, the Exchange Act
and the rules and regulations promulgated thereunder applicable to it with
respect to the disposition of all securities covered by each Registration
Statement during the Effectiveness Period or the Applicable Period, as the
case may be, in accordance with the intended method or methods of
distribution by the selling Holders thereof described in this Agreement
(including sales by any Participating Broker-Dealer);
(c) in the case of a Shelf Registration, (i) notify each Holder of
Registrable Securities, at least three Business Days prior to filing, that
a Shelf Registration Statement with respect to the Registrable Securities
is being filed and advising such Holder that the distribution of
Registrable Securities will be made in accordance with the method selected
by the Majority Holders; and (ii) furnish to each Holder of Registrable
Securities and to each underwriter of an underwritten offering of
Registrable Securities, if any, without charge, as many copies of each
Prospectus, including each preliminary prospectus, and any amendment or
supplement thereto and such other documents as such Holder or underwriter
may reasonably request, in order to facilitate the public sale or other
disposition of the Registrable Securities; and (iii) subject to the last
paragraph of Section 3 hereof, hereby consent to the use of the Prospectus
or any amendment or supplement thereto by each of the selling Holders of
Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or any amendment or
supplement thereto;
(d) in the case of a Shelf Registration, use its best efforts to
register or qualify the Registrable Securities under all applicable state
securities or "blue sky" laws of such jurisdictions by the time the
applicable Registration Statement is declared effective by the SEC as any
Holder of Registrable Securities covered by a Registration Statement and
each underwriter of an underwritten offering of Registrable Securities
shall reasonably request in advance of such date of effectiveness, and do
any and all other acts and things which may be reasonably necessary or
advisable to enable such Holder and underwriter
<PAGE>
-18-
to consummate the disposition in each such jurisdiction of such Registrable
Securities owned by such Holder; provided, however, that the Company shall
-------- -------
not be required to (i) qualify as a foreign corporation or as a dealer in
securities in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d), (ii) file any general consent to service
of process or (iii) subject itself to taxation in any such jurisdiction if
it is not so subject;
(e) in the case of (1) a Shelf Registration or (2) Participating
Broker-Dealers who have notified the Company that they will be utilizing
the Prospectus contained in the Exchange Offer Registration Statement as
provided in Section 3(t) hereof, notify each Holder of Registrable
Securities, or such Participating Broker-Dealers, as the case may be, their
counsel and the managing underwriters, if any, promptly and confirm such
notice in writing (i) when a Registration Statement has become effective
and when any post-effective amendments and supplements thereto become
effective, (ii) of any request by the SEC or any state securities authority
for amendments and supplements to a Registration Statement or Prospectus or
for additional information after the Registration Statement has become
effective, (iii) of the issuance by the SEC or any state securities
authority of any stop order suspending the effectiveness of a Registration
Statement or the initiation of any proceedings for that purpose, (iv) if
the Company receives any notification with respect to the suspension of the
qualification of the Registrable Securities or the Exchange Securities to
be sold by any Participating Broker-Dealer for offer or sale in any
jurisdiction or the initiation of any proceeding for such purpose, (v) of
the happening of any event or the failure of any event to occur or the
discovery of any facts or otherwise during the Effectiveness Period or
Applicable Period, as the case may be, which makes any statement made in a
Registration Statement or the related Prospectus untrue in any material
respect or which causes such Registration Statement or Prospectus to omit
to state a material fact necessary to make the statements therein (in the
case of the Prospectus, in the light of the circumstances under which they
were made) not misleading and (vi) the Company's reasonable determination
that a post-effective amendment to the Registration Statement would be
appropriate;
<PAGE>
-19-
(f) take reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement as soon as
practicable;
(g) in the case of a Shelf Registration, furnish to each Holder of
Registrable Securities, without charge, at least one conformed copy of each
Registration Statement relating to such Shelf Registration and any post-
effective amendment thereto (without documents incorporated therein by
reference or exhibits thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate with the selling
Holders of Registrable Securities to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and
not bearing any restrictive legends; and cause such Registrable Securities
to be in such denominations (consistent with the provisions of the
Indenture) and registered in such names as the selling Holders or the
underwriters may reasonably request at least two Business Days prior to the
closing of any sale of Registrable Securities;
(i) in the case of a Shelf Registration or an Exchange Offer
Registration, upon the occurrence of any circumstance contemplated by
Section 3(e)(ii), 3(e)(iii), 3(e)(v), 3(e)(vi) or 3(e)(vii) hereof, use its
best efforts to prepare a supplement or post-effective amendment to a
Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document
(subject to Section 3(a)) so that, as thereafter delivered to the
purchasers of the Registrable Securities or Exchange Securities to whom a
Prospectus is being delivered by a Participating Broker-Dealer who has
notified the Company that it will be utilizing the Prospectus contained in
the Exchange Offer Registration Statement as provided in Section 3(t)
hereof, such Prospectus will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and to notify each Holder or Participating Broker-Dealer, as
the case may be, to suspend use of the Prospectus as promptly as
practicable after the occurrence of such an event, and each Holder and
Participating Broker-Dealer hereby agrees to suspend use of the Prospectus
until the Company has amended or supplemented the Prospectus to correct
such misstatement or omission;
<PAGE>
-20-
(j) in the case of a Shelf Registration, upon the filing of any
document which is to be incorporated by reference into a Registration
Statement or a Prospectus after the initial filing of a Registration
Statement, provide a reasonable number of copies of such document to the
Holders;
(k) obtain a CUSIP number for all Exchange Securities or Registrable
Securities, as the case may be, not later than the effective date of a
Registration Statement, and provide the Trustee with certificates for the
Exchange Securities or the Registrable Securities, as the case may be, in a
form eligible for deposit with the Depositary;
(l) cause the Indenture or the indenture provided for in Section 2(a)
to be qualified under the TIA in connection with the registration of the
Exchange Securities or Registrable Securities, as the case may be,
cooperate with the Trustee or any trustee under such indenture and the
Holders to effect such changes to the Indenture or such indenture as may be
required for the Indenture or such indenture to be so qualified in
accordance with the terms of the TIA and execute, and use their
commercially reasonable efforts to cause the Trustee or such trustee to
execute, all documents as may be required to effect such changes, and all
other forms and documents required to be filed with the SEC to enable the
Indenture or such indenture to be so qualified in a timely manner;
(m) in the case of a Shelf Registration, enter into such agreements
(including underwriting agreements) as are customary in underwritten
offerings and take all such other appropriate actions as are reasonably
requested in order to expedite or facilitate the registration or the
disposition of such Registrable Securities, and in such connection, whether
or not an underwriting agreement is entered into and whether or not the
registration is an underwritten registration, at the time of effectiveness
of such Shelf Registration: (i) make such representations and warranties to
Holders of such Registrable Securities and the underwriters (if
<PAGE>
-21-
any), with respect to the business of the Company and its subsidiaries as
then conducted or proposed to be conducted and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be incorporated
by reference therein, in each case, in form and substance similar to the
representations and warranties given by the Company in the Purchase
Agreement and reasonably satisfactory to the managing underwriters (if any)
and the Holders of a majority in principal amount at maturity of the
Registrable Securities being sold, and confirm the same if and when
requested; (ii) obtain opinions of counsel to the Company and updates
thereof, if appropriate, in form and substance similar to the opinion given
by counsel to the Company pursuant to the Purchase Agreement and reasonably
satisfactory to the managing underwriters (if any) and the Holders of a
majority in principal amount of the Registrable Securities being sold,
addressed to each selling Holder and the underwriters (if any); (iii)
obtain "cold comfort" letters and updates thereof in form and substance
reasonably satisfactory to the managing underwriters (if any) from the
independent certified public accountants of the Company (and, if necessary,
any other independent certified public accountants of any subsidiary of the
Company or of any business acquired by the Company for which financial
statements and financial data are, or are required to be, included in the
Registration Statement), addressed to the selling Holders of Registrable
Securities (if appropriate) and to each of the underwriters (if any), such
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
underwritten offerings and such other matters as reasonably requested by
such selling Holders and underwriters; and (iv) if an underwriting
agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable than those set forth in Section
4 hereof (or such other less favorable provisions and procedures acceptable
to Holders of a majority in aggregate principal amount of Registrable
Securities covered by such Registration Statement and the managing
underwriters or agents) with respect to all parties to be indemnified
pursuant to said Section (including, without limitation, such underwriters
and selling Holders). The above shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder;
(n) if (1) a Shelf Registration is filed pursuant to Section 2(b) or
(2) a Prospectus contained in an Exchange Offer Registration Statement
filed pursuant to Section 2(a) is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, make available for
inspection by any selling Holder of such Registrable Secu-
<PAGE>
-22-
rities being sold, or each such Participating Broker-Dealer, as the case
may be, any underwriter participating in any such disposition of
Registrable Securities, if any, and any attorney, accountant or other agent
retained by any such selling Holder or each such Participating Broker-
Dealer, as the case may be, or underwriter (collectively, the
"Inspectors"), at the offices where normally kept, during reasonable
----------
business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries (collectively,
the "Records") as shall be reasonably necessary to enable them to exercise
-------
any applicable due diligence responsibilities, and cause the officers,
directors and employees of the Company and its subsidiaries to supply all
information in each case reasonably requested by any such Inspector in
connection with such Registration Statement. Records that the Company
determines to be confidential or any Records which it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless
(i) the disclosure of such Records is necessary in connection with the
Inspectors' assertion of any claims or actions or with their establishment
of any defense in an action then pending before a court of competent
jurisdiction, (ii) the release of such Records is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction or (iii) the
information in such Records has been made generally available to the
public. Each selling Holder of such Registrable Securities and each such
Participating Broker-Dealer will be required to agree that information
obtained by it as a result of such inspections shall be deemed confidential
and shall not be used by it as the basis for any market transactions in the
securities of the Company unless and until such is made generally available
to the public. Each selling Holder of such Registrable Securities and each
such Participating Broker-Dealer will be required to further agree that it
will, prior to disclosure of such Records pursuant to clause (i) or (ii)
above, give prompt notice to the Company and allow the Company at its
expense to undertake appropriate action to prevent disclosure to the public
of the Records deemed confidential;
(o) comply with all applicable rules and regulations of the SEC and
make generally available to their securityholders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder (or any similar rule promulgated under the Securities Act)
no later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Securities
are
<PAGE>
-23-
sold to underwriters in a firm commitment or best efforts underwritten
offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Company
after the effective date of a Registration Statement, which statements
shall cover said 12-month periods;
(p) upon consummation of the Exchange Offer or the Private Exchange,
obtain an opinion of counsel to the Company addressed to the Trustee for
the benefit of all Holders of Registrable Securities participating in the
Exchange Offer or the Private Exchange, as the case may be, and which
includes an opinion that (i) the Company has duly authorized, executed and
delivered the Exchange Securities and Private Exchange Securities and the
Indenture, and (ii) each of the Exchange Securities or the Private Exchange
Securities, as the case may be, and the Indenture constitutes a legal,
valid and binding obligation of the Company, enforceable against the
Company in accordance with its respective terms (in each case, with
customary exceptions);
(q) if the Exchange Offer or the Private Exchange is to be
consummated, upon delivery of the Registrable Securities by Holders to the
Company (or to such other Person as directed by the Company) in exchange
for the Exchange Securities or the Private Exchange Securities, as the case
may be, the Company shall mark, or cause to be marked, on such Registrable
Securities delivered by such Holders that such Registrable Securities are
being cancelled in exchange for the Exchange Securities or the Private
Exchange Securities, as the case may be; in no event shall such Registrable
Securities be marked as paid or otherwise satisfied;
(r) cooperate with each seller of Registrable Securities covered by
any Registration Statement and each underwriter, if any, participating in
the disposition of such Registrable Securities and their respective counsel
in connection with any filings required to be made with the NASD;
(s) use its commercially reasonable efforts to take all other steps
necessary to effect the registration of the Registrable Securities covered
by a Registration Statement contemplated hereby;
<PAGE>
-24-
(t) (A) in the case of the Exchange Offer Registration Statement (i)
include in the Exchange Offer Registration Statement a section entitled
"Plan of Distribution," which section shall be reasonably acceptable to the
Initial Purchasers or another representative of the Participating Broker-
Dealers, and which shall contain a summary statement of the positions taken
or policies made by the staff of the SEC with respect to the potential
"underwriter" status of any broker-dealer (a "Participating Broker-Dealer")
---------------------------
that holds Registrable Securities acquired for its own account as a result
of market-making activities or other trading activities and that will be
the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of
Exchange Securities to be received by such broker-dealer in the Exchange
Offer, whether such positions or policies have been publicly disseminated
by the staff of the SEC or such positions or policies, in the reasonable
judgment of the Initial Purchasers or such other representative, represent
the prevailing views of the staff of the SEC, including a statement that
any such broker-dealer who receives Exchange Securities for Registrable
Securities pursuant to the Exchange Offer may be deemed a statutory
underwriter and must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Securities,
(ii) furnish to each Participating Broker-Dealer who has delivered to the
Company the notice referred to in Section 3(e), without charge, as many
copies of each Prospectus included in the Exchange Offer Registration
Statement, including any preliminary prospectus, and any amendment or
supplement thereto, as such Participating Broker-Dealer may reasonably
request, (iii) hereby consents to the use of the Prospectus forming part of
the Exchange Offer Registration Statement or any amendment or supplement
thereto, by any Person subject to the prospectus delivery requirements of
the SEC, including all Participating Broker-Dealers, in connection with the
sale or transfer of the Exchange Securities covered by the Prospectus or
any amendment or supplement thereto, (iv) use its commercially reasonable
efforts to keep the Exchange Offer Registration Statement effective and to
amend and supplement the Prospectus contained therein in order to permit
such Prospectus to be lawfully delivered by all Persons subject to the
prospectus delivery requirements of the Securities Act for such period of
time as such Persons must comply with such requirements in order to resell
the Exchange Securities; provided, however, that such period shall not be
-------- -------
required to exceed 210 days (or such longer period if extended pur-
<PAGE>
-25-
suant to the last sentence of Section 3 hereof) (the "Applicable Period"),
-----------------
and (v) include in the transmittal letter or similar documentation to be
executed by an exchange offeree in order to participate in the Exchange
Offer (x) the following provision:
"If the exchange offeree is a broker-dealer holding Registrable
Securities acquired for its own account as a result of market-making
activities or other trading activities, it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any
resale of Exchange Securities received in respect of such Registrable
Securities pursuant to the Exchange Offer";
and (y) a statement to the effect that by a Participating Broker-Dealer
making the acknowledgment described in clause (x) and by delivering a
Prospectus in connection with the exchange of Registrable Securities, such
Participating Broker-Dealer will not be deemed to admit that it is an
underwriter within the meaning of the Securities Act; and
(B) in the case of any Exchange Offer Registration Statement, the
Company agree to deliver to the Initial Purchasers or to Participating
Broker-Dealers upon consummation of the Exchange Offer (i) an opinion of
counsel substantially in the form attached hereto as Exhibit A, and (ii) an
---------
officers' certificate containing certifications substantially similar to
those set forth in Section 5(e) of the Purchase Agreement and such
additional certifications as are customarily delivered in a public offering
of debt securities.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding such seller and the proposed distribution of such
Registrable Securities, as the Company may from time to time reasonably request
in writing. The Company may exclude from such registration the Registrable
Securities of any seller who fails to furnish any such information which the
Company reasonably requires in order for the Shelf Registration Statement to
comply with applicable law and SEC policy within a reasonable time after
receiving such request (without the accrual of Additional Interest on such
excluded Registrable Securities) and shall be under no obligation to include the
Registrable Securities of such seller
<PAGE>
-26-
in the Shelf Registration Statement or to compensate any such seller for any
lost income, interest or other opportunity foregone, or any liability incurred,
as a result of the Company's decision to exclude such seller.
In the case of (1) a Shelf Registration Statement or (2) Participating
Broker-Dealers who have notified the Company that they will be utilizing the
Prospectus contained in the Exchange Offer Registration Statement as provided in
Section 3(t) hereof that are seeking to sell Exchange Securities and are
required to deliver Prospectuses, each Holder or Participating Broker-Dealer, as
the case may be, agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(e)(ii), 3(e)(iii),
3(e)(v), 3(e)(vi) or 3(e)(vii) hereof, such Holder or Participating Broker-
Dealer, as the case may be, will forthwith discontinue disposition of
Registrable Securities pursuant to a Registration Statement or Exchange
Securities, as the case may be, until such Holder's or Participating Broker-
Dealer's, as the case may be, receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(i) hereof or until it is advised in
writing (the "Advice") by the Company that the use of the applicable Prospectus
------
may be resumed, and, if so directed by the Company, such Holder or Participating
Broker-Dealer, as the case may be, will deliver to the Company (at the Company's
expense) all copies in such Holder's or Participating Broker-Dealer's, as the
case may be, possession, other than permanent file copies then in such Holder's
or Participating Broker-Dealer's, as the case may be, possession, of the
Prospectus covering such Registrable Securities or Exchange Securities, as the
case may be, current at the time of receipt of such notice. If the Company
shall give any such notice to suspend the disposition of Registrable Securities
or Exchange Securities, as the case may be, pursuant to a Registration
Statement, (x) the Company shall use its commercially reasonable efforts to FILE
and have declared effective (if an amendment) as soon as practicable an
amendment or supplement to the Registration Statement and, in the case of an
amendment, have such amendment declared effective as soon as practicable;
provided, however, that the Company may postpone the filing of such amendment or
- -------- -------
supplement for a period not to extend beyond the earlier to occur of (I) 30 days
after the date of the determination of the Board of Directors referred to below
and (II) the day after the cessation of the circumstances described below upon
which such postponement is based, if the Members of the Company determine
reasonably and in good faith that such filing would require disclosure of
material information which the Company has a bona fide purpose for preserving as
confidential; provided, further, how-
-------- ------- ----
<PAGE>
-27-
ever, that the Company shall be entitled to such postponement only once during
- ----
any 12-month period and the exercise by the Company of its rights under this
provision shall not relieve the Company of any obligation to pay Additional
Interest under Section 2(e); and (y) the Company shall extend the period during
which such Registration Statement shall be maintained effective pursuant to this
Agreement by the number of days in the period from and including the date of the
giving of such notice to and including the date when the Company shall have made
available to the Holders or Participating Broker-Dealers, as the case may be,
(x) copies of the supplemented or amended Prospectus necessary to resume such
dispositions or (y) the Advice.
4. Indemnification and Contribution. (a) The Company agrees to
--------------------------------
indemnify and hold harmless each Initial Purchaser, each Holder, each
Participating Broker-Dealer, each underwriter who participates in an offering of
Registrable Securities, their respective affiliates, each Person, if any, who
controls any of such parties within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act and each of their respective directors,
officers, employees and agents, as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, joint or several, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment or supplement thereto), covering
Registrable Securities or Exchange Securities, including all documents
incorporated therein by reference, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto) or the omission or
alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, joint or several, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or any investigation or
proceeding by any court or governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
<PAGE>
-28-
statement or omission, or any such alleged untrue statement or omission, if
such settlement is effected with the prior written consent of the Company;
and
(iii) against any and all expenses whatsoever, as incurred (including
reasonable fees and disbursements of counsel chosen by the Initial
Purchasers, such Holder, such Participating Broker-Dealer or any
underwriter (except to the extent otherwise expressly provided in Section
4(c) hereof)), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any court or
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense
is not paid under subparagraph (i) or (ii) of this Section 4(a);
provided, however, that this indemnity does not apply to any loss, liability,
- -------- -------
claim, damage or expense to the extent arising out of an untrue statement or
omission or alleged untrue statement or omission (i) made in reliance upon and
in conformity with information furnished in writing to the Company by such
Initial Purchaser, such Holder, such Participating Broker-Dealer or any
underwriter with respect to such Initial Purchaser, Holder, Participating
Broker-Dealer or underwriter, as the case may be, expressly for use in the
Registration Statement (or any amendment or supplement thereto) or in any
Prospectus (or any amendment or supplement thereto) or (ii) contained in any
preliminary prospectus if such Initial Purchaser, such Holder, such
Participating Broker-Dealer or such underwriter failed to send or deliver a copy
of the Prospectus (in the form it was first provided to such parties for
confirmation of sales or as amended or supplemented pursuant to Section 3(i)
prior to such confirmation of sales) to the Person asserting such losses,
claims, damages or liabilities on or prior to the delivery of written
confirmation of any sale of securities covered thereby to such Person in any
case where such delivery is required by the Securities Act and a court of
competent jurisdiction in a judgment not subject to appeal or final review shall
have determined that such Prospectus would have corrected such untrue statement
or omission. Any amounts advanced by the Company to an indemnified party
pursuant to this Section 4 as a result of such losses shall be returned to the
Company if it shall be finally determined by such a court in a judgment not
subject to appeal or final review that such indemnified party was not entitled
to indemnification by the Company.
<PAGE>
-29-
(b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Company, each Initial Purchaser, each underwriter who
participates in an offering of Registrable Securities and the other selling
Holders and each of their respective directors, officers (including each officer
of the Company who signed the Registration Statement), employees and agents and
each Person, if any, who controls the Company, any Initial Purchaser, any
underwriter or any other selling Holder within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, against any and all loss, liability,
claim, damage and expense whatsoever described in the indemnity contained in
Section 4(a) hereof, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto) or in any Prospectus (or any amendment or
supplement thereto) in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such selling Holder with respect to
such Holder expressly for use in the Registration Statement (or any supplement
thereto), or in any such Prospectus (or any amendment thereto); provided,
--------
however, that, in the case of the Shelf Registration Statement, no such Holder
- -------
shall be liable for any claims hereunder in excess of the amount of net proceeds
received by such Holder from the sale or other disposition of Registrable
Securities pursuant to the Shelf Registration Statement.
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure to
so notify an indemnifying party shall not relieve such indemnifying party from
any liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relieve it from any liability which it
may have otherwise than on account of this indemnity agreement. In the case of
parties indemnified pursuant to Section 4(a) above, counsel to the indemnified
parties shall be selected by Merrill Lynch, and, in the case of parties
indemnified pursuant to Section 4(b) above, counsel to the indemnified parties
shall be selected by the Company. An indemnifying party may participate at its
own expense in the defense of any such action; provided, however, that counsel
-------- -------
to the indemnifying party shall not (except with the consent of the indemnified
party) also be counsel to the indemnified party. If it so elects within a
reasonable time after receipt of such notice, an indemnifying party, jointly
with any other indemnifying parties receiving such notice, may assume the
defense of such action with counsel chosen by it and
<PAGE>
-30-
approved by the indemnified parties defendant in such action, unless such
indemnified parties reasonably object to such assumption on the ground that
there may be legal defenses available to them which are different from or in
addition to those available to such indemnifying party. If an indemnifying party
assumes the defense of such action, the indemnifying parties shall not be liable
for any fees and expenses of counsel for the indemnified parties incurred
thereafter in connection with such action. In no event shall the indemnifying
parties be liable for fees and expenses of more than one counsel (in addition to
any local counsel) separate from their own counsel for all indemnified parties
in connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances. No indemnifying party shall, without the prior written consent of
the indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 4 (whether or not the indemnified parties are actual or
potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for reasonable fees and
expenses of counsel, such indemnifying party agrees that it shall be liable for
any settlement of the nature contemplated by Section 4(a)(ii) effected without
its written consent if (i) such settlement is entered into more than 45 days
after receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
Notwithstanding the immediately preceding sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
shall not be liable for any settlement of the nature contemplated by Section
7(a)(ii) effected without its prior written consent of such indemnifying party
(i) reimburses such indemnified party
<PAGE>
-31-
in accordance with such request to the extent it considers such request to be
reasonable and (ii) provides written notice to the indemnified party
substantiating the unpaid balance as unreasonable, in each case prior to the
date of such settlement.
(e) In order to provide for just and equitable contribution in
circumstances under which any of the indemnity provisions set forth in this
Section 4 is for any reason held to be unavailable to the indemnified parties
although applicable in accordance with its terms, the Company and the Holders
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement incurred by the
Company, the Initial Purchasers, the Holders and the Participating Broker-
Dealers; provided, however, that no Person guilty of fraudulent
-------- -------
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person that was not guilty of such
fraudulent misrepresentation. As between the Company and the Holders, such
parties shall contribute to such aggregate losses, liabilities, claims, damages
and expenses of the nature contemplated by such indemnity agreement in such
proportion as shall be appropriate to reflect the relative fault of the Company
on the one hand and of the Holder of Registrable Securities, the Participating
Broker-Dealer or Initial Purchaser, as the case may be, on the other hand in
connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative fault of the Company on the one hand and the Holder of
Registrable Securities, the Participating Broker-Dealer or the Initial
Purchasers, as the case may be, on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, or by the Holder of Registrable
Securities, the Participating Broker-Dealer or the Initial Purchasers, as the
case may be, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company and the Holders of the Registrable Securities and the
Initial Purchasers agree that it would not be just and equitable if contribution
pursuant to this Section 4 were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this Section 4.
<PAGE>
-32-
For purposes of this Section 4, each affiliate of any Initial
Purchaser or Holder, and each director, officer, employee, agent and Person, if
any, who controls a Holder of Registrable Securities, an Initial Purchaser or a
Participating Broker-Dealer within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act shall have the same rights to contribution
as such other Person, and each member or director of the Company, each officer
of the Company who signed the Registration Statement, and each Person, if any,
who controls the Company within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act shall have the same rights to contribution as
the Company.
5. Participation in Underwritten Registrations. No Holder may
-------------------------------------------
participate in any underwritten registration hereunder unless such Holder (a)
agrees to sell such Holder's Registrable Securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all reasonable questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements. The
Company shall be under no obligation to compensate any Holder for lost income,
interest or other opportunity foregone, or other liability incurred, as a result
of the Company's decision to exclude such Holder from any underwritten
registration if such Holder has not complied with the provisions of this Section
5 in all material respects following 5 business days' written notice of non-
compliance and the Company's decision to exclude such Holder.
6. Selection of Underwriters. The Holders of Registrable Securities
-------------------------
covered by the Shelf Registration Statement who desire to do so may sell the
securities covered by such Shelf Registration in an underwritten offering. In
any such underwritten offering, the underwriter or underwriters and manager or
managers that will administer the offering will be selected by the Holders of a
majority in aggregate principal amount of the Registrable Securities included in
such offering; provided, however, that such underwriters and managers must be
-------- -------
reasonably satisfactory to the Company.
7. Miscellaneous.
-------------
(a) Rule 144 and Rule 144A. For so long as the Company is subject to
----------------------
the reporting requirements of Section 13 or 15 of the Exchange Act and any
Registrable Securities remain outstanding, the Company covenants that it will
file the re-
<PAGE>
-33-
ports required to be filed by them under the Securities Act and Section 13(a) or
15(d) of the Exchange Act and the rules and regulations adopted by the SEC
thereunder, that if it ceases to be so required to FILE such reports, it will
upon the request of any Holder of Registrable Securities (i) make publicly
available such information as is necessary to permit sales pursuant to Rule 144
under the Securities Act, (ii) deliver such information to a prospective
purchaser as is necessary to permit sales pursuant to Rule 144A under the
Securities Act, and (iii) take such further action that is reasonable in the
circumstances, in each case, to the extent required from time to time to enable
such Holder to sell its Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule 144
under the Securities Act, as such rule may be amended from time to time, (b)
Rule 144A under the Securities Act, as such rule may be amended from time to
time, or (c) any similar rules or regulations hereafter adopted by the SEC. Upon
the reasonable request of any Holder of Registrable Securities, the Company will
deliver to such Holder a written statement as to whether it has complied with
such requirements.
(b) No Inconsistent Agreements. The Company has not entered into nor
--------------------------
will the Company on or after the date of this Agreement enter into any agreement
which is inconsistent with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's
other issued and outstanding securities under any such agreements.
(c) Amendments and Waivers. The provisions of this Agreement,
----------------------
including provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, otherwise than with the prior written consent of the Company
and the Majority Holders; provided, however, that no amendment, modification, or
-------- -------
supplement or waiver or consent to the departure with respect to the provisions
of Section 4 hereof shall be effective as against any Holder of Registrable
Securities unless consented to in writing by such Holder of Registrable
Securities.
(d) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, telex, telecopier, or any courier guaranteeing overnight delivery
(i) if to a
<PAGE>
-34-
Holder, at the most current address given by such Holder to the Company by means
of a notice given in accordance with the provisions of this Section 7(e), which
address initially is, with respect to the Initial Purchasers, the address set
forth in the Purchase Agreement; and (ii) if to the Company, initially at the
Company's address set forth in the Purchase Agreement and thereafter at such
other address, notice of which is given in accordance with the provisions of
this Section 7(e).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the Person giving the same to the Trustee, at the
address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors, assigns and transferees of the
Initial Purchasers, including, without limitation and without the need for an
express assignment, subsequent Holders; provided, however, that nothing herein
-------- -------
shall be deemed to permit any assignment, transfer or other disposition of
Registrable Securities in violation of the terms of the Purchase Agreement or
the Indenture. If any transferee of any Holder shall acquire Registrable
Securities, in any manner, whether by operation of law or otherwise, such
Registrable Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable Securities, such Person
shall be conclusively deemed to have agreed to be bound by and to perform all of
the terms and provisions of this Agreement and such Person shall be entitled to
receive the benefits hereof.
(f) Third Party Beneficiary. Each of the Initial Purchasers shall be
-----------------------
a third party beneficiary of the agreements made hereunder between the Company
or FLN Finance, on the one hand, and the Holders, on the other hand, and shall
have the right to enforce such agreements directly to the extent it deems such
enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder.
<PAGE>
-35-
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
ANY PROVISIONS RELATING TO CONFLICTS OF LAWS. Specified times of day refer to
New York City time.
(j) Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(k) Securities Held by the Company or Any of Its Affiliates.
-------------------------------------------------------
Whenever the consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable Securities held by the
Company or any of their affiliates (as such term is defined in Rule 405 under
the Securities Act) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
[Signature Pages Follow]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
FOX KIDS WORLDWIDE, INC.
By: /s/ Mel Woods
_____________________________
Name: Mel Woods
Title: President
Confirmed and accepted as of
the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
CITICORP SECURITIES, INC.
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION
MORGAN STANLEY & CO.
BY: MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
By: /s/ David Weil
_____________________________
Name: David Weil
Title: Vice President
<PAGE>
Exhibit A
---------
Form of Opinion of Counsel
--------------------------
1. Each of the Exchange Offer Registration Statement and the
Prospectus (other than the financial statements, notes or schedules thereto and
other financial and statistical information and supplemental schedules included
or referred to therein or omitted therefrom and the Form T-1, as to which such
counsel need express no opinion), complies as to form in all material respects
with the applicable requirements of the Securities Act and the applicable rules
and regulations promulgated under the Securities Act.
2. In the course of such counsel's review and discussion of the
contents of the Exchange Offer Registration Statement and the Prospectus with
certain officers and other representatives of the Company and representatives of
the independent certified public accountants of the Company, but without
independent check or verification or responsibility for the accuracy,
completeness or fairness of the statements contained therein, on the basis of
the foregoing (reasonably relying as to materiality upon representations and
opinions of officers and other representatives of the Company), no facts have
come to such counsel's attention which cause such counsel to believe that the
Exchange Offer Registration Statement (other than the financial statements,
notes and schedules thereto and other financial information contained or
referred to therein and the Form T-1, as to which such counsel need express no
belief), at the time the Exchange Offer Registration Statement became effective
and at the time of the consummation of the Exchange Offer, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading, or that the Prospectus (other than the financial statements, notes
and schedules thereto and other financial information contained or referred to
therein, as to which such counsel need express no belief) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained therein, in the light of the circumstances under which
they were made, not misleading.
<PAGE>
EXHIBIT 4.5
LIQUIDATED DAMAGES AGREEMENT
THIS LIQUIDATED DAMAGES AGREEMENT (the "Agreement") is made and
--------
entered into as of October 28, 1997, among FOX KIDS WORLDWIDE, INC., a Delaware
corporation (the "Company") and MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE,
-------
FENNER & SMITH INCORPORATED, CITICORP SECURITIES, INC., BEAR, STEARNS & CO.
INC., DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION AND MORGAN STANLEY &
CO. (each an "Initial Purchaser" and, collectively, the "Initial Purchasers").
----------------- ------------------
WHEREAS, as an inducement to the Initial Purchasers to enter into the
Purchase Agreement, dated October 22, 1997 (the "Purchase Agreement"), among the
------------------
Company and the Initial Purchasers (providing for, among other things, the sale
by the Company to the Initial Purchasers of $475,000,000 of the Company's 9 1/4%
Senior Notes due 2007 (the "Senior Notes")), and as a condition to the several
------------
obligations of the Initial Purchasers thereunder, the Company has agreed to
provide to the Initial Purchasers and their direct and indirect transferees
certain registration and related rights pursuant to and in accordance with the
terms of the Registration Rights Agreement, of even date herewith (the
"Registration Rights Agreement"), among the Company and the Initial Purchasers;
-----------------------------
WHEREAS, notwithstanding the fact that the Company has consummated or
will consummate an Exchange Offer, pursuant to Section 2(a) of the Registration
Rights Agreement, the Initial Purchasers may, under certain circumstances,
require the Company to file a Shelf Registration Statement for the resale of the
Private Exchange Securities held by them;
WHEREAS, the Registration Rights Agreement contains certain provisions
concerning the time within which the Company must file the Shelf Registration
Statement and the period for which such Shelf Registration Statement must remain
effective and usable for resales; and
WHEREAS, the Company and the Initial Purchasers have agreed to provide
for the payment of liquidated damages by the Company directly to the Initial
Purchasers in the event that the Company fails to comply with such contractual
provisions with respect to the filing of a Shelf Registration Statement for the
Private Exchange Securities, as more fully set forth herein.
<PAGE>
-2-
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. Definitions. Capitalized terms used herein (including in the
-----------
foregoing recitals) but not defined shall have the meanings given to such terms
in the Registration Rights Agreement, except that (a) the term "Shelf
Registration Statement" shall refer only to a Shelf Registration Statement filed
by the Company pursuant to Section 2(b) of the Registration Rights Agreement,
and (b) the term "Registrable Securities" shall refer only to those Private
Exchange Securities which are Registrable Securities held at such time by an
Initial Purchaser.
2. Payment of Liguidated Damages. (a) If: (i) the Shelf
-----------------------------
Registration Statement is not filed with the SEC on or prior to the 30th day
after such obligation arises pursuant to Section 2(b) of the Registration Rights
Agreement; or (ii) the Shelf Registration Statement is not declared effective by
the SEC on or prior to the later of the 45th day after the date such Shelf
Registration Statement was required to be filed pursuant to the terms of the
Registration Rights Agreement and the 210th day after the Issue Date; or (iii)
the Shelf Registration Statement has been declared effective and such Shelf
Registration Statement ceases at any time to be effective and available to an
Initial Purchaser for use in connection with the resale of Registrable
Securities held by that Initial Purchaser (whether or not that cessation is a
result of an event contemplated by Section 3(e) of the Registration Rights
Agreement), and such cessation continues for more than either (A) 30 consecutive
days, or (B) an aggregate of 90 days (whether or not consecutive), in the case
of (A) or (B), during the 210-day period (and any extensions of such period
pursuant to the last paragraph of Section 3 of the Registration Rights
Agreement) immediately following the date on which the Shelf Registration
Statement is first declared effective (other than after such time as all
Registrable Securities have been disposed of thereunder or otherwise cease to be
Registrable Securities pursuant to the terms of the Registration Rights
Agreement), then in each case the Company shall pay liquidated damages to each
Initial Purchaser, at a rate of 0.25% per annum in respect of the aggregate
principal amount of the Senior Notes which constitute Registerable Securities
(as defined herein) held by that Initial Purchaser, in respect of the period:
(x) in the case of clause (i) above, commencing on the 46th day after such
request for the filing of a Shelf Registration Statement is made by the
<PAGE>
-3-
Initial Purchaser and terminating upon the filing of the Shelf Registration
Statement; (y) in the case of clause (ii) above, commencing on the later of the
60th day after the date the Shelf Registration Statement was required to be
filed and the 46th day after the Issue Date and terminating upon the
effectiveness of the Shelf Registration Statement; or (z) in the case of clause
(iii) above, commencing on either (A) the 31st consecutive day, or (B) the 91st
day, after the day the Shelf Registration Statement ceases to be effective or
available for use and terminating on the day that the Shelf Registration
Statement again becomes effective and available for use.
(b) Any amounts of liquidated damages payable by the Company pursuant
to this Section 2 shall be paid in cash directly to each Initial Purchaser on
the next succeeding February 15 or August 15, as the case may be, following the
period in respect of which such Liquidated Damages have become due and payable
hereunder.
3. General.
-------
(a) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(b) Amendments. This Agreement may be amended by the parties hereto
----------
by a written instrument duly executed on behalf of each of the parties hereto.
(c) Entire Agreement. This Agreement and the Registration Rights
----------------
Agreement constitute the entire agreement, and supersede all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof.
(d) GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN MADE
-------------
IN THE STATE OF NEW YORK. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT,
AND THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS. EACH OF THE PARTIES
HERETO AGREES TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE
OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE MATTERS CONTEMPLATED HEREBY, IRREVOCABLY WAIVES ANY
DEFENSE OF LACK OF PERSONAL JURISDICTION
<PAGE>
-4-
AND IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. EACH ISSUER, ON BEHALF
OF ITSELF AND ITS SUBSIDIARIES, IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(e) Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed given if delivered to the parties at the
addresses set forth in, and in a manner contemplated by, the Registration Rights
Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
FOX KIDS WORLDWIDE, INC.
By: /s/ Mel Woods
__________________________________
Name: Mel Woods
Title: President
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
CITICORP SECURITIES, INC.
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY & CO.
By: MERRILL LYNCH, PIERCE,
FENNER & SMITH
INCORPORATED
By: /s/ D. Weil
__________________________________
Authorized Signatory
<PAGE>
EXHIBIT 4.6
LIQUIDATED DAMAGES AGREEMENT
THIS LIQUIDATED DAMAGES AGREEMENT (the "Agreement") is made and
---------
entered into as of October 28, 1997, among FOX KIDS NETWORK, INC., a Delaware
corporation (the "Company") and MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE,
-------
FENNER & SMITH INCORPORATED, CITICORP SECURITIES, INC., BEAR, STEARNS & CO.
INC., DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION and MORGAN STANLEY &
CO. (each an "Initial Purchaser" and, collectively, the "Initial Purchasers").
----------------- ------------------
WHEREAS, as an inducement to the Initial Purchasers to enter into the
Purchase Agreement, dated October 22, 1997 (the "Purchase Agreement"), among the
------------------
Company and the Initial Purchasers (providing for, among other things, the sale
by the Company to the Initial Purchasers of $618,670,000 of the Company's 10
1\4% Senior Discount Notes due 2007 (the "Senior Discount Notes")), and
---------------------
as a condition to the several obligations of the Initial Purchasers thereunder,
the Company has agreed to provide to the Initial Purchasers and their direct and
indirect transferees certain registration and related rights pursuant to and in
accordance with the terms of the Registration Rights Agreement, of even date
herewith (the "Registration Rights Agreement") among the Company and the Initial
-----------------------------
Purchasers;
WHEREAS, notwithstanding the fact that the Company has consummated or
will consummate an Exchange Offer, pursuant to Section 2(a) of the Registration
Rights Agreement, the Initial Purchasers may, under certain circumstances,
require the Company to file a Shelf Registration Statement for the resale of the
Private Exchange Securities held by them;
WHEREAS, the Registration Rights Agreement contains certain provisions
concerning the time within which the Company must file the Shelf Registration
Statement and the period for which such Shelf Registration Statement must remain
effective and usable for resales; and
WHEREAS, the Company and the Initial Purchasers have agreed to provide
for the payment of liquidated damages by the Company directly to the Initial
Purchasers in the event that the Company fails to comply with such contractual
provisions with respect to the filing of a Shelf Registration Statement for the
Private Exchange Securities, as more fully set forth herein.
<PAGE>
-2-
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration the receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. Definitions. Capitalized terms used herein (including in the
-----------
foregoing recitals) but not defined shall have the meanings given to such terms
in the Registration Rights Agreement, except that (a) the term "Shelf
-----
Registration Statement" shall refer only to a Shelf Registration Statement filed
- ----------------------
by the Company pursuant to Section 2(b) of the Registration Rights Agreement,
and (b) the term "Registrable Securities" shall refer only to those Private
----------------------
Exchange Securities which are Registrable Securities held at such time by an
Initial Purchaser.
2. Payment of Liquidated Damages. (a) If: (i) the Shelf
-----------------------------
Registration Statement is not filed with the SEC on or prior to the 30th day
after such obligation arises pursuant to Section 2(b) of the Registration Rights
Agreement; or (ii) the Shelf Registration Statement is not declared effective by
the SEC on or prior to the later of the 60th day after the date such Shelf
Registration Statement was required to be filed pursuant to the terms of the
Registration Rights Agreement and the 180th day after the Issue Date; or (iii)
the Shelf Registration Statement has been declared effective and such Shelf
Registration Statement ceases at any time to be effective and available to an
Initial Purchaser for use in connection with the resale of Registrable
Securities held by that Initial Purchaser (whether or not that cessation is a
result of an event contemplated by Section 3(e) of the Registration Rights
Agreement), and such cessation continues for more than either (A) 30 consecutive
days, or (B) an aggregate of 90 days (whether or not consecutive), in the case
of (A) or (B), during the 210-day period (and any extensions of such period
pursuant to the last paragraph of Section 3 of the Registration Rights
Agreement) immediately following the date on which the Shelf Registration
Statement is first declared effective (other than after such time as all
Registrable Securities have been disposed of thereunder or otherwise cease to be
Registrable Securities pursuant to the terms of the Registration Rights
Agreement), then in each case the Company shall pay liquidated damages to each
Initial Purchaser, at a rate of 0.25% per annum in respect of the Accreted Value
of the Senior Discount Notes which constitute Registerable Securities (as
defined herein) held by that Initial Purchaser, in respect of the period: (x) in
the case of clause (i) above, commencing on the 46th day after such request for
the filing of a Shelf Registration Statement is made by the
<PAGE>
-3-
Initial Purchaser and terminating upon the filing of the Shelf Registration
Statement; (y) in the case of clause (ii) above, commencing on the later of the
60th day after the date the Shelf Registration Statement was required to be
filed and the 80th day after the Issue Date and terminating upon the
effectiveness of the Shelf Registration Statement; or (z) in the case of clause
(iii) above, commencing on either (A) the 31st consecutive day, or (B) the 91st
day, after the day the Shelf Registration Statement ceases to be effective or
available for use and terminating on the day that the Shelf Registration
Statement again becomes effective and available for use.
(b) Any amounts of liquidated damages payable by the Company pursuant
to this Section 2 shall be paid in cash directly to each Initial Purchaser on
the next succeeding February 15 and August 15, as the case may be, following the
period in respect of which such Liquidated Damages have become due and payable
hereunder.
3. General.
-------
(a) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(b) Amendments. This Agreement may be amended by the parties hereto
----------
by a written instrument duly executed on behalf of each of the parties hereto.
(c) Entire Agreement. This Agreement and the Registration Rights
----------------
Agreement constitute the entire agreement, and supersede all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof.
(d) GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN MADE
-------------
IN THE STATE OF NEW YORK. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT,
AND THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS. EACH OF THE PARTIES
HERETO AGREES TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE
OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE MATTERS CONTEMPLATED HEREBY, IRREVOCABLY WAIVES ANY
DEFENSE OF LACK OF PERSONAL JURISDICTION
<PAGE>
-4-
AND IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. EACH ISSUER, ON BEHALF
OF ITSELF AND ITS SUBSIDIARIES, IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(e) Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed given if delivered to the parties at the
addresses set forth in, and in a manner contemplated by, the Registration Rights
Agreement.
<PAGE>
-5-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
FOX KIDS WORLDWIDE, INC.
By: /s/ Mel Woods
________________________________
Name: Mel Woods
Title: President
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
CITICORP SECURITIES, INC.
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY & CO.
By: MERRILL LYNCH, PIERCE,
FENNER & SMITH
INCORPORATED
By: /s/ D. Weil
______________________________
Authorized Signatory
<PAGE>
EXHIBIT 10.1
AMENDED AND RESTATED
STRATEGIC STOCKHOLDERS AGREEMENT
This Amended and Restated Strategic Stockholders Agreement (the
"Agreement") is made and entered into as of August 1, 1997, by and among Haim
Saban ("Saban"), each of the entities listed on Schedule A hereto (the "SEI
Entities" and, with Saban, the "SEI Stockholders"), Fox Broadcasting Company, a
Delaware corporation ("FBC"), Fox Broadcasting Sub, Inc., a Delaware corporation
("FBC Sub") and Allen & Company Incorporated, a New York corporation ("Allen").
R E C I T A L S
---------------
A. On December 22, 1995, the SEI Stockholders owned, in the
aggregate, 800 shares of the common stock, par value $0.01 per share, of Saban
Entertainment, Inc., a Delaware corporation ("SEI") (the "SEI Common Stock") and
FBC owned 800 shares of the common stock, without par value, of FCN Holding,
Inc., a Delaware corporation ("FCNH") (the "FCNH Common Stock").
B. On December 22, 1995, the closing under that certain LLC
Formation Agreement, dated as of November 1, 1995, among SEI, FBC and FCNH (the
"LLC Formation Agreement") occurred and the original Strategic Stockholders
Agreement (the "Initial Strategic Stockholders Agreement") was executed; the
LLC Formation Agreement provided, among other things, for the formation of FOX
KIDS WORLDWIDE L.L.C., a Delaware limited liability company (the "Management
Company").
C. The SEI Stockholders and FBC desired to maximize the long-term
strategic values of their respective corporations, and determined that it would
be in their respective best interests to achieve this objective by entering into
a strategic alliance for the purpose of sharing with each other their respective
strengths, to the mutual benefit of all of them, all on the terms and conditions
of the Initial Strategic Stockholders Agreement, the LLC Formation Agreement,
and the other agreements referred to herein or therein (collectively, the
"Alliance Agreements").
D. On September 27, 1996, FBC transferred to FBC Sub all of its FCNH
Common Stock and FBC Sub agreed to be bound by all of the terms of the Initial
Strategic Stockholders Agreement, as amended by Amendment No. 1 to Strategic
Stockholders Agreement dated February 26, 1996, Amendment No. 2 to Strategic
Stockholders Agreement dated September 27, 1996 and supplemented by Supplement
to Strategic Stockholders Agreement dated September 27, 1996 (together, the
"Strategic Stockholders Agreement").
E. On September 27, 1996, Allen acquired 16 16/99 shares of FCNH
Common Stock pursuant to the Allen Agreement (defined herein) and agreed to be
bound by certain of the terms of the Strategic Stockholders Agreement.
<PAGE>
F. On June 11, 1997, an agreement was executed by and among Fox Kids
Worldwide, Inc., a Delaware corporation ("Fox Kids"), SEI, FBC, FBC Sub, Allen,
and the SEI Stockholders which provided that the SEI Stockholders would
contribute to Fox Kids their SEI Common Stock for an aggregate of 7,920,000
shares of Class B Common Stock of Fox Kids, Allen would contribute its FCNH
Common Stock to Fox Kids for 160,000 shares of Class A Common Stock of Fox Kids,
and FBC Sub would contribute its FCNH Common Stock to Fox Kids for 7,920,000
shares of Class B Common Stock of Fox Kids. On August 1, 1997 this agreement
was amended and restated among the parties (as amended and restated, the
"Reorganization Agreement"). The transactions contemplated by the Reorganization
Agreement are hereinafter referred to as the "Reorganization."
G. On August 1, 1997, the Reorganization was consummated.
Immediately following the Reorganization, (i) all of the equity securities of
SEI and FCNH are held by Fox Kids, and (ii) all of the voting equity securities
of Fox Kids are held by FBC Sub, the SEI Stockholders and Allen.
H. The parties to this Agreement, being the sole holders of voting
equity securities of Fox Kids, have determined that it would be in their
respective best interests to amend and restate the Strategic Stockholders
Agreement to reflect the current organizational and ownership structure of Fox
Kids.
I. All references herein to a "Shareholder" or the "Shareholders"
shall include Allen, the SEI Stockholders and FBC Sub. All references herein to
the (i) SEI Common Stock shall mean the Class B Common Stock of Fox Kids held by
the SEI Stockholders, (ii) Allen Shares shall mean the Class A Common Stock of
Fox Kids held by Allen, and (iii) FCNH Common Stock shall mean the Class B
Common Stock of Fox Kids held by FBC Sub. The shares of Fox Kids now owned by
the SEI Stockholders, Allen and FBC Sub are hereinafter referred to as the
"Shares." Fox Kids and its successors may hereinafter be referred to as "Fox
Kids" or "Successor Entity."
A G R E E M E N T
-----------------
NOW, THEREFORE, in consideration of the foregoing facts and the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
1. Defined Terms. The terms defined in Exhibit "A", which is
-------------
incorporated herein by this reference, shall have the same meanings when used
herein.
2. Restrictions on Transfer.
------------------------
(a) General Restriction. Except as permitted in this Agreement, none
-------------------
of the Shares may be transferred. ANY ATTEMPTED TRANSFER OF SHARES OTHER THAN IN
ACCORDANCE WITH THIS AGREEMENT SHALL BE NULL AND VOID AND OF NO FORCE OR EFFECT.
2
<PAGE>
(b) No Liens. Except as specifically contemplated hereby and except
--------
for the Liens created by that certain Credit Agreement dated as of August 1,
1997 among Fox Kids, FCNH, Fox Kids Merger Corporation and SEI, as Borrowers,
and the initial lenders named therein and Citicorp USA, Inc., as Administrative
Agent ("Citicorp USA"), and Citicorp Securities, Inc., as Arranger (the "Credit
Agreement"), no Shares may be voluntarily subjected to a Lien by any party
hereto, and any such Lien shall be NULL AND VOID AND OF NO FORCE OR EFFECT.
(c) Effect of Transfers. Except for transfers covered by Section
-------------------
3(a)(i) or 3(a)(ii): (i) any Shares transferred in a transaction permitted
hereunder shall remain subject to all of the terms and provisions hereof as if
they were still owned by the transferor, and, without limiting the foregoing,
(x) all transfers of Shares by the transferee shall be subject to this
Agreement; (y) SEI Common Stock transferred shall remain subject to the Options
granted in Section 7 hereof, and shall be transferred and sold at the same time
as the other shares of SEI Common Stock are transferred and sold pursuant
thereto; and (z) Allen Shares transferred shall remain subject to the option
granted in Section 6(a) of the letter agreement, dated as of September 27, 1996,
but effective as of April 3, 1996 between FCNH and Allen (the "Allen
Agreement"), and shall be transferred and sold at the same time as the other
Allen Shares are transferred and sold pursuant thereto; (ii) the transferee
shall enter into a written agreement for the benefit of the parties hereto,
prepared by Fox Kids and in form and substance reasonably acceptable to Saban
and FBC, to be bound by the provisions of this Agreement relating to the
transferred Shares; and (iii) unless Saban and FBC shall otherwise agree, the
transferor of such Shares shall remain fully liable for all of its obligations
with respect to such Shares hereunder.
3. Permitted Transfers. Subject to Section 2(c), Shares may be
-------------------
transferred under the circumstances, and strictly upon the terms and conditions
of, any one of the following Sections:
(a) Public Transfers. Any Shareholder may transfer any or all of its
----------------
Shares free and clear of any and all obligations and restrictions imposed on
such Shares under this Agreement:
(i) pursuant to the "Initial Public Offering" (as defined below)
or otherwise in a public offering effected in accordance with the
provisions of the "Registration Agreement" (as defined below); or
(ii) at any time or from time to time following the Initial
Public Offering and subject to all applicable laws, in a transaction
effected on or through the facilities of a national securities exchange or
an automated quotations system.
Any Shares transferred pursuant to this Section 3(a) shall cease to be
"Shares" under, or subject to, this Agreement; and without limiting the
generality of the foregoing, such Shares shall cease to be subject to the
Options granted in Section 7 of this Agreement.
(b) Transfers to Family Members or Trusts. The SEI Stockholders, or
-------------------------------------
any of them, may transfer all or any portion of their respective Shares, by
death or inter vivos, to any other SEI Stockholders, to any of Saban's family
----- -----
members (including the "spouse" of an "affected SEI Stockholder" (as defined
below)), to any trust established solely for the benefit of one or more of
3
<PAGE>
Saban's family members, or to any legal entity in which Saban or any such
Persons are the sole beneficial owners; provided, however, that the Shares
-------- -------
transferred to the executor of an estate, in the case of death, to any such
family member, trust or legal entity shall be subject to the provisions of this
Agreement. In the event of the dissolution of the marital relationship of any
SEI Stockholder, including Saban, or in the event of the execution of a binding
agreement or issuance of an order with respect to marital property of any SEI
Stockholder, including Saban, any and all Shares transferred pursuant thereto to
the spouse (or ex-spouse) (herein, the "spouse") of such SEI Stockholder (the
"affected SEI Stockholder") shall be subject to all of the provisions of this
Agreement, including the provisions of Section 4 and Section 7 hereof; provided,
--------
that if the spouse desires to transfer any or all of such Shares pursuant to the
provisions of Section 4 hereof, the spouse shall first offer to sell to the
affected SEI Stockholder the Shares proposed to be transferred, and all of the
procedures of Section 4 shall apply thereto (with all references therein to
"Transferor" applying to the spouse, and all references to the "offeree" therein
applying to the affected SEI Stockholder); and the provisions of Section 8 of
this Agreement shall continue to be applicable to such spouse, notwithstanding
such dissolution or order.
(c) Transfer to Affiliates. Any Shareholder may transfer all or any
----------------------
portion of its Shares to a direct or indirect wholly-owned subsidiary of the
Shareholder (or, with respect to a Shareholder which is a natural person, a
corporation or other Person wholly-owned by the Shareholder), or, with respect
to FBC Sub, to a Fox Inc. Subsidiary. A "Fox Inc. Subsidiary" is Twentieth
Holdings Corp. and any Person in which Fox Inc., a Colorado corporation, or
Twentieth Holdings Corp., a Delaware corporation, is the sole beneficial owner
(either directly or indirectly through one or more wholly-owned subsidiaries) of
all of the outstanding voting securities of that Person. If any transferee
subsidiary, including a Fox Inc. Subsidiary, loses its status as such, it shall,
within 30 days of the occurrence of such event, transfer all of its Shares to a
Person which is then wholly-owned by a Shareholder, or a Fox, Inc. Subsidiary,
as the case may be, which transfer shall be effected in compliance with all
other applicable provisions of this Agreement.
(d) Other Permitted Transfers. Any Person may effect a transfer
-------------------------
authorized by Sections 4, 6 or 7 of this Agreement; any holder of SEI Common
Stock may effect a transfer under and pursuant to the "Stock Ownership
Agreement" (as defined in Section 7(b) below); and any Person may effect a
transfer of the Allen Shares under and pursuant to Section 6(a) of the Allen
Agreement.
(e) Notice of Transfers. Promptly upon consummation of a transfer of
-------------------
any Shares, the transferor shall deliver written notice to all parties to this
Agreement pursuant to the notice provisions of Section 11(c). Promptly upon the
determination that an Affiliate of a Person is no longer an Affiliate, such
Person shall deliver written notice to all parties to this Agreement pursuant to
the notice provisions of Section 11(c).
4. Refusal Rights. No Shares may be transferred pursuant to this Section
--------------
4 prior to the first to occur of (i) the Initial Public Offering (subject to the
provisions of the Registration Agreement) or (ii) December 13, 1998.
4
<PAGE>
(a) Offer. If any Shareholder ("Transferor") desires to transfer any
-----
Shares pursuant to this Section 4, it shall deliver a written offer to sell for
cash the Shares, and all rights with respect to the Shares (excluding rights
under this Agreement which, pursuant to Section 11(b), are personal to Saban or
FBC Sub), (x) if Transferor is an SEI Stockholder, to FBC Sub, (y) if Transferor
acquired the Shares pursuant to this Section 4 directly or indirectly: (A) from
FBC Sub, to Saban, or (B) from an SEI Stockholder, to FBC Sub, or (C) from
Allen, to both Saban and FBC Sub; (z) if Transferor is FBC Sub, to Saban; and
(aa) if Transferor is Allen, to both FBC Sub and Saban. In case of an offer to
both FBC Sub and Saban, each of FBC Sub and Saban shall be entitled to subscribe
to purchase 50% of the offered Shares, plus any and all of the offered Shares
----
not subscribed for by the other of Saban or FBC Sub. The offer shall be
accompanied by a Bona Fide Offer from a non-Affiliate of Transferor, and shall
(i) remain open for at least 30 days; (ii) state the date of termination of the
offer; (iii) state the purchase price for the Shares, which shall be equal to
the purchase price set forth in the Bona Fide Offer; provided, if the Bona Fide
--------
Offer provides for consideration other than cash, Transferor's offer shall, to
the extent of such consideration, permit the offeree to pay, in lieu thereof,
cash equal to the Fair Market Value of such other consideration, and
Transferor's offer shall state Transferor's best estimate of such Fair Market
Value, which shall be conclusive and binding upon Transferor (but not the
offeree); and (iv) shall designate the time, the date (which shall not be less
than 45 days from the date of the offer by Transferor) and the place (which
shall be in the County of Los Angeles, California) at which the sale of the
offered Shares is to take place.
In case of an offer to both FBC Sub and Saban pursuant to this Section 4(a), the
provisions of Sections 4(b), 4(c) and 4(d) below shall be separately applicable
to each of FBC Sub and Saban, as an offeree, with respect to the Shares offered
to, subscribed for and purchased by, such offeree; and thus, if, for example,
Saban fails to accept, or rejects, Transferor's offer, but FBC Sub accepts
Transferor's offer, Transferor would not have the right pursuant to Section 4(d)
to sell any of the Shares which FBC Sub has so elected to purchase.
(b) Manner of Payment. Payment of the purchase price for the offered
-----------------
Shares may, at the election of the offeree, be made by either (i) bank cashiers'
check in immediately available funds made payable to the order of the
Transferor, or (ii) wire transfer of immediately available funds to a designated
bank account of the offeree.
(c) Acceptance and Closing. Transferor's offer may be accepted only
----------------------
by delivering to Transferor written notice of acceptance prior to the expiration
of the offer period; provided, that such acceptance may be made subject to the
--------
final determination of the Fair Market Value of any non-cash consideration, in
which event such acceptance shall so state, and be accompanied by the offeree's
estimate of such Fair Market Value; and if the actual Fair Market Value differs
in any material respect from the offeree's estimate, the offeree may, within
four business days following receipt of the final determination of Fair Market
Value, withdraw its acceptance of the offer. If the offer is accepted and not
withdrawn as aforesaid, the closing of the sale shall take place at the time and
place, and upon the terms, specified in the offer; provided, however, that if
-------- -------
the offeree disputes the Transferor's estimate of the Fair Market Value of any
non-cash consideration, the closing shall be delayed to five business days
following the date of final determination of such Fair Market Value, and if the
purchase and sale of such Shares requires the obtaining of any
5
<PAGE>
regulatory approvals or compliance with any other laws, the closing shall be
delayed for such time as is reasonably necessary to obtain such approvals and
comply with such laws; and provided further, however, that if the seeking of
-------- -------
such regulatory approvals and compliance with other applicable laws delays the
closing by more than 90 days, at any time subsequent to such 90-day period and
prior to the closing, the Transferor may, by written notice to offeree, treat
such delay as a rejection of the offer, and, following delivery of such notice,
the provisions of Section 4(d) shall be applicable; and provided further, if the
Management Company, SEI, FCNH or any of their respective Subsidiaries then owns
or controls a television broadcasting station operating under a license issued
by the Federal Communications Commission ("FCC"), and as a result of the
proposed transfer approval by the FCC is required, then such 90-day period
referred to in the preceding proviso shall be a one-year period. At the closing,
Transferor shall deliver to the offeree documents of transfer in form and
substance reasonably acceptable to the offeree and its counsel, necessary to
vest in the offeree good and marketable title to the Shares so sold, free and
clear of any and all Liens, other than those imposed under or pursuant to this
Agreement, against delivery by the offeree to the Transferor of the purchase
price therefor.
(d) Sale Pursuant to Bona Fide Offer. If the offeree fails to accept,
--------------------------------
or rejects, Transferor's offer, then, subject to the provisions of Section 2(c),
Transferor shall have the right to sell to the Person specified in the Bona Fide
Offer the Shares so offered pursuant to the terms and conditions specified in
the Bona Fide Offer or otherwise on terms and conditions no less favorable to
Transferor than the terms set forth in the Bona Fide Offer; provided, that such
--------
sale is consummated within ninety days of the date of delivery of Transferor's
offer.
(e) Transferred Shares Subject to Agreement. All Shares transferred
---------------------------------------
pursuant to this Section 4 shall continue to be subject to this Agreement.
5. Covenants and Voting Agreements.
-------------------------------
(a) Of FBC Sub. Except as provided in or contemplated by this
----------
Agreement, without the prior written consent of Saban, which consent may be
withheld by Saban at his sole and absolute discretion, FBC Sub shall not, (i)
sell any FCNH Common Stock or any options, warrants or rights to subscribe for
or acquire, with or without additional consideration, any shares of FCNH Common
Stock; (iii) merge or consolidate with any other Person; (ii) make any other
payments, whether in the form of advances or loans, to FBC or any of its
Affiliates; (iv) sell, lease or dispose of any assets; (v) liquidate, dissolve,
recapitalize or reorganize in any form of transaction; (vi) engage in any
business or other material activity, other than that of holding its interest in
FCNH Common Stock or own any other non-cash equivalent assets; (vii) amend its
Certificate of Incorporation or By-Laws; or (viii) enter into any commitment or
agreement directly or indirectly to effect any of the foregoing.
(b) Of the SEI Stockholders. Except as provided in or contemplated by
-----------------------
this Agreement or the LLC Formation Agreement, without the prior written consent
of FBC, which consent may be withheld by FBC at its sole and absolute
discretion, the SEI Stockholders shall not: (i) sell any SEI Common Stock, or
any options, warrants or rights to subscribe for or acquire, with or without
additional consideration, any shares of SEI Common Stock other than pursuant to
6
<PAGE>
agreements existing as of the date hereof; (ii) merge or consolidate with any
other Person; (iii) make any other payments, whether in the form of advances or
loans, to Saban and the SEI Stockholders or any of their Affiliates; (iv) sell,
lease or dispose of any assets other than in the ordinary course of business;
(v) liquidate, dissolve, recapitalize or reorganize in any form of transaction;
(vi) amend its Certificate of Incorporation or By-Laws; or (vii) enter into any
commitment or agreement directly or indirectly to effect any of the foregoing.
(c) Intentionally deleted.
(d) Performance; Irrevocable Proxy. (i) Each of the SEI
------------------------------
Stockholders, FBC and FBC Sub, and each of their respective transferees,
successors and assigns (other than with respect to transfers of Shares pursuant
to Section 3(a)(i) or Section 3(a)(ii) of this Agreement) shall take any and all
actions within their power as stockholders of the Successor Entity (defined
herein), including the calling of special meetings of the stockholders of the
Successor Entity and the voting of all of the Shares with respect to which he
or it has sole or shared voting power, in order to carry out and perform their
respective obligations under this Agreement; (ii) FBC shall take any and all
actions within its power as a stockholder of FBC Sub, including the calling of
special meetings of the stockholders of FBC Sub, and the voting of the shares of
capital stock of FBC Sub, required to cause FBC Sub to perform all of its
obligations under this Agreement; and (iii) without limiting the generality of
clauses (i) or (ii) above, if and so long as any party hereto (a "breaching
party") fails or refuses to perform its obligations under this Section 5 or
Section 13, following demand to perform such obligations by Saban or FBC
(whichever is not the breaching party, or a party in control of the breaching
party), without limiting any other rights which may then be available at law or
in equity with respect thereto, all of the Shares of the breaching party (and,
if the breaching party is FBC Sub, all of the voting securities of FBC Sub) and
its controlled Affiliates may be voted by the other of Saban or FBC Sub, as the
case may be, to cure such breach or rectify such default; and in furtherance
thereof, Saban hereby appoints FBC Sub, and FBC and FBC Sub each hereby appoints
Saban, as its proxy and attorney-in-fact pursuant to the provisions of Section
212(e) of the Delaware General Corporation Law, with full power and authority
from time to time to vote or act by written consent with respect to the Shares,
but only following demand to the party granting such proxy to vote the Shares as
required hereby, and then only as may be necessary to ensure full compliance
with the provisions of this Section 5 and Section 13. Each proxy granted hereby
is coupled with an interest in the Shares to which it relates, and shall be
irrevocable for the term of this Section 5 and Section 13.
(dd) Irrevocable Proxy. Allen hereby irrevocably and unconditionally
-----------------
appoints FBC, with full power of substitution, as its proxy and attorney-in-fact
pursuant to the provisions of Section 212(e) of the Delaware General Corporation
Law, with full power and authority from time to time to attend meetings, vote,
act by written consent, and in all other ways act in Allen's place and stead
with respect to the Allen Shares (and any and all shares or other securities
issued in respect of such shares). The proxy granted hereby is coupled with an
interest in the Allen Shares, which interest includes the rights granted to the
Shareholders pursuant to the provisions of Section 6 of this Agreement, and the
rights granted to FCNH pursuant to the Allen Agreement, and shall be irrevocable
for the term of this Section 5. For purposes of Section 5(d) of this Agreement
only, the Allen Shares shall be deemed to be "Shares" owned and controlled by
FBC; and the irrevocable
7
<PAGE>
proxy granted to Saban by FBC in Section 5(d) of this Agreement shall include
the grant by FBC to Saban (under the irrevocable proxy created by this Section
5(dd)) of the power to vote or act by written consent with respect to the Allen
Shares, as therein provided with respect to the Shares of FBC.
(e) Term. All provisions of this Section 5 shall terminate and expire
----
on the first to occur of (i) the closing of the Initial Public Offering; or (ii)
the closing of the purchase and sale of the SEI Common Stock pursuant to Section
7.
6. Initial Public Offering.
-----------------------
(a) Election to Effect Initial Public Offering.
------------------------------------------
(i) Either Saban or FBC may at any time propose to the other that
the Successor Entity effect a firmly underwritten public offering (the
"Initial Public Offering") of its Class A Common Stock pursuant to a
registration statement filed with the Commission under the Securities Act
and otherwise in accordance with the registration agreement between the
parties dated as of December 22, 1995 (the "Registration Agreement"), a
copy of which is attached hereto as Exhibit "B". Saban and FBC shall
thereafter attempt in good faith to reach agreement as to the terms of the
Initial Public Offering, including the designation of the managing
underwriter(s) (the "Underwriters") thereof, the size of the offering, and
the maximum aggregate offering price of securities to be offered by the
Successor Entity in the offering.
(ii) If Saban and FBC fail to agree on the terms of the offering
within 15 days from the date of the original proposal, the party first
proposing the Initial Public Offering (the "Initiating Holder") shall have
the right to cause the Initial Public Offering to be effected on such terms
as the Initiating Holder and the Underwriters designated by the Initiating
Holder may in good faith mutually agree; and all parties to this Agreement
shall fully cooperate in the Initial Public Offering.
(iii) If the Initial Public Offering is terminated prior to the
sale of any securities, the provisions of this Section 6(a) shall be
applicable until an Initial Public Offering is actually effected. FBC and
each of the SEI Stockholders shall have the right to participate in the
Initial Public Offering, and in other future offerings, pursuant to the
Registration Agreement.
(b) Intentionally deleted.
7. Put Option.
----------
(a) Option.
------
(i) Upon the occurrence of each and every "Triggering Event," as
that term is defined in clause (ii), below, Saban shall have the right and
option (the "Put
8
<PAGE>
Option") to require FBC to purchase all Shares of the Successor Entity
which, pursuant to Recital I, are deemed to be shares of SEI Common Stock
and which are owned by the SEI Stockholders or any of their transferees
(other than FBC and excluding Shares transferred pursuant to Section
3(a)(i) or 3(a)(ii)); (the Shares subject to the Put Option are referred to
herein as the "SEI Option Shares") for the per share cash purchase price
determined pursuant to Section 7(c), by delivering written notice of his
election to FBC within the time period for that Triggering Event set forth
in clause (ii) below, accompanied by a separate written notice to FBC Sub
or to the person then holding the Stock Ownership Agreement, of his
election to cause a "Call Triggering Event" thereunder.
(ii) The "Triggering Events," and the time periods for delivery
of election notices with respect thereto, shall be as follows:
(x) death of Saban prior to December 22, 2012 -- 12 calendar
months following death; notice of election may be given by the
executor of his estate, or by a majority in interest of the holders of
the affected Shares of SEI Common Stock;
(y) a Change in Control of FBC -- 90 business days after the
first public announcement of such event;
(z) December 22, 2000 -- notice must be given not later than
180 calendar days prior to December 22, 2000; or
(aa) upon delivery of written notice by Saban of exercise of
the Option at any time on or after the December 22, 2002 and on or
prior to December 22, 2012 -- notice may be given at any time during
the period.
The date of the Triggering Event to which the exercise of the Put Option
relates shall be the "Effective Date" of the Put Option. The failure or decision
not to exercise the Put Option upon the occurrence of a Triggering Event shall
not affect Saban's right to exercise the Put Option on any subsequent Triggering
Event.
(b) Rules of Priority of Call Option Over Put Option. The Management
------------------------------------------------
Company and Saban entered into a separate Stock Ownership Agreement (the "Stock
Ownership Agreement") dated December 22, 1995 pursuant to which the SEI
Stockholders granted a call option (the "Call Option") to the Management
Company. Pursuant to an Assignment and Assumption Agreement dated September 27,
1996, the Management Company transferred to FBC Sub the Call Option. For
purposes of determining whether the SEI Option Shares are being sold under the
Call Option or the Put Option, the following rules will apply:
(i) if the holder of the Call Option has duly exercised the Call
Option, unless FBC Sub thereafter breaches or is unable to perform its
obligations with respect thereto, Saban shall not have the right to
exercise the Put Option; and
9
<PAGE>
(ii) if Saban exercises the Put Option, and the holder of the
Call Option thereafter duly and timely exercises its Call Option, the
exercise of the Call Option shall take precedence over the Put Option, and
the SEI Option Shares shall be sold under and pursuant to the Call Option.
(c) Calculation of Purchase Price.
-----------------------------
(i) Put Option Price. The per share purchase price for the SEI
----------------
Option Shares under the Put Option shall be an amount equal to: the Fair
Market Value of the Successor Entity, divided by the number of shares of
common stock of the Successor Entity then issued and outstanding (and if
there is more than one class of common stock of the Successor Entity, the
denominator shall be adjusted to include on an equitable basis all then
outstanding shares of all classes of common stock);
(A) minus, the amount (but in any event, no more than 10% of the
-----
amount computed above, whichever is applicable) paid or payable by SEI with
respect to United States federal or state income taxes (including interest
and penalties) for any of its taxable years ending on or prior to May 31,
1995 with respect to undistributed, Saban International, N.V. income,
divided by the number of SEI Option Shares;
(B) plus, in either such case, interest thereon at the "prime" or
----
"reference" rate published by Wells Fargo Bank at San Francisco,
California, from time to time from the Effective Date through and including
the date of closing of the purchase and sale of the SEI Option Shares;
(C) plus, in either such case, an amount equal to $50,000,000,
----
divided by the number of SEI Option Shares.
(d) Put Option Closing. The closing of the purchase and sale of the
------------------
SEI Option Shares pursuant to this Section 7 shall take place at such time and
place as Saban and FBC shall mutually agree upon; provided, that the date of
--------
closing shall be five business days following the later of (i) the date of final
determination of Fair Market Value; and (ii) if the purchase and sale of such
Shares requires the obtaining of any material regulatory approvals or compliance
with any other material laws or regulations, the date upon which all such
approvals shall have been obtained, and such compliance effected; provided
--------
further, however, that if through no fault of the SEI Stockholders FBC is unable
- -------
fully to satisfy all conditions of clause (ii) within six calendar months of the
date of final determination of Fair Market Value, then FBC shall on the first
business day following the end of such six-month period pay and deliver to the
holders of the SEI Option Shares an amount equal to the per share purchase price
for such Shares, and the holders of the SEI Option Shares shall enter into such
agreements with respect to the subsequent voting and transfer of such Shares as
FBC shall reasonably request, including the agreement at any time thereafter to
transfer such Shares, without receipt of further consideration, to such Person
or Persons as may be designated by FBC. At the closing, each of the holders of
the SEI Option Shares shall deliver to FBC documents of transfer in form and
substance reasonably acceptable to FBC and its counsel, necessary to vest in FBC
good and
10
<PAGE>
marketable title to the SEI Option Shares so sold by the holder thereof, free
and clear of any and all Liens, other than those imposed under or pursuant to
this Agreement, against delivery by FBC to such holder of the purchase price
therefor, payable, at the election of Saban, by either (x) bank cashiers' checks
in immediately available funds payable to the order of the selling holders, or
(y) wire transfer of immediately available funds to an account or accounts
designated by Saban.
8. Special Provisions Concerning Spouses of SEI Stockholders.
---------------------------------------------------------
This Agreement has been executed by Saban and consented to by his
spouse, who may claim a community property interest, or other interest, in some
or all of the Shares or other rights hereunder held by Saban. Such spouse, in
executing her consent in the form of Exhibit "C" hereto, represents that she has
read provisions of this Agreement (including, without limitation, Sections 2 and
11(b) hereof) and that she has carefully reviewed the same with her counsel, and
acknowledges and irrevocably agrees that by such execution she is waiving any
rights which she may have during the continuance of her marriage, or at any time
thereafter, prior to the death or incompetency of Saban, to control SEI, Fox
Kids or the Management Company. In making such waiver, she has carefully
considered the provisions of Section 1100 of the Family Code of the State of
California which grants to her, among other things, equal right to management
and control of certain community assets, and waives all of her rights thereunder
with respect thereto. Further, she specifically consents to and agrees that the
SEI Common Stock, to the extent that it is controlled by Saban, and the consent,
veto and other rights personally granted to him pursuant to this Agreement, the
Management Agreement and the other Alliance Agreements, constitute a "business
or an interest in a business" which is being operated or managed by Saban, so as
to cause Saban to have primary right to the management and control thereof, and
waives her right to prior notice of any sale, lease, exchange, encumbrance or
other disposition of all or substantially all of the personal property used in
the operation of such business. A copy of Section 1100 is attached as an
exhibit to Exhibit "C".
9. Representations and Warranties.
------------------------------
(a) Intentionally deleted.
(b) No party makes any representation or warranty to the other except
as set forth in this Agreement. Without limiting the generality of the
foregoing, except as and to the extent provided in Sections 10(h) and 10(i)
hereof, no party hereto makes any representation or warranty to any other party
hereto with respect to any financial projection, forecast or other forward-
looking information with respect to its assets, business or operations.
10. Survival of Representations and Warranties; Indemnification.
-----------------------------------------------------------
(a) Survival of Representations and Warranties. All representations
------------------------------------------
and warranties contained in the Initial Strategic Stockholders Agreement, any
amendment thereto and this Agreement shall survive the execution and delivery
of this Agreement and any investigation at any time made; and, with respect to
those matters subject to Section 10(c)(ii), below, shall terminate and expire on
the expiration of the "Indemnification Period" defined in Section 10(c)(ii), and
shall be of no further force or effect thereafter, except with respect to any
claim written notice of which
11
<PAGE>
shall have been delivered to the party making the representation or warranty
subject to Section 10(c)(ii) on or prior to the termination of the
Indemnification Period, but only, if such claim shall not thereto-fore have been
settled, if litigation with respect to which shall have been commenced on or
prior to six months following the termination of the Indemnification Period.
(b) Indemnification. FBC and FBC Sub, with respect to representations
---------------
and warranties made by either or both of them in Section 9 of the Strategic
Stockholders Agreement with respect to themselves, and the SEI Stockholders,
with respect to representations or warranties made by any of them in Section 9
of the Strategic Stockholders Agreement with respect to themselves or the other
SEI Stockholders (each group the "indemnifying party"), jointly and severally
agree to indemnify, defend, and hold the other (such group, the "indemnified
party") harmless against and in respect of:
(i) if and to the extent that any of the representations and
warranties of the indemnifying parties set forth in Section 9(a) of the
Initial Stockholders Agreement are incorrect, the damages sustained by the
indemnified paries as a result thereof, which damages shall be fixed at 50%
of the positive difference, if any, between (A) the Fair Market Value as of
the LLC FA Date of SEI and its Subsidiaries (if the indemnified parties are
FBC and FBC Sub) or of FCNH and FCN (if the indemnified parties are the SEI
Stockholders) had the representations and warranties been true, correct and
complete in all respects (and thus taking into consideration misstatements,
errors and omissions which would have had the effect of increasing such
price, as well as those having the effect of depressing such price), and
(B) the actual Fair Market Value as of the LLC FA Date of SEI and its
Subsidiaries, or of FCNH and FCN, as applicable.
(ii) if and to the extent that any representations and
warranties of the indemnifying parties in the Initial Stockholders
Agreement, any amendment thereto or this Agreement (other than in Section
9(a) of the Initial Stockholders Agreement) are incorrect, any loss or
damage incurred by the indemnified parties by reason thereof;
(iii) any and all loss, cost, liability, or damage incurred by
the indemnified party or the Management Company, the Successor Entity or
operating companies managed by either of them as the result of any claim,
demand, action, suit or proceeding by any third party alleged to be based
upon any mortgage, indenture, loan or credit agreement or any other
agreement or instrument, which, if the allegations in such claim, demand,
action, suit or proceeding were to be proved, would result in a breach of
the representations and warranties of the indemnifying party set forth in
Section 9(b)(iii)(A)(y) of the Initial Strategic Stockholders Agreement;
(iv) any and all loss, cost, liability, damage or deficiency
arising out of or in connection with any breach of any covenant or
agreement made or to be performed by the indemnifying parties under the
terms of this Agreement; and
(v) all claims, demands, actions, suits, proceedings, judgments,
costs, reasonable attorneys' fees and expenses, or liens, charges, or
encumbrances upon the assets
12
<PAGE>
of any of the indemnified parties relating to or incurred by the
indemnified parties incident to the foregoing.
If a claim is made under Section 10(b)(i), Fair Market Value shall be determined
using only a "discounted cash flow" analysis, with the discount rate fixed at
10%.
(c) Limitations.
-----------
(i) The parties' rights to indemnification under this Section 10 shall
be available only if a party entitled to indemnification pursuant to this
Section 10 delivers written notice to the party or parties required to provide
indemnification, setting forth in detail the factual basis for indemnification
and the amount thereof, or a good faith estimate thereof, sought to be
indemnified (the "Indemnification Notice"). The indemnified party or parties
shall use its or their best efforts to provide in its or their Indemnification
Notice sufficient detail to enable the indemnifying party or parties to evaluate
the claim. Except with respect to Indemnification Claims covered by Section
10(d) (which relates to third party claims), within 30 days (the "Objection
Period") of the date such Indemnification Notice is given, the indemnifying
party shall respond to the Indemnification Notice. The indemnifying party shall
be entitled to cure any default which is capable of cure during the Objection
Period, and the amount of the claim for indemnification contained in the
Indemnification Notice shall be reduced by the amount of the damages mitigated
by cure[; and, to the extent that any default relates to a matter covered by
Section 10(i) hereof, payments made or to be made thereunder shall be deemed to
be payments made to cure such defaults, in whole or in part]. If the
indemnifying party or parties agree in writing during the Objection Period to
accept any of the claims included in the Indemnification Notice, such party
shall promptly pay the amounts so agreed upon. In all other cases, the
indemnified party or parties and the indemnifying party or parties shall use
their respective good faith reasonable efforts to resolve the dispute within 60
days of the date such Indemnification Notice is given (the "Settlement Period").
If the dispute is not resolved within the Settlement Period, the parties shall
be free to commence litigation to enforce their rights to indemnification under
this Section 10; provided, however, that if such litigation has not been
-------- -------
commenced on or prior to six months following the date such Indemnification
Notice is given, all rights of the indemnified party or parties to
indemnification with respect to the matters set forth in that Indemnification
Notice shall be deemed to have been irrevocably waived and released by the
indemnified party or parties, and shall terminate and expire.
(ii) Notwithstanding any provision of this Section 10 to the contrary,
the parties' rights to indemnification for breaches of the representations and
warranties contained in Section 9(a) of the Initial Strategic Stockholders
Agreement shall be available only if the party entitled to such indemnification
delivers and Indemnification Notice with respect to such claim prior to the date
which is 24 months from the date of the Initial Strategic Stockholders Agreement
(the "Indemnification Period"). The rights of the Parties to this Agreement to
indemnification under this Section 10 relating to any other representation or
warranty shall survive the closing under the Initial Strategic Stockholders
Agreement and the execution and delivery of this Agreement, and shall not be
subject to the foregoing Indemnification Period.
13
<PAGE>
(d) Defense. If any of the indemnified parties is made or threatened
-------
to be made a defendant in or party to any action or proceeding, judicial or
administrative, instituted by any third party for the liability under which or
the costs or expenses of which any of the indemnified parties is entitled to be
indemnified pursuant to Section 10 (any such third party action or proceeding
being referred to as an "Indemnification Claim"), the indemnified party or
parties shall give prompt notice thereof to the indemnifying party; provided
--------
that the failure to give such notice shall not affect the indemnified party or
parties' ability to seek indemnification hereunder unless such failure has
materially and adversely affected the indemnifying party or parties' ability to
prosecute successfully an Indemnification Claim. Each indemnified party shall
permit the indemnifying party, at its own expense, to assume the defense of any
such claim or any litigation to which this Section 10(d) may be applicable, by
counsel reasonably satisfactory to the indemnified party or parties; provided,
--------
that the indemnified party or parties shall be entitled at any time, at its or
their own cost and expense (which expense shall not be recoverable from the
indemnifying party unless the indemnifying party is not adequately representing
or, because of a conflict of interest, may not adequately represent, the
indemnified party or parties' interests), to participate in such claim, action
or proceeding and to be represented by attorneys of its or their own choosing.
If the indemnified party or parties elects to participate in such defense, such
party or parties will cooperate with the indemnifying party in the conduct of
such defense. The indemnified party or parties may not concede, settle or
compromise any Indemnification Claim without the consent of the indemnifying
party. The indemnifying party, in the defense of any such claim or litigation,
shall not, except with the approval of each indemnified party, consent to entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party or parties of a full and complete release from all liability
in respect to such claim or litigation. If the Indemnification Claim arises
under Section 10(b)(iii), the indemnifying party shall defend the third party
claim in the name of the indemnifying party and pay any amounts to be
indemnified under such section directly to the claiming party.
(e) Indemnification is Sole and Exclusive Remedy. Except as provided
--------------------------------------------
in Section 11(l) of this Agreement, the rights of the parties to indemnification
under this Section 10 shall constitute the sole and exclusive remedies of the
parties for all breaches of representations and warranties of the parties hereto
or for the nonfulfillment or other breach by any of them of any of their
respective covenants and agreements contained herein, and each party hereby
waives any other rights or remedies which it may have against any of the others,
or arising out of any action or failure to act by any of them. If any such
breach or nonfulfillment of any representation, warranty or covenant hereunder
constitutes a breach or nonfulfillment of any representation, warranty or
covenant under any other of the Alliance Agreements, the damaged party or
parties shall have the right to seek relief under each of such agreements; but
in no event shall the amounts paid or recovered by such party and its Affiliates
result in a duplication of damages.
(f) Limitation on Claims. Except with respect to (i) third party
--------------------
Indemnification Claims subject to the terms and provisions of Section 10(d) of
this Agreement, (ii) claims based upon the failure of any party fully to comply
with all of its obligations under Sections 2 through 8 of this Agreement, no
party shall have the right to deliver an Indemnification Notice pursuant to this
Section 10 unless (i) the amount of each of such party's separate claims
included therein is in excess of $500,000 (each, a "Permitted Claim") and the
aggregate amount of all such party's Permitted
14
<PAGE>
Claims included in that Indemnification Notice exceeds $2,000,000, or (ii) the
aggregate amount of all such party's claims included in such Indemnification
Notice (whether Permitted Claims or not) exceeds $3,000,000.
(g) Discharge of Indemnification Obligation. Notwithstanding the
---------------------------------------
provisions of this Section 10 to the contrary, with respect to any damages
relating to a breach of the representations and warranties set forth in Section
9(a) of the Initial Strategic Stockholders Agreement, the indemnifying party or
parties may, at its or their election, either pay the damages with respect
thereto directly to the indemnified parties, or, alternatively, contribute such
additional property reasonably acceptable to FBC and Saban, or cash, or a
combination thereof, to the Successor Entity to increase the Fair Market Value
thereof, defined under Section 10(b)(i), to that value which it should have had,
had the complained or representations and warranties been, true, correct and
complete.
(h) Intentionally deleted.
(i) FBC Cash Receipts Payments. FBC agrees, on the terms and subject
--------------------------
to the conditions of this Section 10(i), to loan to FCN amounts provided for in
Section 10(i)(A) below and indemnify the Management Company for amounts set
forth in Section 10(i)(B) below:
(A) Promptly following the end of June 1996, FBC shall cause FCN
to prepare, or cause to be prepared, and deliver to the Management Company
and Saban a statement of FCN's programming "Net Profits," as determined
pursuant to Exhibit "C" to the Station Affiliate Agreements, through June
30, 1996 (the "FCN Net Profits Statement"), which report shall include the
(i) the actual amounts paid by FCN to FCN's Station Affiliates as their
share of FCN's programming Net Profits for fiscal 1996; (ii) any advances
(the "Advances") made by FCN to the FCN Station Affiliates in excess of the
actual amount of FCN cash available for payment to the FCN Station
Affiliates with respect to their share of FCN's programming Net Profits for
fiscal 1996; and (iii) the actual amount of FCN cash available for payment
at June 30, 1996. If the Advances were paid pursuant to the mutual
agreement of FCNH and Saban, then FBC shall loan FCN an amount equal to the
aggregate of such Advances, which such loan shall (x) be evidenced by a
promissory note containing terms and conditions customary in commercial
transactions, (y) bear interest at the rate historically charged FCN for
advances by FBC, and (z) shall be repaid on the same terms and at the same
times as the Advances are recouped by FCN from the Station Affiliates.
(B) If the aggregate amount of cash received by the Management
Company pursuant to or with respect to the Asset Assignment Agreement
during the period from the date of this Agreement through June 30, 1996
plus the amounts paid to FBC Sub by way of dividend pursuant to the terms
of Section 5.9.2 of the Operating Agreement (the "Actual Cash Payments")
are less than $35,755,000, FBC shall, within 30 days following receipt of
the FCN Net Profits Statement, contribute to the Management Company,
without offset, an amount equal to the difference between $35,755,000 and
the Actual Cash Payments.
15
<PAGE>
(C) Any payments made by FBC pursuant to Section 10(i)(B) above
shall be treated, as between FBC, FCNH and FCN, as payments subject to
Section 19.11 of the Asset Assignment Agreement. This Section 10(i) is
intended for the benefit of, and is enforceable by, the Management Company,
SEI and Saban.
11. Miscellaneous Provisions.
------------------------
(a) In this Agreement, headings are for convenience only and shall not
affect interpretation, and except to the extent that the context otherwise
requires: (i) references to any legislation or to any provision of any
legislation include any modification or re-enactment of, or any legislative
provision substituted for, and all statutory instruments issued under, such
legislation or such provision; (ii words denoting the singular include the
plural and vice versa; (ii words denoting individuals include corporations and
other Persons and vice versa; (iv words denoting any gender include all genders;
(v) references to any document, agreement or other instrument (including this
Agreement) include references to such document, agreement or other instrument as
amended, novated, supplemented or replaced from time to time; (vi references to
clauses, sub-clauses, sections, sub-sections, Schedules and Exhibits are to
clauses, sub-clauses, sections, sub-sections, Schedules and Exhibits of this
Agreement; (vi "or" is not exclusive; (vi "$", and all other references to
dollar amounts, are in U. S. currency; (ix references to any party to this
Agreement or any other document, agreement or other instrument includes its
successors or permitted assigns; and (x) "writing" and cognate expressions
include all means of reproducing words in a tangible and permanently visible
form.
(b) Rights Personal to FBC and Saban. Each and every right and
--------------------------------
obligation which refers to "Saban" or "FBC" is personal to Saban or FBC, as the
case may be, and shall not attach to, or be deemed to relate to or concern the
Shares held by Saban or FBC; and thus, without the prior written consent of both
Saban and FBC, none of such rights or obligations may be assigned, delegated or
transferred to any other Person; provided, however, that in the event of the
-------- -------
incompetency or death of Saban, all rights granted to Saban hereunder shall be
exercisable by his conservator, executor or administrator, or by a single Person
from time to time designated by SEI Stockholders then holding a majority of the
then outstanding Shares of SEI Common Stock held by all SEI Stockholders.
(c) Notices. All notices, demands or other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given (i) if delivered
in person, upon delivery thereof, or (ii) if mailed, certified first class mail,
postage pre-paid, with return receipt requested, on the fifth day after the
mailing, or (iii) if sent by telex or facsimile transmission, with a copy mailed
on the same day in the manner provided in (ii) above, when transmitted and
receipt is confirmed by telephone or telex or facsimile response, or (iv) if
otherwise actually delivered, when delivered:
16
<PAGE>
(i) if to FBC or FBC Sub:
Fox Broadcasting Company, Inc.
P.O. Box 900
10201 West Pico Boulevard
Los Angeles, CA 90035
Attention: Jay Itzkowitz, Esq.
Fax: (310) 369-1391
With a copy to:
Squadron, Ellenoff, Plesent &
Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attention: Jeffrey Rubin, Esq.
Fax: (212) 697-6686
(ii) if to FCNH:
FCN Holding, Inc.
Fox Inc.
10201 West Pico Boulevard
Los Angeles, CA 90035
SVP Legal Affairs
Fox Television Group
Attention: Jay Itzkowitz, Esq.
Fax: (310) 369-2572
With a copy to:
Squadron, Ellenoff, Plesent &
Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attention: Jeffrey Rubin, Esq.
Fax: (212) 697-6686
(iii) If to SEI, Saban or any of the Other SEI Stockholders:
Haim Saban
Saban Entertainment, Inc.
10960 Wilshire Boulevard
Los Angeles, CA 90024
Fax: (310) 235-5108
17
<PAGE>
With a copy to:
Matthew G. Krane, Esq.
1451 North Kings Road
Los Angeles, CA 90069
Fax: (213) 654-6353
and with a copy to:
Troop Meisinger Steuber & Pasich, LLP
10940 Wilshire Boulevard, Suite 800
Los Angeles, California 90024
Attention: Richard E. Troop, Esq.
Fax: (310) 443-8503
(iv) If to Allen:
Allen & Company Incorporated
711 Fifth Avenue
New York, New York 10022
Attention: Stanley S. Shuman,
Executive Vice President
Fax: (212) 832-8023
or at such other address or addresses as may have been furnished by such Person
in like manner to the other parties.
(d) Severability. Should any Section or any part of a Section within
------------
this Agreement be rendered void, invalid or unenforceable by any court of law
for any reason, such invalidity or unenforceability shall not void or render
invalid or unenforceable any other Section or part of a Section in this
Agreement.
(e) Governing Law. THE TERMS OF THIS AGREEMENT SHALL BE GOVERNED BY
-------------
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO
CONTRACTS MADE WITHIN, AND TO BE PERFORMED WITHIN, SUCH STATE, EXCLUDING CHOICE
OF LAW PRINCIPLES OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS
OF A JURISDICTION OTHER THAN SUCH STATE.
(f) No Adverse Construction. The rule that a contract is to be
-----------------------
construed against the party drafting the contract is hereby waived, and shall
have no applicability in construing this Agreement or the terms of this
Agreement.
(g) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same
18
<PAGE>
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.
(h) Costs and Attorneys' Fees. In the event that any action, suit, or
-------------------------
other proceeding is instituted concerning or arising out of this Agreement, the
prevailing party shall recover all of such party's costs, and attorneys' fees
incurred in each and every such action, suit, or other proceeding, including any
and all appeals or petitions therefrom. As used herein, "attorneys' fees" shall
mean the full and actual costs of any legal services actually rendered in
connection with the matters involved, calculated on the basis of the usual fee
charged by the attorneys performing such services, and shall not be limited to
"reasonable attorneys' fees" as defined by any statute or rule of court.
(i) Successors and Assigns. Except as otherwise provided in this
----------------------
Agreement, all rights, covenants and agreements of the parties contained in this
Agreement shall be binding upon and inure to the benefit of their respective
successors and permitted assigns. Except as otherwise specifically set forth
herein, nothing in this Agreement, expressed or implied, is intended to confer
on any Person other than the parties to this Agreement or their respective
successors and assigns any rights, remedies, obligations or liabilities under or
by reason of this Agreement.
(j) Amendments and Waivers. Neither this Agreement nor any term
----------------------
hereof may be changed, waived, discharged or terminated orally or in writing,
except that any term of this Agreement may be amended and the observance of any
such term may be waived (either generally or in a particular instance and either
retroactively or prospectively) by (and only by) a written document executed by
Saban and FBC; and any such amendment or waiver executed by both Saban and FBC
shall be binding upon all of the parties to this Agreement, including each and
every Person (including Allen) who has agreed to be bound by provisions of this
Agreement relating to the Shares which it holds; provided, however, that no such
-------- -------
amendment or waiver shall extend to or affect any obligation not expressly
waived or impair any right consequent therein. No delay or omission to exercise
any right, power or remedy accruing to any party hereto shall impair any such
right, power or remedy of such party nor be construed to be a waiver of any such
right, power or remedy nor constitute any course of dealing or performance
hereunder.
(k) Entire Agreement. This Agreement, the attached Exhibits and
----------------
Schedules and the Alliance Agreements, and the agreements referred to herein and
therein, together contain the entire understanding of the parties, and there are
no further or other agreements or understandings, written or oral, in effect
between the parties relating to the subject matter hereof unless expressly
referred to herein. No party to this Agreement makes any representation or
warranty except as expressly set forth herein.
(l) Specific Performance and Other Remedies. The parties hereto
---------------------------------------
acknowledge and agree that the Shares (including the SEI Common Stock, the FCNH
Common Stock and the Successor Entity Equity Securities) are unique, and that
the parties will have no adequate remedy at law should any party hereto breach
the provisions of Sections 2 through 8 hereof. In the event of the refusal or
failure of any party hereto to fully comply with any of those provisions, the
other parties, and each of them, shall have the right, in addition to any other
rights and remedies which it
19
<PAGE>
or they may have hereunder, to specific performance, and other appropriate
injunctive relief with respect thereto. In no event shall any party to any such
proceeding urge or raise as a defense in any such action that an adequate remedy
at law exists.
(m) Agreement to Perform Required Acts. Each party hereto agrees to
----------------------------------
perform any further acts and to execute and deliver any further documents that
may be reasonably necessary to carry out the provisions hereof, that may be
required to secure performance of any party's duties hereunder or that may be
required to assure the legal and binding effect of the provisions hereof.
(n) Consent to Jurisdiction; Forum Selection. Any actions, suits or
----------------------------------------
proceedings instituted in connection with this Agreement or the performance by
the parties of their obligations hereunder shall be instituted and maintained
exclusively in the Superior Court for the State of California, County of Los
Angeles or in the United States District Court for the Central District of
California. By execution and delivery hereof, each party hereto hereby
consents, for itself and in respect of its property, to the jurisdiction of the
aforesaid courts solely for the purpose of adjudicating its rights or
obligations under, or any disputes involving, this Agreement or any document
related hereto. Each party hereto hereby irrevocably waives, to the extent
permitted by applicable law, any objection, including, without limitation, any
objection that the other corporate party or parties lack the capacity to sue or
defend based upon its or their lack of a certificate of qualification to conduct
intrastate business in California, and any objection to the laying of venue or
based on the grounds of forum non conveniens, which it may now or hereafter have
----- --- ----------
to the bringing of any action or proceeding in such jurisdiction in respect of
this Agreement or any document related
hereto.
(o) Legends. Each of the SEI Stockholders, SEI, FBC, FCNH and Allen
-------
hereby agree that each certificate or other writing evidencing any of the Shares
or any securities of FCN, and each certificate or other writing issued in
exchange or upon the transfer of any Shares or any securities of FCN shall be
stamped or otherwise imprinted with a legend, either on the face of such
certificate, or on the reverse of such certificate, with reference thereto
appearing on the face of such certificate, in substantially the following form:
[DESCRIBE THE SHARES] REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
MATERIAL RESTRICTIONS ON TRANSFER, RIGHTS OF FIRST REFUSAL, OPTIONS TO
PURCHASE AND IRREVOCABLE PROXIES, AMONG OTHER RESTRICTIONS, UNDER THAT
CERTAIN AMENDED AND RESTATED STRATEGIC STOCKHOLDERS AGREEMENT DATED AS OF
AUGUST 1, 1997, BY AND AMONG THE ISSUER, THE RECORD HOLDER OF THE
SECURITIES SUBJECT TO THIS CERTIFICATE AND CERTAIN OTHER PERSONS. A COPY
OF THE AMENDED AND RESTATED STRATEGIC STOCKHOLDERS AGREEMENT SHALL BE
FURNISHED WITHOUT CHARGE BY THE ISSUER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE TO THE HOLDER HEREOF UPON SUCH HOLDER'S WRITTEN REQUEST.
20
<PAGE>
Each of SEI and FCNH covenants and agrees that it shall refuse to recognize
any transfer of any Shares effected otherwise than in strict compliance with the
provisions of this Agreement.
(p) Financial Statements. Until the date upon which Allen ceases to
--------------------
own at least 50% of the Allen Shares, SEI and FCNH shall each from time to time
deliver, on a confidential basis, to Allen, within a reasonable time after their
availability:
(x) with respect to each of the first three fiscal quarters
of each fiscal year ending on or subsequent to the date of this
Agreement, an unaudited consolidated balance sheet of Fox Kids as of
the end of such period, and the related consolidated statements of
operations and cash flows of Fox Kids for each such period and for the
period from the beginning of the current fiscal year to the end of
such quarterly period, setting forth in each case, to the extent
applicable, comparisons to the corresponding period of the previous
fiscal year; and
(y) with respect to each fiscal year ending after the date
of this Agreement, a consolidated balance sheet of Fox Kids as at the
end of such year and consolidated statements of operations and cash
flows of Fox Kids for such year, setting forth in each case
comparisons, to the extent applicable, to the previous fiscal year,
and, if and to the extent audited, accompanied by the opinion thereon
of the auditors for Fox Kids.
(q) Government Filings. In the event that the percentage of the
------------------
outstanding shares of Common Stock of Successor Entity held by FBC Sub shall be
equal to or more than 50%, then each party hereto shall prepare and make all
filings of the notifications required pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended and the rules promulgated
thereunder (the "HSR Act"), including responding promptly to any additional
inquiry, question or second request from either the Federal Trade Commission or
the Department of Justice to the notifications required pursuant to the HSR Act.
In connection therewith, each party thereto shall use its best efforts to
respond diligently and promptly to such requests for additional information made
under the HSR Act by either the Federal Trade Commission or the Department of
Justice, and shall furnish to any other party all such information in its
possession as may be necessary to assist the other party in responding, and
shall deliver copies of any such filings to the other parties thereto.
12. Agreement of Allen. Allen agrees to be bound by all of the provisions
------------------
of Sections 1 through 6 and Section 11, of the Agreement, including, without
limitation, any provision included therein applicable to the Allen Shares, or
Allen as a "Shareholder" or "party" to the Agreement. The provisions of
Sections 7, Section 8 and Section 9 of the Agreement are not for the benefit of,
or enforceable by, Allen. Allen further agrees to indemnify, defend and hold
all of the other parties to the Agreement, and each of them, harmless against
and in respect of any and all loss, cost, liability, damage or deficiency
arising out of or in connection with any breach by Allen of any covenant or
agreement made or to be performed by Allen under the terms of the Agreement, and
all claims, demands, actions, suits, proceedings, judgments, costs, attorneys'
fees and expenses, or liens, charges or encumbrances upon the assets of any of
the indemnified parties relating to or incurred by the indemnified parties
incident to the foregoing.
21
<PAGE>
13. Additional Voting and Other Agreements with respect to the Successor
--------------------------------------------------------------------
Entity.
- ------
(a) Election of Directors of the Successor Entity.
---------------------------------------------
(i) Number of Authorized Directors. The SEI Stockholders, FBC and FBC
------------------------------
Sub shall use their respective best efforts to cause the number of authorized
members ("Directors") of the Board of Directors of the Successor Entity (and
each of its operating Subsidiaries) to be fixed at six. Of the authorized number
of Directors of the Successor Entity and each of its operating Subsidiaries, one
half shall be nominated by FBC (the "FBC Nominees") and one half shall be
nominated by Saban (the "Saban Nominees"); provided, however, that if Saban
-------- -------
transfers, after the date hereof, in the aggregate, a number of Shares held by
him which equal or exceed 1/3 of all of the Shares which are held by all SEI
Stockholders at the date hereof to any other person, then Saban shall only have
the right to so nominate one-third of the authorized number of directors and FBC
shall have the right to designate the remaining 2/3 of the authorized number of
directors.. Further, if at any time after the date hereof, the Successor Entity
becomes subject to any statute, rule or regulation of any national securities
exchange or quotation system or any governmental entity which requires that the
Board of Directors of the Successor Entity include one or more "independent
directors," Fox and Saban each agree to include among their respective slates of
nominees an equal number of such independent directors which is necessary to
satisfy such rule which satisfy such requirements. The current Directors of the
Successor Entity are (x) the Saban Nominees - Haim Saban, Mel Woods and Shuki
Levy and (y) the FBC Nominees - K. Rupert Murdoch, Chase Carey and Margaret
Loesch.
(ii) Nominees for Directors. Within 90 days subsequent to the end of
----------------------
each fiscal year of the Successor Entity and each of its operating Subsidiaries
(but in any event, prior to the date of the annual meeting of stockhoders of the
Successor Entity or the applicable operating Subsidiary, as the case may be,
with respect to such fiscal year (the "Subject Meeting")), Saban shall furnish
to FBC his list of the Saban Nominees for election as Directors at the Subject
Meeting, and (y) FBC shall furnish to Saban its list of the FBC Nominees for
election as Directors at the Subject Meeting. If either or both of Saban and FBC
fail to furnish the other with its list of such nominees, the persons then
serving on the Board of Directors of the Successor Entity (or the applicable
operating Subsidiary, as applicable) as that person's nominees shall be that
person's nominees for the Subject Meeting. Saban and FBC shall advise the
Secretary of the Successor Entity (or the applicable operating Subsidiary, as
applicable) of the identity of the nominees so selected, and Saban and FBC
shall use their respective best efforts to cause the slate of nominees selected
by the Board of Directors of the Successor Entity (or the applicable operating
Subsidiary, as applicable) to consist of the Saban Nominees and the FBC Nominees
selected as hereinabove provided;
(iii) Election of Directors. At each Subject Meeting, (v) FBC, FBC Sub
---------------------
and each of their respective transferees, successors and assigns (other than
with respect to transfers of Shares pursuant to Section 3(a)(i) or Section
3(a)(ii) of this Agreement) shall vote all of the Shares which are deemed to
constitute FCNH Common Stock hereunder, (x) Saban, each of the SEI Entities, and
each of their respective transferees, successors and assigns (other than with
respect to transfers of Shares pursuant to Section 3(a)(i) or Section 3(a)(ii)
of this Agreement) shall vote all of the Shares which are deemed to be SEI
Common Stock hereunder, (y) each of FBC, FBC Sub, Saban, each of the SEI
Entities and each of their respective transferees, successors and assign shall
vote any and all
22
<PAGE>
other Shares of the voting securities of the Successor Entity with respect to
which he or it has sole or shared voting power, in favor of the FBC Nominees and
the Saban Nominees, and (z) in the case of a Subject Meeting for election of any
operating Subsidiary of the Successor Entity, the Successor Entity (itself or
through one or more direct or indirect subsidiaries) shall vote any and all
voting securities of such operating Subsidiary in favor of the FBC Nominees and
the Saban Nominees.
(iv) Special Circumstances. If any Saban Nominee or FBC Nominee shall
---------------------
for any reason be unwilling or unable to serve as a Director of the Successor
Entity, the person designating such Nominee shall have the right at any time
prior to the opening of the polls with respect to the election of Directors at
the Subject Meeting to designate a replacement Nominee, and all parties shall
cast their respective votes for such replacement Nominee, in lieu of the
originally designated Nominee. If Saban desires at any time or from time to
time to remove any Saban Nominee, or FBC desires at any time or from time to
time to remove any FBC Nominee, Saban and FBC shall cooperate with each other,
and shall take any and all actions as reasonably may be required, to cause the
removal of such Director. If any Saban Nominee or FBC Nominee shall cease to
serve as a Director for any reason, Saban and FBC shall cooperate with each
other, and shall take any and all actions as reasonably may be required, to
cause the vacancy resulting therefrom to be filled, respectively, by a designee
of Saban or FBC. If any Directors are to be elected at a meeting other than an
annual meeting, or by means of written consents, all of the provisions of this
Section 13(a) shall apply to such meeting or action, mutatis mutandis. Further,
------- --------
notwithstanding anything to the contrary contained herein, the provisions of
Section 13(a) shall not apply to any operating Subsidiary which is incorporated
or organized in any jurisdiction outside the United States; provided, however,
-------- -------
Saban and FBC agree to cooperate to cause the Boards of Directors of any
operating Subsidiary incorporated or organized outside the United States to have
equal numbers of representatives of Saban and FBC to the extent possible without
violating the applicable laws of such jurisdiction.
(b) Other Shareholder Actions. With respect to each matter other than the
-------------------------
election or removal of Directors submitted to a vote of the stockholders of the
Successor Entity, or the holders of any class or classes of its outstanding
voting securities, whether at a meeting of stockholders or by written consent,
FBC, FBC Sub, Saban, each of the SEI Entities, and each of their respective
transferees, successors and assigns (other than with respect to transfers of
Shares pursuant to Section 3(a)(i) or Section 3(a)(ii) of this Agreement) shall
vote all of the Shares which are deemed to be FCNH Common Stock or SEI Common
Stock hereunder, as applicable, and any and all other Shares of the voting
securities of the Successor Entity with respect to which he or it has sole or
shared voting power, as follows: (i) if Saban and FBC are able to reach
agreement as to the manner in which the Shares are to be voted, in accordance
with that agreement; and (ii) in all other cases, each shall abstain from voting
or taking any other action with respect to such matter.
(c) Negative Covenants.
------------------
Without the prior written consent of both FBC and Saban, neither (i)
FBC, or any direct or indirect Affiliate of FBC (including, without limitation,
The News Corporation Limited and its Affiliates), nor (ii) any of the SEI
Stockholders, or any direct or indirect Affiliate of any of the SEI Stockholders
(excluding, however, with respect to (i) or (ii) above, the Successor Entity and
any Person directly or indirectly controlled by the Successor Entity) shall:
23
<PAGE>
(i) purchase, acquire or offer or agree to purchase or acquire any
Successor Entity Equity Securities or other voting securities of the Successor
Entity;
(ii) solicit, or encourage any persons to solicit, proxies or become a
"participant" or otherwise engage in any "solicitation" (as those terms are
defined in Regulation 14A under the Exchange Act), without regard to whether the
Successor Entity is subject to Regulation 14A, or otherwise seek to advise or
influence any person, entity or group to vote in opposition to a recommendation
of not less than two-thirds of the authorized number of Directors of the
Successor Entity with respect to any matter submitted to the stockholders
(except the election of Directors) of the Successor Entity;
(iii) initiate, propose or otherwise solicit stockholders for the
approval of one or more stockholder proposals (as described in Rule 14a-8 under
the Exchange Act) with respect to the Successor Entity;
(iv) directly or indirectly participate in or encourage the formation
of, or in any manner provide assistance to, any "group" (as defined in Section
13(d)(3) of the Exchange Act) seeking to acquire or effect control of the
Successor Entity, or for the purpose of acquiring, holding or disposing of
voting securities of the Successor Entity;
(v) deposit any voting securities in a voting trust, or subject any
voting securities to a voting agreement, understanding or similar agreement;
(vi) otherwise act, alone or in concert with others, to assist or
encourage any other person, entity or group in seeking to control the
management, Board of Directors or policies of the Successor Entity or to propose
or effect any form of business combination with the Successor Entity or any
restructuring, recapitalization, liquidation, dissolution or other similar
transaction with respect to the Successor Entity; or
(vii) enter into any agreement or understanding with any person to
do or effect any of the foregoing.
(d) Termination of Section 13. If at any time (i) the SEI Stockholders,
-------------------------
together with all other Persons to whom the SEI Stockholders, or any of them,
have transferred Shares pursuant to Section 3(b) or 3(c) of this Agreement,
beneficially own, in the aggregate less than 2,640,000 shares of the Class B
Common Stock, par value $0.001 per share (the "Class B Common Stock"), of the
Successor Entity; or (ii) FBC, or FBC Sub, together with all other Persons to
whom FBC or FBC Sub have transferred Shares pursuant to Section 3(b) or 3(c) of
this Agreement, beneficially own, in the aggregate, less than 2,640,000 shares
of the Class B Common Stock; then FBC (in case of (i), above) or Saban (in case
of (ii), above), as the case may be, shall have the right and power, by delivery
of written notice to the transferring party, to terminate the provisions of this
Section 13. As used in this Section 13, a Person shall have "beneficial
ownership" of shares only if he or it has the power to vote or direct the voting
of, and the power to dispose or direct the disposition of, the Shares, which
power or powers are shared with no Person other than an Affiliate of such Person
or Persons to whom such Person could transfer the Shares under Section 3(b) or
3(c) of this Agreement. The number of shares
24
<PAGE>
referred to above shall be subject to ratable and equitable adjustment with
respect to any stock splits, stock dividends, reverse stock splits,
recapitalizations and other events affecting all of the holders of the Successor
Entity's Class B Common Stock. The termination of the provisions of this Section
13 shall not affect the continuing validity of the other provisions of the
Agreement.
(e) Transfer of Shares. Unless Saban and FBC shall otherwise agree, all
------------------
Shares transferred pursuant to Section 3(b), 3(c) or 4 of the Agreement shall
continue to be subject to this Section 13.
14. Capital Contribution. If Fox Kids is unable to meet its obligations
--------------------
(i) to pay any dividend under the terms of the Series A Preferred Stock of Fox
Kids or to redeem any of the Series A Preferred Stock, (ii) under its lease of
10960 Wilshire Boulevard, Los Angeles, California 90024, or any obligation
guaranteed by News Corp. or its Affiliates, (iii) under the Funding Agreement
dated as of June 11, 1997 by and among Fox Kids, News Corp. and NPAL, and either
News Corp. or NPAL (the "News Parties") provides such funds to Fox Kids (the
"Advance"), then the Advance shall be treated as follows:
1. Loan.
----
(a) the entire amount of such Advance shall be treated as a loan to
the Successor Entity and shall be added to the principal amount then outstanding
under that certain Subordinated Note Agreement by and among the Successor, FBC
and Citicorp USA as Administrative Agent, dated July 31, 1997 (or a comparable
note agreement with News America Holdings Incorporated as lender) (the "Loan
Agreement") and shall be governed by the terms and conditions thereof;
(b) to the extent that the aggregate outstanding principal balance of
all such Advances exceeds $50 million at any given time (such excess hereinafter
referred to as the "Excess Advance"), the following provisions shall apply:
(i) If any portion of the Excess Advance is outstanding and not
repaid by the Successor Entity for more than 18 consecutive months (12
consecutive months after the third anniversary of this Agreement), all or any
portion of such Excess Advance may be converted at the option of FBC Sub into
shares of the Class B Common Stock of the Successor Entity. Such option shall
be exercised by delivery of written notice (the "Conversion Notice") to the
Company, Saban and Allen, and shall be effective 30 days after the delivery of
the Conversion Notice to the Successor Entity (the "Exercise Period") unless
such Excess Advance is repaid prior to the expiration of such Exercise Period.
The number of shares of Class B Common Stock issuable upon such conversion shall
equal that number (rounded to the nearest whole share) which results from
dividing the amount of the Excess Advance to be converted by the Fair Market
Value per share (the "Conversion Price") as of the date of such written notice;
(ii) If FBC Sub elects to convert any portion of the Excess Advance
pursuant to the provisions of this section, Saban shall have the right and
option to purchase from FBC Sub up to 50% of the number of shares of Class B
Common Stock of the Successor Entity issued to FBC Sub pursuant to such
conversion for an exercise price equal to the Conversion Price.
25
<PAGE>
Such option shall be exercisable during the Exercise Period by delivery of
written notice to FBC Sub specifying the number of shares which Saban desires to
purchase accompanied by the total aggregate purchase price therefor;
(iii) If FBC Sub elects to convert any portion of the Excess Advance
pursuant to the provisions of this section, Allen shall have the right and
option to purchase from the Successor Entity a number of shares of Class A Stock
of the Successor Entity equal to 1% of the number of shares of Class B Common
Stock of the Successor Entity issued to FBC Sub pursuant to such conversion for
an exercise price equal to the Conversion Price. Such option shall be
exercisable during the Exercise Period by delivery of written notice to the
Successor Entity specifying the number of shares which Allen desires to purchase
accompanied by the total aggregate purchase price therefor.
2. Preferred Stock. If in the sole discretion of Citicorp USA,
---------------
treating the Advance as a Loan is unacceptable to Citicorp USA, the Advance
shall be treated as follows:
(a) to the extent that there are any authorized but unissued shares of
the Successor Entity's Series B Preferred Stock available for issue,
the Advance shall be applied to the issuance of new shares of Series B
Preferred Stock of the Successor Entity at an issue price of $100,000
per share;
(b) to the extent that there are no authorized but unissued shares of
the Successor Entity's Series B Preferred Stock available for issue,
the Advance shall be applied to the issuance of new shares of Series C
Convertible Preferred Stock of the Successor Entity at an issue price
of $100,000 per share;
(i) the Series B Preferred Stock of the Successor Entity shall have
the following rights, preferences and privileges: (A) the Series B
Preferred Stock shall have an authorized number of shares equal to 500
shares ($50,000,000 original issue amount) (B) the Series B Preferred
Stock shall have a liquidation value equal to its original issue price
plus all cumulated but unpaid dividends accrued thereon, (C) the
Series B Preferred Stock shall be non-voting except as required by
law, (D) the Series B Preferred Stock shall be entitled to dividends
at an annual rate of 11.7% of the liquidation value of the Series B
Preferred Stock, which dividends shall be declared and cumulate
quarterly but not be paid until the 10th anniversary of the date of
this Agreement (unpaid dividends to be added to the liquidation value
of the Series B Preferred Stock), (E) the Series B Preferred Stock
shall be redeemable for its liquidation value (x) at any time at the
election of the Successor Entity (any such shares redeemed shall be
added to treasury and be available for future issue), and (y) on the
10th anniversary of this Agreement, at the election of the holders
thereof, (F) the Series B Preferred Stock shall rank as to payment of
dividends and on liquidation junior to the Series A Preferred Stock of
the Successor Entity, pari passu with the Series C Convertible
Preferred Stock of the Successor Entity, and senior to all classes of
common stock of the Successor Entity, (G) the Series B Preferred Stock
shall
26
<PAGE>
contain no covenants or events of default, and (H) the Series B
Preferred Stock shall have no rights to be converted into any other
equity security of the Successor Entity;
(ii) the Series C Convertible Preferred Stock of the Successor Entity
shall have the following rights, preferences and privileges: (A) the
Series C Convertible Preferred Stock shall have an authorized number
of shares equal to 5,000 shares ($500,000,000 original issue amount)
(B) the Series C Convertible Preferred Stock shall have a liquidation
value equal to its original issue price plus all cumulated but unpaid
dividends accrued thereon, (C) the Series C Convertible Preferred
Stock shall be non-voting except as required by law, (D) the Series C
Convertible Preferred Stock shall be entitled to dividends at an
annual rate of 11.7% of the liquidation value of the Series C
Convertible Preferred Stock, which dividends shall be declared and
cumulate quarterly but not be paid until the 10th anniversary of the
date of this Agreement (unpaid dividends to be added to the
liquidation value of the Series C Convertible Preferred Stock), (E)
the Series C Convertible Preferred Stock shall be redeemable for its
liquidation value (any such shares redeemed shall be added to treasury
and be available for future issue), (x) at any time at the election of
the Successor Entity, and (y) on the 10th anniversary of this
Agreement, at the election of the holders thereof, (F) the Series C
Convertible Stock shall rank as to payment of dividends and on
liquidation junior to the Series A Preferred Stock of the Successor
Entity, pari passu with the Series B Preferred Stock of the Successor
Entity, and senior to all classes of common stock of the Successor
Entity, (G) the Series B Preferred Stock shall contain no covenants or
events of default, and (H) the Series C Convertible Preferred Stock
shall be convertible, at the election of the holder thereof at any
time after its original issue date as follows: (aa) if at the time
notice of conversion is given to the Successor Entity, there are any
authorized but unissued shares of Series B Preferred Stock available
for issue, such shares of Series C Convertible Preferred Stock to be
converted shall be converted into that number of shares of Series B
Preferred Stock determined by dividing the aggregate liquidation value
of the shares to be converted by $100,000, (bb) if at the time notice
of conversion is given to the Successor Entity, there are no
authorized but unissued shares of Series B Preferred Stock available
for issue, such shares of Series C Convertible Preferred Stock to be
converted shall be converted into that number of shares of Class B
Common Stock determined by dividing the aggregate liquidation value of
the shares to be converted by the Fair Market Value per share of the
common stock at the time of such conversion (the "Conversion Price"),
(cc) conversion of the Series C Convertible Preferred Stock into
Series B Preferred Stock or Class B Common Stock (as applicable) shall
be effective as of the 30th day following written notice of exercise
of conversion is delivered (the "Exercise Period") by the holder of
the shares to be converted is delivered to the Successor Entity (with
a copy to Saban and Allen), and (dd) the Successor Entity shall have
the right (but not the obligation) to redeem the Series C Convertible
Stock at any time following receipt of the notice of conversion up and
through the calendar day immediately preceding the effective date of
conversion;
27
<PAGE>
(iii) If a holder of Series C Preferred Stock elects to convert any
portion of the Series C Convertible Preferred Stock into Class B
Common Stock pursuant to the provisions of this section, Saban shall
have the right and option to purchase from such holder up to 50% of
the number of shares of Class B Common Stock of the Successor Entity
issued to such holder pursuant to such conversion for an exercise
price equal to the Conversion Price. Such option shall be exercisable
during the Exercise Period by delivery of written notice to the holder
Sub specifying the number of shares which Saban desires to purchase
accompanied by the total aggregate purchase price therefor;
(iv) If a holder of Series C Preferred Stock elects to convert any
portion of the Series C Convertible Preferred Stock into Class B
Common Stock pursuant to the provisions of this section, Allen shall
have the right and option to purchase from the Successor Entity a
number of shares of Class A Common Stock of the Successor Entity equal
to 1% of the number of shares of Class B Common Stock of the Successor
Entity issued to the holder of Series C Convertible Preferred Stock
pursuant to such conversion for an exercise price equal to the
Conversion Price. Such option shall be exercisable during the Exercise
Period by delivery of written notice to the Successor Entity
specifying the number of shares which Allen desires to purchase
accompanied by the total aggregate purchase price therefor.
As soon as practicable following the execution of this Agreement, FBC Sub, FBC,
Saban and Allen agree to prepare, negotiate and file with the Secretary State of
the Delaware (x) an amendment to the Successor Entity's Certificate of
Incorporation deleting the provisions relating to the Series B Preferred Stock
and Series C Preferred Stock currently provided therein, and (y) a Certificate
of Designation providing for the rights, preferences and privileges of the
Series B Preferred Stock and the Series C Convertible Preferred Stock summarized
above.
Notwithstanding the foregoing, News Corp. shall have no obligation to contribute
any amounts to, or on behalf of, the Successor Entity and the Successor Entity
shall have no obligation to accept any amounts from News Corp. to the extent the
Successor Entity is able to obtain third party financing on terms reasonably
acceptable to it which would not cause it to breach any of its material
agreements or to violate any applicable law.
28
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
/s/ Haim Saban
----------------------------
HAIM SABAN
QUARTZ ENTERPRISES, L.P.
By: /s/ Haim Saban
-------------------------------
-------------------------------
MERLOT INVESTMENTS
By: /s/ Haim Saban
-------------------------------
-------------------------------
SILVERLIGHT ENTERPRISES, L.P.
By: /s/ Haim Saban
-------------------------------
-------------------------------
CELIA ENTERPRISES, L.P.
By: /s/ Haim Saban
-------------------------------
-------------------------------
[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE>
FOX BROADCASTING COMPANY
By: /s/ Jay Itzkowitz
-------------------------------
Its: Senior Vice President
FOX BROADCASTING SUB, INC.
By: /s/ Jay Itzkowitz
-------------------------------
Its:
ALLEN & COMPANY INCORPORATED
By: /s/ William F. Leimkuhler
-------------------------------
Its: Vice President & General Counsel
THE FOLLOWING PERSONS HAVE SIGNED THIS AGREEMENT TO ACKNOWLEDGE THAT THEY ARE NO
LONGER PARTIES HERETO
FCN Holding, Inc.
By: /s/ Jay Itkowitz
-------------------------------
Its: Senior Vice President
SABAN ENTERTAINMENT, INC.
By: /s/ Haim Saban
-------------------------------
Haim Saban
Its: Chief Executive Officer
<PAGE>
EXHIBITS AND SCHEDULES
Exhibits
- --------
Exhibit "A" - Defined Terms
Exhibit "B" - Registration Agreement
Exhibit "C" - Spousal Consent
<PAGE>
SCHEDULE "A"
<TABLE>
<CAPTION>
SEI STOCKHOLDERS NUMBER OF SHARES
- ---------------- ----------------
<S> <C>
HAIM SABAN 3,737,844
QUARTZ ENTERPRISES, L.P. 760,320
MERLOT INVESTMENTS 645,381
SILVERLIGHT ENTERPRISES, L.P. 2,759,724
CELIA ENTERPRISES, L.P. 16,731
</TABLE>
<PAGE>
EXHIBIT "A"
Definitions. As used in the Agreement to which this Exhibit is
-----------
attached (the "Agreement"), the following terms shall have the following
meanings:
"Affiliate" means, when used with reference to a specified Person, any
Person that directly or indirectly through one or more intermediaries controls
or is controlled by, or is under common control with, the specified Person.
"Bona Fide Offer" shall mean an offer from a person which is not an
Affiliate, or otherwise related to, the offeree, and which person has the means
to make or obtain financing for the offer, and which offer clearly identifies,
and is binding upon, the offeror, and which contains all relevant terms and
conditions of an offer to purchase any Shares, including (i) the length and
expiration of the offer, (ii) the purchase price, (iii) the manner of
acceptance, (iv) the manner and mode of payment, and (v) the time, place and
date of the proposed closing.
"Change in Control" of FBC shall mean any event or series of events,
regardless of how structured, as the result of which (i) FBC ceases to be an
Affiliate of Fox Inc. or The News Corporation Limited, or (ii) the primary
business of FBC ceases to be controlled by Fox Inc. or The News Corporation
Limited.
"Commission" shall mean the U.S. Securities and Exchange Commission.
"Control" (including as used in the terms "controlling," "controlled
by" and "under common control with") means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities by contract or
otherwise.
"Fair Market Value" shall mean the value determined pursuant hereto
consistent with the provisions of the Agreement, and, with respect to Section 7
of the Agreement, shall be determined on the basis of the businesses,
properties, historical financial performance and financial condition,
projections and prospects for the further growth of the entity or entities whose
Fair Market Value is being determined. The parties will, in each case, use
reasonable efforts to reach agreement on Fair Market Value. In the event of a
disagreement between the parties regarding the Fair Market Value, (i) each of
Saban and FBC shall retain a reputable investment bank to determine such value,
and within 30 days thereafter, shall deliver to the other the written report of
its investment bank as to such value; (ii) if the higher valuation is less than
10% above the lower valuation, the average shall be the Fair Market Value; (iii)
if the valuations exceed such 10% difference, Saban and FBC shall instruct their
investment banks to forthwith select a third reputable investment bank, and (x)
if the third investment bank's valuation is between the valuations of the other
banks, the third investment bank's valuation shall be the Fair Market Value, or
(y) if the third investment bank's valuation is outside the range of the other
banks, the other banks will continue to select new third investment banks, until
a third bank so selected provides a valuation which is between the first two
valuations, and such valuation shall be the Fair Market Value. In connection
with such valuations, the parties shall cause the entity or entities being
valued to, on a confidential basis, deliver or provide
<PAGE>
access to each investment bank of all information reasonably requested by the
investment bank in order to determine Fair Market Value. The cost of the
appraisal (x) shall be shared equally by the parties if Fair Market Value is
determined without reference to a third investment bank, and (y) otherwise,
shall be borne by the party whose investment bank's valuation is furthest from
the Fair Market Value.
"Family Member" shall any descendant of the grandfather of Saban or
his spouse.
"FCN" means Fox Children's Network, Inc., a Delaware corporation.
"FCNH" means FCN Holding, Inc., a Delaware corporation.
"FCNH Sub" means FCNH Sub, Inc., a Delaware corporation.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect to such asset.
For purposes of the Agreement, any Person shall be deemed to own, subject to a
Lien, any asset which it has acquired or holds, subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"Material Adverse Effect" shall mean any event, act or failure to act
which would have a material adverse effect upon the business, properties or
financial condition of the entity with respect to which such term is used and
all of its Affiliates and Subsidiaries, considered as a whole.
"Person" includes an individual, partnership, trust, corporation,
joint venture, limited liability company, association, government bureau or
agency or other entity of whatsoever kind or nature.
"Securities Act" means the Securities Act of 1933.
"Shares" shall include, without limitation, any securities issued with
respect to such Shares upon the Reorganization, any security issued by the
issuer of such Shares by way of dividend or split or similar transaction, or by
the issuer or successor issuer in connection with any recapitalization, merger,
consolidation or other reorganization.
"Station Affiliate" and "Station Affiliate Agreements" shall have the
meanings ascribed to such terms in the Asset Assignment Agreement.
"Subsidiary" of a Person means (i) any corporation of which equity
securities possessing a majority of the ordinary voting power in electing the
board of directors are, at the time as of which such determination is being
made, owned by such Person either directly or through one or more Subsidiaries,
and (ii) any Person (other than a corporation) in which such Person, or any
Subsidiary or Subsidiaries, directly or indirectly, has more than a 50%
ownership interest. With respect to FBC, FCNH, FCN and their respective
subsidiaries, the term "Subsidiary" shall include Twentieth Holding Corporation
and its subsidiaries.
2
<PAGE>
The "transfer" of any Share shall include, without limitation, any
direct or indirect sale, transfer (with or without consideration, or whether by
operation of law or otherwise), assignment, pledge, hypothecation, encumbrance,
or other disposition of the Share, or the making, issuance, grant or sale,
directly or indirectly, of any option, warrants, convertible security or other
right or agreement which affords any Person the right to purchase or otherwise
acquire the Share.
"Voting Power" means the power to vote, directly or indirectly, for
the election of directors or exercise other rights of holders of voting common
shares to vote on, approve or consent to matters as a shareholder under the
General Corporation Law of the State of Delaware, as the same may from time to
time be amended.
3
<PAGE>
EXHIBIT "C"
SPOUSAL ACKNOWLEDGMENT AND CONSENT
The undersigned, Cheryl Saban, acknowledges and agrees that:
(i) she has read the Amended and Restated Strategic Stockholders
Agreement, dated as of August 1, 1997 (the "Agreement"), to which this Spousal
Acknowledgment and Consent (this "Consent") is attached, the parties to which
include her husband, and including, without limitation, Sections 2, 3, 8 and
11(b) thereof;
(ii) she consents to the execution and performance of the Agreement by
her husband, and specifically consents and agrees that all provisions of the
Agreement, and the other "Alliance Agreements" (as therein defined) which relate
to the SEI Common Stock also relate to any shares of the SEI Common Stock in
which she has or may have or may hereafter acquire a community property or other
interest; and she agrees to be subject to, and abide by the terms of, such
provisions (including, without limitation, the terms and conditions set forth in
Section 2 and 3 thereof) as if she had been a party to the Agreement and such
other Alliance Agreements;
(iii) she hereby waives any rights she may have during the continuance
of her marriage, or at any time thereafter, prior to the death or incompetency
of her spouse, to control and/or manage Saban Entertainment, Inc. ("SEI"), Fox
Kids Worldwide, Inc. ("Fox Kids") or the "Management Company," as that term is
defined in the Agreement;
(iv) she has carefully considered the provisions of Section 1100 of
the California Family Code attached hereto, which Section grants to her, among
other things, equal rights to management and control of certain community
assets, and understands that by executing this Consent she has waived any rights
she may have thereunder with respect to SEI, Fox Kids or the Management Company;
and she specifically consents to and agrees that the SEI Common Stock, to the
extent that it is controlled by her spouse, and the consent, approval and other
rights personally granted to him pursuant to the Agreement, the Management
Agreement and other Alliance Agreements, constitute a "business or an interest
in a business" which is being operated or managed by her spouse, so as to cause
her spouse to have primary right to the management and control thereof, and she
waives her right to prior notice of any sale, lease, exchange, encumbrance or
other disposition of any or all of the personal property used in the operation
of such business.
(v) she was advised to seek independent counsel to review and advise
her with respect to the negotiation and execution of this Consent. She hereby
acknowledges that, of her own free will, she declined to do so.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed and delivered this Consent
as of the 1st day of August, 1997.
/s/ Cheryl Saban
- ----------------------
Cheryl Saban
2
<PAGE>
(S) 1100. Community personal property; management and control;
restrictions on disposition
(a) Except as provided in subdivisions (b), (c), and (d) and Sections 761
and 1103, either spouse has the management and control of the community personal
property, whether acquired prior to or on or after January 1, 1975, with like
absolute power of disposition, other than testamentary, as the spouse has of the
separate estate of the spouse.
(b) A spouse may not make a gift of community personal property, or dispose
of community personal property for less than fair and reasonable value, without
the written consent of the other spouse. This subdivision does not apply to
gifts mutually given by both spouses to third parties and to gifts given by one
spouse to the other spouse.
(c) A spouse may not sell, convey or encumber community personal property
used as the family dwelling, or the furniture, furnishings, or fittings of the
home, or the clothing or wearing apparel of the other spouse or minor children
which is community personal property, without the written consent of the other
spouse.
(d) Except as provided in subdivisions (b) and (c), and in Section 1102, a
spouse who is operating or managing a business or an interest in a business that
is all or substantially all community personal property has the primary
management and control of the business or interest. Primary management and
control means that the managing spouse may act alone in all transactions but
shall give prior written notice to the other spouse of any sale, lease,
exchange, encumbrance, or other disposition of all or substantially all of the
personal property used in the operation of the business (including personal
property used for agricultural purposes), whether or not title to that property
is held in the name of only one spouse. Written notice is not, however,
required when prohibited by the law otherwise applicable to the transaction.
Remedies for the failure by a managing spouse to give prior written notice
as required by this subdivision are only as specified in Section 1101. A
Failure to give prior written notice shall not adversely affect the validity of
a transaction nor of any interest transferred.
(e) Each spouse shall act with respect to the other spouse in the
management and control of the community assets and liabilities in accordance
with the general rules governing fiduciary relationships which control the
actions of persons having relationships of personal confidence as specified in
Section 721, until such time as the assets and liabilities have been divided by
the parties or by a court. This duty includes the obligation to make full
disclosure to the other spouse of all material facts and information regarding
the existence, characterization, and valuation of all assets in which the
community has or may have an interest and debts for which the community is or
may be liable, and to provide equal access to all information, records, and
books that pertain to the value and character of those assets and debts, upon
request.
<PAGE>
EXHIBIT 10.2
EMPLOYMENT ASSUMPTION AGREEMENT
THIS EMPLOYMENT ASSUMPTION AGREEMENT (the "Agreement") is made and entered
into as of July 31, 1997, by and among Saban Entertainment, Inc., a Delaware
corporation ("Saban"), Fox Kids Worldwide, Inc., a Delaware corporation ("FKWW")
and Mel Woods ("Employee").
R E C I T A L S
- - - - - - - -
A. Employee is a party to that certain Employment Agreement entered
into as of June 1, 1994, with Saban (the "Saban Employment Agreement").
B. On June 11, 1997, FKWW, Saban, Fox Broacasting Company, Inc., a
Delaware corporation ("FBC"), Fox Broadcasting Sub, Inc., a Delaware corporation
("Fox Broadcasting Sub"), Allen & Company Incorporated, a New York corporation
("Allen"), Haim Saban and the other stockholders of Saban entered into that
certain Agreement pursuant to which FBC, Fox Broadcasting Sub, Allen, Haim Saban
and the other SEI Stockholders would contribute to FKWW stock of Saban and FCN
Holding for stock of FKWW, such that FKWW will own the business and operations
of Saban, FCN Holding, and of all of their respective subsidiaries (the
"Reorganization").
C. As part of the Reorganization, FKWW desires to assume, and
Employee desires FKWW to assume, the obligations of Saban under the Saban
Employment Agreement.
D. In order to confirm such assumption, FKWW, Saban and Employee
have agreed to execute and deliver this Agreement.
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, in consideration of the foregoing facts, the parties hereby
agree as follows:
1. Employment and Assumption. FKWW hereby employs Employee to render
-------------------------
services as President, Chief Operating Officer and Chief Financial Officer of
FKWW, pursuant to the same terms and conditions of the Saban Employment
Agreement, and FKWW hereby assumes all the duties and obligations of Saban
arising from and in connection with the Saban Employment Agreement. This
assumption shall not affect the calculation of the Contingent Bonus pursuant to
Section 5(b) and 5(c) of the Saban Employment Agreement, and, for purposes of
this Agreement, the term "Company" in the second sentence of Section 5(b), and
in Section 5(c), shall continue to refer to Saban Entertainment, Inc. In
addition, after this assumption, for purposes of
<PAGE>
determining the fair market value of the Option Shares pursuant to Section
5(f)(ix) and 5(f)(xii) of the Saban Employment Agreement, the fair market value
of International Family Entertainment, Inc. ("IFE") shall be equal to the
acquisition price paid for IFE by FKWW, subject only to adjustment (using a
valuation multiplier derived from the acquisition price) for the actual
performance of IFE (compared with currently projected performance) subsequent to
the acquisition by FKWW.
2. Governing Laws. This Agreement has been executed and delivered in the
--------------
State of California and shall be governed by, and construed in accordance with,
the substantive laws of the State of California.
3. Assigns. This Agreement and all representations, warranties, powers
-------
and rights herein contained or resulting therefrom are binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
SABAN ENTERTAINMENT, INC.
By: /s/ Haim Saban
----------------
Name: Haim Saban
Title: Chief Executive Officer
FOX KIDS WORLDWIDE, INC.
By: /s/ Haim Saban
--------------
Name: Haim Saban
Title: Chief Executive Officer
EMPLOYEE:
/s/ Mel Woods
- -------------
Mel Woods
2
<PAGE>
EXHIBIT 10.3
EMPLOYMENT ASSUMPTION AGREEMENT
THIS EMPLOYMENT ASSUMPTION AGREEMENT (the "Agreement") is made and entered
into as of July 31, 1997, by and among Fox Kids Worldwide, L.L.C.,a Delaware
limited liability company (the "LLC"), Fox Kids Worldwide, Inc., a Delaware
corporation ("FKWW") and Haim Saban ("Employee").
R E C I T A L S
- - - - - - - -
A. Employee is a party to that certain Employment Agreement entered
into as of December 22, 1995 with the LLC (the "LLC Employment Agreement").
B. On June 11, 1997, FKWW, Saban Entertainment, Inc., a Delaware
corporation ("Saban"), Fox Broadcasting Company, a Delaware corporation ("FBC"),
Fox Broadcasting Sub, Inc., a Delaware corporation ("Fox Broadcasting Sub"),
Allen & Company Incorporated, a New York corporation ("Allen"), Haim Saban and
the other stockholders of Saban entered into that certain Agreement pursuant to
which FBC, Fox Broadcasting Sub, Allen, Haim Saban and the other SEI
Stockholders would contribute to FKWW stock of Saban and FCN Holding for stock
of FKWW, such that FKWW will own the business and operations of Saban, FCN
Holding, and of all of their respective subsidiaries (the "Reorganization").
C. As part of the Reorganization, FKWW desires to assume, and
Employee desires FKWW to assume, the obligations of the LLC under the LLC
Employment Agreement.
D. In order to confirm such assumption, FKWW, the LLC and Employee
have agreed to execute and deliver this Agreement.
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, in consideration of the foregoing facts, the parties hereby
agree as follows:
1. Employment and Assumption. FKWW hereby employs Employee to render
-------------------------
services as Chairman of the Board and Chief Executive Officer of FKWW, pursuant
to the same terms and conditions of the LLC Employment Agreement, and FKWW
hereby assumes all the duties and obligations of the LLC arising from and in
connection with the LLC Employment Agreement.
<PAGE>
2. Governing Laws. This Agreement has been executed and delivered in the
--------------
State of California and shall be governed by, and construed in accordance with,
the substantive laws of the State of California.
3. Assigns. This Agreement is binding upon and shall inure to the
-------
benefit of the parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
FOX KIDS WORLDWIDE, L.L.C.
By: FOX KIDS WORLDWIDE, INC.
Its: Managing Member
By: /s/ Mel Woods
-------------
Name: Mel Woods
Title: President
FOX KIDS WORLDWIDE, INC.
By: /s/ Mel Woods
-------------
Name: Mel Woods
Title: President
EMPLOYEE:
/s/ Haim Saban
- --------------
Haim Saban
2
<PAGE>
EXHIBIT 10.5
LIST OF INDEMNITEES
-------------------
The attached Form of Indemnification Agreement has been or will be entered
into by and between Fox Kids Worldwide, Inc. and the following persons, each an
"Indemnitee".
1. Haim Saban
2. Mel Woods
3. Lawrence Jacobson
4. K. Rupert Murdoch
5. Chase Carey
6. Shuki Levy
7. William Josey
8. Mark Ittner
<PAGE>
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of this _____ day
of _____, 1996, by and between FOX KIDS WORLDWIDE, INC., a Delaware corporation
(the "Company"), and __________________ ("Indemnitee").
RECITALS
A. The Company and Indemnitee recognize the increasing difficulty in
obtaining liability insurance for directors, officers, employees and agents, the
significant increases in the cost of such insurance and the general reductions
in the coverage of such insurance.
B. The Company and Indemnitee further recognize the substantial increase
in corporate litigation in general, subjecting directors, officers, employees,
and agents to expensive litigation risk at the same time that the availability
and coverage of liability insurance has been severely limited.
C. Indemnitee does not regard the current protection available as
adequate under the present circumstances, and Indemnitee and other directors,
officers, employers and agents of the Company may not be willing to continue to
serve as directors, officers, employees and agents without additional
protection.
D. The Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve as directors, officers,
employees and agents of the Company and to indemnify its directors, officers,
employees and agents so as to provide them with the maximum protection permitted
by law.
AGREEMENT
The Company and Indemnitee hereby agree as follows:
1. AGREEMENT TO SERVE. Indemnitee agrees to serve and/or continue to serve
the Company, at the Company's will (or under separate written agreement approved
by the Board of Directors of the Company, if such agreement exists), in the
capacity Indemnitee currently serves the Company, as long as Indemnitee is duly
appointed or elected and qualified in accordance with the applicable provisions
of the Bylaws of the Company or any subsidiary of the Company or (subject to any
employment agreement between Indemnitee and the Company) until such time as
Indemnitee tenders a written resignation or is removed in accordance with the
Bylaws; provided, however, that nothing contained in this Agreement is intended
-------- -------
to or shall create any right (express or implied) to continued employment by
Indemnitee.
<PAGE>
2. INDEMNIFICATION.
(a) THIRD PARTY PROCEEDINGS. The Company shall indemnify Indemnitee if
Indemnitee is or was a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while a
director, officer, employee or agent, or by reason of the fact that Indemnitee
is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including, without limitation, attorneys'
fees, disbursements and retainers, accounting and witness fees, travel and
deposition costs, and expenses of investigations), judgments, fines and amounts
paid in settlement (if such settlement is approved in advance by the Company)
actually and reasonably incurred by Indemnitee in connection with such action,
suit or proceeding if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe Indemnitee's conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
---- ----------
presumption that Indemnitee did not act in good faith and in a manner which
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that Indemnitee's conduct was unlawful.
(b) PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. The Company shall
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Company or any subsidiary of the Company to procure a judgment in
its favor by reason of the fact that Indemnitee is or was a director, officer,
employee or agent of the Company, or any subsidiary of the Company, by reason of
any action or inaction on the part of Indemnitee while a director, officer,
employee or agent, or by reason of the fact that Indemnitee is or was serving at
the request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including, without limitation, attorneys' fees, disbursements and
retainers, accounting and witness fees, travel and deposition costs, and
expenses of investigations) and, to the fullest extent permitted by law, amounts
paid in settlement, in each case to the extent actually and reasonably incurred
by Indemnitee in connection with the defense or settlement of such action or
suit (i) if Indemnitee acted in good faith and in a manner Indemnitee reasonably
believed to be in or not opposed to the best interests of the Company and its
stockholders, except that no indemnification shall be made in respect of any
claim, issue or matter as to which Indemnitee shall have been adjudged to be
liable to the Company in the performance of Indemnitee's duty to the Company and
its stockholders unless and only to the extent that the court in which such
action or suit is or was pending shall determine upon application that, in view
of all the circumstances of the case, Indemnitee is fairly
2
<PAGE>
and reasonably entitled to indemnity for expenses and then only to the extent
that the court shall determine; (ii) if Indemnitee is a director, to the extent
that the action or contemplated action seeks monetary damages for breach of
Indemnitee's duties to the Company and its stockholders in circumstances under
which Indemnitee's personal liability therefor has been eliminated as a result
of the provisions of Section 102(b)(7) of the Delaware General Corporation Law;
or (iii) if Indemnitee is an agent other than a director, to the extent that,
were Indemnitee a director, Indemnitee would have the right to be indemnified
under Section 2(b)(ii), above; and in the case of Section 2(b)(ii) and 2(b)(iii)
above, indemnification shall include, to the extent not prohibited by law,
indemnification against all judgments, fines and amounts paid in settlement
actually and reasonably incurred by Indemnitee in connection with such action,
suit or proceeding.
(c) MANDATORY PAYMENT OF EXPENSES. To the extent that Indemnitee has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Subsection (a) or (b) of this Section 2 or the defense
of any claim, issue or matter therein, Indemnitee shall be indemnified against
expenses (including, without limitation, attorneys' fees, disbursements and
retainers, accounting and witness fees, travel and deposition costs, and
expenses of investigations) actually and reasonably incurred by Indemnitee in
connection therewith.
(d) INDEMNIFICATION FOR SERVING AS A WITNESS. Notwithstanding any other
provision of this Agreement, to the extent that Indemnitee is, by reason of
Indemnitee's status as a director, officer, employee or agent of the Company, a
witness in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, Indemnitee shall be indemnified against
expenses actually and reasonably incurred by Indemnitee in connection therewith.
3. EXPENSES; INDEMNIFICATION PROCEDURE.
(a) ADVANCEMENT OF EXPENSES. The Company shall advance all reasonable
expenses incurred by Indemnitee in connection with the investigation, defense,
settlement or appeal of any civil, criminal, administrative or investigative
action, suit or proceeding referenced in Section 2(a) or (b) hereof (but not
amounts actually paid in settlement of any such action, suit or proceeding).
Indemnitee hereby undertakes to repay such amounts advanced only if, and to the
extent that, it shall ultimately be determined that Indemnitee is not entitled
to be indemnified by the Company as authorized hereby. The advances to be made
hereunder shall be paid by the Company to Indemnitee within 45 days following
delivery of a written request therefor by Indemnitee to the Company.
(b) NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall, as a condition
precedent to his right to be indemnified under this Agreement, give the Company
notice, in accordance with Section 14 hereof, of any claim made against
Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the Chief Executive
Officer of the Company. In addition, Indemnitee shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Indemnitee's power.
3
<PAGE>
(c) PROCEDURE. Any indemnification and advances provided for in Section 2
and this Section 3 shall be made no later than 45 days after receipt of the
written request of Indemnitee. If a claim under this Agreement, under any
statute, or under any provision of the Company's Certificate of Incorporation or
Bylaws providing for indemnification, is not paid in full by the Company within
45 days after a written request for payment thereof has first been received by
the Company, Indemnitee may, but need not, at any time thereafter bring an
action against the Company to recover the unpaid amount of the claim and,
subject to Section 13 of this Agreement, Indemnitee shall also be entitled to be
paid for the expenses (including attorneys' fees) of bringing such action. It
shall be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in connection with any action, suit or proceeding in
advance of its final disposition) that Indemnitee has not met the standards of
conduct which make it permissible under applicable law for the Company to
indemnify Indemnitee. Indemnitee shall be entitled to receive interim payments
of expenses pursuant to Section 3(a) unless and until such defense may be
finally adjudicated by court order or judgment from which no further right of
appeal exists. It is the intention of the parties that if the Company contests
Indemnitee's right to indemnification, the question of Indemnitee's right to
indemnification shall be for the court to decide, and neither the failure of the
Company (including its Board of Directors, any committee or subgroup of the
Board of Directors, independent legal counsel, or its stockholders) to have made
a determination that indemnification of Indemnitee is proper in the
circumstances because Indemnitee has met the applicable standard of conduct
required by applicable law, nor an actual determination by the Company
(including its Board of Directors, any committee or subgroup of the Board of
Directors, independent legal counsel, or its stockholders) that Indemnitee has
not met such applicable standard of conduct, shall create a presumption that
Indemnitee has or has not met the applicable standard of conduct.
(d) NOTICE TO INSURERS. If, at the time of the receipt of a notice of a
claim pursuant to Section 3(b) hereof, the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(e) SELECTION OF COUNSEL. In the event the Company shall be obligated
under Section 3(a) hereof to pay the expenses of any proceedings against
Indemnitee, the Company, if appropriate, shall be entitled to assume the defense
of such proceeding, with counsel approved by Indemnitee, upon the delivery to
Indemnitee of written notice of its election so to do. After delivery of such
notice, approval of such counsel by Indemnitee and the retention of such counsel
by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same proceeding, provided that (i) Indemnitee shall have the
right to employ separate counsel in any such proceeding at Indemnitee's expense;
and (ii) if (A) the employment of counsel by Indemnitee has been previously
authorized by the Company, (B) Indemnitee shall have reasonably concluded that
there may be a conflict of interest between the Company and
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Indemnitee in the conduct of any such defense, or (C) the Company shall not, in
fact, have employed counsel to assume the defense of such proceeding, then the
fees and expenses of Indemnitee's counsel shall be at the expense of the
Company.
4. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
(a) SCOPE. Notwithstanding any other provision of this Agreement,
the Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Certificate
of Incorporation, the Company's Bylaws or by statute. In the event of any change
in any applicable law, statute or rule which narrows the right of a Delaware
corporation to indemnify a member of its board of directors or its officers,
employees or agents, such change, to the extent not otherwise required by such
law, statute or rule to be applied to this Agreement, shall have no effect on
this Agreement or the parties' rights and obligations hereunder.
(b) NONEXCLUSIVITY. The indemnification provided by this Agreement
shall not be deemed exclusive of any rights to which Indemnitee may be entitled
under the Company's Certificate of Incorporation, its Bylaws, any agreement, any
vote of stockholders or disinterested Directors, the Corporation Law of the
State of Delaware or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while holding such office. The
indemnification provided under this Agreement shall continue as to Indemnitee
for any action taken or not taken while serving in an indemnified capacity even
though he may have ceased to serve in such capacity at the time of any action,
suit or other covered proceeding.
5. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of the
expenses, judgments, fines or penalties actually or reasonably incurred by him
in the investigation, defense, appeal or settlement of any civil or criminal
action, suit or proceeding, but not, however, for the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion of such
expenses, judgments, fines or penalties to which Indemnitee is entitled.
6. MUTUAL ACKNOWLEDGEMENT. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or applicable public policy may prohibit
the Company from indemnifying its directors, officers, employees and/or agents
under this Agreement or other wise. Indemnitee understands and acknowledges that
the Company has undertaken or may be required in the future to undertake with
the Securities and Exchange Commission to submit the question of indemnification
to a court in certain circumstances for a determination of the Company's right
under public policy to indemnify Indemnitee.
7. LIABILITY INSURANCE. The Company shall, from time to time, make the
good faith determination whether or not it is practicable for the Company to
obtain and maintain a policy or policies of insurance with reputable insurance
companies providing the directors, officers, employees and agents of the Company
with coverage for losses from wrongful acts, or to ensure
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the Company's performance of its indemnification obligations under this
agreement. Among other considerations, the Company will weigh the costs of
obtaining such insurance coverage against the protection afforded by such
coverage. In all such policies of liability insurance, Indemnitee shall be
named as an insured in such a manner as to provide Indemnitee the same rights
and benefits as are accorded to the most favorably insured of the Company's
directors, if Indemnitee is a director; or of the Company's officers, if
Indemnitee is not an director of the Company but is an officer; or of the
Company's employees, if Indemnitee is not a director or officer but is an
employee; or of the Company's agents, if Indemnitee is not a director, officer
or employee but is an agent. Notwithstanding the foregoing, the Company shall
have no obligation to obtain or maintain such insurance if the Company
determines in good faith that such insurance is not reasonably available, if the
premium costs for such insurance are dispro portionate to the amount of coverage
provided, if the coverage provided by such insurance is limited by exclusions so
as to provide an insufficient benefit, or if Indemnitee is covered by similar
insurance maintained by a subsidiary or parent of the Company.
8. SEVERABILITY. Nothing in this Agreement is intended to require or
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 8. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
never theless indemnify Indemnitee to the full extent permitted by any
applicable portion of this Agreement that shall not have been invalidated, and
the balance of this Agreement not so invalidated shall be enforceable in
accordance with its terms.
9. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement :
(a) CLAIMS INITIATED BY INDEMNITEE. To indemnify or advance expenses
to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or otherwise as required under Section 145
of the Delaware General Corporation Law, but such indemnification or advancement
of expenses may be provided by the Company in specific cases if the Board of
Directors has approved the initiation or bringing of such suit;
(b) LACK OF GOOD FAITH. To indemnify Indemnitee for any expenses
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous;
(c) INSURED CLAIMS. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and
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amounts paid in settlement) which have been paid directly to Indemnitee by an
insurance carrier under a policy of officers' and directors' liability insurance
or other policy of insurance maintained by the Company;
(d) CLAIMS UNDER SECTION 16(B). To indemnify Indemnitee for expenses
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute;
(e) UNLAWFUL CLAIMS. To indemnify Indemnitee in any manner which is
contrary to public policy or which a court of competent jurisdiction has finally
determined to be unlawful;
(f) FAILURE TO SETTLE PROCEEDING. To indemnify Indemnitee for
liabilities in excess of the total amount at which settlement reasonably could
have been made, or for any cost and/or expenses incurred by Indemnitee following
the time such settlement reasonably could have been effected, if Indemnitee
shall have unreasonably delayed, refused or failed to enter into a settlement of
any action, suit or proceeding (or investigation or appeal thereof) recommended
in good faith, in writing, by the Company; or
(g) BREACH OF EMPLOYMENT AGREEMENT. To indemnify Indemnitee for any
breach by Indemnitee of any employment agreement between Indemnitee and the
Company or any of its subsidiaries.
10. CONSTRUCTION OF CERTAIN PHRASES.
(a) For purposes of this Agreement, references to the "Company" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees and/or agents, so that
if Indemnitee is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, Indemnitee shall stand in
the same position under the provisions of this Agreement with respect to the
resulting or surviving corporation as Indemnitee would have with respect to such
constituent corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on Indemnitee with respect to an employee benefit plan;
and references to "serving at the request of the Company" shall include any
service as a director, officer, employee or agent of the Company or any
subsidiary of the Company which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit plan,
its participants, or beneficiaries; and if Indemnitee acted in good faith and in
a manner Indemnitee
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reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan, Indemnitee shall be deemed to have acted in a
manner "not opposed to the best interest of the Company" as referred to in this
Agreement.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
13. ATTORNEYS' FEES. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement to enforce or
interpret any of the terms of this Agreement, Indemnitee shall be entitled to be
paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.
14. NOTICE. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee, on the date of such
receipt, or (ii) if mailed by domestic certified or registered mail with postage
prepaid, on the third business day after the date postmarked. Addresses for
notice to either party are as shown on the signature page of this Agreement, or
as subsequently modified by written notice.
15. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of California
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of California,
or in Federal courts located in such State.
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16. CHOICE OF LAW. This Agreement shall be governed by and its provisions
construed in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
FOX KIDS WORLDWIDE, INC.,
a Delaware corporation,
as the Company
By:____________________________________
Name:_____________________________
Title:____________________________
Notice Address:
Fox Kids Worldwide, Inc.
10960 Wilshire Boulevard
Los Angeles, California 90024
AGREED TO AND ACCEPTED:
INDEMNITEE:
___________________________
___________________________
Notice Address:
___________________________
___________________________
___________________________
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EXHIBIT 10.6
EMPLOYMENT CONTRACT
This is a contract between SABAN ENTERTAINMENT, INC. ("we", "us", and "our"),
and BILL JOSEY ("you" and "your"). You and we have entered into this contract as
of April 1, 1997.
This contract supercedes and replaces all other prior oral and written
employment agreements between you and us, including that fully-executed
Employment Contract entered into as of March 13, 1997, excepting only the Mutual
Agreement to Arbitrate between you and us, which will remain in full force and
effect.
We agree to continue to employ you, and you accept such continued employment
with us, on the following terms and conditions:
1. EMPLOYMENT PERIOD. Your employment pursuant to the terms of this contract
will begin on April 1, 1997, and will continue for a period of three (3) years
through March 31, 2000 ("Term"). The actual period of time that you remain in
our employ pursuant to this contract is the "Employment Period". Your continued
employment with us, if you remain in our employ after expiration of the Term
will be on an "at-will" basis and will otherwise be in accordance with the
provisions of our then-existing policies applicable to other comparable
executives we employ on an at-will basis.
2. TITLE; DUTIES; RESPONSIBILITIES; REPORTING
a. TITLE. We are employing you, and you agree to serve, as Senior Vice
President of Business Affairs and General Counsel, or in any other similar
capacity or capacities that we designate during the Employment Period.
b. DUTIES. Your duties will be those customarily performed by others
similarly employed in the entertainment industry. We may modify, add to, or
subtract from your duties at any time, subject only to the terms of this
contract. You agree to make business trips at our request both within and
outside the United States.
c. FULL TIME EMPLOYMENT. Your employment with us is full time and,
therefore, during the Employment Period you will not engage in any other
business or employment.
d. RESPONSIBILITIES. You will always use your best efforts to further our
business objectives and protect our business interests. You will follow our
policies, orders, and directives. As with all companies, we reserve the right
to change our policies from time to time to reflect different business,
financial, and legal conditions.
e. APPOINTMENT AS DIRECTOR OR OFFICER. If you are elected a member of the
Board of Directors or appointed as a corporate officer or Saban Entertainment,
Inc., our parent, or any of our affiliates, you agree to serve in such
capacity or capacities without additional compensation.
f. REPORTING. You will report to the person or persons we designate from
time to time. Only our Chief Executive Officer or Chief Operating Officer may
designate the person or persons to whom you report.
3. SALARY AND OTHER COMPENSATION
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a. SALARY
(1) During the first year of the Term, we will pay you a gross annual
salary of $300,000.
(2) During the second year of the Term, we will pay you a gross annual
salary of $315,000.
(3) During the third year of the Term we will pay you a gross annual
salary of $330,000.
(4) Your salary (i) will be paid in equal, pro-rated installments every
other week on our regular company-wide payday, (ii) will be subject to all
withholdings and deductions, such as social security, Medicare, and state
disability insurance, that are required by law or which you ask us to
make, and (iii) is exclusive of employment benefits and discretionary
bonuses, if any.
b. BENEFIT PLANS. You will be entitled to participate in all employee benefit
plans we offer to comparable executives that we employ. These benefits will be
available in accordance with our customary policies and are subject to change
at any time in our sole discretion. To the extent that we or our parent
establish any stock option plan which covers our executives generally, you
will be entitled to participate in such plan pursuant to the terms thereof.
You will be entitled to reasonable periods of paid vacation during the
Employment Period, the length and timing of which will be subject to your
direct supervisor's prior written approval in each instance.
4. EXPENSES; TRAVEL. We will reimburse you for travel and other out-of-pocket
expenses that you reasonably or necessarily incur during the Employment Period
to perform your duties hereunder, in accordance with our Travel and
Entertainment Expense Policy.
5. TERMINATION
a. TERMINATION FOR CAUSE. We expect all of our employees to be honest and
conduct their personal and professional affairs lawfully. Therefore, we may
terminate the Employment Period at any time, effectively immediately upon
notice to you, if you:
(1) are convicted of, plead guilty to, or enter a "no plea" (nolo
contendere) to any felony;
(2) embezzle funds or assets from us or any of our subsidiaries,
affiliates, or related companies;
(3) become physically or mentally disabled and have used all disability
benefits available to you pursuant to state and federal family and
medical leave laws and are either unable to reasonably and effectively
carry out your duties (i) with reasonable accommodations that we
provide, or (ii) because the accommodations we would have to provide
would cause us undue hardship; or,
(4) fail or refuse to perform your reasonable and customary duties
hereunder, fail to comply with any lawful order or directive of your
superiors, or violate any of our policies (such as our non-harassment
policy and Conflict of Interest Statement) which if violated would
expose us to civil and/or criminal liability; or,
(5) materially breach any of the promises, covenants, obligations,
representations, or warranties made by or imposed you upon as set forth
in this Agreement.
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b. TERMINATION UPON DEATH. The Employment Period will terminate
automatically upon your death, and we will pay your estate all earned and
accrued but previously unpaid salary through the date of termination of the
Employment Period.
6. YOUR REPRESENTATIONS AND WARRANTIES. You represent and warrant to us as
follows:
a. AUTHORITY. You have the right, power, and authority to enter into and
perform this contract. You are under no legal or other disability which
would make this contract void or voidable.
b. NO PENDING LITIGATION. You are not presently being sued, nor has any
judgment been entered against you, nor have you received any threats of any
lawsuits against you which would materially and adversely affect your
ability to perform your duties pursuant to this contract.
c. NO PROMISES NOT CONTAINED IN THIS CONTRACT. No person acting or
purporting to act on our behalf has made any promise to you that is not
contained in this contract nor induced you to enter into this contract by
making any promise to you that is not contained in this contract.
d. BINDING CONTRACT. You have personally read, understood, agreed to, and
signed, and delivered to us this contract. You are not breaching any other
agreement to which you a party by signing and delivering to us this
contract. No other contract to which you are a party is inconsistent with
the terms of this agreement.
e. INDEPENDENT COUNSEL. You have had an opportunity to consult with legal
counsel with respect to the negotiations, drafting, and execution of this
contract. You acknowledge that you have had ample opportunity to have this
contract reviewed by legal counsel of your choice, that you fully understand
the legal significance of your representation that you have had the
opportunity to consult with legal counsel.
7. NON-COMPETITION. Because your employment is full time, you agree that you
will not at any time during the Employment Period engage or participate,
directly or indirectly, in any business, or organize any business or venture,
which is competitive with or substantially similar to the business of Saban
Entertainment, Inc., or any of its subsidiary or affiliated companies, by
becoming an owner, officer, director, shareholder, partner, associate, employer,
or agent with respect to any such business or venture. The foregoing does not
prohibit your ownership of less than one percent (1%) of the outstanding common
stock of any company whose shares are publicly traded.
8. CONFIDENTIALITY. You acknowledge that our business arrangements, methods,
and procedures, projects in development or production, and other information
about us are not generally known to the public. You agree that you will not at
any time during the Employment Period and for five (5) years thereafter,
disclose to any third party or use for any purpose outside the scope of your
employment hereunder any information which you obtain as a result of your status
as our employee, unless (i) authorized to make such disclosure or use by an
authorized corporate officer of Saban Entertainment, Inc., (ii) we have publicly
disclosed the information, or (iii) the information is generally known by the
public through sources other than you. At the termination of the Employment
Period or whenever demanded by a corporate officer of Saban Entertainment, Inc.,
you will return all information (in whatever form, including without limitation
documents, sound and audiovisual recordings, and computer
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diskettes) belonging to us or containing information belonging to us, and you
will not retain any copies of such information.
9. NO SOLICITATION OF OUR EMPLOYEES. You will not at any time during the
Employment Period and for one (1) year thereafter, yourself or through any
intermediary or third party, solicit or induce, or attempt to solicit or induce,
any of our employees to leave our employ or render services to any third party.
10. INJUNCTIVE RELIEF. You acknowledge that your breach or threatened breach of
any of the provisions set forth in paragraphs 7, 8, and 9 hereof will cause
substantial and irreparable damage to us and that the amount and character of
such damage will be difficult to ascertain. Therefore, to prevent any such
breach or threatened breach, and in addition to any other remedies to which we
would be entitled at law or in equity, you agree that we will be entitled to
immediate, temporary, preliminary, and permanent injunctive relief through
appropriate legal actions in any court with jurisdiction, without proof of
actual damages that we have incurred or may incur. You expressly agree that we
will not be required to post any bond or other security as a condition to
obtaining any injunctive relief pursuant to this paragraph 10 and you expressly
waive any right to the contrary.
11. EMPLOYEE HANDBOOK AND POLICIES. You acknowledge receipt of our employee
handbook ("Handbook") and that your employment is conditioned on your review and
adherence to the policies and requirements set forth in the Handbook. If there
is a conflict between a term set forth in this contract and a provision of the
Handbook, this contract will control. We may change any of our policies at any
time, in our sole discretion, by giving you written notice thereof.
12. NOTICES. Notices that we give to you hereunder, and notices that you give
to us hereunder, will be given at the addresses set forth below. You and we each
may change your and our respective address for purposes of notice by giving
notice thereof.
a. ADDRESS FOR NOTICE TO YOU
b. ADDRESS FOR NOTICE TO US
Saban Entertainment, Inc.
Saban Plaza
10960 Wilshire Boulevard
Los Angeles, CA 90024
Telephone: (310) 235-5100; facsimile : (310) 235-5195
Attention: Chief Operating Officer
A notice is deemed given hereunder when (i) personally given to the intended
recipient, (ii) if mailed, 48 hours after deposit with the U.S. Postal Service,
postage prepaid, from within the metropolitan Los Angeles area, (iii) if mailed,
72 hours after deposit with the U.S. Postal Service, by certified mail, postage
prepaid, from outside the metropolitan Los Angeles area but within the United
States, (iv) if
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mailed, when received by the intended recipient if sent from outside the United
States, and (v) if sent by facsimile, one business day after the recipient's
receipt of a clearly readable transmission.
13. RELATIONSHIP OF PARTIES; RESULTS AND PROCEEDS; NAME AND LIKENESS. You
acknowledge that the relationship between you and us is exclusively that of
employer and employee and that our obligations to your are exclusively
contractual in nature. We will be the sole owner of all the results and proceeds
of your services hereunder, including, but not limited to, all ideas, concepts,
formats, suggestions, developments, arrangements, designs, packages, programs,
promotions, and other intellectual properties which you may create within the
scope of your employment hereunder, free and clear of any claims by you (or
anyone claiming under you) or any kind or character whatsoever (other than your
right to your salary hereunder). We will have the right to use your name,
biography, and likeness in connection with our business, including advertising
our products and services, and may grant this right to others, but not for use
as a direct endorsement.
14. AMENDMENT; WAIVER. This contract may be amended, supplemented, modified, or
rescinded only through an express written instrument signed both by you and by
our Chief Operating Officer, Chief Executive Officer, or General Counsel. You
and we each may specifically and expressly waive in writing any portion of this
contract or any breach hereof, but no such waiver will be a further or
continuing waiver of any proceeding or succeeding breach of the same or any
other provision. You may not assign any obligation or right hereunder. The
consent by either you or us to any act for which such consent was required will
not be deemed to imply consent, or a waiver of the necessity of obtaining such
consent, for the same or similar acts in the future.
15. SEVERABILITY. Each provision of this contract is intended to be severable
and if any term or provision hereof is determined invalid or unenforceable for
any reason, such unenforceability or invalidity will not effect the
enforceability or validity of the remainder of this contract.
16. COUNTERPARTS. This contract may be executed in any number of counterparts,
each of which will be deemed to be an original, but all of which together will
constitute one and the same instrument.
17. INTERPRETATION. The language and all parts of this contract will in all
cases be construed simply according to its fair meaning and not strictly for or
against any party. Wherever the context requires, all words used in the singular
will be construed to have been used in the plural and vice versa, and each
gender will include the other gender. The captions of the sections of this
contract are for convenience only and will not effect the construction or
interpretation of any of the provisions herein. This contract will be governed
by the laws of the State of California applicable to agreements executed and
fully performed in California, regardless of where actually executed or
performed.
18. ENTIRE AGREEMENT. This Agreement contains the entire and complete
understanding between the parties concerning this subject matter and all
representations, agreements, arrangements or understandings between or among the
parties, whether oral or written have been fully and completely merged herein
and are superseded hereby.
19. SUCCESSORS. This contract will be binding upon and inure to the benefit of
both you and us and your and our respective heirs, legacies, legal
representatives, personal representatives, successors, and permitted assigns.
IN WITNESS HEREOF, you and we have entered into this contract as of the date set
forth above.
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SABAN ENTERTAINMENT, INC.
/s/ Bill Josey By /s/ Mel Woods
- ------------------------------------- -----------------------------------
BILL JOSEY Its President
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EXHIBIT 10.8
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is entered into as of the 1st day of September, 1996
by and between Fox Kids Worldwide, Inc., a Delaware corporation ("Company") and
Shuki Levy ("Employee"):
1. ENGAGEMENT. Company hereby engages Employee to render services as
Executive Vice-President and Supervising Producer of Live Action Programming of
Company pursuant to the terms and conditions hereof, and Employee hereby accepts
such engagement. Concurrently with the execution of this Agreement, the parties
hereto acknowledge the termination of that certain Loan Out Agreement dated as
of January 1, 1995 by and between Saban Entertainment, Inc. and Arpeggio
Productions, Inc. Employee shall report solely to Haim Saban, the Chairman and
Chief Executive Officer of Company, subject to the overall direction and
supervision of Company's Board of Directors; provided that from and after a
"Change of Control," as defined in Section 12, below, Employee agrees that he
may be required to report to some other person. If Employee is elected to the
Board of Directors of Company, Employee agrees to accept such appointment.
2. NATURE AND PLACE OF SERVICES. Employee shall render all services
usually and customarily rendered by and required of executives similarly
employed in the entertainment industry and such other services as may be
reasonably required by Company. The location of Employee's office shall be at
Company's principal Southern California executive offices, which will be located
at such place or places in Los Angeles County as the Board of Directors of
Company shall from time to time designate; and the duties of Employee shall be
performed at such offices, except for such travel as may from time to time be
required.
3. EXCLUSIVITY. Employee shall work for Company and its affiliates
during the Term hereof on a full-time, non-exclusive basis. Notwithstanding the
foregoing, the Company and its affiliates shall have priority on Employee's
services during the Term of this Agreement, and Employee shall not render
services of any nature to or for any other person, firm or corporation in
connection with children's entertainment during the Term of this Agreement
without the prior written consent of Company. For so long as Employee is
employed pursuant to the terms hereof, Employee shall not become financially
interested in or associated with, directly or indirectly, any other person or
entity engaged in the production, distribution or exhibition of motion pictures,
television programs, phonograph recording, or any visual or audio recordings of
any kind (except in connection with Employee's
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employment as a composer by Bubale Music and/or 5161 Corporation), or in the
broadcasting or music publishing businesses, anywhere in the world; provided,
that Employee may invest in the capital stock or other securities of any
corporation whose stock or other securities are publicly owned or are regularly
traded on any securities exchange or in the over-the-counter market, so long as
Employee's ownership of such securities does not exceed 5% of the issued and
outstanding securities of such entity and Employee's holdings in any one such
entity does not in the aggregate cost Employee more than $100,000.
4. TERM. The term of this Agreement ("Term") shall commence on September
1, 1996 and, subject to termination as hereinafter provided, expire with the
close of business on August 31, 1999. Each consecutive year of the Term ending
on August 31 shall be referred to as a "Term Year."
5. COMPENSATION.
(a) Fixed Annual Compensation. The Company shall pay to Employee, as
consideration for all services rendered by Employee pursuant to this Agreement
fixed compensation of Five Hundred Thousand Dollars ($500,000) per year for each
Term Year hereunder.
(b) Stock Options. On June 1, 1994, Employee and Saban Entertainment,
Inc. entered into a Stock Option Agreement, a copy of which is attached to this
Agreement. The Stock Option Agreement shall continue in full force and effect
during the Term, with all references therein to "Consultant" and "engagement"
being deemed to refer to and include, respectively, Employee and his engagement
hereunder.
(c) Bonuses. The Company may in its discretion grant to Employee a
discretionary bonus for each Term Year.
(d) Employee Benefits.
(i) Reimbursements. Company shall reimburse Employee for all
ordinary and necessary business, entertainment and other expenses reasonably
incurred by Employee in the performance of Employee's duties and obligations
under this Agreement, including reimbursement for air travel and accommodations
for business travel. Company agrees to repay or reimburse Employee for such
business expenses upon the presentation of itemized statements of such business
expenses in accordance with Company's policy.
(ii) Annual Vacations. Employee shall be entitled to take four
(4) weeks annual vacation for each Term Year.
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(iii) Health Insurance and Other Employee Benefits. Company shall
provide Employee with health insurance for him and his dependents no less
favorable in benefits than any other employee of Company. To the extent that
Company establishes any other employee benefit plan which provides benefits to
executives of Company generally, Employee shall be entitled to participate in
such plan pursuant to the terms thereof, except that Company may exclude
Employee's participation in any plan which is a stock option plan or plan
similar to a stock option plan.
6. [INTENTIONALLY DELETED]
7. REPRESENTATIONS AND WARRANTIES.
(a) Representations of Employee. Employee represents and warrants
that Employee has all right, power, authority and capacity, and is free, to
enter into this Agreement; that by doing so Employee will not violate or
interfere with the rights of any other person or entity; and that Employee is
not subject to any contract, understanding or obligation which will or might
prevent, interfere with or impair the performance of this Agreement by Employee.
Employee will indemnify and hold Company harmless with respect to any losses,
liabilities, demands, claims, fees, expenses, damages and costs (including
attorneys fees and court costs) resulting from or arising out of any claim or
action based upon Employee's entering into this Agreement.
(b) Representations of Company. Company represents and warrants that
Company has all right, power and authority, without the consent of and other
person, to execute and deliver, and perform its obligations under, this
Agreement. All corporate and other actions required to be taken by Company to
authorize the execution, delivery and performance of this Agreement and the
consummation of all transactions contemplated hereby have been duly and properly
taken. This Agreement is the lawful, valid and legally binding obligation of
Company, enforceable in accordance with its terms.
(c) Materiality of Representations. The representations, warranties
any covenants set forth in this Agreement shall be deemed to be material and
have been relied upon by the parties hereto.
8. RELATIONSHIP AND COVENANTS OF EMPLOYEE.
(a) Covenant Not To Disclose. Employee shall not at any time during
or after the termination of the Term, knowingly reveal, divulge or make known to
any person (other than the Company or its affiliates) or use for Employee's own
account any non-public information concerning or used by Company of which
Employee was
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apprised or otherwise had become aware during the term of Employee's employment
by Company (excluding any such information which becomes public for reasons
other than Employee's breach of this Agreement or which Employee is required to
disclose by law).
(b) Covenant to Deliver Records. All memoranda, notes, records and
other documents made or compiled by Employee, or made available to Employee
during the term of this Agreement concerning the business of Company shall be
Company's property and shall be delivered to Company on the termination of this
Agreement or at any other time on request. Employee shall keep in confidence
and shall not use for Employee or others, or divulge to others, any secret or
confidential information, knowledge or data of Company obtained by Employee as a
result of Company's employment, unless authorized by Company or required by law.
Employee shall be entitled to retain for his own records copies of any and all
memoranda, notes, records and other documents made or compiled by Employee
during the Term of this Agreement.
(c) Covenant Not To Divert. Employee shall not so long as Employee is
employed hereunder, or if such employment shall terminate during or at the
expiration of the Term, for a period of two years following such termination,
directly or indirectly, either on Employee's own behalf, or as a member of a
partnership, joint venture or corporation, or as an employee or agent on behalf
of any person, firm, partnership, joint venture or corporation, either (i)
solicit, induce (or attempt to induce), or endeavor to entice away any clients
of Company (unless Company consents in writing), (ii) solicit, divert, or seek
to develop or exploit any existing entertainment projects on which Company is
working at the time of termination (unless Company thereafter advises Employee
in writing that it has abandoned such project), or (iii) solicit, interfere
with, induce (or attempt to induce) or endeavor to entice away any employee
(other than Employee's assistant) associated with Company to become affiliated
with him or any other person, firm, partnership, joint venture, corporation or
business organization.
(d) Limitations Upon Covenants. The provisions under this Paragraph 8
shall survive the termination of this Agreement. The parties hereto agree that,
in the event any of the provisions set forth in this Paragraph 8 are held by any
court or other duly constituted legal authority to be effective in any
particular area or jurisdiction only if modified to limit their duration or
scope or to be void or otherwise unenforceable in any particular area or
jurisdiction, then such provisions shall be deemed amended and modified with
respect to that particular area or jurisdiction so as to comply with the order
of any such court or other duly constituted legal authority and, as to all other
areas and jurisdictions, and as to all other provisions of this Paragraph 8,
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<PAGE>
such provisions shall remain in full force end effect as set forth in this
Agreement.
(e) Remedies. Employee acknowledges that Company will have no
adequate remedy at law if Employee violates the terms of the provisions of this
Paragraph 8 or any other provisions of this Agreement (including, without
limitation, the exclusivity provisions of Paragraph 3, above). In such event,
Company shall have the right, in addition to any other rights it may have, to
obtain in any court of competent jurisdiction injunctive relief to restrain any
breach or threatened breach or specific performance of this Agreement.
9. CERTAIN RIGHTS OF COMPANY.
(a) Announcement. Company shall have the sole right to make a public
announcement of the terms, provisions, or execution of this Agreement.
(b) Use of Name, Likeness, and Biography. Company shall have the
right (but not the obligation) to use, publish and broadcast, and to authorize
others to do so, the name, approved likeness and approved biographical material
of Employee to advertise, publicize and promote the business of Company and of
affiliates, but not for the purposes of direct endorsement without Employee's
consent. An "approved likeness" and "approved biographical material" shall be,
respectively, any photograph or other depiction of Employee, or any biographical
information or life story concerning the professional career of Employee, which
has been submitted to and approved by Employee prior to its first use,
publication or broadcast, such approval not to be unreasonably withheld.
(c) Corporate Offices. In addition to his positions as Executive
Vice-President and Supervising Producer of Live Action Programming of the
Company, Company or its affiliates may from time to time appoint Employee to one
or more corporate offices of Company or its affiliates. Employee agrees to
accept such offices if consistent with Employee's stature and experience.
(d) Right to Insure. Company shall have the right to secure in its
own name, or otherwise, and at its own expense, life, health, accident or other
insurance covering Employee, and Employee shall have no right, title or interest
in and to such insurance. Employee shall assist Company in procuring such
insurance by submitting to examinations and by signing such applications and
other instruments as may be required by the insurance carriers to which
application is made for any such insurance.
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10. TERMINATION.
(a) Disability. If Employee shall be rendered incapable by illness
(physical or mental disability) of complying with the terms, provisions and
conditions hereof on his part to be performed for a period in excess of 90
consecutive days or 250 days in the aggregate during the Term, then Company may,
at its option, prior to the date Employee resumes the rendering of services,
terminate this Agreement by written notice to that effect sent by registered or
certified mail. Such termination shall terminate any and all obligations to
Employee under this Agreement effective as of the date of such written notice
except Employee's right to receive the Fixed Salary in Paragraph 5(a) for the
Term Year in which the date of such written notice falls, pro-rated to the date
of such written notice.
(b) Death. In the event Employee dies during the Term of this
Agreement, such death shall terminate any and all obligations to Employee under
this Agreement effective as of the date of death except Employee's right to
receive the Fixed Salary in Paragraph 5(a) for the Term Year in which the date
of death falls, pro-rated to the date of death.
(c) Cause. Company may terminate Employee's employment hereunder for
cause, which shall mean (i) indictment of Employee for a felony or a crime
involving a high degree of moral turpitude, (ii) the commission by Employee of
an act or acts of dishonesty constituting a crime, which act or acts are
intended to result, directly or indirectly, in gain or personal enrichment at
the expense of Company or any of its subsidiaries or affiliates by Employee,
(iii) certification by a medical doctor that Employee is a habitual alcoholic or
is a narcotic addict, (iv) Employee's material breach of this Agreement. Such
termination shall terminate any and all obligations to Employee under this
Agreement effective as of the date of such written notice except Employee's
right to receive the Fixed Salary in Paragraph 5(a) for the Term Year in which
the date of such written notice falls, pro-rated to the date of such written
notice.
(d) At Convenience of Company. Company shall have the absolute and
unconditional right to terminate Employee's employment hereunder at any time,
other than pursuant to Paragraphs 10(a), 10(b) or 10(c), by written notice to
that effect delivered in person or sent by registered or certified mail. Such
termination shall terminate any and all obligations to Employee under this
Agreement effective as of the date of such written notice except (i) Employee's
right to receive the Fixed Salary in Paragraph 5(a) for the Term Year in which
the date of such written notice falls, pro-rated to the date of such written
notice, and (ii) Employee's
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<PAGE>
right to receive the Severance Pay provided in, and subject to the terms and
conditions of, Paragraph 11 hereof.
(e) At Employee's Election. Employee may terminate his employment
hereunder upon Company's material breach of this Agreement by written notice to
that effect delivered in person or sent by registered or certified mail. Such
termination shall terminate any and all obligations of Company to Employee under
this Agreement, including liabilities with respect to such breach, effective as
of the date of such written notice except (i) Employee's right to receive the
Fixed Salary in Paragraph 5(a) for the Term Year in which the date of such
written notice falls, pro-rated to the date of such written notice, and (ii)
Employee's right to receive the Severance Pay provided in, and subject to the
terms and conditions of, Paragraph 11 hereof.
11. SEVERANCE PAY. In the event Employee's services are terminated by
Company pursuant to Paragraph 10(d) or by Employee pursuant to Paragraph 10(e)
above prior to the completion of the Term, Employee shall receive Employee's
fixed salary set forth in Paragraph 5(a) hereof for the balance of the Term,
payable in equal installments no less frequently than semi-monthly. The
termination benefits contemplated by this Paragraph shall be reduced by the
aggregate amount of any wages, salaries, fees or other compensation ("Earnings")
earned by Employee during the period in which payments pursuant to the first
sentence of this Paragraph are otherwise to be made, as compensation for full-
time or part-time services rendered as an employee, consultant, manager,
independent contractor or in any other employment capacity. For the purposes of
determining the amount of such Earnings, if any, Employee shall apprise Company
from time to time, upon its request, of such amounts earned, providing to
Company such evidence thereof (on a confidential basis), including, without
limitation, Employee's federal and state income tax returns, as Company may
reasonably request.
12. CHANGE OF CONTROL.
(a) For the purposes of this Section 12, the following definitions
shall apply:
The following events shall each constitute a "Change of Control" of
Company: (i) the acquisition of one or more shares of the voting securities of
Company by any Acquiring Person, or any group of two or more Acquiring Persons
acting in concert, as a result of which such Person or group beneficially owns
fifty percent (50%) or more of the issued and outstanding voting securities of
Company; (ii) the consolidation with, or merger with or into, any other entity,
by Company and, in connection with such merger or consolidation, Company is not
the continuing or surviving
7
<PAGE>
entity; (iii) the sale or transfer by other means by Company in one transaction
or a series of related transactions, of assets or earning power aggregating
fifty percent (50%) or more of the assets or earning power of Company and its
subsidiaries (taken as a whole and calculated on the basis of Company's most
recent regularly prepared financial statements) to any other person or persons
(but excluding sales of inventory in the ordinary course of business). The
determination as to which party to a merger or consolidation the "continuing" or
"surviving" corporation shall be made on the basis of the relative equity
interests of the shareholders in the corporation existing after the merger or
consolidation, as follows: if following any merger or reorganization, the
holders of outstanding voting securities of Company immediately prior to the
merger or consolidation beneficially own fifty percent (50%) or more of the
voting power of the entity existing following the merger or consolidation, then
for purposes of this Agreement, Company shall be the survivor or continuing
corporation. In making the determination of beneficial ownership by the
shareholders of a corporation immediately after the merger or consolidation, of
equity securities which the shareholders owned immediately before the merger or
consolidation, shares which they beneficially owned as shareholders of another
party to the transaction shall be disregarded.
"Acquiring Person" shall mean any individual, corporation,
partnership, limited liability company or other entity or group other than Haim
Saban or any other of the Saban Entitles, Employee or Company or any of its
wholly-owned subsidiaries.
"Beneficial Ownership" shall be determined pursuant to Rule 13d-3 of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as in effect on the date of this Agreement.
(b) If, in the event of a Change of Control of Company, any Acquiring
Person or other person or group proposing to acquire control of Company and/or
the business of Company (the "Proposed Acquiror") objects to any of the terms of
this Agreement, Employee agrees to negotiate in good faith with Company to amend
this Agreement in such manner as to make it acceptable to the Proposed Acquiror.
Haim Saban and Company shall in any event use their best efforts to cause the
Proposed Acquiror to accept the terms of this Agreement.
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13. ARBITRATION.
(a) The terms of this Paragraph 13 contain the sole and exclusive
method, means and procedure to resolve any and all claims, disputes or
disagreements arising under this Agreement, except those arising under the
provisions of Paragraph 8, above. The parties irrevocably waive any and all
rights to the contrary and shall at all times conduct themselves in accordance
with the terms of this Paragraph 13; any attempt to circumvent the terms of this
Paragraph 13 shall be null and void and of no force or effect.
(b) Within ten (10) days after delivery of written notice (the "Notice
of Dispute") of the existence and nature of any dispute given by any party to
the other party, and unless otherwise provided herein in any specific instance,
the parties shall each (i) appoint one (1) lawyer actively engaged in the
licensed and full time practice of law in the County of Los Angeles for a
continuous period immediately preceding the date of delivery (the "Dispute
Date") of the Notice of Dispute of not less than ten (10) years, but who has at
no time ever represented or acted on behalf of any of the parties, and (ii)
deliver written notice of the identity of such lawyer and a copy of his or her
written acceptance of such appointment and acknowledgment of and agreement to be
bound by the time constraints and other terms of this Paragraph 13 (the
"Acceptance") to the other party hereto. In the event that any party fails to
so act, that party's arbitrator shall be appointed pursuant to the same
procedure that is followed when agreement cannot be reached as to the third
arbitrator. Within ten (10) days after such appointment and notice, such
lawyers shall appoint a third lawyer (who, together with the first two (2)
lawyers, shall hereinafter be referred to collectively as the "Arbitration
Panel") of the same qualification and background as the first two (2) lawyers
(including the qualification that he or she has at no time ever represented or
acted on behalf of any of the parties) and shall deliver written notice of the
identity of such lawyers and a copy of his or her written Acceptance of such
appointment to each of the parties. If agreement cannot be reached on the
appointment of a third lawyer within such period, such appointment and
notification shall be made as rapidly as possible by any court of competent
jurisdiction, by any licensing authority, agency or organization having
jurisdiction over such lawyers, by any professional association of lawyers in
existence for not less than ten (10) years at the time of such dispute or
disagreement and the geographical membership boundaries of which extend to the
County of Los Angeles, or by any arbitration association or organization in
existence for not less than ten (10) years at the time of such dispute or
disagreement and the geographic boundaries of which extend to the County of Los
Angeles, as determined by the contrary giving such Notice of Dispute and
simultaneously confirmed in writing delivered by such party to the other party.
Any such
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<PAGE>
court, authority, agency, association or organization shall be entitled either
to directly select such third lawyer or to designate in writing delivered to
each of the parties an individual who shall do so. In the event of any
subsequent vacancies or inabilities to perform among the Arbitration Panel, the
lawyer or lawyers involved shall be replaced in accordance with the terms of
this Paragraph 13 as if such replacement was an initial appointment to be made
under this Paragraph 13 within the time constraints set forth in this Paragraph
13, measured from the date of notice of such vacancy or inability to the person
or persons required to make such appointment, with all attendant consequences of
failure to act timely if such appointment is not so made. Unless the parties
shall otherwise agree, all arbitration proceedings shall be conducted at such
location within Los Angeles County as the members of the Arbitration Panel shall
by majority vote from time to time designate.
(c) Consistent with the terms of this Paragraph 13, the members of the
Arbitration Panel shall utilize their utmost skill and shall apply themselves
diligently so as to hear and decide, by majority vote, the outcome and
resolution of any dispute or disagreement submitted to the Arbitration Panel as
promptly as possible, but in any event on or before the expiration of sixty (60)
days after the appointment of the members of the Arbitration Panel. None of the
members of the Arbitration Panel shall have any liability whatsoever for any
acts or omissions performed or omitted in good faith pursuant to the provisions
of this Article.
(d) The Arbitration Panel shall (i) enforce and interpret the rights
and obligations set forth in this Agreement to the extent not prohibited by law,
(ii) fix and establish any and all rules as it shall consider appropriate in its
sole and absolute discretion to govern the proceedings before it, including any
and all rules of discovery, procedure and/or evidence, provided however, that
such rules shall be consistent with such rules established by the American
Arbitration Association and (iii) make and issue any and all orders, final or
otherwise, and any all awards, as a court of competent jurisdiction sitting at
law or in equity could make and issue and as it shall consider appropriate in
its sole and absolute discretion, including the awarding of monetary damages
(but specifically excluding the awarding of consequential, punitive or exemplary
damages or the awarding of attorneys' fees and costs to either party) to the
prevailing party as determined by the Arbitration Panel in its sole and absolute
discretion, and the issuance of injunctive relief.
(e) The decision of the Arbitration Panel shall be final and binding,
and may be confirmed and entered by any court of competent jurisdiction at the
request of any party and may not be appealed to any court of competent
jurisdiction or otherwise,
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except upon a claim of fraud on the part of any member of the Arbitration Panel
(except as to the arbitrator chosen by the party claiming the fraud), or on the
basis of a manifest error as to the applicable Law. The Arbitration Panel shall
retain jurisdiction over any dispute until its award has been implemented, and
judgment on any such award may be entered in any court having appropriate
Jurisdiction and may be enforced against either party and its assets pursuant to
applicable laws and procedures.
(f) Each member of the Arbitration Panel (i) shall be compensated for
any and all services rendered under this Paragraph 13 at a rate of compensation
equal to the sum of Two Hundred Fifty Dollars ($250.00) per hour, which sum
shall be increased each year in accordance with annual increases in the Consumer
Price Index for Urban Wage Earners and Clerical workers, Los Angeles-Anaheim-
Riverside, California 1982-84 - 100 ("CPI"), and (ii) shall be reimbursed for
any and all expenses incurred in connection with the rendering of such services,
payable in full promptly upon conclusion of the proceedings before the
Arbitration Panel. Such compensation and reimbursement shall be borne by the
non-prevailing party as determined by the Arbitration Panel in its sole and
absolute discretion, unless the Arbitration Panel does not make a determination
that one of the parties is the prevailing party, in which case the parties shall
bear the cost as fixed by the Arbitration Panel.
14. INDEMNIFICATION. Concurrent with the execution and delivery of this
Agreement, Company and Employee have entered into an Indemnification Agreement,
pursuant to which, inter alia, Company has agreed, on the terms and conditions
----- ----
therein set forth, to indemnify Employee against certain claims arising by
reason of the fact that he is or was an officer or director of Company.
15. GENERAL.
(a) Assignment; Successors; Affiliates. Company may assign this
Agreement (or the interest of Company therein) to any affiliate of Company or to
any entity which is a party to a merger, reorganization, or consolidation with
Company or to a subsidiary of Company or to an entity or entities acquiring
substantially all of the assets of Company or of any division with respect to
which Employee is providing services (providing any such assignee assumes
Company's obligations under this Agreement). Employee shall, if requested by
Company, perform Employee's services and duties, as specified in this Agreement,
to or for the benefit of any subsidiary or other affiliate of Company. Upon
such assignment, acquisition, merger, consolidation, or reorganization, the term
"Company" as used herein shall be deemed to refer to such assignee or such
successor entity. Employee shall not have the right to assign Employee's
interest in this Agreement, any rights under this
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Agreement or any duties imposed under this Agreement nor shall Employee (or
Employee's spouse, heirs, beneficiaries, administrator's or executors) have the
right to pledge, hypothecate or otherwise encumber Employee's right to receive
compensation hereunder without the consent of Company.
(b) Headings. The subject headings of the paragraphs and
subparagraphs of this Agreement are included for purposes of convenience only,
and shall not affect the construction or interpretation of any of its
provisions.
(c) Severability. It is agreed that if any term, covenant, provision,
paragraph or condition of this Agreement shall be illegal, such illegality shall
not invalidate the whole Agreement but it shall be construed as if not
containing the illegal part, and the rights and obligations of the parties shall
be construed and enforced accordingly.
(d) Entire Agreement. The parties hereto agree that this Agreement
supersedes all existing agreements between Company and Employee, whether oral,
written, expressed or implied, and contains the entire understanding and
agreement between the parties. This Agreement shall not be amended, modified,
or supplemented in any respect except by a subsequent written agreement entered
into by both parties hereto.
(e) Choice of Law. This Agreement and the performance hereunder shall
be construed in accordance with and under and pursuant to the internal
substantive laws of the State of California applicable to agreements fully
executed and to be performed entirely in such state.
(f) Notices. All communications and notices hereunder shall be in
writing and shall be deemed to have been duly given and delivered personally if
sent by united States registered or certified mail, postage prepaid:
If to Company: Fox Kids Worldwide, Inc.
10960 Wilshire Boulevard
Los Angeles, California 90024
Attn: Haim Saban
With a copy to:
Matthew G. Krane, Esq.
Attorney
2051 Hercules Drive
Los Angeles, California 90046
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If to Employee:
Shuki Levy
c/o Saban Entertainment, Inc.
10960 Wilshire Boulevard
Los Angeles, CA 90024
or to such other addresses as my be designated in writing by either of the
parties.
(g) No Joint Venture. Nothing herein contained shall constitute a
partnership between or joint venture by the parties hereto or appoint any party
the agent of any other party. No party shall hold itself out contrary to the
terms of this paragraph and, except as otherwise specifically provided herein,
no party shall become liable for the representation, act or omission of any
other party. This Agreement is not for the benefit of any third party who is
not referred to herein and shall not be deemed to give any right or remedy to
any such third party.
(h) Contractual Nomenclature. All reference herein to "Dollars" or
"$" shall mean Dollars of the United States of America, its legal tender for all
debts public and private. Where used herein and to the extent appropriate, the
masculine, feminine or neuter gender shall include the other two genders, the
singular shall include the plural, and the plural shall include the singular.
(i) Time of Essence. Time is of the essence of each provision in this
Agreement in which time is an element.
(j) No Adverse Construction. The rule that a contract is to be
construed against the party drafting the contract is hereby waived, and shall
have no applicability in construing this Agreement or the terms of this
Agreement.
IN WITNESS WHEREOF, Company and Employee have executed this Agreement as of
the 1st day of September 1996.
FOX KIDS WORLDWIDE, INC.
By: /s/ Mel Woods
------------------------------
MEL WOODS
/s/ Shuki Levy
------------------------------
SHUKI LEVY
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STOCK OPTION AGREEMENT
----------------------
This STOCK OPTION AGREEMENT (this "Option Agreement") is made and entered
into as of the 1st day of June, 1994 by and between Saban Entertainment, Inc., a
Delaware corporation ("Company"), and Shuki Levy ("Consultant"):
R E C I T A L S
---------------
A. Consultant is currently engaged by Company as a consultant pursuant to
an oral consulting agreement, terminable at will by either party, with or
without cause; the parties intend to memorialize that agreement in the near
future. If and when the agreement is memorialized, terms used herein will be
defined consistent with the understanding of the parties as to their use and
meaning herein.
B. As used herein, "Term Year" means a period of twelve (12) consecutive
calendar months ending on May 31 of each year. The first Term Year shall
commence on the date of this Agreement. The "Term" shall be a period of five (5)
consecutive years, commencing with the date of this Agreement.
Company and Consultant agree as follows:
1. Subject to the terms and conditions hereof, including the vesting
requirements under Paragraph 2, below, Company hereby grants to Consultant the
option to purchase sixteen and three hundred twenty-seven one thousandths
(16.327) shares ("Option Shares") of Company common stock at a purchase price of
One Hundred Twenty-Two Thousand Four Hundred Ninety-Six Dollars and Forty-Eight
Cents ($122,496.48) per share.
2. The option shall vest and be exercisable by Consultant with respect to
one-fifth (1/5) of the Option Shares after the completion of the first Term
Year, provided Consultant is then and has continuously been engaged by Company.
The option shall vest and be exercisable by Consultant with respect to an
additional one-fifth (1/5) of the Option Shares after the completion of each
Term Year of the Term, provided Consultant is
<PAGE>
and has continuously been engaged by Company at the end of each such Term Year.
Notwithstanding the foregoing:
(A) if (I) Consultant dies during the Term or Consultant's
engagement is terminated by reason of disability, (II) Consultant was until
then continuously engaged by Company, and (III) the option has then vested
and become exercisable with respect to less than one-half (1/2) of the
Option Shares, then the option shall immediately vest and be exercisable by
Consultant with respect to an additional number of Option Shares equal to
one-half the Option Shares less the number of Option Shares which have
theretofore vested and become exercisable;
(B) if (I) Consultant's engagement is terminated during any Term
Year other than for cause, death or disability, (II) Consultant was until
then continuously engaged by Company, and (III) the option has then vested
and become exercisable with respect to less than one-half (1/2) of the
Option Shares, then the option shall immediately vest and be exercisable by
Consultant with respect to an additional number of Option Shares equal to
one-half the Option Shares less the number of Option Shares which have
theretofore vested and become exercisable; and
(C) if (I) Consultant's engagement is terminated during any Term
Year other than for cause, death or disability, (II) Consultant was until
then continuously engaged by Company, and (III) the option has then vested
and become exercisable with respect to at least one-half (1/2) of the
Option Shares, then the option shall, effective immediately prior to such
termination, vest and be exercisable by Consultant with respect to that
portion of the Option Shares which would have vested upon completion of the
Term Year in which Consultant's termination occurs, had such termination
not occurred.
3. Upon termination of Consultant's engagement with Company for any
reason, Consultant shall be entitled to exercise only the portion of the option
that has vested pursuant to Paragraph 2, above, as of the termination date.
Nothing in this Paragraph 3 shall, however, be construed to limit any of
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Consultant's rights or remedies in the event of Company's breach of this
Agreement.
4. During Consultant's lifetime, the option may be exercised only by
him and may not be transferred, assigned, pledged or hypothecated (whether by
operation of law or otherwise) other than by will or the applicable laws of
descent or distribution. If Consultant dies at a time when the option, or a
portion thereof, is exercisable by him, the portion of the option that is then
exercisable by him shall be exercisable by Consultant's executors, personal
representatives, legatees or distributees, as applicable.
5. The option granted hereunder shall be exercised by Consultant by
giving written notice to Company stating the number of Option Shares with
respect to which the option is being exercised and tendering payment therefor in
cash or by certified check. As a condition to the issuance of the Option Shares,
Consultant shall (A) execute such further documents and instruments and take
whatever acts are necessary in order for the issuance to be in compliance with
all applicable federal and state securities laws, (B) enter into a shareholders
agreement restricting the transferability of the Option Shares and providing for
such other matters as the parties may agree, the terms of which shareholders
agreement shall be negotiated in good faith, and (C) enter into a voting trust
agreement or such other arrangement as is reasonably satisfactory to Company
whereunder Haim Saban (or, in the event of Haim Saban's death, his successor) is
granted the power to vote the Option Shares. As soon as reasonably practicable
thereafter, a certificate representing the Option Shares with respect to which
the option is exercised shall be delivered to Consultant. Such certificate may
contain a legend thereon reflecting the restrictions set forth in subparagraphs
(A), (B) and (C), above, and Paragraphs 9 and 10, below.
6. Consultant shall have none of the rights or privileges of a
shareholder of Company in respect of any of the Option Shares, unless and until
the purchase price for such Option Shares shall have been paid in full.
7. The number of Option Shares shall be appropriately adjusted for
any increase or decrease in the number
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<PAGE>
of shares of issued and outstanding common stock of Company resulting from a
subdivision or consolidation of shares, whether through reorganization,
recapitalization, stock split-up, stock distribution or combination of shares,
or payment of a share dividend or other increase or decrease in the number of
such shares outstanding effected without receipt of consideration by Company. In
the event of any such adjustment, the purchase price per share for the Option
Shares as so adjusted shall be adjusted by dividing Two Million Dollars
($2,000,000) by the number of Option Shares as so adjusted. Upon a merger or
consolidation of Company in which Company is not the surviving corporation or an
exchange of all of the outstanding shares of common stock of Company or all or a
substantial portion of the assets of Company for shares of another corporation
or equity interests in a partnership, limited partnership, limited liability
company or other entity (any such corporation and any such entity is referred to
in this Paragraph 7 as a "corporation"), the successor or exchanging corporation
shall assume all obligations under this Agreement and such option shall be
converted into an option for a number of shares or other equity interests of the
successor or exchanging corporation (or cash, property or such other
consideration) that Consultant would have received if Consultant had owned the
Option Shares on the effective date of such transaction, and the purchase price
per share of the stock or other equity interests of the successor or exchanging
corporation under such converted option shall be equal to Two Million Dollars
($2,000,000) divided by the number of shares of the stock or other equity
interests of such successor or exchanging corporation to which the converted
option applies (if, following such merger, consolidation or exchange, Consultant
would receive non-share (or other equity interest) consideration upon exercise
of the option, the purchase price to be paid upon exercise of the option shall
be equal to Two Million Dollars ($2,000,000) multiplied by a fraction equal to
that portion of the option then being exercised). Upon the dissolution or
liquidation of Company other than following an asset transfer subject to this
Paragraph 7, the option granted hereunder shall expire as of the effective date
of such transaction, provided, however, that Company shall give at least sixty
(60) days prior written notice of such event to Consultant during which time he
shall have a right to exercise his unexercised vested option.
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8. Upon the exercise of the option hereunder, Company shall have
the right to require Consultant to remit to Company, prior to the issuance of
any Option Shares, an amount sufficient to satisfy all federal, state and local
withholding tax requirements. As soon as reasonably practicable following the
"initial public offering" (as that term is defined in Paragraph 5(f)(xii)
hereof), Company shall prepare, or cause to be prepared, and file with the
Securities and Exchange Commission (the "Commission") a registration statement
on Form S-8 under the Securities Act of 1933, as amended (the "Act"), (or such
successor form of registration statement as shall then have been adopted by the
Commission) covering the offer and sale by Company of the Option Shares
underlying the then unexercised portion of the option granted to Employee
hereunder, and, to the extent permitted under such form, any Option Shares
issued upon exercise of such option prior to the initial public offering; and
Company shall use its best efforts during the term of the option to maintain
such registration statement in effect, and to comply with the rules and
regulations of the Commission applicable to securities covered by such
registration statement, so that the issuance of any Option Shares upon exercise
of the option shall be registered under the Act.
9. After Consultant's engagement with Company is terminated for any
reason, Company shall purchase from Consultant and Consultant shall sell to
Company any and all Option Shares owned by Consultant and the option granted to
Consultant hereunder for an amount (the "Termination Purchase Price") equal to
(A) the fair market value of the Option Shares owned by Consultant plus the fair
market value of the Option Shares with respect to which Consultant's option has
vested but has not been exercised, less (B) Consultant's purchase price,
determined under Paragraph 1, above, for the Option Shares with respect to which
Consultant's option has vested but has not been exercised. The fair market
value of the Option Shares for purposes of the Termination Purchase Price shall
be determined by mutual agreement of the parties as of the date of Consultant's
termination of his engagement ("Termination Date"). In the event the parties
are unable to reach agreement within thirty (30) days of the Termination Date,
the fair market value of the Option Shares shall be determined by the following
appraisal procedure: Each party shall appoint an appraiser by giving notice
of such appointment to the other party within forty-five (45) days
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from the Termination Date. Such appraiser shall be a certified public accountant
practicing in the entertainment, licensing and television industries or such
other person with experience in valuing companies in the entertainment,
licensing and television businesses. If either party fails to appoint an
appraiser within said time period, the other party's appointed appraiser shall
be the sole appraiser. If both parties have so appointed appraisers, then within
thirty (30) days from the appointment of both parties' appraisers, the
appraisers so appointed shall appoint a third appraiser, with the same
qualifications. The third appraiser (or the sole appraiser if either party fails
to appoint an appraiser within the required time period) shall then determine
the fair market value of the Option Shares within sixty (60) days after the
appointment of the third appraiser (or within sixty (60) days after the failure
by either party to appoint an appraiser within the required time period). The
third appraiser, or such sole appraiser, as applicable, is referred to
hereinbelow as the "Selected Appraiser." The determination of the Selected
Appraiser shall be binding on the parties hereto. The costs and fees of the
Selected Appraiser shall be borne equally by the parties hereto. Company shall
give the Selected Appraiser reasonable access to its books and records to enable
him or her to undertake his or her appraisal. Within ten (10) days after the
parties' agreement on the fair market value of the Option Shares, or, failing
such agreement, the notification by the Selected Appraiser of his or her
appraisal, Company shall pay to Consultant ten percent (10%) of the Termination
Purchase Price (the "Down Payment") and shall deliver to Consultant a promissory
note (the "Note") for payment of the remainder of the Termination Purchase Price
in nine (9) equal annual installments. The Note shall provide for the annual
payment of interest on the outstanding balance of the remainder of the
Termination Purchase Price at the rate per annum equal to the "prime" or
"reference" rate charged by Company's principal bank (currently Imperial Bank),
as determined from time to time. Concurrently with the payment of the Down
Payment and delivery of the Note, Consultant shall execute and deliver to
Company an assignment of the option in form reasonably satisfactory to Company
and an assignment separate from certificate for the Option Shares, in each case
free and clear of any and all liens, claims, encumbrances and restrictions of
any type, kind or nature.
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10. Except as provided below, in the event Haim Saban, any member of
his immediate family or any of his affiliated entities (collectively with Haim
Saban and such family members, "Saban Entities") sells to a third party in a
bona fide sale any of his or its shares of the common stock of Company ("Saban
Shares"), the parties agree as follows:
(a) Company shall purchase from Consultant and Consultant shall
sell to Company the "Applicable Percentage," as defined below, of the Option
Shares owned by Consultant for a per-share consideration equal to the per-share
consideration paid by the third party for the Saban Shares. If the consideration
paid by the third party for the Saban Shares includes non-cash consideration
and/or deferred consideration, the consideration paid by Company to Consultant
for the Option Shares sold by Consultant to Company under this subparagraph (a)
shall consist of similar non-cash and/or deferred consideration in the same
ratio as the non-cash and/or deferred consideration paid by the third party for
the Saban Shares bears to the total consideration paid by the third party for
the Saban Shares. The "Applicable Percentage" shall equal the percentage that
the Saban Shares sold to the third party represents of the total shares of
Company owned by the Saban Entities immediately prior to the sale. The purchase
and sale of the Option Shares under this subparagraph (a) shall close no later
than ten (10) days after the closing of the sale of the Saban Shares to the
third party. Concurrently with the purchase and sale of the Option Shares under
this subparagraph (a), Consultant shall execute and deliver to Company an
assignment separate from certificate for the Option Shares, free and clear of
any and all liens, claims, encumbrances and restrictions of any type, kind or
nature.
a. Company shall pay to Consultant an amount equal to the
Applicable Percentage (as defined in subparagraph (a) above) of (x) the per-
share consideration paid by the third party for the Saban Shares multiplied by
the number of Option Shares with respect to which Consultant's option has vested
but has not been exercised, less (y) Consultant's purchase price, determined
under Paragraph 1, above, for such Option Shares. If the consideration paid by
the third party for the Saban Shares includes non-cash consideration and/or
deferred consideration, the payment by Company to Consultant under this
subparagraph (b) shall consist of similar non-cash and/or deferred consideration
in the same ratio as the
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<PAGE>
non-cash and/or deferred consideration paid by the third party for the Saban
Shares bears to the total consideration paid by the third party for the Saban
Shares. The payment under this subparagraph (b) shall be made no later than ten
(10) days after the closing of the sale of the Saban Shares to the third party.
b. The number of Option Shares Consultant shall have the option to
purchase pursuant to this Agreement shall immediately be reduced by a number of
shares of Company equal to the Applicable Percentage (as defined in subparagraph
(a), above) of the Option Shares with respect to which Consultant's option has
vested but has not been exercised. Such reduction shall reduce only the Option
Shares with respect to which Consultant's option has vested but has not been
exercised and shall not reduce any Option Shares with respect to which
Consultant's option has not then vested.
d. If in connection with any sale of Saban Shares subject to this
Paragraph 10, Haim Saban is required to enter into an agreement which includes
provisions restricting his ability to compete, directly or indirectly
(including, without limitation, through an ownership or licensing arrangement
with a competitor or potential competitor of Company), with Company
("noncompetition provisions"), and if the purchaser of the Saban Shares so
requires, Consultant shall, in connection with the sale of the Option Shares and
payment for vested options under this Paragraph 10, execute and deliver to
Company and such purchaser an agreement, in form and substance reasonably
acceptable to the purchaser, which agreement shall contain noncompetition
provisions, the scope, duration, terms and provisions of which are substantially
identical to the noncompetition provisions contained in Haim Saban's agreement;
provided, that no separate payment will be required to be made to Consultant on
account of such agreement.
This Paragraph 10 shall not apply to (i) any sale by a Saban Entity pursuant to
an "initial public offering" (as defined in Paragraph 12) of the common stock of
the Company or (ii) any transaction subject to Paragraph 7, above.
11. The obligations of Company to make any payment or payments to
Consultant with respect to the purchase of Option Shares by Company (including
any payments under the Note)
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are subject to the satisfaction by Company of any applicable statutory
provisions restricting Company's ability to make such payments, including,
without limitation, Section 160 of the Delaware General Corporation Law and
Chapter 5 of the California General Corporation Law, and if and to the extent
that under those provisions, any such payment would expose the directors of
Company to any liability, or would be unlawful, Company shall deliver to
Consultant, in lieu of such payment, a promissory note with terms identical to
the Note, which note shall be due and payable at the earliest practicable date
thereafter when such payment would not be violative of such statutory
provisions.
12. Notwithstanding any provision of this Paragraph Agreement to the
contrary, following the earlier to occur of (I) the first closing of an offer
and sale of shares of the common stock of Company (whether such shares are sold
by Company, existing stockholders or both) for cash pursuant to a firmly
underwritten public offering effected pursuant to a registration statement filed
by Company with the Securities and Exchange Commission under the Securities Act
of 1933, as amended (or such successor legislation as shall then be in effect)
or (II) the date upon which the shares of common stock of Company are first
authorized for quotation on the Nasdaq National Market, or listed on the New
York Stock Exchange or American Stock Exchange (either event, an "initial public
offering"):
(A) the provisions of Paragraphs 9 and 10 shall terminate and be of no
further force or effect;
(B) the provisions of any voting trust agreement entered into pursuant
to Paragraph 5(C) shall not prevent or restrict Consultant's right to sell and
transfer any of the Option Shares free and clear of the obligations therein set
forth;
(C) the option shall terminate and expire, to the extent not
theretofore exercised, (x) if Consultant's engagement with Company is terminated
for any reason other than for "cause", on the first anniversary of such
termination, and (y) if Consultant's engagement with Company is terminated for
"cause", on
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<PAGE>
the thirtieth (30th) day following the date of such termination; and
(D) after Consultant's engagement with Company is terminated for any
reason, Company shall have the right and option, exercisable at any time prior
to the date of expiration of the option by delivery of written notice of such
exercise to Consultant, to purchase from Consultant, and if such option is
exercised, Consultant shall sell to Company, any and all Option Shares owned by
Consultant on the date of receipt of the notice of exercise (or acquired
thereafter upon exercise of the option and prior to the closing of such
purchase) and the option granted to Consultant hereunder for an amount equal to
the "Termination Purchase Price," as defined in and determined pursuant to the
procedures provided in Paragraph 9, above; and within ten (10) days after the
parties' agreement on the fair market value of the Option Shares, or, failing
such agreement, the notification by the Selected Appraiser of his or her
appraisal, Company shall pay the Termination Purchase Price to Consultant,
against delivery by Consultant to Company of an assignment of the option in form
reasonably satisfactory to Company and an assignment separate from certificate
for the Option Shares, in each case free and clear of any and all liens, claims,
encumbrances and restrictions of any type, kind or nature.
13. ARBITRATION.
(a) The terms of this Paragraph 13 contain the sole and exclusive
method, means and procedure to resolve any and all claims, disputes or
disagreements arising under this Agreement, except those arising under the
provisions of Paragraph 9, above. The parties irrevocably waive any and all
rights to the contrary and shall at all times conduct themselves in accordance
with the terms of this Paragraph 13; any attempt to circumvent the terms of this
Paragraph 13 shall be null and void and of no force or effect.
(b) Within ten (10) days after delivery of written notice (the "Notice
of Dispute") of the existence and nature of any dispute given by any party to
the other party, and unless otherwise provided herein in any specific instance,
the parties shall each
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(i) appoint one (1) lawyer actively engaged in the licensed and full time
practice of law in the County of Los Angeles for a continuous period immediately
preceding the date of delivery (the "Dispute Date") of the Notice of Dispute of
not less than ten (10) years, but who has at no time ever represented or acted
on behalf of any of the parties, and (ii) deliver written notice of the identity
of such lawyer and a copy of his or her written acceptance of such appointment
and acknowledgment of and agreement to be bound by the time constraints and
other terms of this Paragraph 13 (the "Acceptance") to the other party hereto.
In the event that any party fails to so act, that party's arbitrator shall be
appointed pursuant to the same procedure that is followed when agreement cannot
be reached as to the third arbitrator. Within ten (10) days after such
appointment and notice, such lawyers shall appoint a third lawyer (who, together
with the first two (2) lawyers, shall hereinafter be referred to collectively as
the "Arbitration Panel") of the same qualification and background as the first
two (2) lawyers (including the qualification that he or she has at no time ever
represented or acted on behalf of any of the parties) and shall deliver written
notice of the identity of such lawyers and a copy of his or her written
Acceptance of such appointment to each of the parties. If agreement cannot be
reached on the appointment of a third lawyer within such period, such
appointment and notification shall be made as rapidly as possible by any court
of competent jurisdiction, by any licensing authority, agency or organization
having jurisdiction over such lawyers, by any professional association of
lawyers in existence for not less than ten (10) years at the time of such
dispute or disagreement and the geographical membership boundaries of which
extend to the County of Los Angeles, or by any arbitration association or
organization in existence for not less than ten (10) years at the time of such
dispute or disagreement and the geographic boundaries of which extend to the
County of Los Angeles, as determined by the party giving such Notice of Dispute
and simultaneously confirmed in writing delivered by such party to the other
party. Any such court, authority, agency, association or organization shall be
entitled either to directly select such third lawyer or to designate in writing
delivered to each of the parties an individual who shall do so. In the event of
any subsequent vacancies or inabilities to perform among the Arbitration Panel,
the lawyer or
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<PAGE>
lawyers involved shall be replaced in accordance with the terms of this
Paragraph 13 as if such replacement was an initial appointment to be made under
this Paragraph 13 within the time constraints set forth in this Paragraph 13,
measured from the date of notice of such vacancy or inability to the person or
persons required to make such appointment, with all attendant consequences of
failure to act timely if such appointment is not so made. Unless the parties
shall otherwise agree, all arbitration proceedings shall be conducted at such
location within Los Angeles County as the members of the Arbitration Panel shall
by majority vote from time to time designate.
(c) Consistent with the terms of this Paragraph 13, the members of the
Arbitration Panel shall utilize their utmost skill and shall apply themselves
diligently so as to hear and decide, by majority vote, the outcome and
resolution of any dispute or disagreement submitted to the Arbitration Panel as
promptly as possible, but in any event on or before the expiration of sixty (60)
days after the appointment of the members of the Arbitration Panel. None of the
members of the Arbitration Panel shall have any liability whatsoever for any
acts or omissions performed or omitted in good faith pursuant to the provisions
of this Article.
(d) The Arbitration Panel shall (i) enforce and interpret the rights and
obligations set forth in this Agreement to the extent not prohibited by law,
(ii) fix and establish any and all rules as it shall consider appropriate in its
sole and absolute discretion to govern the proceedings before it, including any
and all rules of discovery, procedure and/or evidence, provided however, that
such rules shall be consistent with such rules established by the American
Arbitration Association and (iii) make and issue any and all orders, final or
otherwise, and any all awards, as a court of competent jurisdiction sitting at
law or in equity could make and issue and as it shall consider appropriate in
its sole and absolute discretion, including the awarding of monetary damages
(but specifically excluding the awarding of consequential, punitive or exemplary
damages or the awarding of attorneys' fees and costs to either party) to the
prevailing party as determined by the Arbitration Panel in its sole and absolute
discretion, and the issuance of injunctive relief.
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(e) The decision of the Arbitration Panel shall be final and binding, and
may be confirmed and entered by any court of competent jurisdiction at the
request of any party and may not be appealed to any court of competent
jurisdiction or otherwise, except upon a claim of fraud on the part of any
member of the Arbitration Panel (except as to the arbitrator chosen by the party
claiming the fraud), or on the basis of a manifest error as to the applicable
law. The Arbitration Panel shall retain jurisdiction over any dispute until its
award has been implemented, and judgment on any such award may be entered in any
court having appropriate jurisdiction and may be enforced against either party
and its assets pursuant to applicable laws and procedures.
(f) Each member of the Arbitration Panel (i) shall be compensated for any
and all services rendered under this Paragraph 13 at a rate of compensation
equal to the sum of Two Hundred Fifty Dollars ($250.00) per hour, which sum
shall be increased each year in accordance with annual increases in the Consumer
Price Index for Urban Wage Earners and Clerical Workers, Los Angeles-Anaheim-
Riverside, California 1982-84 = 100 ("CPI"), and (ii) shall be reimbursed for
any and all expenses incurred in connection with the rendering of such services,
payable in full promptly upon conclusion of the proceedings before the
Arbitration Panel. Such compensation and reimbursement shall be borne by the
non-prevailing party as determined by the Arbitration Panel in its sole and
absolute discretion, unless the Arbitration Panel does not make a determination
that one of the parties is the prevailing party, in which case the parties shall
bear the cost as fixed by the Arbitration Panel.
14. GENERAL.
A. Assignment; Successors; Affiliates. Company may assign this
Agreement (or the interest of Company therein) to any affiliate of Company or to
any entity which is a party to a merger, reorganization, or consolidation with
Company or to a subsidiary of Company or to an entity or entities acquiring
substantially all of the assets of Company or of any division with respect to
which Consultant is providing services (providing any such assignee
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<PAGE>
assumes Company's obligations under this Agreement). Consultant shall, if
requested by Company, perform Consultant's services and duties, as specified in
this Agreement, to or for the benefit of any subsidiary or other affiliate of
Company. Upon such assignment, acquisition, merger, consolidation, or
reorganization, the term "Company" as used herein shall be deemed to refer to
such assignee or such successor entity. Consultant shall not have the right to
assign Consultant's interest in this Agreement, any rights under this Agreement
or any duties imposed under this Agreement nor shall Consultant (or Consultant's
spouse, heirs, beneficiaries, administrator's or executors) have the right to
pledge, hypothecate or otherwise encumber Consultant's right to receive
compensation hereunder without the consent of Company.
B. Headings. The subject headings of the paragraphs and
subparagraphs of this Agreement are included for purposes of convenience only,
and shall not affect the construction or interpretation of any of its
provisions.
C. Severability. It is agreed that if any term, covenant, provision,
paragraph or condition of this Agreement shall be illegal, such illegality shall
not invalidate the whole Agreement but it shall be construed as if not
containing the illegal part, and the rights and obligations of the parties shall
be construed and enforced accordingly.
D. Entire Agreement. The parties hereto agree that this Agreement
supersedes all existing agreements between Company and Consultant, whether oral,
written, expressed or implied, and contains the entire understanding and
agreement between the parties. This Agreement shall not be amended, modified, or
supplemented in any respect except by a subsequent written agreement entered
into by both parties hereto.
E. Choice of Law. This Agreement and the performance hereunder shall
be construed in accordance with and under and pursuant to the internal
substantive laws of the State of California applicable to agreements fully
executed and to be performed entirely in such state.
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F. Notices. All communications and notices hereunder shall be in
writing and shall be deemed to have been duly given and delivered personally if
sent by united States registered or certified mail, postage prepaid:
If to Company: Saban Entertainment, Inc.
4000 West Alameda Avenue
Burbank, California 91505
Attn: Haim Saban
With a copy to:
Matthew G. Krane, Esq.
Attorney
2051 Hercules Drive
Los Angeles, California 90046
If to Consultant:
Shuki Levy
------------------------
------------------------
or to such other addresses as my be designated in writing by either of the
parties.
G. No Joint Venture. Nothing herein contained shall constitute a
partnership between or joint venture by the parties hereto or appoint any party
the agent of any other party. No party shall hold itself out contrary to the
terms of this paragraph and, except as otherwise specifically provided herein,
no party shall become liable for the representation, act or omission of any
other party. This Agreement is not for the benefit of any third party who is not
referred to herein and shall not be deemed to give any right or remedy to any
such third party.
H. Contractual Nomenclature. All reference herein to "Dollars" or
"$" shall mean Dollars of the United States of America, its legal tender for all
debts public and private. Where
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<PAGE>
used herein and to the extent appropriate, the masculine, feminine or neuter
gender shall include the other two genders, the singular shall include the
plural, and the plural shall include the singular.
(i) Time of Essence. Time is of the essence of each provision in
this Agreement in which time is an element.
(j) No Adverse Construction. The rule that a contract is to be
construed against the party drafting the contract is hereby waived, and shall
have no applicability in construing this Agreement or the terms of this
Agreement.
* * *
IN WITNESS WHEREOF, Company and Consultant have executed this Agreement as
of the 1st day of June 1994.
SABAN ENTERTAINMENT, INC.
By /s/ Haim Saban
----------------------------
/s/ Shuki Levy
----------------------------
SHUKI LEVY
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<PAGE>
AMENDMENT NO. 1
TO
STOCK OPTION AGREEMENT
This Amendment No. 1 to Stock Option Agreement (the "Amendment") is made
and entered into as of September 26, 1996, by and between Saban Entertainment,
Inc., a Delaware corporation ("SEI") and Shuki Levy ("Levy").
R E C I T A L S
----------------
A. Levy and SEI are parties to that certain Stock Option Agreement,
dated as of June 1, 1994 (the "Agreement"). All terms defined in the Agreement
which are not defined in this Amendment shall have the same meanings when used
in this Amendment.
B. The parties hereto desire to amend the Agreement from and after
the effective date of the initial public offering (the "Initial Public
Offering") of Fox Kids Worldwide, Inc., a Delaware corporation ("Fox Kids
Worldwide").
A G R E E M E N T
-----------------
NOW, THEREFORE, in consideration of the foregoing facts, the parties hereto
agree that from and after the effective date of the Initial Public Offering, the
following sections are amended as follows:
1. Expiration of Stock Option. From and after the effective date of the
--------------------------
Initial Public Offering, Paragraph 1. of the Agreement is amended by adding the
following sentence at the end of such Paragraph.
"As long as the option is not earlier exercised or terminated in
accordance with the terms of this Agreement, the option shall expire on June 1,
2004."
2. Termination of Option. From and after the effective date of the
---------------------
Initial Public Offering, Paragraph 12(D) of the Agreement shall terminate and be
of no further force or effect.
3. Effect of Amendment. Except as expressly modified herein, all terms
-------------------
of the Agreement remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the day
and year first above written.
SABAN ENTERTAINMENT, INC.
By: /s/ Mel Woods
_________________________
Its: President
________________________
SHUKI LEVY
/s/ Shuki Levy
_________________________
<PAGE>
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is entered into as of the 1st day of June, 1994
by and between Saban Entertainment, Inc., a Delaware corporation ("Company") and
Mel Woods ("Employee"):
1. ENGAGEMENT. Company hereby engages Employee to render services as
President and Chief Operating Officer of Company pursuant to the terms and
conditions hereof, and Employee hereby accepts such engagement. Employee shall
report solely to Haim Saban, the Chairman and Chief Executive Officer of
Company, subject to the overall direction and supervision of Company's Board of
Directors; provided that from and after a "Change of Control," as defined in
Section 12, below, Employee agrees that he may be required to report to some
other person. If Employee is elected to the Board of Directors of Company,
Employee agrees to accept such appointment.
2. NATURE AND PLACE OF SERVICES. Employee shall render all services
usually and customarily rendered by and required of executives similarly
employed in the entertainment industry and such other services as may be
reasonably required by Company. The location of Employee's office shall be at
Company's principal Southern California executive offices, which will be located
at such place or places in Los Angeles County as the Board of Directors of
Company shall from time to time designate; and the duties of Employee shall be
performed at such offices, except for such travel as may from time to time be
required.
3. EXCLUSIVITY. Employee shall work full-time for Company and its
affiliates during the Term hereof. Without limiting the foregoing, Employee's
services shall be rendered exclusively to Company and its affiliates hereunder
during the Term of this Agreement, and Employee shall not render services of any
nature to or for any other person, firm or corporation during the Term of this
Agreement without the prior written consent of Company. For so long as Employee
is employed pursuant to the terms hereof, Employee shall not become financially
interested in or associated with, directly or indirectly, any other person or
entity engaged in the production, distribution or exhibition of motion pictures,
television programs, phonograph recordings, or any visual or audio recordings of
any kind, or in the broadcasting or music publishing businesses, anywhere in the
world; provided, that Employee may invest in the capital stock or other
securities of any corporation whose stock or other securities are publicly owned
or are regularly traded on any securities exchange or in the over-the-counter
market, so long as Employee's ownership of such securities does not
<PAGE>
exceed 5% of the issued and outstanding securities of such entity and Employee's
holdings in any one such entity does not in the aggregate cost Employee more
than $100,000.
4. TERM. The term of this Agreement ("Term") shall commence on June 1,
1994 and, subject to termination as hereinafter provided, expire with the close
of business on May 31, 1999. Each consecutive year of the Term beginning on June
1 and ending on the following May 31 shall be referred to as a "Term Year."
5. COMPENSATION.
(a) Fixed Salary. As consideration for the services to be rendered by
Employee pursuant hereto, and upon condition that Employee is substantially
performing all of the services required hereunder, that Employee is not in
material default, and that grounds do not then exist under this Agreement for
the termination of Employee hereunder, Company will pay or will cause to be paid
to Employee, subject to all applicable laws and requirements respecting
withholding of federal, state, and/or local taxes, a fixed annual salary,
payable in equal installments, no less frequently than semi-monthly, in the
following amounts:
FOR THE FIRST TERM YEAR: Four Hundred Twenty-Six Thousand Dollars
($426,000).
FOR THE SECOND TERM YEAR: Four Hundred Twenty-Six Thousand Dollars
($426,000).
FOR THE THIRD TERM YEAR: Four Hundred Fifty Thousand Dollars ($450,000).
FOR THE FOURTH TERM YEAR: Four Hundred Seventy-Five Thousand Dollars
($475,000).
FOR THE FIFTH TERM YEAR: Five Hundred Thousand Dollars ($500,000).
(b) Contingent Bonus. Provided Employee is not in material default
hereof, and that grounds do not then exist under this Agreement for the
termination of Employee hereunder, Company will pay or will cause to be paid to
Employee, subject to all applicable laws and requirements respecting withholding
of federal, state, and/or local taxes, the "Contingent Bonus," as hereinafter
defined, for each Term Year. The Contingent Bonus for any Term Year shall be an
amount equal to the lesser of one percent (1%) of the "Consolidated Pre-Tax
------
Income" of Company, as defined in Paragraph 5(c), below, for such Term Year, or
the "Maximum Bonus Amount," as defined in Paragraph 5(d), below, for such Term
Year.
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(c) Consolidated Pre-Tax Income. "Consolidated Pre-Tax Income" for
any Term Year shall be the "Consolidated Pre-Tax Income" of Company, as such
term is defined in Section 4 of that certain Employment Agreement dated as of
July 1, 1994 by and between Company and Haim Saban; and, as is provided therein,
no portion of any Annual Bonus Amount payable or paid to Haim Saban shall be
treated as an expense in computing "Consolidated Pre-Tax Income" for any period.
(d) Maximum Bonus Amount. The "Maximum Bonus Amount" for any Term
Year shall be as follows:
FOR THE FIRST TERM YEAR: Five Hundred Seventy-Four Thousand Dollars
($574,000).
FOR THE SECOND TERM YEAR: Six Hundred Twenty-Four Thousand Dollars
($624,000).
FOR THE THIRD TERM YEAR: Six Hundred Fifty Thousand Dollars ($650,000).
FOR THE FOURTH TERM YEAR: Six Hundred Seventy-Five Thousand Dollars
($675,000).
FOR THE FIFTH TERM YEAR: Seven Hundred Thousand Dollars ($700,000).
(e) Payment of Contingent Bonus. The Contingent Bonus, if any, for
any Term Year shall be payable to Employee within thirty (30) days after the
issuance by Company's auditors of Company's audited consolidated financial
statements for Company's fiscal year which is concurrent with such Term Year;
provided that, if such statements are not issued within nine (9) months after
the close of such fiscal year, Company will pay or will cause to be paid to
Employee, subject to all applicable laws and requirements respecting withholding
of federal, state, and/or local taxes, an amount equal to eighty-five percent
(85%) of the amount that would constitute the Contingent Bonus for such Term
Year if the Contingent Bonus were computed based on the lesser of the Maximum
Bonus Amount or Company's then most recently prepared unaudited consolidated
income statements for such fiscal year. Such amount shall constitute an advance
against the Contingent Bonus for such Term Year and in the event such amount is
in excess of the Contingent Bonus for such Term Year, Employee shall, within
three (3) business days after issuance of the audited consolidated financial
statements for such fiscal year, pay to Company an amount equal to such excess.
(f) Stock Options.
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(i) Subject to the terms and conditions hereof, including the
vesting requirements under Paragraph 5(f)(ii), below, Company hereby grants to
Employee the option to purchase sixteen and three hundred twenty-seven one
thousandths (16.327) shares ("Option Shares") of Company common stock at a
purchase price of One Hundred Twenty-Two Thousand Four Hundred Ninety-Six
Dollars and Forty-Eight Cents ($122,496.48) per share.
(ii) The option shall vest and be exercisable by Employee with
respect to one-fifth (1/5) of the Option Shares after the completion of the
first Term Year provided Employee is then and has continuously been employed by
Company. The option shall vest and be exercisable by Employee with respect to an
additional one-fifth (1/5) of the Option Shares after the completion of each
Term Year of the Term, provided Employee is and has continuously been employed
by Company at the end of each such Term Year. Notwithstanding the foregoing:
(A) if (I) Employee dies during the Term or Employee's
employment is terminated by reason of disability as set forth in Paragraph
10(a) hereof, (II) Employee was until then continuously employed by
Company, and (III) the option has then vested and become exercisable with
respect to less than one-half (1/2) of the Option Shares, then the option
shall immediately vest and be exercisable by Employee with respect to an
additional number of Option Shares equal to one-half the Option Shares less
the number of Option Shares which have theretofore vested and become
exercisable;
(B) if (I) Employee's employment is terminated during
any Term Year pursuant to Paragraph 10(d) hereof (a termination other than
for cause), (II) Employee was until then continuously employed by Company,
and (III) the option has then vested and become exercisable with respect to
less than one-half (1/2) of the Option Shares, then the option shall
immediately vest and be exercisable by Employee with respect to an
additional number of Option Shares equal to one-half the Option Shares less
the number of Option Shares which have theretofore vested and become
exercisable; and
(C) if (I) Employee's employment is terminated during
any Term Year pursuant to Paragraph 10(d) hereof, (II) Employee was until
then continuously employed by Company, and (III) the option has then vested
and become exercisable with respect to at least one-half (1/2) of the
Option Shares, then the option shall,effective immediately prior to such
termination, vest and be exercisable by Employee with respect to that
portion of the Option Shares which would have vested upon completion of the
Term Year in which
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Employee's termination occurs, had such termination not occurred.
(iii) Upon termination of Employee's employment with Company
for any reason, Employee shall be entitled to exercise only the portion of the
option that has vested pursuant to Paragraph 5(f)(ii), above, as of the
termination date. Nothing in this Paragraph 5(f)(iii) shall, however, be
construed to limit any of Employee's rights or remedies in the event of
Company's breach of this Agreement.
(iv) During Employee's lifetime, the option may be exercised
only by him and may not be transferred, assigned, pledged or hypothecated
(whether by operation of law or otherwise) other than by will or the applicable
laws of descent or distribution. If Employee dies at a time when the option, or
a portion thereof, is exercisable by him, the portion of the option that is then
exercisable by him shall be exercisable by Employee's executors, personal
representatives, legatees or distributees, as applicable.
(v) The option granted hereunder shall be exercised by
Employee by giving written notice to Company stating the number of Option Shares
with respect to which the option is being exercised and tendering payment
therefor in cash or by certified check. As a condition to the issuance of the
Option Shares, Employee shall (A) execute such further documents and instruments
and take whatever acts are necessary in order for the issuance to be in
compliance with all applicable federal and state securities laws, (B) enter into
a shareholders agreement restricting the transferability of the Option Shares
and providing for such other matters as the parties may agree, the terms of
which shareholders agreement shall be negotiated in good faith, and (C) enter
into a voting trust agreement or such other arrangement as is reasonably
satisfactory to Company whereunder Haim Saban (or, in the event of Haim Saban's
death, his successor) is granted the power to vote the Option Shares. As soon as
reasonably practicable thereafter, a certificate representing the Option Shares
with respect to which the option is exercised shall be delivered to Employee.
Such certificate may contain a legend thereon reflecting the restrictions set
forth in subparagraphs (A), (B) and (C), above, and Paragraphs 5(f)(ix) and
5(f)(x), below.
(vi) Employee shall have none of the rights or privileges of a
shareholder of Company in respect of any of the Option Shares, unless and until
the purchase price for such Option Shares shall have been paid in full.
(vii) The number of Option Shares shall be appropriately
adjusted for any increase or decrease in the number of shares of issued and
outstanding common stock of Company
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resulting from a subdivision or consolidation of shares, whether through
reorganization, recapitalization, stock split-up, stock distribution or
combination of shares, or payment of a share dividend or other increase or
decrease in the number of such shares outstanding effected without receipt of
consideration by Company. In the event of any such adjustment, the purchase
price per share for the Option Shares as so adjusted shall be adjusted by
dividing Two Million Dollars ($2,000,000) by the number of Option Shares as so
adjusted. Upon a merger or consolidation of Company in which Company is not the
surviving corporation or an exchange of all of the outstanding shares of common
stock of Company or all or a substantial portion of the assets of Company for
shares of another corporation or equity interests in a partnership, limited
partnership, limited liability company or other entity (any such corporation and
any such entity is referred to in this subparagraph (vii) as a "corporation"),
the successor or exchanging corporation shall assume all obligations under this
Agreement and such option shall be converted into an option for a number of
shares or other equity interests of the successor or exchanging corporation (or
cash, property or such other consideration) that Employee would have received if
Employee had owned the Option Shares on the effective date of such transaction,
and the purchase price per share of the stock or other equity interests of the
successor or exchanging corporation under such converted option shall be equal
to Two Million Dollars ($2,000,000) divided by the number of shares of the stock
or other equity interests of such successor or exchanging corporation to which
the converted option applies (if, following such merger, consolidation or
exchange, Employee would receive non-share (or other equity interest)
consideration upon exercise of the option, the purchase price to be paid upon
exercise of the option shall be equal to Two Million Dollars ($2,000,000)
multiplied by a fraction equal to that portion of the option then being
exercised). Upon the dissolution or liquidation of Company other than following
an asset transfer subject to this subparagraph (vii), the option granted
hereunder shall expire as of the effective date of such transaction, provided,
however, that Company shall give at least sixty (60) days prior written notice
of such event to Employee during which time he shall have a right to exercise
his unexercised vested option.
(viii) Upon the exercise of the option hereunder, Company shall
have the right to require Employee to remit to Company, prior to the issuance of
any Option Shares, an amount sufficient to satisfy all federal, state and local
withholding tax requirements. As soon as reasonably practicable following the
"initial public offering" (as that term is defined in Paragraph 5(f)(xii)
hereof), Company shall prepare, or cause to be prepared, and file with the
Securities and Exchange Commission (the "Commission") a registration statement
on Form S-8 under the Securities Act of 1933, as amended (the "Act"), (or such
successor
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form of registration statement as shall then have been adopted by the
Commission) covering the offer and sale by Company of the Option Shares
underlying the then unexercised portion of the option granted to Employee
hereunder, and, to the extent permitted under such form, any Option Shares
issued upon exercise of such option prior to the initial public offering; and
Company shall use its best efforts during the term of the option to maintain
such registration statement in effect, and to comply with the rules and
regulations of the Commission applicable to securities covered by such
registration statement, so that the issuance of any Option Shares upon exercise
of the option shall be registered under the Act.
(ix) After Employee's employment with Company is terminated for
any reason, Company shall purchase from Employee and Employee shall sell to
Company any and all Option Shares owned by Employee and the option granted to
Employee hereunder for an amount (the "Termination Purchase Price") equal to (A)
the fair market value of the Option Shares owned by Employee plus the fair
market value of the Option Shares with respect to which Employee's option has
vested but has not been exercised, less (B) Employee's purchase price,
determined under Paragraph 5(f)(i), above, for the Option Shares with respect to
which Employee's option has vested but has not been exercised. The fair market
value of the Option Shares for purposes of the Termination Purchase Price shall
be determined by mutual agreement of the parties as of the date of Employee's
termination of his employment ("Termination Date"). In the event the parties are
unable to reach agreement within thirty (30) days of the Termination Date, the
fair market value of the Option Shares shall be determined by the following
appraisal procedure: Each party shall appoint an appraiser by giving notice of
such appointment to the other party within forty-five (45) days from the
Termination Date. Such appraiser shall be a certified public accountant
practicing in the entertainment, licensing and television industries or such
other person with experience in valuing companies in the entertainment,
licensing and television businesses. If either party fails to appoint an
appraiser within said time period, the other party's appointed appraiser shall
be the sole appraiser. If both parties have so appointed appraisers, then within
thirty (30) days from the appointment of both parties' appraisers, the
appraisers so appointed shall appoint a third appraiser, with the same
qualifications. The third appraiser (or the sole appraiser if either party fails
to appoint an appraiser within the required time period) shall then determine
the fair market value of the Option Shares within sixty (60) days after the
appointment of the third appraiser (or within sixty (60) days after the failure
by either party to appoint an appraiser within the required time period). The
third appraiser, or such sole appraiser, as applicable, is referred to
hereinbelow as the
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"Selected Appraiser." The determination of the Selected Appraiser shall be
binding on the parties hereto. The costs and fees of the Selected Appraiser
shall be borne equally by the parties hereto. Company shall give the Selected
Appraiser reasonable access to its books and records to enable him or her to
undertake his or her appraisal. Within ten (10) days after the parties'
agreement on the fair market value of the Option Shares, or, failing such
agreement, the notification by the Selected Appraiser of his or her appraisal,
Company shall pay to Employee ten percent (10%) of the Termination Purchase
Price (the "Down Payment") and shall deliver to Employee a promissory note (the
"Note") for payment of the remainder of the Termination Purchase Price in nine
(9) equal annual installments. The Note shall provide for the annual payment of
interest on the outstanding balance of the remainder of the Termination Purchase
Price at the rate per annum equal to the "prime" or "reference" rate charged by
Company's principal bank (currently Imperial Bank), as determined from time to
time. Concurrently with the payment of the Down Payment and delivery of the
Note, Employee shall execute and deliver to Company an assignment of the option
in form reasonably satisfactory to Company and an assignment separate from
certificate for the Option Shares, in each case free and clear of any and all
liens, claims, encumbrances and restrictions of any type, kind or nature.
(x) Except as provided below, in the event Haim Saban, any
member of his immediate family or any of his affiliated entities (collectively
with Haim Saban and such family members, "Saban Entities") sells to a third
party in a bona fide sale any of his or its shares of the common stock of
Company ("Saban Shares"), the parties agree as follows:
(A) Company shall purchase from Employee and Employee shall
sell to Company the "Applicable Percentage," as defined below, of the Option
Shares owned by Employee for a per-share consideration equal to the per-share
consideration paid by the third party for the Saban Shares. If the consideration
paid by the third party for the Saban Shares includes non-cash consideration
and/or deferred consideration, the consideration paid by Company to Employee for
the Option Shares sold by Employee to Company under this subparagraph (A) shall
consist of similar non-cash and/or deferred consideration in the same ratio as
the non-cash and/or deferred consideration paid by the third party for the Saban
Shares bears to the total consideration paid by the third party for the Saban
Shares. The "Applicable Percentage" shall equal the percentage that the Saban
Shares sold to the third party represents of the total shares of Company owned
by the Saban Entities immediately prior to the sale. The purchase and sale of
the Option Shares under this subparagraph (A) shall close no later than ten (10)
days after the closing of the sale of the Saban Shares to the third party.
Concurrently with the purchase and sale
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of the Option Shares under this subparagraph (A), Employee shall execute and
deliver to Company an assignment separate from certificate for the Option
Shares, free and clear of any and all liens, claims, encumbrances and
restrictions of any type, kind or nature.
(B) Company shall pay to Employee an amount equal to the
Applicable Percentage (as defined in subparagraph (A) above) of (x) the per-
share consideration paid by the third party for the Saban Shares multiplied by
the number of Option Shares with respect to which Employee's option has vested
but has not been exercised, less (y) Employee's purchase price, determined under
Paragraph 5(f)(i), above, for such Option Shares. If the consideration paid by
the third party for the Saban Shares includes non-cash consideration and/or
deferred consideration, the payment by Company to Employee under this
subparagraph (B) shall consist of similar non-cash and/or deferred consideration
in the same ratio as the non-cash and/or deferred consideration paid by the
third party for the Saban Shares bears to the total consideration paid by the
third party for the Saban Shares. The payment under this subparagraph (B) shall
be made no later than ten (10) days after the closing of the sale of the Saban
Shares to the third party .
(C) The number of Option Shares Employee shall have the
option to purchase pursuant to this Paragraph 5(f) shall immediately be reduced
by a number of shares of Company equal to the Applicable Percentage (as defined
in subparagraph (A), above) of the Option Shares with respect to which
Employee's option has vested but has not been exercised. Such reduction shall
reduce only the Option Shares with respect to which Employee's option has vested
but has not been exercised and shall not reduce any Option Shares with respect
to which Employee's option has not then vested.
(D) If in connection with any sale of Saban Shares subject
to this Paragraph 5(f)(x), Haim Saban is required to enter into an agreement
which includes provisions restricting his ability to compete, directly or
indirectly (including, without limitation, through an ownership or licensing
arrangement with a competitor or potential competitor of Company), with Company
("noncompetition provisions"), and if the purchaser of the Saban Shares so
requires, Employee shall, in connection with the sale of the Option Shares and
payment for vested options under this Paragraph 5(f)(x), execute and deliver to
Company and such purchaser an agreement, in form and substance reasonably
acceptable to the purchaser, which agreement shall contain noncompetition
provisions, the scope, duration, terms and provisions of which are substantially
identical to the noncompetition provisions contained in Haim Saban's agreement;
provided, that no separate payment will be required to be made to Employee on
account of such agreement.
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This subparagraph (x) shall not apply to (A) any sale by a Saban Entity pursuant
to an "initial public offering" (as defined in Paragraph 5(f)(xii)) of the
common stock of the Company or (B) any transaction subject to Paragraph
5(f)(vii), above.
(xi) The obligations of Company to make any payment or payments
to Employee with respect to the purchase of Option Shares by Company (including
any payments under the Note) are subject to the satisfaction by Company of any
applicable statutory provisions restricting Company's ability to make such
payments, including, without limitation, Section 160 of the Delaware General
Corporation Law and Chapter 5 of the California General Corporation Law, and if
and to the extent that under those provisions, any such payment would expose the
directors of Company to any liability, or would be unlawful, Company shall
deliver to Employee, in lieu of such payment, a promissory note with terms
identical to the Note, which note shall be due and payable at the earliest
practicable date thereafter when such payment would not be violative of such
statutory provisions.
(xii) Notwithstanding any provision of this Paragraph 5(f) to
the contrary, following the earlier to occur of (I) the first closing of an
offer and sale of shares of the common stock of Company (whether such shares are
sold by Company, existing stockholders or both) for cash pursuant to a firmly
underwritten public offering effected pursuant to a registration statement filed
by Company with the Securities and Exchange Commission under the Securities Act
of 1933, as amended (or such successor legislation as shall then be in effect)
or (II) the date upon which the shares of common stock of Company are first
authorized for quotation on the Nasdaq National Market, or listed on the New
York Stock Exchange or American Stock Exchange (either event, an "initial public
offering"):
(A) the provisions of Paragraphs 5(f)(ix) and 5(f)(x) shall
terminate and be of no further force or effect;
(B) the provisions of any voting trust agreement entered into
pursuant to Paragraph 5(f)(v)(C) shall not prevent or restrict Employee's right
to sell and transfer any of the Option Shares free and clear of the obligations
therein set forth;
(C) the option shall terminate and expire, to the extent not
theretofore exercised, (x) if Employee's employment with Company is terminated
for any reason other than for "cause" pursuant to Paragraph 10(c) hereof, on the
first anniversary of the date of such termination, and (y) if Employee's
employment with Company is terminated for "cause" pursuant to Paragraph 10(c)
hereof, on the thirtieth (30th) day following the date of such termination; and
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(D) after Employee's employment with Company is terminated for
any reason, Company shall have the right and option, exercisable at any time
prior to the date of expiration of the option by delivery of written notice of
such exercise to Employee, to purchase from Employee, and if such option is
exercised, Employee shall sell to Company, any and all Option Shares owned by
Employee on the date of receipt of the notice of exercise (or acquired
thereafter upon exercise of the option and prior to the closing of such
purchase) and the option granted to Employee hereunder for an amount equal to
the "Termination Purchase Price," as defined in and determined pursuant to the
procedures provided in Paragraph 5(f)(ix), above; and within ten (10) days after
the parties' agreement on the fair market value of the Option Shares, or,
failing such agreement, the notification by the Selected Appraiser of his or her
appraisal, Company shall pay the Termination Purchase Price to Employee, against
delivery by Employee to Company of an assignment of the option in form
reasonably satisfactory to Company and an assignment separate from certificate
for the Option Shares, in each case free and clear of any and all liens, claims,
encumbrances and restrictions of any type, kind or nature.
(g) Employee Benefits.
(i) Reimbursements. Company shall reimburse Employee for
all ordinary and necessary business, entertainment and other expenses reasonably
incurred by Employee in the performance of Employee's duties and obligations
under this Agreement, including reimbursement for air travel and accommodations
for business travel. Company agrees to repay or reimburse Employee for such
business expenses upon the presentation of itemized statements of such business
expenses in accordance with Company's policy.
(ii) Annual Vacations. Employee shall be entitled to take
four (4) weeks annual vacation for each Term Year.
(iii) Health Insurance and Other Employee Benefits.
Company shall provide Employee with health insurance for him and his dependents
no less favorable in benefits than any other employee of Company. To the extent
that Company establishes any other employee benefit plan which provides benefits
to executives of Company generally, Employee shall be entitled to participate in
such plan pursuant to the terms thereof, except that Company may exclude
Employee's participation in any plan which is a stock option plan or plan
similar to a stock option plan.
(h) Signing Bonus. On or prior to execution hereof, Company will pay
or will cause to be paid to Employee, subject to
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all applicable laws and requirements respecting withholding of federal, state,
and/or local taxes, a signing bonus of One Hundred Thousand Dollars ($100,000).
Employee hereby acknowledges receipt in full of such signing bonus.
6. [INTENTIONALLY DELETED]
7. REPRESENTATIONS AND WARRANTIES.
(a) Representations of Employee. Employee represents and warrants
that Employee has all right, power, authority and capacity, and is free, to
enter into this Agreement; that by doing so Employee will not violate or
interfere with the rights of any other person or entity; and that Employee is
not subject to any contract, understanding or obligation which will or might
prevent, interfere with or impair the performance of this Agreement by Employee.
Employee will indemnify and hold Company harmless with respect to any losses,
liabilities, demands, claims, fees, expenses, damages and costs (including
attorneys fees and court costs) resulting from or arising out of any claim or
action based upon Employee's entering into this Agreement.
(b) Representations of Company. Company represents and warrants that
Company has all right, power and authority, without the consent of any other
person, to execute and deliver, and perform its obligations under, this
Agreement. All corporate and other actions required to be taken by Company to
authorize the execution, delivery and performance of this Agreement and the
consummation of all transactions contemplated hereby have been duly and properly
taken. This Agreement is the lawful, valid and legally binding obligation of
Company, enforceable in accordance with its terms.
(c) Materiality of Representations. The representations, warranties
and covenants set forth in this Agreement shall be deemed to be material and to
have been relied upon by the parties hereto.
8. RELATIONSHIP AND COVENANTS OF EMPLOYEE.
(a) Covenant Not To Disclose. Employee shall not at any time during
or after the termination of the Term, knowingly reveal, divulge or make known to
any person (other than the Company or its affiliates) or use for Employee's own
account any non-public information concerning or used by Company of which
Employee was apprised or otherwise had become aware during the term of
Employee's employment by Company (excluding any such information
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which becomes public for reasons other than Employee's breach of this Agreement
or which Employee is required to disclose by law).
(b) Covenant to Deliver Records. All memoranda, notes, records and
other documents made or compiled by Employee, or made available to Employee
during the term of this Agreement concerning the business of Company shall be
Company's property and shall be delivered to Company on the termination of this
Agreement or at any other time on request. Employee shall keep in confidence and
shall not use for Employee or others, or divulge to others, any secret or
confidential information, knowledge or data of Company obtained by Employee as a
result of Company's employment, unless authorized by Company or required by law.
Employee shall be entitled to retain for his own records copies of any and all
memoranda, notes, records and other documents made or compiled by Employee
during the Term of this Agreement.
(c) Covenant Not To Divert. Employee shall not so long as Employee
is employed hereunder, or if such employment shall terminate during or at the
expiration of the Term, for a period of two years following such termination,
directly or indirectly, either on Employee's own behalf, or as a member of a
partnership, joint venture or corporation, or as an employee or agent on behalf
of any person, firm, partnership, joint venture or corporation, either (i)
solicit, induce (or attempt to induce), or endeavor to entice away any clients
of Company (unless Company consents in writing), (ii) solicit, divert, or seek
to develop or exploit any existing entertainment projects on which Company is
working at the time of termination (unless Company thereafter advises Employee
in writing that it has abandoned such project), or (iii) solicit, interfere
with, induce (or attempt to induce) or endeavor to entice away any employee
(other than Employee's assistant) associated with Company to become affiliated
with him or any other person, firm, partnership, joint venture, corporation or
business organization.
(d) Limitations Upon Covenants. The provisions under this Paragraph
8 shall survive the termination of this Agreement. The parties hereto agree
that, in the event any of the provisions set forth in this Paragraph 8 are held
by any court or other duly constituted legal authority to be effective in any
particular area or jurisdiction only if modified to limit their duration or
scope or to be void or otherwise unenforceable in any particular area or
jurisdiction, then such provisions shall be deemed amended and modified with
respect to that particular area or jurisdiction so as to comply with the order
of any such court or other duly constituted legal authority and, as to all other
areas and jurisdictions, and as to all other provisions of this Paragraph 8,
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such provisions shall remain in full force and effect as set forth in this
Agreement.
(e) Remedies. Employee acknowledges that Company will have no
adequate remedy at law if Employee violates the terms of the provisions of this
Paragraph 8 or any other provisions of this Agreement (including, without
limitation, the exclusivity provisions of Paragraph 3, above). In such event,
Company shall have the right, in addition to any other rights it may have, to
obtain in any court of competent jurisdiction injunctive relief to restrain any
breach or threatened breach or specific performance of this Agreement.
9. CERTAIN RIGHTS OF COMPANY.
(a) Announcement. Company shall have the sole right to make a public
announcement of the terms, provisions, or execution of this Agreement.
(b) Use of Name, Likeness, and Biography. Company shall have the
right (but not the obligation) to use, publish and broadcast, and to authorize
others to do so, the name, approved likeness and approved biographical material
of Employee to advertise, publicize and promote the business of Company and of
affiliates, but not for the purposes of direct endorsement without Employee's
consent. An "approved likeness" and "approved biographical material" shall be,
respectively, any photograph or other depiction of Employee, or any biographical
information or life story concerning the professional career of Employee, which
has been submitted to and approved by Employee prior to its first use,
publication or broadcast, such approval not to be unreasonably withheld.
(c) Corporate Offices. In addition to his positions as President and
Chief Operating Officer of the Company, Company or its affiliates may from time
to time appoint Employee to one or more corporate offices of Company or its
affiliates. Employee agrees to accept such offices if consistent with Employee's
stature and experience.
(d) Right to Insure. Company shall have the right to secure in its
own name, or otherwise, and at its own expense, life, health, accident or other
insurance covering Employee, and Employee shall have no right, title or interest
in and to such insurance. Employee shall assist Company in procuring such
insurance by submitting to examinations and by signing such applications and
other instruments as may be required by the insurance carriers to which
application is made for any such insurance.
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10. TERMINATION.
(a) Disability. If Employee shall be rendered incapable by illness
(physical or mental disability) of complying with the terms, provisions and
conditions hereof on his part to be performed for a period in excess of 90
consecutive days or 250 days in the aggregate during the Term, then Company may,
at its option, prior to the date Employee resumes the rendering of services,
terminate this Agreement by written notice to that effect sent by registered or
certified mail. Such termination shall terminate any and all obligations to
Employee under this Agreement effective as of the date of such written notice
except (i) Employee's right to receive the Fixed Salary in Paragraph 5(a) for
the Term Year in which the date of such written notice falls, pro-rated to the
date of such written notice, (ii) Employee's right to receive the Contingent
Bonus in Paragraph 5(b) for the Term Year in which the date of such written
notice falls, prorated to the date of such written notice (payable at the time
set forth in Paragraph 5(e)), and (iii) Employee's vested rights with respect to
the option set forth in Paragraph 5(f).
(b) Death. In the event Employee dies during the Term of this
Agreement, such death shall terminate any and all obligations to Employee under
this Agreement effective as of the date of death except (i) Employee's right to
receive the Fixed Salary in Paragraph 5(a) for the Term Year in which the date
of death falls, pro-rated to the date of death, (ii) Employee's right to receive
the Contingent Bonus in Paragraph 5(b) for the Term Year in which the date of
death falls, pro-rated to the date of death (payable at the time set forth in
Paragraph 5(e)), and (iii) Employee's vested rights with respect to the option
set forth in Paragraph 5(f).
(c) Cause. Company may terminate Employee's employment hereunder for
cause, which shall mean (i) indictment of Employee for a felony or a crime
involving a high degree of moral turpitude, (ii) the commission by Employee of
an act or acts of dishonesty constituting a crime, which act or acts are
intended to result, directly or indirectly, in gain or personal enrichment at
the expense of Company or any of its subsidiaries or affiliates by Employee,
(iii) certification by a medical doctor that Employee is a habitual alcoholic or
is a narcotic addict, (iv) Employee's material breach of this Agreement. Such
termination shall terminate any and all obligations to Employee under this
Agreement effective as of the date of such written notice except (i) Employee's
right to receive the Fixed Salary in Paragraph 5(a) for the Term Year in which
the date of such written notice falls, pro-rated to the date of such written
notice, and (ii) Employee's
15
<PAGE>
vested rights with respect to the option set forth in Paragraph 5(f).
(d) At Convenience of Company. Company shall have the absolute and
unconditional right to terminate Employee's employment hereunder at any time,
other than pursuant to Paragraphs 10(a), 10(b) or 10(c), by written notice to
that effect delivered in person or sent by registered or certified mail. Such
termination shall terminate any and all obligations to Employee under this
Agreement effective as of the date of such written notice except (i) Employee's
right to receive the Fixed Salary in Paragraph 5(a) for the Term Year in which
the date of such written notice falls, pro-rated to the date of such written
notice, (ii) Employee's right to receive the Severance Pay provided in, and
subject to the terms and conditions of, Paragraph 11 hereof, (iii) Employee's
right to receive the Contingent Bonus in Paragraph 5(b) for the Term Year in
which the date of such written notice falls, prorated to the date of such
written notice (payable at the time set forth in Paragraph 5(e)), and (iv)
Employee's vested rights with respect to the option set forth in Paragraph 5(f).
(e) At Employee's Election. Employee may terminate his employment
hereunder upon Company's material breach of this Agreement by written notice to
that effect delivered in person or sent by registered or certified mail. Such
termination shall terminate any and all obligations of Company to Employee under
this Agreement, including liabilities with respect to such breach, effective as
of the date of such written notice except (i) Employee's right to receive the
Fixed Salary in Paragraph 5(a) for the Term Year in which the date of such
written notice falls, pro-rated to the date of such written notice, (ii)
Employee's right to receive the Severance Pay provided in, and subject to the
terms and conditions of, Paragraph 11 hereof, (iii) Employee's right to receive
the Contingent Bonus in Paragraph 5(b) for the Term Year in which the date of
such written notice falls, prorated to the date of such written notice (payable
at the time set forth in Paragraph 5(e)), and (iv) Employee's vested rights with
respect to the option set forth in Paragraph 5(f).
11. SEVERANCE PAY. In the event Employee's services are terminated by
Company pursuant to Paragraph 10(d) or by Employee pursuant to Paragraph 10(e)
above prior to the completion of the Term, Employee shall receive Employee's
fixed salary set forth in Paragraph 5(a) hereof for the balance of the Term,
payable in equal installments no less frequently than semi-monthly. The
termination benefits contemplated by this Paragraph shall be reduced by the
aggregate amount of any wages, salaries, fees or other compensation ("Earnings")
earned by Employee during the period in which payments
16
<PAGE>
pursuant to the first sentence of this Paragraph are otherwise to be made, as
compensation for full-time or part-time services rendered as an employee,
consultant, manager, independent contractor or in any other employment capacity.
For the purposes of determining the amount of such Earnings, if any, Employee
shall apprise Company from time to time, upon its request, of such amounts
earned, providing to Company such evidence thereof (on a confidential basis),
including, without limitation, Employee's federal and state income tax returns,
as Company may reasonably request.
12. CHANGE OF CONTROL.
(a) For the purposes of this Section 12, the following definitions
shall apply:
The following events shall each constitute a "Change of Control"
of Company: (i) the acquisition of one or more shares of the voting securities
of Company by any Acquiring Person, or any group of two or more Acquiring
Persons acting in concert, as a result of which such Person or group
beneficially owns fifty percent (50%) or more of the issued and outstanding
voting securities of Company; (ii) the consolidation with, or merger with or
into, any other entity, by Company and, in connection with such merger or
consolidation, Company is not the continuing or surviving entity; (iii) the sale
or transfer by other means by Company in one transaction or a series of related
transactions, of assets or earning power aggregating fifty percent (50%) or more
of the assets or earning power of Company and its subsidiaries (taken as a whole
and calculated on the basis of Company's most recent regularly prepared
financial statements) to any other person or persons (but excluding sales of
inventory in the ordinary course of business). The determination as to which
party to a merger or consolidation is the "continuing" or "surviving"
corporation shall be made on the basis of the relative equity interests of the
shareholders in the corporation existing after the merger or consolidation, as
follows: if following any merger or reorganization, the holders of outstanding
voting securities of Company immediately prior to the merger or consolidation
beneficially own fifty percent (50%) or more of the voting power of the entity
existing following the merger or consolidation, then for purposes of this
Agreement, Company shall be the survivor or continuing corporation. In making
the determination of beneficial ownership by the shareholders of a corporation
immediately after the merger or consolidation, of equity securities which the
shareholders owned immediately before the merger or consolidation, shares which
they beneficially owned as shareholders of another party to the transaction
shall be disregarded.
17
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"Acquiring Person" shall mean any individual, corporation,
partnership, limited liability company or other entity or group other than Haim
Saban or any other of the Saban Entities, Employee or Company or any of its
wholly-owned subsidiaries.
"Beneficial Ownership" shall be determined pursuant to Rule 13d-3 of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as in effect on the date of this Agreement.
(b) If, in the event of a Change of Control of Company, any Acquiring
Person or other person or group proposing to acquire control of Company and/or
the business of Company (the "Proposed Acquiror") objects to any of the terms of
this Agreement, Employee agrees to negotiate in good faith with Company to amend
this Agreement in such manner as to make it acceptable to the Proposed Acquiror.
Haim Saban and Company shall in any event use their best efforts to cause the
Proposed Acquiror to accept the terms of this Agreement.
13. ARBITRATION.
(a) The terms of this Paragraph 13 contain the sole and exclusive method,
means and procedure to resolve any and all claims, disputes or disagreements
arising under this Agreement, except those arising under the provisions of
Paragraph 8, above. The parties irrevocably waive any and all rights to the
contrary and shall at all times conduct themselves in accordance with the terms
of this Paragraph 13; any attempt to circumvent the terms of this Paragraph 13
shall be null and void and of no force or effect.
(b) Within ten (10) days after delivery of written notice (the "Notice of
Dispute") of the existence and nature of any dispute given by any party to the
other party, and unless otherwise provided herein in any specific instance, the
parties shall each (i) appoint one (1) lawyer actively engaged in the licensed
and full time practice of law in the County of Los Angeles for a continuous
period immediately preceding the date of delivery (the "Dispute Date") of the
Notice of Dispute of not less than ten (10) years, but who has at no time ever
represented or acted on behalf of any of the parties, and (ii) deliver written
notice of the identity of such lawyer and a copy of his or her written
acceptance of such appointment and acknowledgment of and agreement to be bound
by the time constraints and other terms of this Paragraph 13 (the "Acceptance")
to the other party hereto. In the event that any party fails to so act, that
party's arbitrator shall be appointed pursuant to the same procedure that is
followed when agreement cannot be reached as to the third arbitrator. Within ten
(10) days
18
<PAGE>
after such appointment and notice, such lawyers shall appoint a third lawyer
(who, together with the first two (2) lawyers, shall hereinafter be referred to
collectively as the "Arbitration Panel") of the same qualification and
background as the first two (2) lawyers (including the qualification that he or
she has at no time ever represented or acted on behalf of any of the parties)
and shall deliver written notice of the identity of such lawyers and a copy of
his or her written Acceptance of such appointment to each of the parties. If
agreement cannot be reached on the appointment of a third lawyer within such
period, such appointment and notification shall be made as rapidly as possible
by any court of competent jurisdiction, by any licensing authority, agency or
organization having jurisdiction over such lawyers, by any professional
association of lawyers in existence for not less than ten (10) years at the time
of such dispute or disagreement and the geographical membership boundaries of
which extend to the County of Los Angeles, or by any arbitration association or
organization in existence for not less than ten (10) years at the time of such
dispute or disagreement and the geographic boundaries of which extend to the
County of Los Angeles, as determined by the party giving such Notice of Dispute
and simultaneously confirmed in writing delivered by such party to the other
party. Any such court, authority, agency, association or organization shall be
entitled either to directly select such third lawyer or to designate in writing
delivered to each of the parties an individual who shall do so. In the event of
any subsequent vacancies or inabilities to perform among the Arbitration Panel,
the lawyer or lawyers involved shall be replaced in accordance with the terms of
this Paragraph 13 as if such replacement was an initial appointment to be made
under this Paragraph 13 within the time constraints set forth in this Paragraph
13, measured from the date of notice of such vacancy or inability to the person
or persons required to make such appointment, with all attendant consequences of
failure to act timely if such appointment is not so made. Unless the parties
shall otherwise agree, all arbitration proceedings shall be conducted at such
location within Los Angeles County as the members of the Arbitration Panel shall
by majority vote from time to time designate.
(c) Consistent with the terms of this Paragraph 13, the members of the
Arbitration Panel shall utilize their utmost skill and shall apply themselves
diligently so as to hear and decide, by majority vote, the outcome and
resolution of any dispute or disagreement submitted to the Arbitration Panel as
promptly as possible, but in any event on or before the expiration of sixty (60)
days after the appointment of the members of the Arbitration Panel. None of the
members of the Arbitration Panel shall have any
19
<PAGE>
liability whatsoever for any acts or omissions performed or omitted in good
faith pursuant to the provisions of this Article.
(d) The Arbitration Panel shall (i) enforce and interpret the rights and
obligations set forth in this Agreement to the extent not prohibited by law,
(ii) fix and establish any and all rules as it shall consider appropriate in its
sole and absolute discretion to govern the proceedings before it, including any
and all rules of discovery, procedure and/or evidence, provided however, that
such rules shall be consistent with such rules established by the American
Arbitration Association and (iii) make and issue any and all orders, final or
otherwise, and any all awards, as a court of competent jurisdiction sitting at
law or in equity could make and issue and as it shall consider appropriate in
its sole and absolute discretion, including the awarding of monetary damages
(but specifically excluding the awarding of consequential, punitive or exemplary
damages or the awarding of attorneys' fees and costs to either party) to the
prevailing party as determined by the Arbitration Panel in its sole and absolute
discretion, and the issuance of injunctive relief.
(e) The decision of the Arbitration Panel shall be final and binding, and
may be confirmed and entered by any court of competent jurisdiction at the
request of any party and may not be appealed to any court of competent
jurisdiction or otherwise, except upon a claim of fraud on the part of any
member of the Arbitration Panel (except as to the arbitrator chosen by the party
claiming the fraud), or on the basis of a manifest error as to the applicable
law. The Arbitration Panel shall retain jurisdiction over any dispute until its
award has been implemented, and judgment on any such award may be entered in any
court having appropriate jurisdiction and may be enforced against either party
and its assets pursuant to applicable laws and procedures.
(f) Each member of the Arbitration Panel (i) shall be compensated for any
and all services rendered under this Paragraph 13 at a rate of compensation
equal to the sum of Two Hundred Fifty Dollars ($250.00) per hour, which sum
shall be increased each year in accordance with annual increases in the Consumer
Price Index for Urban Wage Earners and Clerical Workers, Los Angeles-Anaheim-
Riverside, California 1982-84 = 100 ("CPI"), and (ii) shall be reimbursed for
any and all expenses incurred in connection with the rendering of such services,
payable in full promptly upon conclusion of the proceedings before the
Arbitration Panel. Such compensation and reimbursement shall be borne by the
non-prevailing party as determined by the Arbitration Panel in its sole and
absolute discretion, unless the Arbitration Panel does not make a determination
that one of the parties is the prevailing party, in
20
<PAGE>
which case the parties shall bear the cost as fixed by the Arbitration Panel.
14. INDEMNIFICATION. Concurrent with the execution and delivery of this
Agreement, Company and Employee have entered into an Indemnification Agreement,
pursuant to which, inter alia, Company has agreed, on the terms and conditions
----- ----
therein set forth, to indemnify Employee against certain claims arising by
reason of the fact that he is or was an officer or director of Company.
15. GENERAL.
(a) Assignment; Successors; Affiliates. Company may assign this
Agreement (or the interest of Company therein) to any affiliate of Company or to
any entity which is a party to a merger, reorganization, or consolidation with
Company or to a subsidiary of Company or to an entity or entities acquiring
substantially all of the assets of Company or of any division with respect to
which Employee is providing services (providing any such assignee assumes
Company's obligations under this Agreement). Employee shall, if requested by
Company, perform Employee's services and duties, as specified in this Agreement,
to or for the benefit of any subsidiary or other affiliate of Company. Upon such
assignment, acquisition, merger, consolidation, or reorganization, the term
"Company" as used herein shall be deemed to refer to such assignee or such
successor entity. Employee shall not have the right to assign Employee's
interest in this Agreement, any rights under this Agreement or any duties
imposed under this Agreement nor shall Employee (or Employee's spouse, heirs,
beneficiaries, administrator's or executors) have the right to pledge,
hypothecate or otherwise encumber Employee's right to receive compensation
hereunder without the consent of Company.
(b) Headings. The subject headings of the paragraphs and
subparagraphs of this Agreement are included for purposes of convenience only,
and shall not affect the construction or interpretation of any of its
provisions.
(c) Severability. It is agreed that if any term, covenant,
provision, paragraph or condition of this Agreement shall be illegal, such
illegality shall not invalidate the whole Agreement but it shall be construed as
if not containing the illegal part, and the rights and obligations of the
parties shall be construed and enforced accordingly.
(d) Entire Agreement. The parties hereto agree that this Agreement
supersedes all existing agreements between Company and Employee, whether oral,
written, expressed or implied, and contains
21
<PAGE>
the entire understanding and agreement between the parties. This Agreement shall
not be amended, modified, or supplemented in any respect except by a subsequent
written agreement entered into by both parties hereto.
(e) Choice of Law. This Agreement and the performance hereunder
shall be construed in accordance with and under and pursuant to the internal
substantive laws of the State of California applicable to agreements fully
executed and to be performed entirely in such state.
(f) Notices. All communications and notices hereunder shall be in
writing and shall be deemed to have been duly given and delivered personally if
sent by united States registered or certified mail, postage prepaid:
If to Company: Saban Entertainment, Inc.
4000 West Alameda Avenue
Burbank, California 91505
Attn: Haim Saban
With a copy to:
Matthew G. Krane, Esq.
Attorney
2051 Hercules Drive
Los Angeles, California 90046
If to Employee:
Mel Woods
or to such other addresses as my be designated in writing by either of the
parties.
(g) No Joint Venture. Nothing herein contained shall constitute a
partnership between or joint venture by the parties hereto or appoint any party
the agent of any other party. No party shall hold itself out contrary to the
terms of this paragraph and, except as otherwise specifically provided herein,
no party shall become liable for the representation, act or omission of any
other party. This Agreement is not for the benefit of any third party who is not
referred to herein and shall not be deemed to give any right or remedy to any
such third party.
22
<PAGE>
(h) Contractual Nomenclature. All reference herein to "Dollars" or
"$" shall mean Dollars of the United States of America, its legal tender for all
debts public and private. Where used herein and to the extent appropriate, the
masculine, feminine or neuter gender shall include the other two genders, the
singular shall include the plural, and the plural shall include the singular.
(i) Time of Essence. Time is of the essence of each provision in
this Agreement in which time is an element.
(j) No Adverse Construction. The rule that a contract is to be
construed against the party drafting the contract is hereby waived, and shall
have no applicability in construing this Agreement or the terms of this
Agreement.
* * *
IN WITNESS WHEREOF, Company and Employee have executed this Agreement as of
the 1st day of June 1994.
SABAN ENTERTAINMENT, INC.
By \s\ Haim Saban
-------------------------------------------------
\s\ Mel Woods
--------------------------------------------------
MEL WOODS
23
<PAGE>
AMENDMENT NO. 1
TO
EMPLOYMENT AGREEMENT
This Amendment No. 1 to Employment Agreement (the "Amendment") is made and
entered into as of September 26, 1996, by and between Saban Entertainment,
Inc., a Delaware corporation ("SEI") and Mel Woods ("Woods").
R E C I T A L S
----------------
A. Woods and SEI are parties to that certain Employment Agreement,
dated as of June 1, 1994 (the "Agreement"). All terms defined in the Agreement
which are not defined in this Amendment shall have the same meanings when used
in this Amendment.
B. The parties hereto desire to amend the Agreement from and after
the effective date of the initial public offering (the "Initial Public
Offering") of Fox Kids Worldwide, Inc., a Delaware corporation ("Fox Kids
Worldwide").
A G R E E M E N T
-----------------
NOW, THEREFORE, in consideration of the foregoing facts, the parties hereto
agree that from and after the effective date of the Initial Public Offering, the
following sections are amended as follows:
1. Expiration of Stock Option. From and after the effective date of the
--------------------------
Initial Public Offering, Paragraph 5(f)(i) of the Agreement is amended by adding
the following sentence at the end of such Paragraph.
"As long as the option is not earlier exercised or terminated in
accordance with the terms of this Agreement, the option shall expire on June 1,
2004."
2. Termination of Option. From and after the effective date of the
---------------------
Initial Public Offering, Paragraph 5(f)(xii)(D) of the Agreement shall terminate
and be of no further force or effect.
3. Effect of Amendment. Except as expressly modified herein, all terms
-------------------
of the Agreement remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the day
and year first above written.
SABAN ENTERTAINMENT, INC.
By: /s/ Haim Saban
________________________________________
Its: Chairman and Chief Executive Officer
________________________________________
MEL WOODS
/s/ Mel Woods
________________________________________
<PAGE>
EXHIBIT 10.12
OPERATING AGREEMENT
OF
FOX KIDS WORLDWIDE, L.L.C.
A DELAWARE LIMITED LIABILITY COMPANY
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
R E C I T A L S......................................................................................... 2
ARTICLE 1 DEFINED TERMS............................................................................... 2
1.1 Defined Terms............................................................................... 2
ARTICLE 2 FORMATION AND BUSINESS OF THE COMPANY....................................................... 2
2.1 Formation of the Company.................................................................... 2
2.2 Name of Company............................................................................. 3
2.3 Place of Business........................................................................... 3
2.4 Service Of Process: Registered Office....................................................... 3
2.5 Purposes.................................................................................... 3
2.6 Powers...................................................................................... 3
2.7 Term........................................................................................ 4
ARTICLE 3 MEMBERS..................................................................................... 4
3.1 Limited Liability........................................................................... 4
3.2 Class A Member.
3.3 Class B Members.
3.4 Admission of Additional Members............................................................. 4
3.5 Withdrawals................................................................................. 5
3.6 Transfer and Assignment of Interests........................................................ 5
3.7 Transactions between Members and their Affiliates........................................... 5
ARTICLE 4 GOVERNANCE AND MANAGEMENT................................................................... 5
4.1 Members Committee........................................................................... 5
4.1.1 Composition of the Members Committee................................................. 5
4.2 Meetings Of The Members Committee........................................................... 6
4.3 Voting By Members of the Members Committee.................................................. 7
4.4 Operating Committee......................................................................... 7
4.5 Other Committees Of The Members Committee................................................... 7
4.6 Vote by Haim Saban.......................................................................... 7
4.7 Delegation Of Authority; Officers........................................................... 8
4.8 Senior Executives........................................................................... 9
4.9 Operational Veto Rights..................................................................... 10
4.10 Sale of More than One-Third Original Interest............................................... 11
4.11 Indemnification............................................................................. 11
4.12 Special Provision Related to Israel Licensee................................................ 12
4.13 Saban Receivable............................................................................ 12
4.14 Fiduciary Duties............................................................................ 12
ARTICLE 5 CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS,
ALLOCATION OF TAX ITEMS; MEMBER LOANS; DISTRIBUTIONS........................................ 12
5.1 Initial Capital Contributions............................................................... 12
5.2 Additional Capital Contributions............................................................ 13
5.3 Maintenance Of Capital Accounts............................................................. 13
5.4 Allocation Of Tax Items..................................................................... 13
5.5 Negative Capital Accounts................................................................... 14
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
5.6 Tax Distributions........................................................................... 14
5.7 Additional Distributions.................................................................... 14
5.8 FBC Loan.................................................................................... 15
5.9 Transfer of Distributable Cash to the Company; Dividends ................................... 15
5.10 Return of Distributions..................................................................... 15
5.11 No Interest................................................................................. 16
5.12 Tax Matters Partner......................................................................... 16
5.13 Taxation As a Partnership................................................................... 16
ARTICLE 6 EXCULPATION; INDEMNIFICATION............................................................... 16
6.1 No Liability................................................................................ 16
6.2 Company Indemnity Obligations............................................................... 16
6.3 Settlement; Procedures...................................................................... 17
6.4 Withdrawal.................................................................................. 17
6.5 Settlements Conditioned Upon Full Release................................................... 17
6.6 Subrogation................................................................................. 17
ARTICLE 7 BOOKS OF ACCOUNT, ACCOUNTING AND REPORTS.................................................... 18
7.1 Books and Records........................................................................... 18
7.2 Inspection Rights........................................................................... 18
7.3 Annual and Quarterly Statements............................................................. 18
7.4 Certified Public Accountants................................................................ 19
7.5 Bank Accounts............................................................................... 19
7.6 Tax Elections............................................................................... 19
ARTICLE 8 DISSOLUTION AND LIQUIDATION OF THE COMPANY.................................................. 19
8.1 Dissolution................................................................................. 19
8.2 Effect Of Dissolution....................................................................... 19
8.3 No Recourse Against Members For Distribution................................................ 20
8.4 Liquidation................................................................................. 20
ARTICLE 9 MISCELLANEOUS PROVISIONS.................................................................... 21
9.1 Miscellaneous............................................................................... 21
9.2 Rights Personal to FCNH and Saban........................................................... 21
9.3 Notices..................................................................................... 22
9.3.4 Severability....................................................................... 23
9.3.5 Governing Law...................................................................... 23
9.3.6 No Adverse Construction............................................................ 23
9.3.7 Counterparts....................................................................... 23
9.3.8 Costs and Attorneys' Fees.......................................................... 24
9.3.9 Successors and Assigns............................................................. 24
9.3.10 Amendments and Waivers............................................................. 24
9.3.11 Entire Agreement................................................................... 24
9.3.12 Agreement to Perform Required Acts................................................. 25
9.3.13 Consent to Jurisdiction; Forum Selection........................................... 25
9.3.14 Deadlock........................................................................... 25
EXHIBIT A Defined Terms............................................................................... 27
</TABLE>
ii
<PAGE>
OPERATING AGREEMENT
FOR
FOX KIDS WORLDWIDE, L.L.C.
A DELAWARE LIMITED LIABILITY COMPANY
This Operating Agreement (the "Agreement") is made and entered into as of
December 22, 1995, by and among Saban Entertainment, Inc., a Delaware
corporation ("SEI"), FCN Holding, Inc., a Delaware corporation ("FCNH"), and Fox
Broadcasting Company, a Delaware corporation ("FBC").
R E C I T A L S
---------------
A. SEI, FBC and FCNH desire to maximize their long-term strategic
values, and have determined that it would be in their respective best interests
to achieve this objective by entering into a strategic alliance for the purpose
of sharing with each other their respective strengths, to the mutual benefit of
all of them, all on the terms and conditions of this Agreement, and in
connection therewith have entered into that certain LLC Formation Agreement
dated as of November 1, 1995 (the "Formation Agreement").
B. Pursuant to the Formation Agreement, SEI, FCNH and FBC have
formed FOX KIDS WORLDWIDE, L.L.C. (the "Company") under the laws of the State of
Delaware and have entered into this Agreement to regulate the rights,
preferences and privileges of the Members of the Company.
ARTICLE 1
DEFINED TERMS
-------------
1.1 DEFINED TERMS. The terms defined in Exhibit "A" shall have the same
-------------
meanings when used herein.
ARTICLE 2
FORMATION AND BUSINESS
----------------------
OF THE COMPANY
--------------
2.1 FORMATION OF THE COMPANY. Pursuant to the Delaware Act, the
Members have formed a Delaware limited liability company under the laws of the
State of Delaware by filing the Certificate of Formation attached hereto as
Schedule 2.1 with the Delaware Secretary of State and entering into this
- ------------
Agreement. It is the
2
<PAGE>
intent of the parties that this Agreement be deemed effective as of June 1, 1995
and that, to the extent permissible under GAAP, the operations of the Company
and the Operating Entities be accounted for as if this Agreement had been
entered into at such time. The rights and obligations of the Members shall be
determined pursuant to the Delaware Act and this Agreement. To the extent that
the rights or obligations of any Member are different by reason of any provision
of this Agreement than they would be in the absence of such provision, this
Agreement shall, to the extent permitted by the Delaware Act, control.
2.2 NAME OF COMPANY. The name of the Company is FOX KIDS WORLDWIDE,
L.L.C., and all of the Company's business shall be conducted under this name or
under any other name approved by the Members Committee, but in any case, only to
the extent permitted by applicable law. The Operating Entities shall operate
under their respective names as of the date of this Agreement unless otherwise
determined by the Members Committee.
2.3 PLACE OF BUSINESS. The location of the principal place of business
shall from time to time be determined by the Members Committee. The Company may
have such additional offices and places of business as may be established at
such other locations as may from time to time be approved by the Members
Committee.
2.4 SERVICE OF PROCESS: REGISTERED OFFICE. The registered agent for the
service of process and the registered office shall be that Person and location
reflected in the Certificate of Formation. The Members Committee may, from time
to time, change the registered agent or office through appropriate filings with
the Secretary of State of the State of Delaware. In the event the registered
agent ceases to act as such for any reason, or the registered office shall
change, the Members Committee promptly shall designate a replacement registered
agent or file a notice of change of address as the case may be, all in
accordance with any applicable requirements of the Delaware Act.
2.5 PURPOSES. The purpose of the Company shall be to engage in the
business of forming and operating an integrated children's entertainment
business which shall include, but not be limited to, the business currently
operated or contemplated by the Operating Entities (including, in the case of
SEI, the operations of its movie, merchandising and consumer products
divisions). Initially, it is contemplated that the Company's primary operations
will be limited to the management of the Operating Entities pursuant to the
provisions of the Management Agreement. The Company may engage in any lawful
business which is incidental, necessary, or desirable to carry out the business
of the Company as described herein.
2.6 POWERS. The Company will have the power to do any and all acts and
things necessary, appropriate, advisable, or
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convenient for the furtherance and accomplishment of the purposes of the
Company, including, without limitation, to engage in any kind of activity and to
enter into and perform obligations of any kind necessary to or in connection
with, or incidental to, the accomplishment of the purposes of the Company.
2.7 TERM. Unless sooner terminated in accordance with Article 8 hereof,
the Company shall liquidate and dissolve on October 31, 2070.
ARTICLE 3
MEMBERS
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3.1 LIMITED LIABILITY. Except as required under the Act or as expressly
set forth in this Agreement, no Member shall be personally liable for any debt,
obligation, or liability of the Company, whether that liability or obligation
arises in contract, tort or otherwise.
3.2 CLASS A MEMBER. FBC shall be a Class A Member hereunder. As a Class
A Member, FBC shall have the right to receive distributions of Distributable
Cash pursuant to Sections 5.7.3 and 5.7.4 hereof, distributions on dissolution
or liquidation pursuant to Sections 8.4.1(c) and 8.4.1(d) and allocations of net
profits and net losses and similar items from the Company as expressly provided
for in Section 5.4 hereof, but shall not have any other rights of a Member
including, without limitation, the right to vote or participate in the
management or any right to information concerning the business and affairs of
the Company. FBC's Class A membership in the Company shall terminate at such
time as FBC shall receive aggregate distributions from the Company under
Sections 5.7.3, 5.7.4, 8.4.1(c) and 8.4.1(d) or otherwise in an aggregate amount
equal to $50 million.
3.3 CLASS B MEMBERS. Each of SEI and FCNH shall be a Class B Member. As
a Class B Member, each of SEI and FCNH shall have the right to receive
distributions of Distributable Cash pursuant to Section 5.7 hereof,
distributions on dissolution or liquidation pursuant to Section 8.4.1(e) hereof,
allocations of net profits and net losses and similar items from the Company as
expressly provided for in Section 5.4 hereof, and the right to vote on or
participate in the management and the right to receive information concerning
the business and affairs of the Company, all as provided for herein.
3.4 ADMISSION OF ADDITIONAL MEMBERS. The Company shall not admit any
Members other than SEI, FCNH and FBC.
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3.5 WITHDRAWALS OR RESIGNATIONS. No Member may withdraw or resign from
the Company.
3.6 TRANSFER AND ASSIGNMENT OF INTERESTS. No Member shall be entitled
to transfer, assign, convey, sell, encumber or in any way alienate all or any
part of its membership interest in the Company, including by way of involuntary
transfer.
3.7 TRANSACTIONS BETWEEN MEMBERS AND THEIR AFFILIATES. Except as
provided in Sections 4.12 and 4.13 hereof, (i) all transactions between any
Member or any Subsidiary of such Member, on the one hand, and any Affiliate of
such Member, on the other, shall be made only with the prior approval of the
Senior Executive-Children's Network, in the case of SEI and its Subsidiaries and
Affiliates, and the Senior Executive-Saban Entertainment, in the case of FCNH
and FBC and their respective Subsidiaries and Affiliates, and (ii) all
agreements between the Company, on the one hand, and any Member or any Affiliate
of a Member, on the other, shall be negotiated and approved by the Senior
Executive-Children's Network, in the case of SEI and its Subsidiaries and
Affiliates, and the Senior Executive-Saban Entertainment, in the case of FCNH
and FBC and their respective Subsidiaries and Affiliates. SEI shall have the
right and power, without approval of the Members Committee, to cause the
Company, SEI or any of its Subsidiaries to pursue any claim or litigation
against FBC or FCNH or any of their respective Affiliates for breach of any
contract between such Person and the Company or any of the Operating Entities.
FCNH shall have the right and power, without approval of the Members Committee,
to cause the Company, FCNH or FBC or any of their respective Subsidiaries, to
pursue any claim or litigation against SEI or any of its Affiliates for breach
of any contract between such Person and the Company or any of the Operating
Entities.
ARTICLE 4
GOVERNANCE AND MANAGEMENT
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4.1 MEMBERS COMMITTEE
4.1.1 COMPOSITION OF THE MEMBERS COMMITTEE. The Members shall
manage the Company's Business through a members committee (the "Members
Committee") which, except as otherwise expressly provided herein, shall have and
exercise full power and discretion and final authority with respect to the
management of the affairs of the Company. The Members Committee shall be
comprised of eight members (each, a "Member of the Members Committee" or a
"Committee Member") to be elected by the Class B Members as provided in this
Section 4.1.1 and Section 4.10 below. Until the occurrence of a Terminating
Event, the Committee Members shall be divided into two (2) classes. Subject to
the provisions of Section 4.10 below, the
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first class ("Class I Committee Members") shall consist of four (4) Committee
Members to be designated by FCNH and the second class ("Class II Committee
Members") shall consist of four (4) Committee Members to be designated by Saban.
FCNH or Saban each may, at any time, change any or all of the Class I or Class
II Committee Members, respectively, appointed by it and, upon such change, or
the death, permanent disability sufficient to prevent performance of the duties
of a Member of the Members Committee or resignation of any Class I or Class II
Committee Member, a successor shall be designated (in a notice delivered to all
Members) by the Person which appointed the Member of the Members Committee being
replaced. From and after a Terminating Event, the Members Committee shall
consist of one class of four Committee Members to be elected as provided in
Section 4.10 below.
4.2 MEETINGS OF THE MEMBERS COMMITTEE.
4.2.1 Regular meetings of the Members Committee may be held upon
such notice, or without notice, and at such time and at such place as shall from
time to time be determined by the Members Committee. Special meetings of the
Members Committee may be called by either Class B Member on 48 hours notice to
each Member of the Members Committee, given in person or by telephone or
facsimile transmission, or by overnight mail or courier delivery. Actions taken
at a meeting at which a quorum is present shall be effective irrespective of the
lack of appropriate notice to any Member of the Members Committee. The business
to be transacted at a Special Meeting must be specified in the notice of such
meeting.
4.2.2 Subject to the provisions of Section 4.10 below, a quorum of
the Members Committee shall consist of at least two Class I Committee Members
and two Class II Committee Members (except if Saban is present at the meeting,
his presence shall be sufficient for quorum purposes so long as two Class I
Committee Members are also present). No vote of Committee Members at any meeting
at which a quorum is not present shall be effective. If a quorum is not present
at any meeting, the meeting shall be adjourned and reconvened only with the
giving of notice as required by Section 4.2.1.
4.2.3 Committee Members may participate in a meeting of the
Members Committee by conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other, and
such participation in a meeting shall constitute presence in person at the
meeting.
4.2.4 Any action required or permitted to be taken at a meeting of
the Members Committee may be taken without a meeting upon consent of a majority
vote of each Class of Committee Members. Such consent shall be obtained through
the signing of a resolution
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authorizing action without a meeting. Such resolution shall be provided to all
Committee Members in advance of a vote thereon. The signed consent to action
without a meeting shall be inserted in the minutes of the Members Committee
along with the record of the written vote on the underlying action.
4.3 VOTING BY MEMBERS OF THE MEMBERS COMMITTEE. On all matters
submitted to the Members Committee, each Member of the Members Committee shall
be entitled to one vote. Subject to the provisions of Section 4.10 below, action
by the Members Committee shall require the approval or authorization by the
Members Committee evidenced by a resolution adopted by a vote of a majority of
the Class I Committee Members present and voting and a majority of the Class II
Committee Members present and voting at a duly called meeting of the Members
Committee.
4.4 OPERATING COMMITTEE. Subject to the provisions of Section 4.10
below, there shall be an Operating Committee to be composed of two Class I
Committee Members to be appointed by the Class I Committee Members as a group
and two Class II Committee Members (which shall include Saban) to be appointed
by the Class II Committee Members as a group. The Operating Committee shall have
all of the powers of the Members Committee as a whole and shall oversee the
operations of the Company. A quorum of the Operating Committee shall consist of
at least one Class I Committee Member and at least one Class II Committee
Member. An action by the Operating Committee shall require the approval or
authorization by such committee evidenced by a resolution adopted unanimously by
all of the Committee Members present and voting at a duly called meeting of the
committee. The provisions of Sections 4.2.2, 4.2.3 and 4.2.4 shall also govern
the conduct of the Operating Committee to the extent not otherwise inconsistent
with the provisions of this Section 4.4.
4.5 OTHER COMMITTEES OF THE MEMBERS COMMITTEE. The Members Committee
may designate from among the Committee Members such other committees as it shall
deem appropriate to conduct such investigation and other business as it deems
necessary or appropriate from time to time.
4.6 VOTE BY HAIM SABAN. Notwithstanding anything to the contrary
contained herein, until such time as the Successor Entity (as defined in the
Strategic Shareholders Agreement) registers any of its equity securities under
the Securities Act of 1933, as amended, if Saban is present and voting at any
meeting of the Members Committee or any meeting of a committee thereof of which
he is a member (including, but not limited to, the Operating Committee), then he
shall have the sole right to cast any vote of the Class II Committee Members. If
the vote or consent of the Members Committee or committee thereof is being
solicited by written consent pursuant to the provisions of Section 4.2.4 hereof,
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the action of Saban evidenced by his written consent shall be deemed the written
consent of all other Class II Committee Members entitled to vote thereon
notwithstanding their failure or refusal to execute such written consent.
4.7 DELEGATION OF AUTHORITY; OFFICERS.
4.7.1 The officers of the Company shall include a Senior
Executive-Children's Network and a Senior Executive-Saban Entertainment, each of
whom shall be employees of the Company. The Company also may have such other
officers as the Members Committee may in its discretion appoint, including
without limitation: (a) one or more Vice Presidents, (b) a Chief Financial
Officer, (c) a Chief Operating Officer, and (d) a Secretary. Any number of the
offices established in the discretion of the Members Committee may be held by
the same individual.
4.7.2 The initial Senior Executive-Children's Network shall be
Loesch and the initial Senior Executive-Saban Entertainment shall be Saban
(referred to herein collectively as the "Senior Executives"). Saban may not be
removed or replaced as Senior Executive-Saban Entertainment by vote of the
Members, the Members Committee or any committee thereof (including the Operating
Committee) or otherwise, with or without cause; provided, however, that, subject
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to the terms and provisions of any employment agreement between the Company and
Saban, the provisions of this sentence shall have no force or effect at such
time as either a "Triggering Event" or a "Terminating Event," as those terms are
defined in Section 4.10 hereof, as occurred. Until the first to occur of (i) a
Triggering Event, (ii) a Terminating Event, or (iii) that date on which this
Section 4.7.2 is amended (which shall require the consent of each of SEI, FCNH
and Saban) to provide that the Senior Executives shall be appointed and serve at
the pleasure of the Members Committee, FCNH shall have the sole and exclusive
right to appoint (or remove) the Senior Executive Officer-Children's Network and
Saban shall have the sole and exclusive right to appoint (or remove) the Senior
Executive-Saban Entertainment; provided, however, each such Person will have the
right to veto one person proposed by the other to serve as such Senior Executive
in the course of designating each successor for Saban and Loesch. From and after
the date of such event or amendment identified in the preceding sentence, the
Senior Executives shall be appointed by the Members Committee.
4.7.3 Subject to the provisions of Section 4.8 below, the officers
of the Company shall have such powers, duties and obligations as are from time-
to-time designated by the Members Committee or the Operating Committee.
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4.8 SENIOR EXECUTIVES.
4.8.1 Subject to the provisions of Section 4.9 and 4.10 below, the
Members hereby delegate to and authorize the Senior Executive-Saban
Entertainment, to manage, control and supervise, in all respects and
particulars, SEI and any other businesses allocated to Senior Executive-Saban
Entertainment pursuant to Section 4.8.3 hereof (collectively, the "SEI Managed
Businesses"), and the business, activities, operations, assets, obligations and
liabilities of the SEI Managed Businesses. The rights, powers and duties of the
Senior Executive-Saban Entertainment shall, to the maximum extent permitted by
law, and subject to any contractual obligations of the SEI Managed Businesses,
include any and all rights, powers and obligations with respect to the SEI
Managed Businesses which under Delaware laws are granted to the shareholders,
board of directors, general managers and/or executive officers of the SEI
Managed Businesses, including but not limited to, the right to appoint and
remove the directors of the SEI Managed Businesses, to determine the retention,
termination, and designation and appointment of all corporate officers and other
employees, and to delegate any of such duties and responsibilities to other
officers and employees of the SEI Managed Businesses. The rights, powers and
authorities delegated to the Senior Executive-Saban hereunder shall include, but
not be limited to, the exercise of all rights, powers and authorities of the
Company with respect to SEI under the Management Agreement.
4.8.2 Subject to the provisions of Sections 4.9 and 4.10 below,
the Members hereby delegate to and authorize the Senior Executive- Children's
Network to manage, control and supervise, in all respects and particulars, FCN,
FCNH Sub and FCP, and any other businesses allocated to Senior Executive-
Children's Network pursuant to Section 4.8.3 hereof (collectively, the
"Children's Network Managed Businesses")and the business, activities,
operations, assets, obligations and liabilities of the Children's Network
Managed Businesses. The rights, powers and duties of the Senior Executive-
Children's Network hereunder shall, to the maximum extent permitted by law, and
subject to any contractual obligations of the Children's Network Managed
Businesses, include any and all rights, powers and obligations with respect to
each such Person which, under the Delaware laws are granted at law to the
shareholders, board of directors, general managers and/or executive officers of
the Children's Network Managed Businesses, including but not limited to, the
right to appoint and remove the directors of the Children's Network Managed
Businesses, to determine the retention, termination, and designation and
appointment of all corporate officers and other employees, and to delegate any
of such duties and responsibilities to other officers and employees of the
Children's Network Managed Businesses. The rights, powers and authorities
delegated to the Senior Executive-Children's Network hereunder shall include,
but not be limited to,
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the exercise of all rights, powers and authorities of the Company with respect
to FCN and FCP under the Management Agreement.
4.8.3 For purposes of this Agreement, those assets assigned to the
Management Company at the closing under the Formation Agreement pursuant to that
certain Asset Assignment Agreement of even date herewith and any operating
assets acquired after the date hereof (such as a separate kid's service or
production company), shall be allocated by the Members Committee to either or
both of the Children's Network Managed Businesses and the SEI Managed
Businesses.
4.9 OPERATIONAL VETO RIGHTS.
4.9.1 At any time or from time to time during the term of this
Agreement and prior to a Triggering Event and subject to any ongoing contractual
commitments of the Company to any Person who is not a Member or an Affiliate of
a Member, each Senior Executive may, by written notice (a "Management Decision
Notice") delivered to the Members Committee and the other Senior Executive,
require that any act, action or activity, or any group of acts, actions, or
activities under the management and control of the other Senior Executive may
not be agreed to, arranged or effected without the prior approval of the Senior
Executive delivering such Management Decision Notice.
The Management Decision Notice may be in such form as the delivering
party deems appropriate under the circumstances, and may include such matters as
threshold levels which must be exceeded, singularly or in the aggregate, to
necessitate Members Committee or Committee action. Once a Management Decision
Notice has been delivered, unless and until the Senior Executive who delivered
such Management Decision Notice modifies or rescinds such notice, or until a
Triggering Event disables such notice, neither the Company nor any of the
Operating Entities shall have the right or power to take effect any such act,
action or activity, or to enter into an agreement to do so, without the prior
approval of the Senior Executive who delivered the Management Decision Notice.
4.9.2 To provide an information flow which should enable the
respective Senior Executives to be able to prepare and deliver timely Management
Decision Notices, the two Senior Executives shall meet on a regular basis to
review the status of each other's business. In addition, each will agree to
advise the other of any proposed significant business transaction (including,
but not limited to, with respect to FCN, the ordering of any show for
production, and, with respect to SEI, a multi-year output agreement in any
territory) sufficiently in advance so as reasonably to allow the other to reach
a decision as to whether to deliver a Management Decision Notice with respect to
that transaction.
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4.10 SALE OF MORE THAN ONE-THIRD ORIGINAL INTEREST. Upon the occurrence
of a Triggering Event with respect to SEI or FCNH, then (x) the rights of the
applicable Senior Executive under Section 4.9 above shall terminate, (y) a
quorum for the conduct of business by the Members Committee and Operating
Committee under Sections 4.2.2 and 4.4 shall be modified to mean a majority of
the Committee Members of the Company, in the case of the Members Committee, and
a majority of the members of the committee, in the case of the Operating
Committee, (z) the requirement that action by the Members Committee or Operating
Committee be approved by a majority of the Class I Committee Members and a
majority of the Class II Committee Members shall terminate, and all further
action shall take place solely upon vote of a majority of those entitled to vote
thereon, and (aa) the class of Committee Members to be appointed by FCNH and
Saban, as the case may be, shall be reduced by one-half and the number of
representatives from such class on the Operating Committee shall be reduced by
one-half, and (bb) the right of FCNH or Saban, as the case may be, to appoint
the applicable Senior Executive pursuant to Section 4.7.2 shall terminate. Upon
the occurrence of a Terminating Event, the applicable party (FCNH in the case of
a Terminating Event with respect to FCNH and Saban with respect to a Terminating
Event with respect to SEI) shall lose all rights to appoint Committee Members to
the Members Committee of the Company and all other approval rights provided for
in this Agreement. For purposes of this Agreement, a Triggering Event with
respect to SEI or FCNH shall be deemed to occur on such date as the SEI
Stockholders or FBC, respectively, transfer more than one-third (after
adjustment for any stock splits, stock dividends, reorganization or
recapitalization effected after the date hereof) of the number of shares of SEI
Common Stock or FCNH Common Stock which they own at the date hereof; provided,
however, that any transfer effected pursuant to Section 3(b) or 3(c) of the
Strategic Stockholders Agreement shall not be deemed a transfer for these
purposes. A Terminating Event with respect to SEI or FCNH shall be deemed to
occur on such date as the SEI Stockholders or FBC, respectively, transfer more
than two-thirds (after adjustment for any stock splits, stock dividends,
reorganization or recapitalization effected after the date hereof) of the number
of shares of SEI Common Stock or FCNH Common Stock which they own at the date
hereof; provided, however, that any transfer effected pursuant to Section 3(b)
or 3(c) of the Strategic Stockholders Agreement shall not be deemed a transfer
for these purposes.
4.11 INDEMNIFICATION. The officers, Committee Members, employees and
agents of the Company shall be entitled to be indemnified by the Company for any
action taken or failure to act within the scope of the authority conferred on
the Member by this Agreement or by law, unless such action or omission was
performed or omitted in bad faith, involved intentional misconduct or a knowing
violation of law. This right of indemnification shall not be construed as being
in lieu of, or otherwise limiting, any right
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that any party may have under any agreement providing for indemnification by the
Company, any Member or any Operating Entity.
4.12 SPECIAL PROVISION RELATED TO ISRAEL LICENSEE. SEI currently
licenses and distributes certain of its properties (e.g., motion pictures,
television programs, other productions, merchandising and license rights) in the
country of Israel through Israel Audiovisual Corporation (the "Israeli
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Licensee"). Notwithstanding anything to the contrary contained herein or in any
of other Alliance Agreement, so long as Saban is the Senior Executive-Saban
Entertainment, SEI may distribute and/or license all current or future
properties of the Company, FCN and SEI to the Israel Licensee on the same basis
as SEI currently distributes its properties in Israel. Notwithstanding the
foregoing, SEI shall not grant rights to the Israeli Licensee that conflict with
or restrict the Company's ability to grant to others satellite broadcast rights
in a territory including Israel.
4.13 SABAN RECEIVABLE. At the date hereof, Saban owes SEI an amount
equal to $2,649,000. Notwithstanding anything to the contrary contained herein,
effective as of the date hereof, SEI shall forgive the payment of such amount
and Saban shall have no further liability with respect thereto.
4.14 FIDUCIARY DUTIES. Notwithstanding anything to the contrary
contained herein, each of the Members, on its own behalf and on behalf of its
Affiliates, agrees that it will exercise the governance rights and veto rights
accorded to it pursuant to this Agreement and the other Alliance Agreements in
good faith and in a manner it believes to be in the best interests of the
Company and the Members taken as a whole and shall not exercise any of such
rights for the purpose of exploiting a business opportunity itself separate from
the Company.
ARTICLE 5
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS, ALLOCATION OF TAX ITEMS; MEMBER LOANS;
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DISTRIBUTIONS
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5.1 INITIAL CAPITAL CONTRIBUTIONS.
5.1.1 Each of SEI, FBC and FCNH have made initial capital
contributions to the Company as provided in the Formation Agreement.
5.1.2 SEI shall make an additional capital contribution in an
amount up to $14.5 million to the Company to the extent the Members Committee
determines that such contribution is necessary in
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order to allow the Company to make the first installment payment due on the FBC
Loan referred to in Section 5.8 hereof.
5.1.3 For purposes of this Agreement, any payment to the Company
by FBC pursuant to Section 10(i)(B) of the Strategic Stockholders Agreement
shall constitute a capital contribution by FBC.
5.2 ADDITIONAL CAPITAL CONTRIBUTIONS. Other than as set forth in
Section 5.1 hereof or pursuant to the provisions of Section 5.9.1 hereof, no
Member is required to make any additional capital contribution to the Company
and no such additional capital contribution may be made by any Member without
the approval of the Members Committee.
5.3 MAINTENANCE OF CAPITAL ACCOUNTS. A Capital Account shall be
established and maintained on the books of the Company for each Member.
5.4 ALLOCATION OF TAX ITEMS. "Net Income" and "Net Loss" shall mean,
with respect to each taxable year of the Company, the net income or net loss of
the Company for such taxable year for federal and state income tax purposes,
including, without limitation, each item of Company taxable income, loss,
deduction or credit and any net gain or net loss from the sale, exchange or
other disposition of Company assets.
5.4.1 Net Income for each taxable year of the Company (the
"Subject Taxable Year") shall be allocated to the Members as follows:
(a) First, to the Members to the extent that aggregate Net
Losses allocated to them pursuant to Section 5.4.2 hereof, from the inception of
the Company, are in excess of aggregate Net Income allocated to them pursuant to
this Section 5.4.1(a), from the inception of the Company, in accordance with the
ratio of such excesses, until all such excesses shall have been eliminated.
(b) Second, to the Class A Member, to the extent of the
excess, if any, of (i) the aggregate of the amounts distributed to it under
Sections 5.7.3, 5.7.4, 8.4.1(c) and 8.4.1(d) with respect to all taxable years
of the Company up to and including the Subject Taxable Year over (ii) the
aggregate Net Income allocated to it under this Section 5.4.1(b) for all taxable
years of the Company prior to the Subject Taxable Year.
(c) Third, to the Class B Members in accordance with their
Interests in the Company.
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5.4.2 Net Loss for each taxable year of the Company shall be
allocated to the Members in accordance with their Interest in the Company.
5.4.3 Notwithstanding any provision in this Section 5, if by
reason of any of the transactions set forth in this Agreement or the Asset
Assignment Agreement any Member is treated as receiving imputed interest from
the Company, any corresponding deduction allowed to the Company for such
interest shall be specially allocated to the Member which is treated as
receiving such imputed interest.
5.4.4 Notwithstanding any provision in this Section 5, if any
distribution to a Member under this Section 5 is treated as a payment to a
Member other than in its capacity as a Member and such payment constitutes
income to such Member for tax purposes, any deduction allowed to the Company by
reason of such treatment shall be specially allocated to such Member.
5.5 NEGATIVE CAPITAL ACCOUNTS. Except to the extent the Members make
contributions to the capital of the Company, no Member shall be required to pay
to the Company or to any other Member any deficit or negative balance which may
exist from time to time in such Member's Capital Account.
5.6 TAX DISTRIBUTIONS. The Company shall make mandatory distributions
of Distributable Cash to cover the actual tax liability of the Members with
respect to their allocable share of the income of the Company, except that no
such distributions shall be made to cover any Member's tax liability with
respect to any income allocated to it under Section 5.4.1(a) or Section 5.4.1(b)
hereof. In no event shall distributions be made under this Section 5.6 to the
Class A Member until the aggregate Net Income allocated to it from the inception
of the Company exceeds the aggregate Net Losses allocated to it from the
inception of the Company by $50,000,000.
5.7 ADDITIONAL DISTRIBUTIONS. Unless the Members Committee of the
Company determines otherwise (which discretion shall terminate at the time of a
Triggering Event), the Company shall distribute all of its Distributable Cash at
the end of each fiscal year within 90 days thereafter in the following order of
priority:
5.7.1 First, as provided in Section 5.6 hereof;
5.7.2 Second, to reduce the principal balance on the FBC Loan
prov1 ided for in Section 5.8 hereof until such principal balance has been paid
in full;
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5.7.3 Third, to FBC in payment of the Company's obligations under
Section 9.3.15 hereof until such obligation is paid in full;
5.7.4 Fourth, to the Class A Member until the Class A Member has
received aggregate distributions under this Section 5.7.4 in the aggregate
amount of $40 million, after which the Class A Member shall not have any further
right to receive any distributions hereunder.
5.7.5 Fifth, to the Class B Members as from time to time
determined by the Members Committee.
5.8 FBC LOAN. FBC shall loan the Company $64.5 million interest free on
the date of this Agreement, which loan (the "FBC Loan") shall (i) be evidenced
by a separate unsecured promissory note reasonably acceptable to the Company and
FBC which contains the terms summarized in this Section 5.8 and otherwise terms
and conditions customary in commercial transactions, and (ii) be repaid in
installments, the first installment being in the amount of $14.5 million and
payable on July 15, 1996 and the remaining installments payable solely out of
Distributable Cash as provided in Section 5.7.2 and liquidation proceeds as
provided in Section 8.4.1(b) hereof.
5.9 TRANSFER OF DISTRIBUTABLE CASH TO THE COMPANY; DIVIDENDS.
5.9.1 In the event any Distributable Cash is located in the
accounts of any Operating Entity and the Company is obligated under this
Agreement to distribute such Distributable Cash, then the Members shall
cooperate with one another in order to arrange for a transfer of such
Distributable Cash to the Company for distribution to the Members.
5.9.2 Further, FCNH agrees to cause FCN to make a dividend payment
to FCNH Sub at the time or times during each fiscal year that FCN distributes
net profits to its station affiliates in the amount that would have been payable
to Fox Television Stations, Inc. on behalf of the Designated Fox O&Os (as
defined in the Asset Assignment Agreement dated as of the date hereof by and
between FBC and the Company (the "Asset Assignment Agreement") pursuant to the
terms of the Station Affiliate Agreements between such entities and FCN had such
Station Affiliate Agreements not been amended in accordance with the provisions
of the Asset Assignment Agreement.
5.10 RETURN OF DISTRIBUTIONS. Except for distributions made in violation
of the Delaware Act or this Agreement, no Member shall be obligated to return
any distribution to the Company or pay the amount of any distribution for the
account of the Company or to any
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creditor of the Company. The amount of any distribution returned to the Company
by a Member or paid by a Member for the account of the Company or to a creditor
of the Company shall be added to the account or accounts from which it was
subtracted when it was distributed to the Member.
5.11 NO INTEREST. No Member shall be entitled to receive any payment or
accrual in the nature of interest on such Member's capital contributions.
5.12 TAX MATTERS PARTNER. The Members Committee shall designate one of
the Members as the "tax matters partner" (as defined in the Code). The Tax
Matters Partner shall take no action which is reasonably likely to have a
material adverse affect on one or more of the Members unless such action is
approved by the Members Committee or the Operating Committee.
5.13 TAXATION AS A PARTNERSHIP. The Members intend that, for federal and
state tax purposes, the Company should and will be taxed as a partnership. The
Members agree to cooperate and to take such steps as are reasonably necessary,
if any, by amendment of this Agreement or otherwise to assure that the Company
will be taxed as a partnership.
ARTICLE 6
EXCULPATION; INDEMNIFICATION
----------------------------
6.1 NO LIABILITY. No Member, officer, director, partner, shareholder,
employee, attorney, trustee, manager or adviser of any Member or any of the
Operating Entities shall be liable, accountable or responsible in damages or
otherwise to a Member or the Company for any action taken or failure to act
within the scope of the authority conferred on the Member or such other Person
by this Agreement or with regard to this Agreement by law, unless such action or
omission was performed or omitted in bad faith, involved intentional misconduct
or a knowing violation of law.
6.2 COMPANY INDEMNITY OBLIGATIONS. The Company shall indemnify and hold
harmless each of the Members, their respective Affiliates, and their respective
officers, directors, partners, shareholders, employees, attorneys, trustees,
managers, advisers and agents (the "Indemnified Parties") from and against any
and all losses incurred by any of them by reason of any acts, omissions or
alleged acts or omissions by any of the Indemnified Parties (i) undertaken or
omitted in the good faith belief that such act or omission was in furtherance of
the Company's Business, (ii) undertaken or omitted not in contravention of this
Agreement, and (iii) other than where such loss is incurred as a result of any
actual or threatened civil, criminal, administrative or
16
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investigative action, proceeding or claim; provided, however, that if an
Indemnified Party is finally determined by any court of competent jurisdiction
or by any arbitrator to have acted or omitted to act in a manner which is in
contravention of the standard set forth in any of the foregoing clauses (i),
(ii) or (iii), the Indemnified Party shall repay all amounts paid or reimbursed
by the Company.
6.3 SETTLEMENT; PROCEDURES. The Company shall not be required to
indemnify any Indemnified Party for any amount paid or payable by such
Indemnified Party in the settlement of any action, proceeding or investigation
agreed to without the written consent of such Company (which consent shall not
be unreasonably withheld or delayed). Promptly after receipt by an Indemnified
Party of notice of its involvement in any action, proceeding or investigation,
such Indemnified Party shall, if a claim in respect thereof is to be made
against the Company under this Section, notify Company in writing of such
involvement. No failure by such an Indemnified Party to so notify the Company
shall relieve the Company from the obligation to indemnify such Indemnified
Party unless and to the extent that the Company shall have been actually
prejudiced by such failure. To the extent it wishes, the Company shall be
entitled to assume the defense of any action that is the subject of this Section
with counsel reasonably satisfactory to such Indemnified Party; provided,
--------
however, that such Indemnified Party may retain its own counsel at its expense
- -------
if representation of both such Indemnified Party and the Company would, in the
reasonable judgment of such Indemnified Party, be inappropriate due to actual or
potential differing interests between them.
6.4 WITHDRAWAL. This Article 6 shall survive the withdrawal of any
Member from the Company and any termination or dissolution of the Company:
provided, however, that in no event shall any Member (or former Member) be
- -------- -------
liable for any liability or obligation resulting from acts or omissions which
occurred following such withdrawal, termination or dissolution except as
expressly provided in this Agreement.
6.5 SETTLEMENTS CONDITIONED UPON FULL RELEASE. The Company will not,
without the prior written consent of each affected Indemnified Party, settle or
compromise any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought under this Article 6, unless such
settlement or compromise includes a full and unconditional release of each such
Indemnified Party from all liability arising out of such claim, action, suit or
proceeding, reasonably satisfactory in form and substance to such Indemnified
Party.
6.6 SUBROGATION. If any Indemnified Party receives payment or other
indemnification from the Company with respect to any claim or demand by any
third Person against the Indemnified Party, the
17
<PAGE>
Company shall be subrogated to the extent of such payment or indemnification to
all rights in respect of the subject matter of such claim to which the
Indemnified Party may be entitled, to institute appropriate action for the
recovery thereof, and the Indemnified Party agrees to provide reasonable levels
of assistance and cooperation to the Company, in enforcing such rights;
provided, however, that no right of subrogation shall exist in favor of the
- -------- -------
Company to institute any action for the recovery of any amount from any officer
or Member of the Members Committee or any officer or director of any Member, if
the actions of such officer, director or Member of the Members Committee giving
rise to the indemnified claim would prohibit indemnification by the Company of
such officer, director or Member of the Members Committee under this Agreement
solely because such officer, director or Member of the Members Committee did not
meet the applicable standard of conduct set forth in this Agreement, and not as
a result of the unavailability of indemnification as a result of any public
policy or for any other reason.
ARTICLE 7
BOOKS OF ACCOUNT, ACCOUNTING AND REPORTS
----------------------------------------
7.1 BOOKS AND RECORDS. The books and records of the Company shall be
kept, and the financial position and the results of its operations recorded, in
accordance with the GAAP. The books and records of the Company shall reflect all
Company transactions and shall be appropriate and adequate for the Company's
business.
7.2 INSPECTION RIGHTS. Each Class B Member and any of its designated
representatives has the right, upon reasonable request for purposes reasonably
related to the interest of the Person as a Member, to inspect and copy, at the
Company's expense, during normal business hours any of the Company books and
records.
7.3 ANNUAL AND QUARTERLY STATEMENTS.
7.3.1 Within 45 days following the end of each fiscal quarter of
the Company, the Members Committee shall prepare and submit or cause to be
prepared and submitted to the Class B Members an unaudited income statement for
such fiscal quarter and a balance sheet as of the end of such quarter, in each
case (where applicable) with information for the comparable period during the
prior fiscal year of the Company and further, in each case prepared in
accordance with GAAP.
7.3.2 Within 90 days following the end of each fiscal year of the
Company, the Members Committee shall prepare and submit or cause to be prepared
and submitted to the Class B Members (i) an audited balance sheet, together with
audited income statements,
18
<PAGE>
Members equity and changes in financial position for the Company during such
fiscal year; a report on activities during the fiscal year; and an audited
statement showing any amounts distributed to a Member in respect of such fiscal
year.
7.3.3 The Members Committee shall cause to be prepared at least
annually, at the expense of the Company, information necessary for the
preparation of the Members' federal and state income tax returns. The Members
Committee shall send or cause to be sent to each Member within 60 days after the
end of each taxable year such information as is necessary to complete its
federal and state income tax or information returns, and, a copy of the
Company's federal, state, and local income tax or information returns for that
year.
7.4 CERTIFIED PUBLIC ACCOUNTANTS. Until otherwise determined by the
Members Committee, Ernst & Young LLP shall serve as the outside accountants for
the Company.
7.5 BANK ACCOUNTS. All funds and monies of the Company shall be
deposited in its name in such accounts and at such banks as shall be from time
to time determined by the Members Committee.
7.6 TAX ELECTIONS. All federal or state income tax elections, and other
tax policy determinations shall be subject to approval of the Members Committee.
ARTICLE 8
DISSOLUTION AND LIQUIDATION OF THE COMPANY
------------------------------------------
8.1 DISSOLUTION. The Company shall dissolve upon the happening of any
one of the following events:
8.1.1 Any event which results in the Company having less than two
Members.
8.1.2 The Bankruptcy, death, retirement, withdrawal, or incapacity
of any Member, unless the remaining Members determine to continue the existence
of the Company. Each of SEI and FCNH hereby agree to continue the existence of
the Company notwithstanding the termination of FBC's Class A Membership pursuant
to the provisions of Section 3.2 hereof.
8.2 EFFECT OF DISSOLUTION. The dissolution of the Company shall be
effective on the day on which the event occurs giving rise to the dissolution,
but the Company shall not terminate until this Agreement has been canceled and
the assets of the Company shall have been distributed as provided in Section 8.4
of this Agreement and the Delaware Act. Notwithstanding the dissolution of the
19
<PAGE>
Company, prior to the termination of the Company, the business of the Company
and the affairs of the Members, as such, shall continue to be governed by this
Agreement. The dissolution of the Company shall not result in the termination or
modification of any provision of any other agreement between the Company and any
of its Members or Affiliates thereof except as provided in such other agreement.
8.3 NO RECOURSE AGAINST MEMBERS FOR DISTRIBUTION. Except as expressly
provided herein to the contrary, each Member shall look solely to the assets of
the Company for all distributions with respect to the Company, for return of its
capital contribution thereto, for its share of net profit or net loss, and for
any other payment in respect of its interest in the Company, and shall have no
recourse therefor (upon dissolution or otherwise) against the other Members.
8.4 LIQUIDATION.
8.4.1 Upon dissolution of the Company, the Class B Members shall
liquidate the assets of the Company, and after allocating all Net Income or Net
Loss for the fiscal year in which such dissolution occurs (including any capital
gain or loss resulting from the disposition of such assets) in accordance with
Section 5.4 hereof and shall apply and distribute the proceeds thereof (a)
first, to the payment of the obligations of the Company to third parties, to the
expenses of liquidation, and to the setting up of any reserves for contingencies
which the Members may consider necessary, (b) second, to FBC to retire any
remaining outstanding and unpaid principal on the FBC Loan, (c) third, to FBC in
an amount equal to the positive difference, if any, between $10 million and the
aggregate of all payments out of Distributable Cash paid to FBC pursuant to
Section 5.7.3 hereof, (d) fourth, to the Class A Member in an amount equal to
the positive difference, if any, between $40 million and the aggregate of all
distributions of Distributable Cash distributed to the Class A Member pursuant
to Section 5.7.4 hereof, and (e) the balance to the Class B Members in
accordance with their respective Capital Accounts (as adjusted to reflect the
aforesaid allocation of Net Income or Net Loss).
8.4.2 Notwithstanding Section 8.4.1, in the event that the Class B
Members determine that an immediate sale of all or any portion of the Company's
assets would cause undue loss to the Members, the Class B Members, in order to
avoid such loss, may either defer liquidation of and withhold from distribution
for a reasonable time any assets of the Company except those necessary to
satisfy the Company's debts and obligations, or distribute the assets to the
Members in kind.
8.4.3 If any assets of the Company are to be distributed in kind,
such assets shall be distributed on the basis
20
<PAGE>
of the fair market value thereof, and any Member entitled to any interest in
such assets shall receive an interest therein as a tenant-in-common with all
other Members so entitled.
8.4.4 The Members Committee or surviving Member shall cause the
cancellation of this Agreement following the liquidation and distribution of all
of the Company's assets.
8.4.5 Notwithstanding anything in this Article 8 to the contrary,
in the event of dissolution as required in Section 8.1.1 the Members shall work
with one another to arrive at terms and conditions for the ordinary and
equitable dissolution of the Company.
8.4.6 No Member shall have any obligation to restore any deficit
balance in such Member's Capital Account upon completion of the liquidation
described in this Section 8.4.
ARTICLE 9
MISCELLANEOUS PROVISIONS
------------------------
9.1 MISCELLANEOUS. In this Agreement, headings are for con venience
only and shall not affect interpretation, and except to the extent that the
context otherwise requires: (a) references to any legislation or to any
provision of any legislation include any modification or re-enactment of, or any
legislative provision substituted for, and all statutory instruments issued
under, such legislation or such provision; (b) words denoting the singular
include the plural and vice versa; (c) words denoting individuals include
corporations and other Persons and vice versa; (d) words denoting any gender
include all genders; (e) references to any document, agreement or other
instrument (including this Agreement) include references to such document,
agreement or other instrument as amended, novated, supplemented or replaced from
time to time; (f) references to clauses, sub-clauses, sections, sub-sections,
Schedules and Exhibits are to clauses, sub-clauses, sections, sub-sections,
Schedules and Exhibits of this Agreement; (g) "or" is not exclusive; (h) "$",
and all other references to dollar amounts, are in U. S. currency; (i)
references to any party to this Agreement or any other document, agreement or
other instrument includes its successors or permitted assigns; and (j) "writing"
and cognate expressions include all means of reproducing words in a tangible and
permanently visible form.
9.2 RIGHTS PERSONAL TO FCNH AND SABAN. Each and every right and
obligation which refers to "Saban" or FCNH is personal to Saban or FCNH, as the
case may be, and shall not attach to, or be deemed to relate to or concern the
Shares held by Saban or FCNH; and thus, without the prior written consent of
both Saban and FCNH none of
21
<PAGE>
such rights or obligations may be assigned, delegated or transferred to any
other Person; provided, however, that in the event of the incompetency or death
-------- -------
of Saban, all rights granted to Saban hereunder shall be exercisable by his
conservator, executor or administrator, or by a single Person from time to time
designated by SEI Stockholders then holding a majority of the then outstanding
Shares of SEI Common Stock held by all SEI Stockholders.
9.3 NOTICES. All notices, demands or other communications hereunder
shall be in writing and shall be deemed to have been duly given (i) if delivered
in person, upon delivery thereof, or (ii) if mailed, certified first class mail,
postage pre-paid, with return receipt requested, on the fifth day after the
mailing, or (iii) if sent by telex or facsimile transmission, with a copy mailed
on the same day in the manner provided in (ii) above, when transmitted and
receipt is confirmed by telephone or telex or facsimile response, or (iv) if
otherwise actually delivered, when delivered:
9.3.1 If to FCNH:
FCN Holding, Inc.
FOX INC.
10201 W. Pico Boulevard
Los Angeles, CA 90035
SVP Legal Affairs
Fox Television Group
Attention: Jay Itzkowitz, Esq.
Fax: (310) 369-2572
With a copy to:
Squadron, Ellenoff, Plesent &
Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attention: Harry Horowitz, Esq.
Fax: (212) 697-6686
9.3.2 If to FBC:
FOX INC.
10201 W. Pico Boulevard
Los Angeles, CA
SVP Legal Affairs
Fox Television Group
Attention: Jay Itzkowitz, Esq.
Fax: (310) 369-2572
22
<PAGE>
With a copy to:
Squadron, Ellenoff, Plesent &
Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attention: Harry Horowitz, Esq.
Fax: (212) 697-6686
9.3.3 If to Saban or SEI:
Saban Entertainment, Inc.
10960 Wilshire Boulevard
Los Angeles, CA 90024
Fax: (310) 235-5108
With a copy to:
Matthew G. Krane, Esq.
2051 Hercules Drive
Los Angeles, CA 90046
Fax: (213) 851-1178
and with a copy to:
Troop Meisinger Steuber & Pasich, LLP
10940 Wilshire Boulevard, Suite 800
Los Angeles, California 90024
Attention: Richard E. Troop, Esq.
Fax: (310) 443-8503
or at such other address or addresses as may have been furnished by such Person
in like manner to the other parties.
9.3.4 SEVERABILITY. Should any Section or any part of a Section
within this Agreement be rendered void, invalid or unenforceable by any court of
law for any reason, such invalidity or unenforceability shall not void or render
invalid or unenforceable any other Section or part of a Section in this
Agreement.
9.3.5 GOVERNING LAW. THE TERMS OF THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA
APPLICABLE TO CONTRACTS MADE WITHIN, AND TO BE PERFORMED WITHIN, SUCH STATE,
EXCLUDING CHOICE OF LAW PRINCIPLES OF SUCH STATE THAT WOULD REQUIRE THE
APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
9.3.6 NO ADVERSE CONSTRUCTION. The rule that a contract is to be
construed against the party drafting the contract
23
<PAGE>
is hereby waived, and shall have no applicability in construing this Agreement
or the terms of this Agreement.
9.3.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall 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.
9.3.8 COSTS AND ATTORNEYS' FEES. In the event that any action,
suit, or other proceeding is instituted concerning or arising out of this
Agreement, the prevailing party shall recover all of such party's costs, and
attorneys' fees incurred in each and every such action, suit, or other
proceeding, including any and all appeals or petitions therefrom. As used
herein, "attorneys' fees" shall mean the full and actual costs of any legal
services actually rendered in connection with the matters involved, calculated
on the basis of the usual fee charged by the attorneys performing such services,
and shall not be limited to "reasonable attorneys' fees" as defined by any
statute or rule of court.
9.3.9 SUCCESSORS AND ASSIGNS. Except as otherwise provided in
this Agreement, all rights, covenants and agreements of the parties contained in
this Agreement shall be binding upon and inure to the benefit of their
respective successors and permitted assigns. Except as otherwise specifically
set forth herein, nothing in this Agreement, expressed or implied, is intended
to confer on any Person other than the parties to this Agreement or their
respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
9.3.10 AMENDMENTS AND WAIVERS. Neither this Agreement nor any term
hereof may be changed, waived, discharged or terminated orally or in writing,
except that any term of this Agreement may be amended and the observance of any
such term may be waived (either generally or in a particular instance and either
retroactively or prospectively) with (but only with) the written consent of each
of the Class B Members and Saban; provided, however, that no such amendment or
-------- -------
waiver shall extend to or affect the obligation to make distributions to the
Class A Member pursuant to Sections 5.7.2, 5.7.3, 5.7.4, 8.4.1(b), 8.4.1(c) or
8.4.1(d) without the consent of the Class A Member; and provided further, that
----------------
no such amendment or waiver shall extend to or affect any obligation not
expressly waived or impair any right consequent therein. No delay or omission to
exercise any right, power or remedy accruing to any party hereto shall impair
any such right, power or remedy of such party nor be construed to be a waiver of
any such right, power or remedy nor constitute any course of dealing or
performance hereunder.
24
<PAGE>
9.3.11 ENTIRE AGREEMENT. This Agreement, the attached Exhibits and
Schedules and the agreements referred to herein and therein, together contain
the entire understanding of the parties, and there are no further or other
agreements or understandings, written or oral, in effect between the parties
relating to the subject matter hereof unless expressly referred to herein. No
party to this Agreement makes any representation or warranty except as expressly
set forth herein.
9.3.12 AGREEMENT TO PERFORM REQUIRED ACTS. Each party hereto
agrees to perform any further acts and to execute and deliver any further
documents that may be reasonably necessary to carry out the provisions hereof,
that may be required to secure performance of any party's duties hereunder or
that may be required to assure the legal and binding effect of the provisions
hereof.
9.3.13 CONSENT TO JURISDICTION; FORUM SELECTION. Any actions,
suits or proceedings instituted in connection with this Agreement or the
performance by the parties of their obligations hereunder shall be instituted
and maintained exclusively in the Superior Court for the State of California,
County of Los Angeles or in the United States District Court for the Central
District of California. By execution and delivery hereof, each party hereto
hereby consents, for itself and in respect of its property, to the jurisdiction
of the aforesaid courts solely for the purpose of adjudicating its rights or
obligations under, or any disputes involving, this Agreement or any document
related hereto. Each party hereto hereby irrevocably waives, to the extent
permitted by applicable law, any objection, including, without limitation, any
objection that the other corporate party or parties lack the capacity to sue or
defend based upon its or their lack of a certificate of qualification to conduct
intrastate business in California, and any objection to the laying of venue or
based on the grounds of forum non conveniens, which it may now or hereafter have
----- --- ----------
to the bringing of any action or proceeding in such jurisdiction in respect of
this Agreement or any document related hereto.
9.3.14 DEADLOCK. The parties intend that any controversy or
dispute with regard to the management of the Company which results in a deadlock
between them, or between members of the Members Committee or the Operating
Committee, is to be resolved between them without the intervention of any court
or other tribunal and each party expressly waives the right or power to seek
relief (including, but not limited to dissolution) from any court (whether
sitting in law or equity) with respect thereto.
9.3.15 ADMINISTRATION AGREEMENT. Pursuant to Section 10.2 of the
Asset Assignment Agreement, the Company has assumed all of the executory
obligations of FBC under that certain Administration Agreement by and between
FCN and FBC dated as of
25
<PAGE>
February 7, 1990 ("Administration Agreement"). For so long as FCNH remains a
Member hereunder, it shall be the sole responsibility of FBC to carry out all of
such obligations on behalf of the Company. FBC shall receive a fixed fee in the
amount of $10,000,000 in consideration of all services performed under this
Section, which amount shall be solely paid out of Distributable Cash or
liquidation proceeds as provided in Sections 5.7.3 and 8.4.1(c). The Company
may, upon delivery of six months notice to FBC, release FBC from any and all of
its obligations under this Section 9.3.15, provided that such release shall not
-------- ----
affect FBC's right to receive its fee hereunder, and provided further, that such
-------- -------
release shall not affect the obligations in the Administration Agreement assumed
by Company.
26
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
SABAN ENTERTAINMENT, INC.
By: /s/ Haim Saban
----------------------------
Haim Saban
Its: Chief Executive Officer
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
FCN HOLDING, INC.
By: /s/ Jay Itzkowitz
------------------------------
Its: Senior Vice President
FOX BROADCASTING COMPANY
By: /s/ Jay Itzkowitz
------------------------------
Its: Senior Vice President
28
<PAGE>
EXHIBIT A
DEFINED TERMS
Definitions. As used in the Agreement to which this Exhibit is attached
-----------
(the "Agreement"), the following terms shall have the following meanings:
"AFFILIATE" shall mean, any Person which directly or indirectly
controls, or is controlled by, or is under common control with another Person.
The term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, or otherwise.
"ALLIANCE AGREEMENTS" shall have the meaning set forth in the
Formation Agreement.
"ASSET ASSIGNMENT AGREEMENT" means that certain Asset Assignment
Agreement, dated as of the date hereof, by and among, inter alia, FBC and the
----- ----
Company.
"BANKRUPTCY" means: (a) the filing of an application by a Member for,
or its consent to, the appointment of, a trustee, receiver or custodian of its
assets; (b) the entry of an order for relief with respect to a Member in
proceedings under the United States Bankruptcy Code, as amended from time to
time; (c) the making by a Member of a general assignment for the benefit of
creditors; (d) the entry of an order, judgment or decree by any court of
competent jurisdiction appointing a trustee, receiver or custodian of the assets
of a Member unless the proceedings and the Person appointed are dismissed within
one hundred twenty (120) days; or (e) the failure by a Member generally to pay
its debts as the debts become due within the meaning of Section 303(h)(1) of the
United States Bankruptcy Code, as determined by the Bankruptcy Court, or the
admission by a Member in writing of its inability to pay its debts as they
become due.
"CAPITAL ACCOUNTS" mean capital accounts maintained for the Members
in accordance with Section 1.704-1(b) of the Treasury Regulations.
"CERTIFICATE OF FORMATION" means the Certificate of Formation of the
Company in the form set forth in Schedule 2.1, which has been filed with the
------------
Secretary of State of the State of Delaware.
29
<PAGE>
"CLASS A MEMBER" means FBC.
"CLASS B MEMBERS" means SEI and FCNH.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" shall mean FOX KIDS WORLDWIDE, L.L.C., the limited liability
company formed hereby.
"COMPANY'S BUSINESS" shall have the meaning set forth in Section 2.5
of this Agreement.
"DELAWARE ACT" shall mean the Limited Liability Company Act of the
State of Delaware as the same may be amended from time to time.
"DISTRIBUTABLE CASH" means, at the time a determination of
Distributable Cash is made, the amount of cash which the Members Committee
reasonably determines is available for distribution to Members taking into
account all cash amounts, debts, liabilities, and obligations of the Company and
each of the Operating Entities then due and after setting aside reserves
("Reserves") in an amount reasonably deemed necessary to provide for the
Company's or such Operating Entities' current or planned capital expenditures,
debt service, working capital and expansion plans. If the Members Committee is
unable to agree as to the amount of the Reserves, then Reserves shall be
maintained in an amount equal to $30 Million.
"FBC" shall mean the Fox Broadcasting Company, a Delaware corporation.
"FBC COMMON STOCK shall have the meaning ascribed to such term in the
Strategic Stockholders Agreement.
"FBC LOAN" shall have the meaning set forth in Section 5.8 of this
Agreement.
"FBC SERVICE FEE" shall have the meaning set forth in Section 9.3.15
of this Agreement.
"FCN" means the Fox Children's Network, Inc., a Delaware corporation,
and its direct and indirect subsidiaries.
"FCNH SUB" means FCNH Sub, Inc., a Delaware corporation and a wholly
owned subsidiary of FCNH and the parent of FCN and FCP.
"FCNH" means FCN Holding, Inc., a Delaware corporation.
30
<PAGE>
"FCP" means Fox Children's Productions, Inc., a Delaware corporation.
"FORMATION AGREEMENT" shall have the meaning set forth in the Recitals
to this Agreement
"GAAP" means generally accepted principles as in effect on the date
hereof.
"INTEREST IN THE COMPANY" shall mean with respect to each Member its
"partner's interest in the partnership," as such term is defined in Section
704(b) of the Code and the Treasury Regulations thereunder.
"LOESCH" means Margaret Loesch.
"MANAGEMENT AGREEMENT" means that certain Management Agreement, dated
as of the date hereof, by and among FCNH Sub, SEI and the Company.
"MANAGEMENT DECISION NOTICE" shall have the meaning set forth in
Section 4.9.1 of this Agreement.
"MEMBER(S)" shall mean individually each of the Class A Members and
the Class B Members and collectively all of the foregoing.
"MEMBERS COMMITTEE" shall have the meaning set forth in Section 4.1.1
of this Agreement.
"OPERATING AGREEMENT" shall mean this Operating Agreement entered into
by and between SEI, FBC and FCNH.
"OPERATING COMMITTEE" shall mean that certain operating committee
established by the Members Committee pursuant to Section 4.4 of the Operating
Agreement.
"OPERATING ENTITIES" shall mean and include SEI, FCN and FCP and their
respective subsidiaries.
"PERSON" means an individual, partnership, corporation, limited
liability company, limited liability partnership, business trust, joint stock
company, trust, unincorporated association, joint venture, governmental
authority or other entity of whatever nature.
"SABAN" means Haim Saban.
"SEI" means Saban Entertainment, Inc., a Delaware corporation, and its
direct and indirect subsidiaries.
31
<PAGE>
"SEI STOCKHOLDERS AND SEI COMMON STOCK shall have the meanings
ascribed to such terms in the Strategic Stockholders Agreement.
"STRATEGIC SHAREHOLDERS AGREEMENT" shall mean that certain Strategic
Shareholders Agreement dated as of the date hereof by and between, among others,
SEI, FCNH, Saban, FBC and the SEI Stockholders named therein.
"TERMINATING EVENT" shall have the meaning set forth in Section 4.10
of this Agreement.
"TREASURY REGULATIONS" means the Treasury Regulations, as amended,
adopted by the Internal Revenue Service under the Code.
"TRIGGERING EVENT" shall have the meaning set forth in Section 4.10
hereof.
32
<PAGE>
EXHIBIT 10.14
AMENDMENT NO. 2
TO
OPERATING AGREEMENT
This Amendment No. 2 to the Operating Agreement (the "Amendment") of Fox
Kids Worldwide, L.L.C., a Delaware limited liability company (the "Company"), is
made and entered into as of July 31, 1997, by and among Saban Entertainment,
Inc. ("SEI"), FCN Holding, Inc. ("FCNH"), Fox Broadcasting Company ("FBC") and
Fox Kids Worldwide, Inc. ("Fox Kids"), which are each Delaware corporations.
R E C I T A L S
- - - - - - - -
A. SEI, FCNH and FBC are parties to that certain Operating
Agreement, dated as of December 22, 1995, as amended by Amendment No. 1 to
Operating Agreement dated as of September 27, 1996 (the "Agreement"). All terms
defined in the Agreement which are not defined in this Amendment shall have the
same meanings when used in this Amendment.
B. The parties desire to amend the Agreement to reflect agreed upon
modifications and deletions of various sections thereof.
C. Pursuant to Section 9.3.10 of the Agreement, Sections 3.2, 5.7.4
and 8.4.1(d) of the Agreement may be amended only with the written consent of
each of the Class B Members, Saban and the Class A Member.
D. In connection with the reorganization (the "Reorganization") of
SEI and FCNH into Fox Kids pursuant to that certain Agreement dated as of June
11, 1997 (the "Reorganization Agreement"), the parties to this Amendment have
determined that it is in the best interest of all of the parties that this
Agreement be amended to reflect the Reorganization.
E. In connection with the Reorganization, FBC is transferring to Fox
Kids a $50 million note receivable due to it from the Company and is assigning
to Fox Kids its current Class A membership interest in the Company, and is
assigning to Fox Kids existing intercompany indebtedness of $4,573,000 owed to
FBC or its affiliates by the Company or its affiliates, and in consideration
therefor, Fox Kids is issuing a note in the amount of $104,573,000 to FBC under
the Subordinated Note Agreement between Fox Kids and FBC. In the possession of
Fox Kids, the Class A membership interest in the Company shall be a Class B
membership interest.
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A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, in consideration of the foregoing facts, the parties hereto
agree as follows:
1. Section 3.2 of the Agreement is amended to read in full as follows:
3.2 [Intentionally deleted.]
2. Section 3.3 of the Agreement is amended to read in full as follows:
3.3 CLASS B MEMBERS. Each of SEI, FCNH and Fox Kids shall be a Class
B Member. As a Class B Member, each of SEI, FCNH and Fox Kids shall have the
right to receive distributions of Distributable Cash pursuant to Section 5.7
hereof, distributions on dissolution or liquidation pursuant to Section 8.4.1(e)
hereof, allocations of net profits and net losses and similar items from the
Company as expressly provided for in Section 5.4 hereof, and the right to vote
on or participate in the management and the right to receive information
concerning the business and affairs of the Company, all as provided for herein.
3. Section 3.4 of the Agreement is amended to read in full as follows:
3.4 ADMISSION OF ADDITIONAL MEMBERS. The Company shall not admit any
Members other than SEI, FCNH and Fox Kids.
4. Section 3.5 of the Agreement is amended to read in full as follows:
3.5 WITHDRAWALS OR RESIGNATIONS. Except for FBC, no Member may
withdraw or resign from the Company.
5. Section 3.6 of the Agreement is amended to read in full as follows:
3.6 TRANSFER AND ASSIGNMENT OF INTERESTS. No Member shall be
entitled to transfer, assign, convey, sell, encumber or in any way alienate all
or any part of its membership interest in the Company, including by way of
involuntary transfer; provided, however, that FBC is hereby entitled to exchange
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its Class A membership interest to Fox Kids in exchange for an obligation from
Fox Kids to pay to FBC $50 million and Fox Kids is hereby admitted as a new
Class B Member.
6. Section 3.7 of the Agreement is amended to read in full as follows:
3.7 [Intentionally deleted.]
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7. Section 4.1 of the Agreement is amended to read in full as follows:
4.1 MANAGEMENT.
4.1.1 MANAGING MEMBER. The Company's business, property and
affairs shall be managed, and all powers of the Company shall be exercised, by
or under the direction of the Manager. So long as Fox Kids is a Member and is
not in default of any obligations under this Agreement, Fox Kids shall be the
Manager of the Company. The Manager shall have and exercise full power and
discretion and final authority with respect to the management of the affairs of
the Company.
4.1.2 PERFORMANCE OF DUTIES; LIABILITY OF MANAGER. The Manager
shall not be liable to the Company or to any Member for any loss or damage
sustained by the Company or any Member, unless the loss or damage results from
fraud, gross negligence, reckless or intentional misconduct, or an intentional
violation of law by the Manager. The Manager shall perform its managerial duties
in good faith, in a manner it reasonably believes to be in the best interests of
the Company and its Members, and with such care, including reasonable inquiry,
as an ordinarily prudent person in a like position would use under similar
circumstances. In performing its managerial duties, the Manager shall be
entitled to rely on information, opinions, reports or statements, including
financial statements and other financial data, in each case prepared or
presented by counsel, independent accountants or other persons as to matters
which the Manager believes to be within such person's professional or expert
competence, so long as the Manager acts in good faith, after reasonable inquiry
and without knowledge that would cause such reliance to be unwarranted.
8. Section 4.2 of the Agreement is amended to read in full as follows:
4.2 INFORMATIONAL MEETINGS OF THE CLASS B MEMBERS
Meetings of the Class B Members may be called by any of the Class B
Members on 48 hours notice to each other Class B Member, given in person or by
telephone or facsimile transmission, or by overnight mail or courier delivery.
Members may participate in a meeting of Members by conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
9. Section 4.3 of the Agreement is amended to read in full as follows:
4.3 [Intentionally deleted.]
10. Section 4.4 of the Agreement is amended to read in full as follows:
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4.4 [Intentionally deleted.]
11. Section 4.5 of the Agreement is amended to read in full as follows:
4.5 [Intentionally deleted.]
12. Section 4.6 of the Agreement is amended to read in full as follows:
4.6 [Intentionally deleted.]
13. Section 4.7 of the Agreement is amended to read in full as follows:
4.7 [Intentionally deleted.]
14. Section 4.8.1 of the Agreement is amended to read in full as follows:
4.8.1 [Intentionally deleted.]
15. Section 4.8.2 of the Agreement is amended to read in full as follows:
4.8.2 [Intentionally deleted.]
16. Section 4.8.3 of the Agreement is amended to read in full as follows:
4.8.3 For purposes of this Agreement, those assets assigned to the
Management Company at the closing under the Formation Agreement pursuant to that
certain Asset Assignment Agreement dated as of December 22, 1995 and any
operating assets acquired after such date (such as a separate kid's service or
production company), shall be allocated by the Manager in its discretion.
17. Section 4.9 of the Agreement is amended to read in full as follows:
4.9 [Intentionally deleted.]
18. Section 4.10 of the Agreement is amended to read in full as follows:
4.10 [Intentionally deleted.]
19. Section 4.11 of the Agreement is amended to read in full as follows:
4.11 INDEMNIFICATION. The Manager, employees and agents of the
Company shall be entitled to be indemnified by the Company for any action taken
or failure to act within the
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scope of the authority conferred on the Member by this Agreement or by law,
unless such action or omission was performed or omitted in bad faith, involved
intentional misconduct or a knowing violation of law. This right of
indemnification shall not be construed as being in lieu of, or otherwise limit,
any right that any party may have under any agreement providing for
indemnification by the Company, any Member or any Operating Entity.
20. Section 4.12 of the Agreement is amended to read in full as follows:
4.12 SPECIAL PROVISION RELATED TO ISRAEL LICENSE. SEI currently
licenses and distributes certain of its properties (e.g., motion pictures,
television programs, other productions, merchandising and license rights) in the
country of Israel through Israel Audiovisual Corporation (the "Israeli
Licensee"). Notwithstanding anything to the contrary contained herein or in any
of the other Alliance Agreements, so long as Saban is the Chairman and Chief
Executive Officer of Fox Kids, SEI may distribute and/or license all current or
future properties of the Company, FCN and SEI to the Israel Licensee on the same
basis as SEI currently distributes its properties in Israel. Notwithstanding the
foregoing, SEI shall not grant rights to the Israeli Licensee that conflict with
or restrict the Company's ability to grant to others satellite broadcast rights
in a territory including Israel.
21. Section 4.14 of the Agreement is amended to read in full as follows:
4.14 FIDUCIARY DUTIES. Notwithstanding anything to the contrary
contained herein, each of the Members, on its own behalf and on behalf of its
Affiliates, agrees that it will exercise the governance rights accorded to it
pursuant to this Agreement and the other Alliance Agreements in good faith and
in a manner it believes to be in the best interests of the Company and the
Members taken as a whole and shall not exercise any of such rights for the
purpose of exploiting a business opportunity itself separate from the Company.
22. Section 5.1.3 of the Agreement is amended to read in full as follows:
5.1.3 For purposes of this Agreement, (i) all payments to the Company
by FBC pursuant to Section 10(i)(B) of the Strategic Stockholders Agreement and
(ii) all rights, assets, monies and obligations transferred, assigned or
delegated to the Company pursuant to the Asset Assignment Agreement dated as of
December 22, 1995, shall constitute direct or indirect capital contributions by
FBC.
23. Section 5.2 of the Agreement is amended to substitute the term
"Manager" for "Members Committee."
24. Section 5.4.1(b) of the Agreement is amended to read in full as
follows:
[Intentionally deleted.]
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25. Section 5.4.1(c) of the Agreement is amended to read in full as
follows:
Second, to the Class B Members in accordance with their Interests in
the Company.
26. Section 5.6 of the Agreement is amended to read in full as follows:
5.6 The Company shall make mandatory distributions of Distributable
Cash to cover the actual tax liability of the Members with respect to their
allocable share of the income of the Company, except that no such distributions
shall be made to cover any Member's tax liability with respect to any income
allocated to it under Section 5.4.1(a) hereof.
27. The first paragraph of Section 5.7 is amended to read in full as
follows:
5.7 ADDITIONAL DISTRIBUTIONS. Unless the Manager of the Company
determines otherwise, the Company shall distribute all of its Distributable Cash
at the end of each fiscal year within 90 days thereafter in the following order
of priority:
28. Section 5.7.2 of the Agreement is amended to read in full as follows:
5.7.2 Second, to reduce the principal balance on the Fox Kids Loan
provided for in Section 5.8 hereof until such principal balance has been paid in
full;
29. Section 5.7.4 of the Agreement is amended to read in full as follows:
5.7.4 [Intentionally deleted.]
30. Section 5.7.5 of the Agreement is amended to read in full as follows:
5.7.5 Third, to the Class B Members as from time to time
determined by the Members Committee.
31. Section 5.8 of the Agreement is amended to read in full as follows:
5.8 FOX KIDS LOAN. The Company owes to Fox Kids $50 million pursuant
to the transfer of a note receivable from FBC to Fox Kids pursuant to that
certain Agreement re Transfer of LLC Interests dated as of the date hereof (the
"Loan").
32. Section 5.12 of the Agreement is amended to read in full as follows:
5.12 TAX MATTERS PARTNER. The Manager shall designate one of the
Members as the "tax matters partner" (as defined in the Code). The Tax Matters
Partner shall take no action
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which is reasonably likely to have a material adverse affect on one or more of
the Members unless such action is approved by the Manager.
33. All references to "or Member of the Members Committee" in Section 6.6
of the Agreement are hereby deleted.
34. Article 7 of the Agreement is amended to substitute the term "Manager"
for "Members Committee."
35. The second sentence of Section 8.1.2 of the Agreement is amended to
read in full as follows:
Each of SEI, FCNH and Fox Kids hereby agrees to continue the existence
of the Company notwithstanding the termination of FBC's Class A membership
pursuant to the provisions of Section 3.2 hereof.
36. Section 8.4.1(b) of the Agreement is amended to read in full as
follows:
(b) second, to Fox Kids to retire any remaining outstanding and unpaid
principal on the Loan,
37. Section 8.4.1(d) of the Agreement is amended to read in full as
follows:
(d) [Intentionally deleted.]
38. All references to "Members Committee or" in Section 8.4.4 of the
Agreement are hereby deleted.
39. The second part of Section 9.3.3 is amended to read in full as
follows:
with a copy to:
Matthew G. Krane, Esq.
1451 North Kings Road
Los Angeles, CA 90069
Fax: (213) 654-6353
40. A new Section 9.3.4 is added to read in full as follows:
9.3.4 If to Fox Kids:
Fox Kids Worldwide, Inc.
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10960 Wilshire Boulevard
Los Angeles, CA 90024
Fax: (310) 235-5552
with a copy to:
Troop Meisinger Steuber & Pasich, LLP
10940 Wilshire Boulevard
Suite 800
Los Angeles, CA 90024
Attention: C.N. Franklin Reddick III
Fax: (310) 443-8512
41. Sections 9.3.4 (Severability) through 9.3.15 (Administration
Agreement) are amended to be renumbered as 9.4 (Severability) through 9.15
(Administration Agreement).
42. Section 9.3.10 of the Agreement is amended to read in full as follows:
9.10 AMENDMENTS AND WAIVERS. Neither this Agreement nor any term
hereof may be changed, waived, discharged or terminated orally or in writing,
except that any term of this Agreement may be amended and the observance of any
such term may be waived (either generally or in a particular instance and either
retroactively or prospectively) with (but only with) the written consent of each
of the Class B Members and Saban; provided, however, that no such amendment or
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waiver shall extend to or affect any obligation not expressly waived or impair
any right consequent therein. No delay or omission to exercise any right, power
or remedy accruing to any party hereto shall impair any such right, power or
remedy of such party nor be construed to be a waiver of any such right, power or
remedy nor constitute any course of dealing or performance hereunder.
43. Section 9.3.14 of the Agreement is amended to read in full as follows:
9.14 DEADLOCK. The parties intend that any controversy or dispute
with regard to the management of the Company which results in a deadlock between
them is to be resolved between them without the intervention of any court or
other tribunal and each party expressly waives the right or power to seek relief
(including, but not limited to dissolution) from any court (whether sitting in
law or equity) with respect thereto.
44. The definition of "Distributable Cash" set forth on Exhibit A is
amended to read in full as follows:
"Distributable Cash" means, at the time a determination of
Distributable Cash is made, the net cash provided by operating activities
of the Company and its Operating
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Entities from the date of issuance of each Member's membership interest in
the Company through the end of the last fiscal quarter ending not less than
90 days prior to the time of determination, less the sum of (i) all
restricted cash, (ii) all Reserves and (iii) all amounts previously paid as
distributions to the Members. "Reserves" are those amounts determined from
time to time by the Manager as necessary to provide, over such period as
the Manager considers appropriate, for current and planned capital
expenditures, debt service, working capital requirements and expansion
plans; and if the Manager has not made such a determination, the Reserves
shall be maintained at a level equal to the sum of $30 million."
45. Exhibit A of the Agreement is hereby amended to delete the following
definitions:
Loesch, Management Decision Notice, Members Committee, Operating Committee,
Terminating Event and Triggering Event.
46. Except as expressly modified herein, all terms of the Operating
Agreement shall remain in full force and effect.
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the day
and year first above written.
SABAN ENTERTAINMENT, INC.
By /s/ Haim Saban
------------------------------
Haim Saban
Its: Chief Executive Officer
FOX BROADCASTING COMPANY
By /s/ Jay Itzkowitz
------------------------------
Jay Itzkowitz
Its: Senior Vice President
FOX KIDS WORLDWIDE, INC.
By /s/ Haim Saban
-------------------------------
Haim Saban
Its: Chief Executive Officer
FCN HOLDING, INC.
By /s/ Jay Itzkowitz
-------------------------------
Jay Itzkowitz
Its: Senior Vice President
The Undersigned hereby consents and agrees to the foregoing Amendment, as of the
date first above written.
/s/ Haim Saban
-----------------------
Haim Saban
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EXHIBIT 10.17
STOCK OWNERSHIP AGREEMENT
THIS STOCK OWNERSHIP AGREEMENT (the "Agreement") is made and entered into
as of December 22, 1995 by and among Haim Saban ("Saban"), each of the entities
listed on Schedule 1.1(a) hereto (the "SEI Entities" and, with Saban, the "SEI
Stockholders") and FOX KIDS WORLDWIDE, L.L.C., a Delaware limited liability
company (the "Management Company").
R E C I T A L S
- - - - - - - -
A. Concurrent with the execution of this Agreement, the parties have
entered into that certain Strategic Stockholders Agreement, which agreement is
intended, among other things, to enable the SEI Stockholders and FBC to maximize
the long-term strategic values of their respective corporations. Such
agreement, as the same may be amended from time to time, is referred to herein
as the "Strategic Stockholders Agreement." Terms defined in the Strategic
Stockholders Agreement which are not defined herein shall have the same meanings
when used herein.
B. Under the provisions of Section 6 of the Strategic Stockholders
Agreement, the parties have agreed, on the terms and conditions therein set
forth, to form a Successor Entity (herein, regardless of the form of such
Successor Entity, the "Corporation") in connection with the Initial Public
Offering.
C. The Management Company desires to acquire, and the SEI
Stockholders desire to sell, an option to acquire all of the SEI Option Shares
(as defined below), all on the terms and conditions contained herein.
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, in consideration of foregoing premises and of the mutual
covenants and agreements contained in this Agreement, and subject to the terms
and conditions set forth herein, the parties to this Agreement hereby agree as
follows:
1. Call Option.
-----------
1.1 Call Option.
-----------
(a) (i) In consideration for the payment in full to the SEI
Stockholders of the "Call Option Payment," as provided in Section 1.1(a)(ii)
hereof, the SEI Stockholders hereby severally grant to the Management Company
the right and option (the "Call Option") to purchase, upon the occurrence of any
of the "Call Triggering Events" described below, (x) with respect to any Call
<PAGE>
Triggering Event which occurs prior to the Initial Public Offering, all, and not
less than all, of the SEI Common Stock owned by the SEI Stockholders or any of
their transferees (other than FBC); and (y) with respect to any Call Triggering
Event which occurs thereafter, all Shares of the Successor Entity which,
pursuant to Section 6(b) of the Strategic Stockholders Agreement, are deemed to
be shares of SEI Common Stock and which are owned by the SEI Stockholders or any
of their transferees (other than FBC and excluding Shares transferred pursuant
to Section 3(a)(i) or 3(a)(ii) of the Strategic Stockholders Agreement); (the
Shares subject to the Call Option are referred to herein as the "SEI Option
Shares").
(ii) Concurrently with the execution and delivery of this Agreement,
the Management Company has paid to the SEI Stockholders an aggregate of SIXTY-
FOUR MILLION FIVE HUNDRED THOUSAND DOLLARS ($64,500,000), in amounts set forth
on Schedule 1.1(a) hereof, by wire transfer of immediately available funds to
the bank accounts designated by the SEI Stockholders on Schedule 1.1(a) hereto
(the "Initial Payment"). The Management Company agrees to pay, without offset,
to the order of the SEI Stockholders, on or prior to June 30, 1996, an aggregate
of an additional FIFTEEN MILLION SIX HUNDRED THOUSAND DOLLARS ($15,600,000) (the
"Additional Payment"), together with interest on the unpaid balance thereof from
February 20, 1996, to the extent that such amount has not been paid in full on
or prior to February 20, 1996, at the rate of 7% per annum; any amounts paid by
the Management Company pursuant to this sentence shall be applied first to any
accrued but unpaid interest, with the balance applied against the unpaid amount
of the Additional Payment. All payments with respect to the Additional Payment
shall be made by wire transfer of immediately available funds to the bank
accounts designated by the SEI Stockholders on Schedule 1.1(a) hereto, and shall
be allocated among the SEI Stockholders pro rata in the same percentages as the
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percentage of the Initial Payment allocated to each SEI Stockholder in Schedule
1.1(a) hereto bears to the total aggregate Initial Payment. The sum of the
Initial Payment, the Additional Payment, and interest, if any, payable thereon
is referred to in this Agreement as the "Call Option Payment."
(b) The "Call Triggering Events," and the time periods for delivery of
election notices with respect thereto, shall be as follows:
(x) death of Saban prior to the 17th anniversary of the date
of this Agreement -- 12 calendar months following death;
(y) upon delivery of written notice by the Management
Company of exercise of the Call Option at any time on or after the
seventh anniversary of the date of this Agreement and on or prior to
the seventeenth anniversary of the date of this Agreement -- notice
may be given at any time during the period; or
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(z) upon receipt by FBC of written notice from Saban of his
election pursuant to Section 7(a)(i) of the Strategic Stockholders
Agreement to cause a Call Triggering Event hereunder -- notice must be
given within 20 business days after receipt of Saban's notice.
The date of the Call Triggering Event to which the exercise of the Call
Option relates shall be the "Effective Date" of the Call Option; provided,
--------
that the Effective Date of a Call Triggering Event under (z), above, shall
be the Effective Date of the option under Section 7(a) of the Strategic
Stockholders Agreement to which the notice effecting such Call Triggering
Event relates. The failure or decision not to exercise the Call Option
upon the occurrence of any Call Triggering Event shall not affect FBC's
right to exercise the Call Option on any subsequent Call Triggering Event.
(c) The Call Option Payment is payment in consideration for the grant
of the Call Option, and shall not be a credit against, or a deduction from, the
purchase price payable to the SEI Stockholders upon the sale of Shares pursuant
to the exercise of the Call Option.
1.2 Calculation of Purchase Price. The per share purchase price for the
-----------------------------
SEI Option Shares under the Call Option shall be an amount equal to:
(i) if the Effective Date of the Option is prior to the Initial
Public Offering, an amount equal to 50% of the Fair Market Value as of the
Effective Date of SEI and FCNH, including their respective subsidiaries and
other consolidated or owned operations (including the Management Company),
considered as a single entity, multiplied by a fraction, the numerator of which
is the number of SEI Option Shares, and the denominator of which is the sum of
(x) the number of SEI Option Shares, plus the number of shares of SEI Common
----
Stock acquired by FBC pursuant to the provisions of Section 4 of the Strategic
Stockholders Agreement, plus 50% of the number of shares of SEI Common Stock
----
issued subsequent to the date of this Agreement and on or prior to the Effective
Date pursuant to options granted at any time to officers, directors, consultants
or employees of SEI; or
(ii) if the Effective Date of the Option is on or subsequent to
the Initial Public Offering, an amount equal to the Fair Market Value of the
Successor Entity, divided by the number of shares of common stock of the
Successor Entity then issued and outstanding (and if there is more than one
class of common stock of the Successor Entity, the denominator shall be adjusted
to include on an equitable basis all then outstanding shares of all classes of
common stock);
(iii) minus, in either such case, the amount (but in any event,
no more than 10% of the amount computed pursuant to clause (A) or (B) above,
whichever is applicable) paid or payable
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by SEI with respect to United States federal or state income taxes (including
interest and penalties) for any of its taxable years ending on or prior to May
31, 1995 with respect to undistributed Saban International, N.V. income, divided
by the number of SEI Option Shares;
(iv) plus, in either such case, interest thereon at the "prime"
----
or "reference" rate published by Wells Fargo Bank at San Francisco, California,
from time to time from the Effective Date through and including the date of
closing of the purchase and sale of the SEI Option Shares.
1.3 Option Closing. The closing of the purchase and sale of the SEI
--------------
Option Shares pursuant to this Section 1 shall take place at such time and place
as Saban and the Management Company shall mutually agree upon; provided, that
--------
the date of closing shall be five business days following the later of (i) the
date of final determination of Fair Market Value; and (ii) if the purchase and
sale of such Shares requires the obtaining of any material regulatory approvals
or compliance with any other material laws or regulations, the date upon which
all such approvals shall have been obtained, and such compliance effected;
provided further, however, that if through no fault of the SEI Stockholders,
- -------- -------
the Management Company is unable fully to satisfy all conditions of clause (ii)
within 3 calendar months of the date of final determination of Fair Market
Value, then the Management Company shall on the first business day following the
end of such 3-month period pay and deliver to the holders of the SEI Option
Shares an amount equal to the per share purchase price for such Shares, and the
holders of the SEI Option Shares shall enter into such agreements with respect
to the subsequent voting and transfer of such Shares as the Management Company
shall reasonably request, including the agreement at any time thereafter to
transfer such Shares, without receipt of further consideration, to such Person
or Persons as may be designated by the Management Company. At the closing, each
of the holders of the SEI Option Shares shall deliver to the Management Company
documents of transfer in form and substance reasonably acceptable to the
Management Company and its counsel, necessary to vest in the Management Company
good and marketable title to the SEI Option Shares so sold by the holder
thereof, free and clear of any and all Liens, other than those imposed under or
pursuant to this Agreement, against delivery by the Management Company to such
holder of the purchase price therefor, payable, at the election of Saban, by
either (x) bank cashiers' checks in immediately available funds payable to the
order of the selling holders, or (y) wire transfer of immediately available
funds to an account or accounts designated by Saban.
2. Miscellaneous Provisions.
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(a) In this Agreement, headings are for convenience only and shall not
affect interpretation, and except to the extent that the context otherwise
requires: (a) references to any legislation or to any provision of any
legislation include any modification or re-enactment of, or any legislative
provision substituted for, and all statutory instruments issued under, such
legislation or such provision; (b) words denoting the singular include the
plural and vice versa; (c) words denoting individuals include corporations and
other Persons and vice versa; (d) words denoting any gender include all genders;
(e) references to any document, agreement or other instrument (including this
Agreement) include references to such document, agreement or other instrument as
amended, novated, supplemented or replaced from time to time; (f) references to
clauses, sub-clauses, sections, sub-sections, Schedules and Exhibits are to
clauses, sub-clauses, sections, sub-sections, Schedules and Exhibits of this
Agreement; (g) "or" is not exclusive; (h) "$", and all other references to
dollar amounts, are in U. S. currency; (i) references to any party to this
Agreement or any other document, agreement or other instrument includes its
successors or permitted assigns; and (j) "writing" and cognate expressions
include all means of reproducing words in a tangible and permanently visible
form.
(b) Rights Personal to Saban. Each and every right and obligation
------------------------
which refers to "Saban" or the "Management Company" is personal to Saban and the
Management Company and shall not attach to, or be deemed to relate to or concern
the Shares held by Saban; and thus, without the prior written consent of Saban
and the Management Company, other than as provided in the Strategic Stockholders
Agreement, none of such rights or obligations may be assigned, delegated or
transferred to any other Person; provided, however, this Stock Ownership
Agreement may be assigned to FBC; provided, further, that in the event of the
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incompetency or death of Saban, all rights granted to Saban hereunder shall be
exercisable by his conservator, executor or administrator, or by a single Person
from time to time designated by SEI Stockholders then holding a majority of the
then outstanding Shares of SEI Common Stock held by all SEI Stockholders.
(c) Notices. All notices, demands or other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given (i) if delivered
in person, upon delivery thereof, or (ii) if mailed, certified first class mail,
postage pre-paid, with return receipt requested, on the fifth day after the
mailing, or (iii) if sent by telex or facsimile transmission, with a copy mailed
on the same day in the manner provided in (ii) above, when transmitted and
receipt is confirmed by telephone or telex or facsimile response, or (iv) if
otherwise actually delivered, when delivered:
5
<PAGE>
(i) If to Saban or any of the Other SEI Stockholders:
Haim Saban
Saban Entertainment, Inc.
10960 Wilshire Boulevard
Los Angeles, CA 90024
Fax: (310) 235-5108
With a copy to:
Matthew G. Krane, Esq.
2051 Hercules Drive
Los Angeles, CA 90046
Fax: (213) 851-1178
and with a copy to:
Troop Meisinger Steuber & Pasich, LLP
10940 Wilshire Boulevard, Suite 800
Los Angeles, California 90024
Attention: Richard E. Troop, Esq.
Fax: (310) 443-8503
(ii) if to the Management Company, the registered agent in
the State of Delaware.
and with a copy to:
Squadron, Ellenoff, Plesent &
Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Fax: (212) 697-6686
Attn: Harvey Horowitz, Esq.
or at such other address or addresses as may have been furnished by such Person
in like manner to the other parties.
(d) Severability. Should any Section or any part of a Section within
------------
this Agreement be rendered void, invalid or unenforceable by any court of law
for any reason, such invalidity or unenforceability shall not void or render
invalid or unenforceable any other Section or part of a Section in this
Agreement.
(e) Governing Law. THE TERMS OF THIS AGREEMENT SHALL BE GOVERNED BY
-------------
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE
TO CONTRACTS MADE WITHIN, AND TO BE PERFORMED WITHIN, SUCH STATE, EXCLUDING
CHOICE OF LAW PRINCIPLES OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE
LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
6
<PAGE>
(f) No Adverse Construction. The rule that a contract is to be
-----------------------
construed against the party drafting the contract is hereby waived, and shall
have no applicability in construing this Agreement or the terms of this
Agreement.
(g) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall 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.
(h) Costs and Attorneys' Fees. In the event that any action, suit, or
-------------------------
other proceeding is instituted concerning or arising out of this Agreement, the
prevailing party shall recover all of such party's costs, and attorneys' fees
incurred in each and every such action, suit, or other proceeding, including any
and all appeals or petitions therefrom. As used herein, "attorneys' fees" shall
mean the full and actual costs of any legal services actually rendered in
connection with the matters involved, calculated on the basis of the usual fee
charged by the attorneys performing such services, and shall not be limited to
"reasonable attorneys' fees" as defined by any statute or rule of court.
(i) Successors and Assigns. Except as otherwise provided in this
----------------------
Agreement, all rights, covenants and agreements of the parties contained in this
Agreement shall be binding upon and inure to the benefit of their respective
successors and permitted assigns. Except as otherwise specifically set forth
herein, nothing in this Agreement, expressed or implied, is intended to confer
on any Person other than the parties to this Agreement or their respective
successors and assigns any rights, remedies, obligations or liabilities under or
by reason of this Agreement.
(j) Amendments and Waivers. Neither this Agreement nor any term
----------------------
hereof may be changed, waived, discharged or terminated orally or in writing,
except that any term of this Agreement may be amended and the observance of any
such term may be waived (either generally or in a particular instance and either
retroactively or prospectively) with (but only with) the written consent of
Saban and FBC; provided, however, that no such amendment or waiver shall extend
-------- -------
to or affect any obligation not expressly waived or impair any right consequent
therein. No delay or omission to exercise any right, power or remedy accruing
to any party hereto shall impair any such right, power or remedy of such party
nor be construed to be a waiver of any such right, power or remedy nor
constitute any course of dealing or performance hereunder.
(k) Entire Agreement. This Agreement, the attached Exhibits and
----------------
Schedules and the Alliance Agreements, and the agreements referred to herein and
therein, together contain the entire understanding of the parties, and there are
no further or other agreements or understandings, written or oral, in effect
between the parties relating to the subject matter hereof unless
7
<PAGE>
expressly referred to herein. No party to this Agreement makes any
representation or warranty except as expressly set forth herein.
(l) Specific Performance and Other Remedies. The parties hereto
---------------------------------------
acknowledge and agree that the Shares (including the SEI Common Stock, the FCNH
Common Stock and the Successor Entity Equity Securities) are unique, and that
the parties will have no adequate remedy at law should any party hereto breach
the provisions of Sections 2 through 8 hereof. In the event of the refusal or
failure of any party hereto fully to comply with any of those provisions, the
other parties, and each of them, shall have the right, in addition to any other
rights and remedies which it or they may have hereunder, to specific
performance, and other appropriate injunctive relief with respect thereto. In
no event shall any party to any such proceeding urge or raise as a defense in
any such action that an adequate remedy at law exists.
(m) Agreement to Perform Required Acts. Each party hereto agrees to
----------------------------------
perform any further acts and to execute and deliver any further documents that
may be reasonably necessary to carry out the provisions hereof, that may be
required to secure performance of any party's duties hereunder or that may be
required to assure the legal and binding effect of the provisions hereof.
(n) Consent to Jurisdiction; Forum Selection. Any actions, suits or
----------------------------------------
proceedings instituted in connection with this Agreement or the performance by
the parties of their obligations hereunder shall be instituted and maintained
exclusively in the Superior Court for the State of California, County of Los
Angeles or in the United States District Court for the Central District of
California. By execution and delivery hereof, each party hereto hereby
consents, for itself and in respect of its property, to the jurisdiction of the
aforesaid courts solely for the purpose of adjudicating its rights or
obligations under, or any disputes involving, this Agreement or any document
related hereto. Each party hereto hereby irrevocably waives, to the extent
permitted by applicable law, any objection, including, without limitation, any
objection that the other corporate party or parties lack the capacity to sue or
defend based upon its or their lack of a certificate of qualification to conduct
intrastate business in California, and any objection to the laying of venue or
based on the grounds of forum non conveniens, which it may now or hereafter have
----- --- ----------
to the bringing of any action or proceeding in such jurisdiction in respect of
this Agreement or any document related hereto.
(o) Legends. Each of the SEI Stockholders hereby agree that each
-------
certificate or other writing evidencing any of the SEI Option Shares, shall be
stamped or otherwise imprinted with a legend, either on the face of such
certificate, or on the reverse of such certificate, with reference thereto
appearing on the face of such certificate, in substantially the following form:
8
<PAGE>
[DESCRIBE THE SHARES] REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
OPTIONS TO PURCHASE UNDER THAT CERTAIN STOCK OWNERSHIP AGREEMENT DATED AS
OF DECEMBER 22, 1995, BY AND AMONG THE RECORD HOLDER OF THE SECURITIES
SUBJECT TO THIS CERTIFICATE AND FOX KIDS WORLDWIDE, L.L.C. A COPY OF THE
STOCK OWNERSHIP AGREEMENT SHALL BE FURNISHED WITHOUT CHARGE BY THE ISSUER
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE TO THE HOLDER HEREOF UPON
SUCH HOLDER'S WRITTEN REQUEST.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.
FOX KIDS WORLDWIDE, L.L.C.,
a Delaware limited liability company
By: /s/ Haim Saban
------------------------------
Its:
-------------------------
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.
/s/ Haim Saban
--------------------------------
HAIM SABAN
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.
QUARTZ ENTERPRISES, L.P.
By: /s/ Stan Golden
-------------------------
-------------------------
MERLOT INVESTMENTS
By: /s/ Bill Josey
---------------------------
---------------------------
SILVERLIGHT ENTERPRISES, L.P.
By: /s/ Mel Woods
---------------------------
---------------------------
CELIA ENTERPRISES, L.P.
By: /s/ Matthew Krane
---------------------------
---------------------------
11
<PAGE>
Exhibit 10.18
AMENDMENT NO. 1
TO
STOCK OWNERSHIP AGREEMENT
This Amendment No. 1 to Stock Ownership Agreement (the "Amendment") is made
and entered into as of September 26, 1996, by and among Haim Saban ("Saban"),
each of the entities listed on Schedule "A" hereto (the "SEI Entities" and, with
Saban, the "SEI Stockholders") and Fox Broadcasting Sub, Inc., a Delaware close
corporation ("Fox Broadcasting Sub"), and Fox Broadcasting Company, a Delaware
corporation, has concurrently herewith consented to this Amendment.
R E C I T A L S
- - - - - - - -
A. The SEI Shareholders and the Management Company are parties to that
certain Stock Ownership Agreement, dated as of December 22, 1995 (as amended by
this Amendment, the "Agreement"). On September 26, 1996, Fox Kids Worldwide,
L.L.C. (the "LLC") assigned its rights thereunder to FCN Holding, Inc. which
assigned them to Fox Broadcasting Sub. All terms defined in the Agreement which
are not defined in this Amendment shall have the same meanings when used in this
Amendment.
B. Pursuant to a letter agreement, dated as of September 26, 1996, but
effective as of April 3, 1996 (the "Allen Agreement") between FCN Holding, Inc.,
a Delaware close corporation ("FCNH") and Allen, FCNH has, concurrently with the
execution and delivery of this Amendment, issued and sold to Allen 16 16/99
shares (the "Allen Shares") of the Common Stock, without par value, of FCNH.
C. The parties desire to amend the Agreement in order, inter alia, to
----- ----
clarify the effect of the issue and sale of the Allen Shares on the provisions
of the Agreement.
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, in consideration of the foregoing facts, and the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
1. Calculation of Purchase Price. Section 1.2(i) of the Agreement is
-----------------------------
amended to read in full as follows:
<PAGE>
"(i) if the Effective Date of the Option is prior to the Initial
Public Offering, an amount equal to 50% of the Fair Market Value as of
the Effective Date of SEI and FCNH, including their respective
subsidiaries and other consolidated or owned operations (including the
Management Company), considered as a single entity, divided by,
without duplication, the sum of (A) the number of SEI Option Shares,
plus (B) the number of shares of SEI Common Stock acquired by FBC
----
pursuant to the provisions of Section 4 of the Strategic Stockholders
Agreement, plus (C) 50% of the number of "Later-Issued Shares" (as
----
that term is defined in Amendment No. 2 to the Strategic Stockholders
Agreement); or"
2. Miscellaneous Provisions. Section 2(j) of the Agreement is amended to
------------------------
read in full as follows:
"(j) Amendments and Waivers. Neither this Agreement nor any term
----------------------
hereof may be changed, waived, discharged or terminated orally or in
writing, except that any term of this Agreement may be amended and the
observance of any such term may be waived (either generally or in a
particular instance and either retroactively or prospectively) by (and
only by) a written document executed by Saban and Fox Broadcasting
Sub; and any such amendment or waiver executed by both Saban and Fox
Broadcasting Sub shall be binding upon all of the parties to this
Agreement, including each and every Person who has agreed to be bound
by provisions of this Agreement relating to the Shares which it holds;
provided, however, that no such amendment or waiver shall extend to or
-------- -------
affect any obligation not expressly waived or impair any right
consequent therein. No delay or omission to exercise any right, power
or remedy accruing to any party hereto shall impair any such right,
power or remedy of such party nor be construed to be a waiver of any
such right, power or remedy nor constitute any course of dealing or
performance hereunder."
3. Change of Name. All references in the Agreement to Fox Kids
--------------
Worldwide, L.L.C. or to the Management Company shall hereafter be references to
Fox Broadcasting Sub.
4. Effective Date of Amendment. While this Amendment has been executed
---------------------------
as of its date, it shall be deemed to be effective as of April 3, 1996.
5. Effect of Amendment. Except as expressly modified herein, all terms
-------------------
of the Agreement remain in full force and effect.
2
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the day
and year first above written.
FOX BROADCASTING SUB, INC.
as assignee of Fox Kids
Worldwide, L.L.C.
By: /s/ Larry Jacobson
--------------------
/s/ Haim Saban
-------------------------
Its: Executive Vice President HAIM SABAN
------------------------
QUARTZ ENTERPRISES, L.P.
By: /s/ Stan Golden
--------------------
Its:
--------------------
MERLOT INVESTMENTS
By: /s/ Bill Josey
--------------------
Its:
--------------------
SILVERLIGHT ENTERPRISES, L.P.
By: /s/ Mel Woods
-------------------
Its:
--------------------
3
<PAGE>
CELIA ENTERPRISES, L.P.
By: /s/ Matthew Krane
--------------------
Its:
--------------------
Each of the Undersigned hereby consents and agrees to the foregoing
Amendment, as of the date first above written.
FOX BROADCASTING COMPANY
By: /s/ Larry Jacobson
--------------------
Its: Executive Vice President
------------------------
/s/ Haim Saban
-------------------------
HAIM SABAN
4
<PAGE>
SCHEDULE "A"
SEI STOCKHOLDERS
----------------
Haim Saban
Quartz Enterprises, L.P.
Merlot Investments
Silverlight Enterprises, L.P.
Celia Enterprises, L.P.
5
<PAGE>
EXHIBIT 10.20
FOX BROADCASTING COMPANY
STATION AFFILIATION AGREEMENT
Date
Licensee
Call letters-TV
Station Address
City, State & Zip
Attention: Addressee, Title
This sets forth the terms and conditions of the agreement between Fox
Broadcasting Company ("Fox") , on behalf of itself and its wholly-owned
subsidiary, the Fox Children's Network, Inc. ("FCN"), and _________________
("Licensee") for the carriage of programming over the facilities of Licensee's
television station ______ ("Station"). As used in this Agreement, the terms
"program," "programming" and "Fox programming" and any derivations thereof shall
mean, unless specifically indicated otherwise, the programming of Fox and the
programming of FCN, and all terms of this Agreement shall apply to both.
1. Fox Programming: Fox will deliver to the Station for free over-the-air
---------------
television broadcasting, programming which Fox and FCN make available for
broadcasting in the community to which Station is presently licensed by the FCC,
which is ____________, __. The selection, scheduling, substitution and
withdrawal of any program or portion thereof shall at all times remain within
Fox's sole discretion and control. Licensee shall not and shall not authorize
others to broadcast or otherwise use any program (or part thereof) or other
material supplied by Fox except as specified in this Agreement, and without
limiting the foregoing, Station may broadcast Fox programming only: (i) as
scheduled by Fox, (ii) over Station's facilities in the Community specified
above in this Paragraph 1 ("Station's Community"), and (iii) by free over-the-
air television broadcasting.
2. Delivery: Fox will transmit the programming hereunder by satellite and
--------
shall keep Licensee apprised of both the satellite and transponder being used
for that transmission. Any and all costs of whatever kind that Station incurs
to pickup the programming from the satellite and rebroadcast it shall be the
sole responsibility of Licensee.
3. Carriage & Preemption:
---------------------
(a) Licensee agrees to broadcast over Station's facilities all Fox
programs in their entirety, including, but not limited to, all
commercial announcements, Fox i.d.'s, Fox promos and credits, without
interruption, deletion, addition, squeezing, alteration, or other
changes (except for adding Licensee's commercial announcements as
provided in this Agreement) on the dates and at the times the programs
are scheduled by Fox.
<PAGE>
(b) Fox commits to supply sufficient programming throughout the term of
this Agreement for the hours presently programmed by it (the
"Programmed Time Periods"), which Programmed Time Periods are as
follows (for programming other than FCN programming, the specified
rites apply for the Eastern or Pacific Time Zones, and the Mountain
and Central Time Zones are one hour earlier; for FCN programming, the
specified times apply to all Time Zones, unless Fox agrees otherwise):
Prime Time: 7-10 P.M. Sunday
8-10 P.M. Monday thru Saturday
Late Night: 11 P.M.-12:00 A.M. Monday thru Saturday
FCN: 7:30 A.M.-8:30 A.M. Monday thru Friday
3:00 P.M.-5:00 P.M. Monday thru Friday
8:00 A.M.-12:00 Noon Saturday
Weekend Sports: As scheduled by Fox, including pre-game and post-game
shows.
Subject only to the preemption rights in Paragraph 11 below, Licensee
shall broadcast over Station for the term of this Agreement, during
the Programmed Time Periods, all Fox programming specified by Fox,
except to the extent that Licensee is broadcasting programming
pursuant to (and within the specific limits of) a commitment expressly
set forth on Exhibit A (for non-sports programming) or Exhibit B (for
sports programming) to this Agreement (but not including any extension
or renewal of such commitment by option extension or otherwise). If
any Fox programming is not broadcast in its Programmed Time Period due
to any such commitment, Licensee shall broadcast that Fox programming
in the "make good" time period specified in Exhibit A or B, as
applicable.
(c) Without limiting subparagraph (b) above, each time that Licensee for
any reason fails to (or advises Fox it will not) telecast any Fox
programming as provided for in this Agreement, then upon Fox's
request, Licensee shall telecast that programming (or replacement
programming selected by Fox) and the commercial announcements
contained in it, in a substitute time period that is within the same
A.C. Nielsen broadcast ratings week as, and that is of a quality and
rating value as nearly as possible equal to that of, the time period
during which the programming was not telecast. Licensee shall give
Fox at least 72 hours advance notice that it intends not to broadcast
any Fox programming and in such notice shall identify the substitute
time period that License selects, which time period shall be subject
to Fox's prior approval. If Licensee does not fully comply with the
foregoing, then, without limitation to any other rights of Fox under
this Agreement or otherwise, Fox shall have the right to license the
broadcast rights to the applicable omitted programming (or replacement
programming) to another television station located in Station's
Community. In addition to the foregoing,
2
<PAGE>
with respect to programming for broadcast within the New Programmed
Time Periods (as defined in subparagraph 3(e) below), Fox will provide
Licensee with a minimum of six months notice for each program
addition, and Licensee shall be required to advise Fox within ten days
of receiving notification if Licensee does not wish to televise said
programming as scheduled by Fox. If Licensee refuses to broadcast any
program within a New Programmed Time Period for any reason other than
(i) a program conflict specified in subparagraph 3(e) below, or (ii)
those specified in Paragraph 11 below, then either Licensee or Fox
shall have the right to terminate this Agreement upon six months prior
notice to the other party.
(d) Under this Agreement, an "Approved Preemption" shall mean: any
failure to broadcast due to force majeure under Paragraph 7 below, any
preemption permitted by Exhibit A or B hereto that is "made good" in
accordance therewith and any preemption permitted by Paragraph 11
below. Any other preemption or failure to broadcast any Fox
programming is an"Unauthorized Preemption" and without limiting any
other rights of Fox under this Agreement or otherwise, if within any
12-month period during the term of this Agreement, Station makes three
(3) or more Unauthorized Preemptions of any Fox programming (or
Licensee or Station states, either in general or specific terms, that
Station intends to make such Unauthorized Preemptions or Fox
reasonably concludes, based upon Licensee's or Station's actions or
otherwise, that such Unauthorized Preemptions will occur), Fox may,
upon 30 days prior written notice to Licensee, elect to either: (1)
terminate Station's right to broadcast any one or more series or other
Fox programs, as Fox shall elect, and, to the extent and for the
period(s) that Fox elects, thereafter license the broadcast rights to
the applicable series or other Fox programs to any other television
station or stations located in Station's Community, or (2) terminate
this Agreement.
(e) Licensee shall broadcast over Station's facilities all Fox programming
to be offered during time periods not presently programmed by Fox
("New Programmed Time Periods"), subject to Fox providing to Licensee
at least six months notice prior to delivering any additional
programming within these time periods. Furthermore, if Licensee has
entered into any agreement(s) prior to an announcement by Fox to
program a specific time period and the agreement(s) is (are) for
barter programming that Licensee is required by the terms of the
agreement(s) to broadcast during a New Programmed Time Period, then
Licensee shall not be required to broadcast the new Fox programming
within the same time period, and the provisions of subparagraph 3(c)
of this Agreement shall govern; provided, however, in any such
instance(s) Licensee agrees not to renew or otherwise extend its
rights to broadcast such conflicting programming within a New
Programmed Time Period.
3
<PAGE>
4. Promotion:
---------
(a) Fox will provide Licensee with on-air promotional announcements, which
may be for any Fox programming ("Fox Promos"), including without
limitation, any FCN programming, for broadcast in Station's non-Fox
programming. Licensee shall use its good faith, best efforts to
provide an on-air promotional schedule consistent with Fox's
recommendations and in coordination with Fox, and to budget Station's
annual advertising funds so as to enable Station to participate, on a
year-round basis, in Fox's "co-op" advertising plan. Without
limitation to the foregoing, in each instance, if any, that Fox
determines that Station's "Sweeps Rating" (as defined below) is below
the average Sweeps Rating for all Fox affiliated stations, then
Station shall be deemed to be "Performing Below Average" and shall,
within 15 days of Fox giving Licensee written notice thereof, commence
full compliance with the following: (1) Station shall not broadcast,
during each one-half hour of all periods that Station is not
broadcasting Fox programming (the "Non-Fox Time Periods"), less than
one (1) thirty (30) second promotional announcement (or promotional
announcements aggregating 30 seconds, to the extent Fox so elects) for
Station's local, syndicated or Fox programming, and (2) during all
Non-Fox Time Periods, Licensee shall broadcast Fox Promos for not less
than 45% of 100% (the "Applicable Percentage") of the total, aggregate
"gross ratings points" for all the promotional announcements broadcast
by Licensee ("Aggregate Promotional GRP's") within the Non-Fox Time
Periods (the specific Fox Promos broadcast by Licensee and number of
broadcasts of each Fox Promo shall be, to the extent Fox elects, as
specified by Fox, and the broadcasts of the Fox Promos shall be made
so that the GRP's allocated thereto are distributed fairly and
reasonably across the Non-Fox Time Periods); provided, however, that
if Station's Sweeps Rating ranks Station within the bottom 50% (ranked
highest to lowest) of those Fox affiliated stations that are
Performing Below Average, then the Applicable Percentage for Station
shall be not less than 55% of 100% of said Aggregate Promotional
GRP's. Licensee's full compliance with the immediately foregoing
sentence shall continue until Licensee is no longer Performing Below
Average, as determined by the most recent Sweeps Rating. For purposes
hereof, the "Sweeps Rating" shall mean for each station the average
A.C. Nielsen rating for the most current completed "sweeps" period for
Adults 18-49 for all prime time hours programmed by Fox. Licensee
agrees to maintain complete and accurate records of all promotional
announcements broadcast as provided herein. Within two (2) weeks
following each request by Fox therefor, Licensee will submit copies of
all such records to Fox.
(b) In addition to providing the promotion announcements referred to
above, Fox shall make available to Licensee, at reasonable costs, such
other promotional and sales materials as Fox and Licensee may mutually
consider appropriate. Licensee shall not delete any copyright,
trademark, logo or other notice, or any credit, included in any
materials delivered pursuant to this paragraph or otherwise, and
Licensee shall not exhibit, display, distribute or otherwise use any
trademark,
4
<PAGE>
logo or other material or item delivered pursuant to this paragraph or
otherwise, except as instructed by Fox at the time.
5. Commercial Announcements:
------------------------
(a) Licensee may include in each individual Fox program the same number
and length of commercial announcements (including station breaks) as
Fox provides generally in that program for its affiliates on a
national basis, which is currently that set forth on Exhibit D
attached to this Agreement.
(b) Fox shall determine the placement, timing and format of Fox's and
Licensee's commercial announcements. Fox shall have the right to
include commercial announcements in all of the commercial time
available in each hour of the programming other than that expressly
allocated to Licensee in this Agreement.
(c) Licensee's broadcast over the Station of all commercial announcements
included by Fox in Fox programming is of the essence of this
Agreement, and nothing contained in Paragraph 3 above or elsewhere in
this Agreement (other than Paragraph 11 below) shall limit Fox's
rights or remedies at law or otherwise relating to failure to so
broadcast said commercial announcements. Licensee agrees to maintain
complete and accurate records of all commercial announcements
broadcast as provided in this Agreement. Within two (2) weeks
following each request by Fox therefor, Licensee will submit copies of
all such records to Fox.
6. Station Compensation: Subject to the terms and conditions of this
--------------------
Agreement and to the condition that Licensee is not in breach of this Agreement,
FCN shall pay Licensee a share of FCN's programming Net Profits. That share
shall be the amount obtained by multiplying Net Profits by a fraction, the
numerator of which is Station's cumulative, aggregate audience delivery for FCN
Programming from the commencement of the term of this Agreement under Paragraph
10 below, and the denominator of which is the cumulative, aggregate audience
delivery for FCN Programming for all FCN affiliates, past and present, from the
inception of FCN, and audience delivery shall be determined in accordance with
the method utilized as of September 3, 1990 by Fox with respect to Fox
programming (other than FCN programming) in its formula for distribution of
station compensation to its affiliates (except that the rating base shall be
kids, ages 2 to 11); provided, however, that said formula for dividing Net
Profits may be changed or modified to contain in whole or in part such other
factors as FCN shall determine from time to time. For purposes hereof, the term
"Net Profits" shall be defined, computed, accounted for and paid in accordance
with Exhibit C attached hereto and incorporated herein by this reference. If
this Agreement is terminated or otherwise expires, the provisions of Paragraph 6
of said Exhibit C shall apply. Notwithstanding anything to the contrary in this
Agreement or in Exhibit C hereto, in no event shall the provisions of Exhibit C
hereto or of this subparagraph (b) apply to any Fox programming other than the
FCN programming specifically covered by Paragraph 2 of Exhibit C hereto.
5
<PAGE>
7. Force Majeure: Neither Fox nor FCN shall be liable to Licensee for failure
-------------
to supply any programming or any part thereof, nor shall Licensee be liable to
Fox or FCN for failure to broadcast any such programming or any part thereof, by
reason of any act of God, labor dispute, non-delivery by program suppliers or
others, failure or breakdown of satellite or other facilities, legal enactment,
governmental order or regulation or any other similar or dissimilar cause beyond
their respective control ("force majeure event"). If, due to any force majeure
event(s), Fox substantially fails to provide the programming to be delivered to
Licensee under Paragraph 1 above, or Licensee substantially fails to broadcast
such programming as scheduled by Fox, for 4 consecutive weeks, or for 6 weeks in
the aggregate during any 12-month period, then the other party hereto (the
"unaffected party") may terminate this Agreement upon thirty (30) days prior
written notice to the party so failing, which notice may be given at any time
prior to the expiration of 7 days after the unaffected party's receipt of actual
notice that the force majeure event(s) has ended.
8. Assignment: This Agreement shall not be assigned by Licensee without the
----------
prior written consent of Fox, and any permitted assignment shall not relieve
Licensee of its obligations hereunder. Any purported assignment by Licensee
without such consent shall be null and void and not enforceable against Fox.
Licensee also agrees that if any application is made to the Federal
Communications Commission pertaining to an assignment or a transfer of control
of Licensee's license for the Station, or any interest therein, Licensee shall
immediately notify Fox in writing of the filing of such application. Except as
to "short form" assignments or transfers of control made pursuant to Section
73.3540(f) of the Rules and Regulations of the Federal Communications
Commission, Fox shall have the right to terminate this Agreement, effective upon
thirty (30) days notice to Licensee and the transferee or assignee of such
termination, which notice may be given at any time within ninety (90) days after
the later occurring of: (a) the date on which Fox learns that such assignment or
transfer has become effective, or (b) the date on which Fox receives written
notice of such assignment or transfer, or (c) the effective date of this
Agreement (the foregoing termination provision shall apply to any assignments or
transfers of control that become effective at any time on or after the beginning
of the sixth month prior to the effective date of this Agreement). Licensee
agrees, that upon Fox's request, Licensee shall procure and deliver to Fox, in
form satisfactory to Fox, the agreement of the proposed assignee or transferee
that, upon consummation of the assignment or transfer of control of the
Station's authorization, the assignee or transferee will assume and perform this
Agreement in its entirety without limitation of any kind. If Licensee fails to
notify Fox of the proposed assignment or transfer of control of said Station's
authorization, or fails to procure the agreement of the proposed assignee or
transferee in accordance with this Paragraph, then such failure shall be deemed
a material breach of this Agreement.
9. Unauthorized Copying: Licensee shall not, and shall not authorize others
--------------------
to, record, copy or duplicate any programming or other material furnished by Fox
hereunder, in whole or in part, and shall take all reasonable precautions to
prevent any such recordings, copying or duplicating. Notwithstanding the
foregoing, if Station is located in the Mountain Time Zone, Licensee may pre-
record programming from the satellite feed for later telecast at the times
scheduled by Fox. Licensee shall erase all such pre-recorded programming
promptly after its scheduled telecast.
6
<PAGE>
10. Term: The term of this Agreement shall commence on ___________, 19___ and
----
shall continue until the expiration of _____________________, 19____ (the
"initial period"). After the initial period, the term of this Agreement may be
extended for additional successive periods of two (2) years each, by Fox, in its
sole discretion, giving written notice of such extension (the "extension
notice") to Licensee at least one hundred twenty (120) days prior to the
expiration of the then-current period; provided, however, that if, within thirty
(30) days of Licensee's receipt of the extension notice, Licensee, in its sole
discretion, gives Fox written notice that Licensee rejects such extension, then
the extension notice shall not be effective and this Agreement shall terminate
upon expiration of the then current period. Any presently existing Station
Affiliation Agreements between Fox and Licensee and FCN and Licensee shall be
deemed terminated as of the commencement of this Agreement; provided, however,
that the following, between Fox and Licensee, shall remain in full effect: (1)
any presently existing Network Non-Duplication Amendment to any such existing
Station Affiliation Agreement (which shall be deemed a part of this Agreement
and is incorporated herein by this reference), (2) any existing Agreement and
Amendment to Station Affiliation Agreement (the "Retransmission Agreement") and
(3) the provisions of any existing NFL Amendment that relate to the
Retransmission Agreement. Notwithstanding anything to the contrary contained in
this Agreement, upon the termination or expiration of the term of this
Agreement, all of Licensee's and Station's rights to broadcast or otherwise use
any Fox program or any trademark, logo or other material or item hereunder shall
immediately cease and neither Licensee nor Station shall have any further rights
whatsoever with respect to any such program, material or item.
11. Applicable Law: The obligations of Licensee and Fox under this Agreement
--------------
are subject to all applicable federal, state, and local laws, rules and
regulations (including, but not limited to, the Communications Act of 1934, as
amended, and the rules and regulations of the Federal Communications Commission)
and this Agreement shall be deemed to have been negotiated and entered into, and
this Agreement and all matters or issues collateral thereto shall be governed
by, the law of the State of California applicable to contracts negotiated,
executed and performed entirely within that state. With respect to programs
offered or already contracted for pursuant to this Agreement, nothing in any
other Paragraph hereof shall be construed to prevent or hinder Licensee from (a)
rejecting or refusing Fox programs which Licensee reasonably believes to be
unsatisfactory, unsuitable or contrary to the public interest, or (b)
substituting a program which, in Licensee's opinion, is of greater local or
national importance; provided, however, Licensee shall give Fox written notice
of each such rejection or substitution and the justification therefor, at least
72 hours in advance of the scheduled broadcast, or as soon thereafter as
possible (including an explanation of the cause for any lesser notice).
Programming will be deemed to be unsatisfactory or unsuitable only if it (i) is
delivered in a form which does not meet accepted standards of good engineering
practice; (ii) does not comply with the rules and regulations of the FCC; or
(iii) is programming which Licensee reasonably believes would not meet
prevailing contemporary standards of good taste in its community of license. In
view of the limited nature of the Fox programming within each day-part as
specified in subparagraph 3(b) above, Licensee does not foresee any need to
substitute programming of greater local or national importance for Fox
programming, except to present locally originated, non-entertainment, non-
religious timely public interest programming, such as election coverage, live
coverage of fast-breaking news events, political debates, town hall-type
meetings and telethons that serve the public interest and that are approved by
Fox, which approval shall not be unreasonably withheld. Notwithstanding
7
<PAGE>
anything to the contrary expressed or implied herein, the parties acknowledge
that Station has the ultimate responsibility to determine the suitability of the
subject matter of program content, including commercial, promotional or public
service announcements.
12. Station Acquisition by Fox: If Fox or any of Fox's parent, affiliated,
--------------------------
subsidiary or related companies or other entities enters into any agreement to
acquire any significant ownership and/or controlling interest in any television
broadcast station licensed to any community within Station's television market,
then Fox shall have the right at any time after that agreement is made, to
terminate this Agreement upon not less than sixty (60) days notice to Licensee.
Said termination shall be effective as of such date as Fox shall designate in
said notice.
13. Change in Operations: If at any time Station's transmitter location,
--------------------
power, frequency, programming format, hours of operation, technical quality of
transmissions or any other material aspect of Station's operations is such that
Fox determines in its reasonable judgement that Station is of less value to Fox
as a broadcaster of Fox programming than at the date of this Agreement, then Fox
shall have the right to terminate this Agreement upon thirty (30) days prior
written notice to Licensee.
14. Non-Liability of Board Members: To the extent the Board and its members
------------------------------
are acting in their capacity as such, then the Board and each such member so
acting shall not have any obligation or legal or other liability whatsoever to
Licensee in connection with this Agreement or Exhibit C hereto, including
without limitation, with respect to the Board's or such member's approval or
non-approval of any matter, exercise or non-exercise of any right or taking of
or failing to take any other action in connection therewith.
15. Warranties and Indemnities:
--------------------------
(a) Fox represents and warrants that Station's broadcast, in accordance
with this Agreement, of any Fox programming provided by Fox to Station
shall not violate or infringe upon the trade name, trademark,
copyright, literary or dramatic right, or right of privacy or
publicity of any party, or constitute a libel or slander of any party;
provided, however, that the foregoing representations and warranties
shall not apply: (1) to public performance rights in music, (2) to any
material furnished or added by any party other than Fox after delivery
of the programming to Station or (3) to the extent such programming is
changed or otherwise affected by deletion of any material by any party
other than Fox after delivery of the programming to Station. Fox
agrees to indemnify and hold harmless Station and its parents,
affiliates, subsidiaries, successors and assigns, and the respective
owners, officers, directors, agents and employees of each, from and
against all liability, actions, claims, demands, losses, damages or
expenses (including reasonable attorneys' fees, but excluding
Licensee's or Station's lost profits or consequential damages, if any)
caused by or arising out of Fox's breach of the representations and
warranties set forth in the foregoing sentence. Fox makes no
representations, warranties or indemnities, express or implied, except
as expressly set forth in this subparagraph (a).
8
<PAGE>
(b) Without limitation to any of Licensee's other obligations and
agreements under this Agreement, Licensee agrees to indemnify and hold
harmless Fox and its parents, affiliates, subsidiaries, successors and
assigns, and the respective owners, officers, directors, agents and
employees of each, from and against all liability, actions, claims,
demands, losses, damages or expenses (including reasonable attorneys'
fees, but excluding Fox's lost profits or Fox's consequential damages,
if any) caused by or arising out of any matters excluded from Fox's
representations and warranties by subparagraphs (a)(1), (2) or (3)
above, or any breach of any of Licensee's representations, warranties
or agreements hereunder or any programming broadcast by Station other
than that provided by Fox hereunder.
(c) The indemnitor may assume, and if the indemnitee requests in writing
shall assume, the defense of any claim, demand or action covered by
indemnity hereunder, and upon the written request of the indemnitee,
shall allow the indemnitee to cooperate in the defense at the
indemnitee's sole cost and expense. The indemnitee shall give the
indemnitor prompt written notice of any claim, demand or action
covered by indemnity hereunder. If the indemnitee settles any claim,
demand or action without the prior written consent of the indemnitor,
the indemnitor shall be released from the indemnity in that instance.
16. Notices: All notices to each party required or permitted hereunder to be
-------
in writing shall be deemed given when personally delivered (including, without
limitation, upon delivery by overnight courier or other messenger or upon
receipt of facsimile copy), upon the date of mailing postage prepaid or when
delivered charges prepaid to the telegraph office for transmission, addressed as
specified below, or addressed to such other address as such party may hereafter
specify in a written notice given as provided herein. Such notices to Licensee
shall be to the address set forth for Licensee on page 1 of this Agreement.
Such notices to Fox shall be to: Fox Broadcasting Company, 10201 West Pico
Boulevard, Los Angeles, CA 90035, Attn: Network Distributions; with a copy to:
Fox Broadcasting Company, 10201 West Pico Boulevard, Los Angeles, CA 90035,
Attn: Legal Affairs.
17. Retransmission Consent: Without Fox's prior written approval, Licensee
----------------------
shall not grant its consent to the transmission or retransmission, by any cable
system, telephone system, microwave carrier, wireless cable system, satellite or
other technology wherever located, of Stations broadcast of any Fox programming.
18. Change In Fox Operations: Notwithstanding anything to the contrary in this
------------------------
Agreement and without limitation to any of Fox's rights, Fox reserves the right
to make changes in its operations (and/or terms of doing business) that will be
applicable to its affiliates generally but that will conflict with the terms of
this Agreement, and within 30 days after each instance that Fox notifies
Licensee that Fox has made or intends to make any such change, Licensee shall
notify Fox in writing (the "Response Notice") either that Licensee does or does
not agree that this Agreement shall be amended to reflect such change (if
Licensee fails to so notify Fox within said 30 days, then Licensee shall be
deemed to have agreed to said amendment). If such change is or will be
applicable to Fox affiliates representing in total at least 70% of U.S.
Television
9
<PAGE>
Households, then effective on such date, if any, as Fox shall elect after Fox's
receipt of the Response Notice: (1) this Agreement will be deemed amended to
reflect such change, if Licensee so agreed in the Response Notice (or is deemed
to have so agreed), or (2) this Agreement shall terminate, if Licensee did not
so agree.
19. Miscellaneous:
-------------
(a) Nothing contained in this Agreement shall create any partnership,
association, joint venture, fiduciary or agency relationship between
Fox and Licensee.
(b) No waiver of any failure of any condition or of the breach of any
obligation hereunder shall be deemed to be a waiver of any preceding
or succeeding failure of the same or any other condition, or a waiver
of any preceding or succeeding breach of the same or any other
obligation.
(c) In connection with Fox programming, Station shall at all times permit
Fox, without charge, to place, maintain and use on Station's premises,
at Fox's expense, such reasonable amounts of devices and equipment as
Fox shall require, in such location and manner, as to allow Fox to
economically, efficiently and accurately achieve the purposes of such
equipment. Station shall operate such equipment for Fox, to the
extent Fox reasonably requests, and no fee shall be charged by Station
therefor.
(d) This Agreement constitutes the entire understanding between Fox and
Licensee concerning the subject matter hereof and shall not be
amended, modified, changed, renewed, extended or discharged except by
an instrument in writing signed by Fox and Licensee or as otherwise
expressly provided herein. Fox and Licensee each hereby acknowledges
that neither is entering into this Agreement in reliance upon any
term, condition, representation or warranty not stated herein, and
that this Agreement replaces any and all prior and contemporaneous
agreements, whether oral or written, pertaining to the subject matter
hereof. All actions, proceedings or litigation brought against Fox by
Licensee shall be instituted and prosecuted solely within the County
of Los Angeles, California. Licensee hereby consents to the
jurisdiction of the state courts of California and the federal courts
located in the Central District of California as to any matter arising
out of, or related to this Agreement.
(e) Each and all of the several rights and remedies of each party hereto
under or contained in or by reason of this Agreement shall be
cumulative, and the exercise of one or more of said rights or remedies
shall not preclude the exercise of any other right or remedy under
this Agreement, at law, or in equity. Notwithstanding anything to the
contrary contained in this Agreement, in no event shall either party
hereto be entitled to or recover any lost profits or consequential
damages because of a breach or failure by the other party, and except
as expressly provided in this Agreement to the contrary, neither Fox
nor Licensee
10
<PAGE>
shall have any right against the other with respect to claims by any
third person or other third entity.
(f) It is understood that FCN is indemnifying Fox in connection with all
costs, expenses, liabilities and other matters relating to the FCN
programming covered hereunder.
(g) Paragraph headings are inserted for convenience only and shall not be
used to interpret this Agreement or any of the provisions hereof or
given any legal or other effect whatsoever.
(h) Licensee acknowledges that Station's rights contained in this
Agreement are subject to and must be exercised consistent with the
rights conveyed to Fox by the NFL, the NHL or any other licensor of
programming delivered under this Agreement and any limitations and
restrictions thereon.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.
Fox Broadcasting Company ___________________________________
("Fox") ("Licensee")
By:_____________________________ By:________________________________
Title:__________________________ Title:_____________________________
11
<PAGE>
Exhibit 10.21
Portions of this exhibit have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment. The redacted portions are identified by brackets with the character
"X" indicating deleted information.
<PAGE>
Exhibit 10.21
MERCHANDISING RIGHTS ACQUISITION AGREEMENT
AGREEMENT dated as of July 1, 1990 ("Effective Date") between TWENTIETH CENTURY
FOX LICENSING AND MERCHANDISING a unit of FOX INC. ("Fox") and FOX CHILDREN'S
NETWORK, INC. ("Licensor").
1. DEFINITIONS: In addition to the following terms defined in this Paragraph
-----------
1., all initially capitalized words shall have the meaning set forth for such
words where they appear herein in initial quotation marks.
(a) "Literary Material": Written matter, whether published or unpublished
-------------------
in any form, including a novel, treatment, outline, screenplay, teleplay,
story, manuscript, play or otherwise, which may be included in a "Program"
(as defined in Paragraph 2. below) or upon which a Program may be based.
(b) "Literary Publishing Rights": The right to publish and distribute for
----------------------------
sale to the public hardcover or soft-cover printed publications (including
novelizations, screenplays and teleplays) of all or any part of the
Literary Material or other material (other than music and/or lyrics) used
in connection with a Program, including artwork, logos or photographic
stills (but solely to the extent that the right to make such use of such
other material has been separately obtained from the owner thereof), other
than the publications included within Merchandising Rights.
(c) "Merchandising Rights": The right to license, manufacture, distribute,
----------------------
and sell articles of merchandise and/or products (including toys, board and
video games, novelties, trinkets, souvenirs, wearing apparel, fabric,
foods, beverages and cosmetics) and the right to license, distribute, and
sell services, which embody on or in such merchandise, products or services
characters, designs, visual representations, names, likenesses and/or
characteristics of artists, physical properties or other materials
appearing or used in or in connection with a Program or all or any part of
the Literary Material and the right to publish, distribute, and sell
souvenir programs, picture books, comic books, post cards, photo novels,
illustration books, and activity books or booklets which embody on or in
the foregoing any or all of the characters, designs, visual
representations, names, likenesses and;or characteristics of artists,
physical properties or other materials papering or used in or in connection
with a Program or all or any part of the Literary Material.
2. SCOPE OF AGREEMENT: This Agreement covers the acquisition and exercise by
------------------
Fox of Merchandising Rights and Literary Publishing Rights (collectively
"Rights") in and to each Program which comprises a part of the programming ("FCN
Programming") that Licensor provides to its affiliated television stations ("FCN
Affiliated Stations") as part of its national program service. As used herein,
Program means each Television Motion Picture or Television Series currently
existing or hereinafter produced by or on behalf of Licensor for initial
exhibition in the United States as part of FCN Programming, including each of
the following Television
<PAGE>
Series: "BOBBY'S WORLD", "ATTACK OF THE KILLER TOMATOES", "PIGGSBURG PIGS" and
"FOX'S PETER PAN AND THE PIRATES".
3. LICENSE: Licensor grants and licenses to Fox, for the Term and the
-------
Territory specified below, the sole and exclusive right and license under
copyright to exercise all Rights with respect to each Program to the extent that
such Rights are owned and/or controlled by Licensor.
4. TERM: The period during which Fox may exercise the Rights with respect to
----
each Program ("Term") shall commence on the date of this Agreement and shall
continue in perpetuity, unless limitations with respect to the Term of a Program
are set forth in writing by Licensor. Any such limitations shall take the form
of Exhibit "___" which shall be attached to and become a part of this Agreement.
To the extent that any Program created after the date hereof shall have less
than a perpetual Term, Licensor shall deliver to Fox a written notice specifying
the relevant Program and the duration of its Term. Upon receipt by Fox, such
notice shall constitute an amendment to Exhibit "B" and shall be deemed to be a
part of this Agreement for all purposes.
5. TERRITORY: The "Territory" in which Fox may exercise the Rights shall
---------
consist of the entire world.
6. LICENSOR'S RESERVED RIGHTS: Licensor reserves all rights in the Programs
--------------------------
and the literary, dramatic and musical material on which they are based which
are not specifically granted to Fox hereunder or under any other agreement
between Licensor and Fox.
7. PAYMENTS TO LICENSOR:
--------------------
(a) Licensor's Share of Net Profits: In consideration of the Rights, Fox
-------------------------------
shall pay to Licensor an amount equal to [XXXXXXXXXXXXXXXXX] ("Licensor's
Share of Net Profits").
(b) Terminology: As used herein, the term "Net Profits" means, with
-----------
respect to any particular Program, the amount, if any, remaining after Fox
has deducted and retained the aggregate of the following from the Gross
Receipts derived from Fox's exercise of Rights in respect of such Program
in the following order of priority:
(i) Fox's Distribution Fees:[XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
-----------------------
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX] Fox
acknowledges and agrees that it shall bear responsibility for the
payment of any and all agent fees incurred in connection with the
exploitation of the Rights, as described in Paragraph 9. hereinbelow.
(ii) Distribution Expenses: With respect to any particular Program,
---------------------
the aggregate of Distribution Expenses, as defined in Exhibit "A,"
incurred in connection with Fox's exercise of Distribution Rights in
respect of such Program.
2
<PAGE>
The computation of Gross Receipts shall be as set forth in Exhibit "A"
hereto. In connection therewith, the term "Participant's Percentage
Participation" as used in Exhibit "A" is synonymous with Licensor's Share
of Net Profits as defined in paragraph 7.(a) above.
8. OBLIGATIONS OF FOX: Fox agrees:
------------------
(a) to diligently and continuously promote and expand the licensing and
other exploitation of Rights derived from the Programs throughout the
Territory during the Term by soliciting and negotiating merchandising
license agreements and promotion license agreements (collectively "License
Agreements") with manufacturers and distributors of commercial products
and/or services ("Licensee Companies") in accordance with the terms and
conditions of this Agreement;
(b) to administer, supervise and service the License Agreements, including,
without limitation, by collecting all revenues earned and/or derived from
the License Agreements and/or other means of exploitation of the
Merchandising Rights and by accounting for all such revenues to Licensor as
provided herein;
(c) to protect and defend the property rights of Licensor in and to any
copyrights, trademarks, trade names, service marks and other related rights
in respect of the Programs by maintaining approval processes in connection
with the Merchandise manufactured and distributed pursuant to the License
Agreements; and
(d) to perform any and all other services reasonably required by Licensor
in connection with the exercise and exploitation of Rights arising out of
the Programs.
9. APPOINTMENT OF AGENTS: Fox shall be free, in its sole discretion, to
---------------------
appoint third parties to act as agents throughout the Territory either with
respect to a particular geographical region or with respect to a specialized
aspect for representation of the Rights. Fox shall enter into contractual
arrangements with all such agents pursuant to which Fox shall maintain full
control and supervision over the manner in which such agents represent the
Rights in and to the Programs. In no event shall any agents have the authority
to bind either Licensor or Fox in any manner whatsoever.
10. EXPLOITATION OF RIGHTS: Fox shall have complete, exclusive and unqualified
----------------------
discretion and control as to the time, manner and terms of the marketing, sales,
distribution, promotion and related activities in respect of its duties in
connection with the Rights in accordance with such policies, terms and
conditions and through such parties as Fox in its sole business judgment may
determine proper or expedient. Notwithstanding the foregoing, Fox agrees that
it shall transmit each and every merchandising proposal in the form of a deal
memo to Licensor's designee for Licensor's written approval. If such approval
is given, Fox shall prepare and issue from license agreements (or negotiate any
agreements issued by licensees) among Fox, Licensor and each licensee which Fox
is authorized to sign on behalf of Licensor. Such license agreements, whether
prepared by Fox or by a licensee, shall expressly require that samples of
merchandise and related materials, in all stages of development, both prior to
and
3
<PAGE>
upon manufacture, be submitted to Licensor for its approval. License agreements
shall specify the correct copyright and trademark notices, as dictated to Fox by
Licensor, for inclusion on all merchandise and related materials derived from
each Program. Fox makes no representation or implied warranty or agreement as
to the manner or extent of any exercise or exploitation of any Rights in and to
a particular Program nor the amount of money to be derived from any such
exploitation or exercise. Fox does not guarantee the performance of any third
party who becomes a licensee of any Rights for any Program.
11. WARRANTIES AND INDEMNIFICATIONS:
-------------------------------
(a) Rights/Payments/Quality: Licensor warrants, represents and agrees as
-----------------------
follows:
(i) it has and shall continue to have during the Term,
exclusively, all rights necessary to enter into this Agreement free
and clear of any and all restrictions (other than any restrictions
upon the rights disclosed by Licensor to Fox upon execution of this
Agreement or upon acquisition or development of any new Programs
during the Term hereof), claims, litigation, encumbrances, impairments
or defects of any kind;
(ii) it has not and will not commit or omit to perform any act by
which any of the Rights could or will be encumbered, diminished or
impaired;
(iii) neither the execution by Fox of this Agreement nor anything
contained in any Program nor the exercise by Fox of any of the Rights
will violate or infringe upon any rights of any kind of any Party nor
require Fox, its parent company, Affiliates or any of their licensees
or agents to make any payment of any kind to any party for any reason
(such payments, if any, being the sole responsibility and obligation
of Licensor) other than as described in Paragraph 4.(b) of Exhibit "A"
hereto.
(iv) each of Fox, its parent company, Affiliates and each of its
and their licensees and agents will peacefully enjoy and possess each
and all of the rights and licenses granted or purported to be granted
herein throughout the Term without impairment and without hindrance on
the part of any third party.
(b) Copyright: Licensor warrants, represents and agrees as follows:
---------
(i) the copyright in each Program or any part thereof and in the
literary, dramatic and musical material upon which each Program or any
part thereof is based or which is contained therein will be valid and
subsisting during the Term throughout the Territory; and
(ii) it will secure, register, renew and extend all copyrights in
each Program and any part thereof and all related properties upon
eligibility for copyright registration, renewal and extension.
Licensor hereby irrevocably designates Fox as its attorney-in-fact to
do so if Licensor fails to do so, and also designates Fox
4
<PAGE>
as its attorney-in-fact to take reasonable steps to defend said
copyrights against any and all infringements thereof. Licensor agrees
that the foregoing designations constitute powers coupled with an
interest, are irrevocable throughout the Term and may be exercised at
Fox's sole discretion. Fox shall not be liable to Licensor for any
action or failure to act on behalf of Licensor within the scope of
authority conferred on Fox under this Paragraph 11.(b) unless such
action or omission was performed or omitted fraudulently or in bad
faith or constituted wanton and willful misconduct or gross
negligence.
(c) Trademark Protection: Licensor warrants, represents and agrees that it
--------------------
will secure, register and maintain at Licensor's expense federal trademark
registrations and protection both in the United States and in those
countries in which Fox exploits the Rights and engages in licensing
activity in the classes and categories and to the extent to which the
parties hereto may mutually agree such protection is required.
(d) Indemnity: Licensor agrees to indemnify and hold Fox, its parent
---------
company, Subsidiaries and Affiliates and their respective officers, agents,
directors, employees and licensees harmless from and against any and all
claims, actions or proceedings of any kind and from any and all damages,
liabilities, costs and expenses (including reasonable attorneys' fees)
relating to or arising out of any violation of any of the warranties,
representations or agreements or any error or omission in any of the
material or information furnished to Fox in accordance with this Agreement.
If Licensor shall fail to do so promptly upon Fox's written request, Fox
shall have the right to adjust, settle, litigate and take any other action
Fox deems necessary or desirable for the disposition thereof. In any such
event, Licensor shall reimburse Fox on demand for all amounts paid or
incurred by Fox, including reasonable attorneys' fees, and Fox shall have
the right to deduct the amount thereof from sums accruing to Licensor under
this Agreement.
12. FOX'S DEFAULT: Licensor shall not have any right to terminate or rescind
-------------
this Agreement because of any default or breach of any kind by Fox, its parent
company, Affiliates or their licensees. Licensor shall not be entitled to seek
or obtain any injunctive relief with respect to the exercise of the Distribution
Rights granted hereunder by reason of any alleged default or breach by Fox or
its parent company, Affiliates or their licensees, it being agreed that the only
remedy of Licensor in any such event shall be an action for an accounting or for
damages.
13. CHOICE OF LAW/VENUE: This Agreement will be interpreted in accordance with
-------------------
the Laws of the State of California applicable to contracts made therein, but
without regard to any principles of conflict of laws. Licensor agrees that any
legal action or proceeding relating to this Agreement may be instituted in any
State or Federal court in the County of Los Angeles, State of California and
irrevocably submits to the jurisdiction of such courts.
14. NOTICES: All notices to Licensor or Fox shall be in writing and shall be
-------
sent by registered or certified mail to the respective address set forth below
or such other address as shall be designated by written notice. The address for
all notices to Fox shall be as follows:
5
<PAGE>
Twentieth Century Fox Licensing and Merchandising
P.O. Box 900
Beverly Hills, California 90213
Attention: Senior Vice President
with an additional copy sent to the following person at the above address:
Attention: Counsel, Legal Affairs
The address for all notices to Licensor shall be as follows:
Fox Children's Network
P.O. Box 900
Beverly Hills, California 90213
Attention: Senior Vice President, Business Affairs
with an additional copy sent to the following person at the above address:
Attention: Legal Affairs
15. RELATIONSHIP OF PARTIES: Neither Fox nor Licensor is an agent or
-----------------------
representative of the other, and neither shall be liable for or bound by any
representation, act or omission whatever of the other. This Agreement shall in
no way create a joint venture or partnership nor be for the benefit of any third
party.
16. ENTIRE AGREEMENT: This Agreement and each of the Exhibits and Schedules
----------------
attached hereto embody the entire agreement between Fox and Licensor as to the
subject matter hereof, and expressly and unequivocally supersedes all previous
agreements, warranties or representations, oral or written, which may have been
made between Fox and Licensor as to the subject matter hereof. This Agreement
may only be amended by a written instrument duly signed by Fox and Licensor.
By signing in the spaces provided below, Fox and Licensor accept and agree to
all of the terms and conditions of this Agreement.
FOX CHILDREN'S NETWORK, INC. TWENTIETH CENTURY FOX LICENSING
("Licensor") AND MERCHANDISING, a unit of
FOX INC. ("Fox")
By/s/ R. Vokulich By /s/ Jamie Samson for Al Ovadia
----------------------------------- --------------------------------
Its: Vice-President, Business Affairs Its: Sr. Vice President
6
<PAGE>
EXHIBIT "A"
Exhibit "A" to the Merchandising Rights Acquisition Agreement dated as of July
1, 1990 ("Agreement") between TWENTIETH CENTURY FOX LICENSING AND MERCHANDISING
("Fox") and FOX CHILDREN'S NETWORK, INC. (referred to as "Licensor" in the
Agreement and as "Participant" herein).
1. DEFINED TERMS: All words appearing within the text of this Exhibit with
-------------
initial letters capitalized (except the first word of a sentence and proper
nouns) and all words appearing within underlined paragraph captions with initial
letters capitalized and within quotation marks are specifically defined terms
for purposes of this Exhibit, the definitions for which are set forth within the
text of this Exhibit. Words which appear within parentheses with initial
letters capitalized and within quotation marks are specifically defined terms
for purposes of this Exhibit defined by the text immediately preceding the
parentheses.
2. "PARTICIPANT'S PERCENTAGE PARTICIPATION": Participant's Percentage
----------------------------------------
Participation refers to the share of monies to which Participant is entitled
under the Agreement and which shall be accounted for and paid as provided in the
Agreement and this Exhibit.
3. "GROSS RECEIPTS": Gross Receipts means the aggregate of the following
----------------
received with respect to each Program:
(a) [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXX]
(b) [XXXXXXXXXXXXXXX]
(i) [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]
(ii) [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]
4. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
1
<PAGE>
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]
(a) [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXX]
(b) [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]
5. ACCOUNTING PRACTICES: Books of account which pertain to the exercise of
--------------------
Rights with respect to each Program shall be maintained by Fox or under its
supervision at such place or places as may from time to time be customary with
Fox pursuant to its ordinary business practices. All financial matters shall be
determined, accounted for and calculated in all respects pursuant to
participation accounting practices customarily used by Fox. Fox may establish
reasonable reserves for anticipated Distribution Expenses. If Fox incurs any
costs and/or receives any receipts pertaining to a Program together with other
matters, a portion of such costs and/or receipts shall be allocated to such
Program in accordance with the participation accounting practices customarily
used by Fox.
6. FOREIGN REMITTANCES: No monies shall be included in Gross Receipts unless
-------------------
and until such sums have been received in U.S. Dollars in the United States.
All Gross Receipts received in a foreign currency will be converted into United
States Dollars and remitted to Fox in the United States as promptly as
applicable laws will permit. As to funds received in a foreign country which
are not includable in Gross Receipts as a result of being in a Restricted
Currency ("Restricted Proceeds"), Fox shall notify Participant of the amount of
such funds on the appropriate Participation Statement. As and when
Participant's Percentage Participation becomes payable to Participant,
Participant may notify Fox in writing that Participant elects to require
settlement of Participant's share of the Restricted Proceeds remaining in any
country (not yet converted into United States Dollars and therefore not
includable in Gross Receipts) in the
2
<PAGE>
currency of such country, by designating a bank or other representative in such
country, to whom payment may be made for Participant's account. Subject to
applicable laws affecting such transactions, such payment shall be made to such
bank or representative at Participant's expense and shall fully satisfy Fox's
obligations to Participant as to such funds and Participant's share thereof.
Any taxes or expenses incurred in connection with the making of such payments
shall be deducted from amounts paid, or otherwise charged to or paid by the
Participant, in advance, if so required. In no event shall Fox be obligated to
apply Gross Receipts not actually received by Fox in United States Dollars in
the United States to the recoupment of any costs deductible from Gross Receipts
hereunder.
7. STATEMENTS: Fox shall render to Participant periodic Participation
----------
Statements showing, in summary form, Gross Receipts for each Program during the
Term thereof and permitted deductions therefrom, accompanied by payment of the
amount, if any, shown thereon to be due Participant by check drawn to the order
of Participant. The initial Participation Statement shall be rendered for the
period ending as of the close of the calendar quarter during which the exercise
of any Rights with respect to a specific Program by Fox commences.
Participation Statements shall be rendered for periods of 3 months in length
following the end of the period covered by the first Participation Statement.
The period covered by a Participation Statement is referred to as a Statement
Period. No Participation Statements need be rendered for any Statement Period
during which no Gross Receipts are received. Each Participation Statement shall
be furnished 90 days after the close of the Statement Period for which the
Participation Statement is rendered. Any Participation Statement may be changed
from time to time to effectuate year-end adjustments made by Fox's Accounting
Department or its certified public accountants or to correct any errors or
omissions. Each Participation Statement will be mailed to Participant at
Participant's then current address for Notices under the Agreement.
8. WITHHOLDINGS: There shall be deducted from any payments to or for the
------------
account of Participant hereunder, the amount of any tax or other withholding
which, pursuant to applicable laws, is required to be made by Fox, based upon,
measured by, or resulting from payments to or for the account of Participant.
Such deduction shall be in accordance with the good faith interpretation by Fox
of such laws. Fox shall not be liable to Participant for the amount of such
deductions because of the payment of said amount to the Party involved.
Participant shall make and prosecute any and all claims which it may have as to
such tax deductions and/or withholdings directly with the Party involved.
9. OVERPAYMENT/OFFSET: If Fox makes an overpayment to Participant hereunder
------------------
for any reason or if Participant is indebted to Fox for any reason relating to
the Agreement, Participant shall pay Fox such overpayment or indebtedness on
demand, or at the election of Fox, Fox may deduct and retain for its own account
an amount equal to any such overpayment or indebtedness from any sums that may
become due or payable by Fox to Participant for the account of Participant, or
to any company owned by, owning, or under common ownership with Participant.
10. AUDIT: If Participant requests, Fox shall permit during the Term of a
-----
Program, at the sole cost and expense of Participant, a first class and
reputable firm of certified public accountants to examine Fox's books of account
which relate to the Participation Statements
3
<PAGE>
rendered to Participant in respect to such Program which have not become
incontestable. Participant may make copies of or make excerpts from only such
part of Fox's books of account which relate to the matters subject to
examination as herein provided. Such examination shall be only at such place
where said books of account are maintained and during reasonable business hours
in such manner as not to interfere with Fox's normal business activities and not
more frequently than once each calendar year. No examination may last for more
than 30 days. A true copy of all reports made by Participant's representative
pursuant to the foregoing provisions shall be delivered to Fox at the same time
as delivered to Participant. Such right to examine is limited to the Programs
and under no circumstances shall Participant or its authorized representatives
have the right to examine records relating to Fox's business generally or with
respect to any other motion pictures for purposes of comparison or otherwise.
11. INCONTESTABILITY: All information on Participation Statements rendered to
----------------
Participant will be deemed conclusive and binding on Participant unless a
written statement specifying the transactions or items to which Participant
objects is delivered to Fox within 36 months after the date of the first
Participation Statement reflecting the transaction or item in question. If
Participant's objections are not resolved amicably, Participant may maintain or
institute an action with respect to an objection raised and not resolved
amicably if commenced within 6 months after the expiration of said 36-month
period or the expiration of the period for the applicable statute of limitations
established by law as to such transactions or items, whichever first occurs.
The Fox books of account and all supporting documentation need not be retained
and may be destroyed after the expiration of said 36-month period unless
Participant has duly objected prior thereto and instituted an action as herein
provided. Participant agrees that Participant's sole right to receive
accountings in connection with the Rights granted, to examine records, and/or to
object as to transactions or items of information and/or any other matter with
respect to Participant's Participation and/or to maintain or institute any
action or proceeding shall be only as provided in this Exhibit, and Participant
hereby waives the benefits of any applicable Law under which Participant
otherwise may be entitled to an accounting, rights of examination and/or rights
of objection and/or rights to maintain or institute any action or proceeding and
agrees that the accountings to Participant as provided in this Exhibit shall not
be deemed a book account or an open account between Fox and Participant and
shall not be viewed in any way so as to deny the applicability of the
incontestability provisions set forth in this Exhibit.
12. OTHER TERMS AND CONDITIONS:
--------------------------
(a) Creditor - Debtor Relationship: Participant expressly acknowledges the
------------------------------
relationship between Participant and Fox to be that of creditor and debtor
with respect to the payment of monies due Participant hereunder. Nothing
contained herein shall be construed to create a trust or specific fund as
to Gross Receipts of any Program or Participant's share thereof or any
other monies, or to prevent or preclude Fox from commingling Gross Receipts
or any monies due Participant with any other monies or to give Participant
a lien on any Program or an assignment of the proceeds thereof.
(b) Litigation: Participant waives any right which Participant may have at
----------
law or equity to revoke, terminate, diminish or enjoin any rights granted
or acquired by Fox
4
<PAGE>
hereunder by reason of any claim which Participant may assert for non-
payment of any monies claimed due and payable hereunder, it being agreed
that Participant shall be limited to an action at law for recovery of any
such monies claimed and for damages (if any) as a result of non-payment.
(c) No Joint Venture or Partnership: Nothing contained herein shall be
-------------------------------
construed so as to create a joint venture or partnership between
Participant and Fox, or a third party beneficiary relationship as to any
third party.
(d) No Representations: Fox has not made any express or implied
------------------
representation, warranty, guarantee or agreement that any the exercise of
Rights with respect to any Program will earn any minimum amount of Gross
Receipts, Net Profits, or any minimum amount of monies will be expended in
connection therewith or that Participant's Percentage Participation will
equal or exceed any minimum amount or that the Rights in and to any Program
will be exploited in any particular manner.
(e) Assignment by Participant: Subject to all applicable laws and to the
-------------------------
rights of Fox hereunder, Participant may assign the rights to Participant's
Percentage Participation at any time during the Term provided that a Notice
of Irrevocable Authority and Acceptance in Fox's usual form shall be
executed by Participant and by the assignee and delivered to Fox. Fox
shall no be obligated to pay in accordance with any partial assignment if
the formula or basis of computation creates any doubt of interpretation
whereby Fox takes any risk whatsoever and/or it all the assignees fail to
execute and deliver an agreement in Fox's usual form appointing a single
person as a disbursing agent, to whom Fox may make all such payments
thereafter regardless of any further assignment(s). Fox's payment in
accordance with any such assignment or designation shall be deemed to be
equivalent of payment to Participant hereunder and shall discharge Fox from
any further liability or obligation to Participant for the payment of
monies hereunder. Participant's rights to inspect and audit Fox's books of
account shall not be assignable without Fox's prior written consent.
(f) Captions: Captions of paragraphs hereof are inserted for reference and
--------
convenience only and in no way define, limit or prescribe the scope or
intent of any provisions hereof.
5
<PAGE>
EXHIBIT 10.22
INDEMNIFICATION AGREEMENT
This Indemnification Agreement is entered into as of this 22nd day of
December, 1995 ("Agreement") by and between Fox Broadcasting Company ("FBC") and
Fox Children's Network, Inc. ("FCN").
Whereas, FBC is party to a number of affiliation agreements with United
States television stations pursuant to which, inter alia, FBC has agreed to
----- ----
provide such stations with, and such stations have agreed to air, certain
programming; for purposes of this Agreement, such affiliation agreements
(including, without limitation, those heretofore and those hereafter entered
into by FBC) shall be referred to as the "Station Affiliation Agreements";
Whereas, in connection with certain of the Station Affiliation Agreements
the programming that FBC is providing to the applicable stations includes
programming produced by or for or otherwise licensed by FCN (collectively, "FCN
Programming"); and
WHEREAS, the parties hereto desire to enter into this Agreement in order to
evidence their agreement to cross-indemnify one another in connection with third
party claims, if any, arising under the Station Affiliation Agreements;
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement and for other good and valuable consideration (the
receipt and sufficiency of which is hereby acknowledged by each of the parties
hereto), FBC and FCN hereby agree as follows:
I. INDEMNIFICATION:
---------------
A. FBC INDEMNIFICATION OF FCN: FBC shall indemnify and hold harmless FCN
--------------------------
(and its respective directors, officers, employees, agents, successors, assigns
and licensees) (collectively, the "FCN Indemnified Parties") from and against
all loss, cost, liabilities and expenses (including, without limitation,
reasonable attorneys' fees, court costs and any judgment and settlement
payments) or claims suffered by, incurred by or imposed upon the FCN Indemnified
Parties by reason of any third party claim or action asserted under or pursuant
to any Station Affiliation Agreement (other than a third party claim which is
based primarily upon the acts or omissions of FCN and/or any FCN Programming
and/or any advertising or promotional materials created by FCN).
B. FCN INDEMNIFICATION OF FBC: FCN shall indemnify and hold harmless FBC
--------------------------
(and its directors, officers, employees, agents, successors, assigns and
licensees) (collectively, the "FBC
1
<PAGE>
Indemnified Parties") from and against all loss, cost, liabilities and expenses
(including, without limitation, reasonable attorneys' fees, court costs and any
judgment and settlement payments) or claims suffered by, incurred by or imposed
upon the FBC Indemnified Parties by reason of any third party claim or action
asserted under or pursuant to any Station Affiliation Agreement, the basis of
which arises primarily from the acts or omissions of FCN and/or any FCN
Programming and/or any advertising or promotional materials created by FCN.
C. DEFENSE: If any of the indemnified parties is made or threatened to be
-------
made a defendant in or party to any action or proceeding, judicial or
administrative, instituted by any third party for the liability under which or
the costs or expenses of which any of the indemnified parties is entitled to be
indemnified pursuant to this Paragraph I (any such third party action or
proceeding being referred to as an "Indemnification Claim"), the indemnified
party or parties shall give prompt notice thereof to the indemnifying party;
provided that the failure to give such notice shall not affect the indemnified
- --------
party or parties' ability to seek indemnification hereunder unless such failure
has materially and adversely affected the indemnifying party or parties' ability
to prosecute successfully an Indemnification Claim. Each indemnified party
shall permit the indemnifying party, at its own expense, to assume the defense
of any such claim or any litigation to which this Paragraph 1 may be applicable,
by counsel reasonably satisfactory to the indemnified party or parties;
provided, that the indemnified party or parties shall be entitled at any time,
- --------
at its or their own cost and expense (which expense shall not be recoverable
from the indemnifying party unless the indemnifying party is not adequately
representing or, because of a conflict of interest, may not adequately
represent, the indemnified party or parties' interests), to participate in such
claim, action or proceeding and to be represented by attorneys of its or their
own choosing. If the indemnified party or parties elects to participate in such
defense, such party or parties will cooperate with the indemnifying party in the
conduct of such defense. The indemnified party or parties may not concede,
settle or compromise any Indemnification Claim without the consent of the
indemnifying party. The indemnifying party, in the defense of any such claim or
litigation, shall not, except with the approval of each indemnified party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party or parties of a full and complete release from all
liability in respect to such claim or litigation.
2
<PAGE>
II. MISCELLANEOUS:
-------------
A. GOVERNING LAW: THE TERMS OF THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO
CONTRACTS MADE WITHIN, AND TO BE PERFORMED WITHIN, SUCH STATE, EXCLUDING CHOICE
OF LAW PRINCIPLES OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS
OF A JURISDICTION OTHER THAN SUCH STATE.
B. NO ADVERSE CONSTRUCTION: The rule that a contract is to be construed
-----------------------
against the party drafting the contract is hereby waived, and shall have no
applicability in construing this Agreement or the terms of this Agreement.
C. COUNTERPARTS: This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall 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.
D. AMENDMENTS AND WAIVERS: Neither this Agreement nor any term hereof may
----------------------
be changed, waived, discharged or terminated orally or in writing, except that
any term of this Agreement may be amended and the observance of any such term
may be waived (either generally or in a particular instance and either
retroactively or prospectively) with (but only with) the written consent of all
of the parties hereto; provided, however, that no such amendment or waiver shall
-------- -------
extend to or affect any obligation not expressly waived or impair any right
consequent therein. No delay or omission to exercise any right, power or remedy
accruing to any party hereto shall impair any such right, power or remedy of
such party nor be construed to be a waiver of any such right, power or remedy
nor constitute any course of dealing or performance hereunder.
E. CONSENT TO JURISDICTION; FORUM SELECTION: Any actions, suits or
----------------------------------------
proceedings instituted in connection with this Agreement or the performance by
the parties of their obligations hereunder shall be instituted and maintained
exclusively in the Superior Court for the State of California, County of Los
Angeles or in the United States District Court for the Central District of
California. By execution and delivery hereof, each party hereto hereby
consents, for itself and in respect of its property, to the jurisdiction of the
aforesaid courts solely for the purpose of adjudicating its rights or
obligations under, or any disputes involving, this Agreement or any document
related hereto. Each party hereto hereby irrevocably waives, to the extent
permitted by applicable law, any objection, including, without limitation, any
objection that the other corporate party or parties lack the
3
<PAGE>
capacity to sue or defend based upon its or their lack of a certificate of
qualification to conduct intrastate business in California, and any objection to
the laying of venue or based on the grounds of forum non conveniens, which it
----- --- ----------
may now or hereafter have to the bringing of any action or proceeding in such
jurisdiction in respect of this Agreement or any document related
hereto.
F. NOTICE: Any notice or demand which either FCN or FBC is required, or
------
may desire, to give to the other shall be in writing and shall be given by
addressing the same to the other at the address hereinafter set forth, or at
such other address as may be designated in writing by any such party by notice
given to the other in the manner prescribed in this Paragraph II.F and shall be
deemed given by being so addressed and (i) delivered personally, (ii) deposited
postage prepaid in the United States mail, (iii) delivered to a telegraph or
cable company toll prepaid or (iv) sent by telecopy (or telefax), and the date
of said personal delivery, deposit, telegraphing or the sending of such telecopy
shall be the date of the giving of such notice; provided, however, that any
notice alleging a default must be given by the means set forth in (i), (iii) or
(iv) above. Any notice or demand to FCN shall be addressed as follows:
Fox Children's Network, Inc.
10201 West Pico Boulevard
Los Angeles, CA 90035
Attn: Margaret Loesch
Any notice or demand to FBC shall be addressed as follows:
Fox Broadcasting Company
10201 W. Pico Boulevard
Los Angeles, CA 90035
SVP Legal Affairs
Fox Television Group
Attention: Jay Itzkowitz
G. SEVERABILITY: If any provision of this Agreement shall, for any reason,
------------
be held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement, but this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. If, moreover, any
restriction or other provision of this Agreement shall for any reason be held to
be too broad as to duration, geographical scope, activity or subject, it shall
be construed by limiting and reducing such provision or restriction so as to be
enforceable to the extent compatible with applicable law, the parties hereby
agreeing that said restrictions and other provisions
4
<PAGE>
of this Agreement are fair and reasonable as at the date hereof. The parties
shall endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
H. NO THIRD PARTY BENEFICIARIES: Except as expressly otherwise provided to
----------------------------
the contrary in Paragraph 1 for the benefit of the FCN Indemnified Parties and
the FBC Indemnified Parties, as applicable, this Agreement is not for the
benefit of any third party and shall not be deemed to give any right or remedy
to any such third party whether referred to herein or not.
I. FURTHER ASSURANCES: Each party to this Agreement agrees to execute,
------------------
acknowledge, deliver, file and record such further certificates, amendments,
instruments, agreements and documents, and to do all such other acts and things,
as may be required by Law or as may reasonably be necessary or advisable to
carry out the intent and purposes of this Agreement.
J. ENTIRE AGREEMENT: This Agreement contains the entire understanding of
----------------
the parties, and there are no further or other agreements or understandings,
written or oral, in effect between the parties relating to the subject matter
hereof unless expressly referred to herein. No party to this Agreement makes any
representation or warranty except as expressly set forth herein.
5
<PAGE>
IN WITNESS WHEREOF, FCN and FBC have executed this Agreement as of the date
first above written.
FOX CHILDREN'S NETWORK, INC.
By: /s/ Jay Itzkowitz
----------------------------------
Its: Senior Vice President
FOX BROADCASTING COMPANY
By: /s/ Jay Itzkowitz
----------------------------------
Its: Senior Vice President
6
<PAGE>
Exhibit 10.23
Portions of this exhibit have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment. The redacted portions are identified by brackets with the character
"x" indicating deleted information.
<PAGE>
Exhibit 10.23
DISTRIBUTION RIGHTS ACQUISITION AGREEMENT
AGREEMENT dated as of September 1, 1990 ("Effective Date") between
TWENTIETH CENTURY FOX FILM CORPORATION ("Fox") and FOX CHILDREN'S NETWORK, INC.
("Licensor"). Capitalized words used herein not otherwise defined have the
meanings set forth in Exhibit "A" hereto and the Glossary attached to Exhibit
"A" as Schedule "1."
1. Scope of Agreement: This Agreement covers the distribution by Fox of
------------------
each Program which comprises a part of the programming ("FCN" Programming")
that Licensor provides to its affiliated television stations ("FCN
Affiliated Stations") as part of its national program service. As used
herein, "Program" means each Television Motion Picture or Television Series
currently existing or hereinafter produced by or on behalf of Licensor for
initial exhibition in the United States as part of FCN Programming,
including each of the following Television Series: "BOBBY'S WORLD,"
"ATTACK OF THE KILLER TOMATOES,"ZAZOO U," "PIGGSBURG PIGS" and "FOX'S
PETER PAN AND THE PIRATES."
2. LICENSE:
-------
(a) Distribution Rights: Subject to subsection (iii) below, Licensor
-------------------
grants and licenses to Fox the following, collectively referred to as
"Distribution Rights," for the term and the Territory specified below:
(i) General Grant of Rights: The sole and exclusive right and
-----------------------
license under copyright to exercise all rights of Free
Television Distribution, Free Television Exhibition, Pay
Television Distribution, Pay Television Exhibition, Home
Video Distribution, Home Video Exhibition, Theatrical
Distribution, Theatrical Exhibition, Non-Theatrical
Distribution and Non-Theatrical Exhibition with respect to
each program and trailers thereof and excerpts and clips
therefrom for an unlimited number of exhibitions in any
language version, including dubbed, subtitled and narrated
versions, using any form of Motion Picture Copy. Without
limiting the generality of the foregoing, Fox shall have
the right, in connection with the marketing, distribution
and exploitation of each Program, (A) to use and to
authorize others to use the title of each Program or to
change any such title, (B) to use and perform and to
authorize others to use and perform any musical material
contained in each Program, (C) to cut, edit and alter any
Program or any part thereof as Fox may reasonably deem
necessary to conform to censorship, import permit and other
legal requirements and/or to conform to time segment
requirements and/or the exhibition standards of licensees
or
<PAGE>
exhibitors engaged in the Pay Television Exhibition, Free
Television Exhibition, Theatrical Exhibition, Non-
Theatrical Exhibition or Home Video Exhibition of the
Programs, and (D) to use Fox's name and trademark and/or
the name and trademark of any of Fox's Subdistributors and
licensees in such manner, position and form as Fox, its
Subdistributors or licensees may elect.
(ii) Advertising and Publicity Rights: For purposes of
--------------------------------
advertising and publicizing each Program, the right (A) to
publish and to license and authorize others to publish in
any language, in any media and in such form as Fox deems
advisable, synopses, summaries, adaptations, resumes and
stories of and excerpts from each Program and from any
literary, dramatic or musical material contained in each
Program or upon which each Program is based, (B) to use
and authorize others to use the name, voice and likeness
(and any simulation or reproduction thereof) of any person
appearing in or rendering services in connection with each
Program, (C) to broadcast and authorize others to broadcast
by radio and television in any language version excerpts
from each Program and from any literary, dramatic, or
musical material contained in each Program or upon which
each Program is based, and (D) to use Fox's name and
trademark and/or the name and trademark of any of Fox's
Subdistributors and licensees in such manner, position and
form as Fox, its Subdistributors or licensees may elect.
(iii) Limitation on Grant of Distribution Rights: To
------------------------------------------
the extent that the Distribution Rights granted to Fox
hereunder with respect to any of the Programs are limited
in any manner, such limitations are set forth on Exhibit
"D" hereto. To the extent that the Distribution Rights
granted to Fox hereunder are limited with respect to any
Program created after the date hereof, Licensor shall
deliver to Fox a written notice specifying the relevant
Program and the limitations on Fox's Distribution Rights
with respect thereto. Upon receipt by Fox, such notice
shall constitute an amendment to Exhibit "D" and shall be
deemed to be a part of this Agreement for all purposes.
(b) Secondary Transmission: Licensor grants Fox a beneficial
----------------------
interest in all revenues to which Licensor is entitled under the Law
of countries in the Territory by reason of the secondary transmission
of any Program by cable television or similar distribution system, the
primary transmission of which is
2
<PAGE>
made pursuant to a valid license agreement from Fox. All such
revenues, whether collected by Licensor or Fox, shall be included
within Gross Receipts of the Programs. Licensor hereby names Fox its
duly appointed agent to make all necessary filings and to collect all
such revenues resulting from the secondary transmission of any Program
to which Licensor, as copyright owner, would otherwise be entitled and
to include such revenues within Gross Receipts of the Programs.
3. TERM: The period during which Fox may exercise the Distribution
----
Rights with respect to each Program ("Term") shall commence on the
Effective Date and shall continue in perpetuity, except as set forth on
Exhibit "D" hereto. To the extent that any Program created after the date
hereof shall have less than a perpetual Term, Licensor shall deliver to Fox
a written notice specifying the relevant Program and the duration of its
Term. Upon receipt by Fox, such notice shall constitute an amendment to
Exhibit "C" and shall be deemed to be a part of this Agreement for all
purposes.
4. TERRITORY: The "Territory" in which Fox may exercise the Distribution
---------
Rights shall consist of the entire world.
5. LICENSOR'S RESERVED RIGHTS/HOLDBACK:
-----------------------------------
(a) Reserved Rights: Licensor reserves all rights in the Programs
---------------
and the literary, dramatic and musical material on which they are
based which are not specifically granted to Fox hereunder or under any
other agreement between Licensor and Fox.
(b) Holdback: With respect to each Program, Fox shall not exercise
--------
or authorize others to exercise the Distribution Rights in the United
States until the expiration of the period during which the FCN
Affiliated Stations are entitled to exhibit the relevant Program as
part of FCN Programming under their applicable station affiliation
agreement. Licensor shall give Fox at least 6 months prior notice of
the availability date for each Program.
6. PAYMENTS TO LICENSOR:
--------------------
(a) Licensor's Share of Net Profits: [XXXXXXXXXXXXXXXXXXXXXXXXXXX
-------------------------------
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]
(b) Terminology: As used herein, the term "Net Profits" means, with
-----------
respect to any particular Program, the amount, if any, remaining after
Fox has deducted and retained the aggregate of the following from the
Gross Receipts derived from
3
<PAGE>
Fox's exercise of Distribution Rights in respect of such Program in
the following order of priority:
(i) Fox's Distribution Fees: Fox shall be entitled to keep for
-----------------------
its own account the following percentages of Gross Receipts from
the categories listed below:
Network Exhibitions and/or licenses
to a Network in the United States
(excluding Licensor's licenses of FCN
Programming to FCN Affiliated Stations).............[X]
Free Television Distribution in the
United States (excluding Network
Television and Barter Sales)........................[X]
Barter Sales from Free Television
Distribution in the United States
(excluding Network Television)......................[X]
Pay Television Distribution in the
United States.......................................[X]
Free Television Distribution and
Pay Television Distribution in Canada...............[X]
Free Television Distribution in the
Foreign Territory...................................[X]
Pay Television Distribution in the
Foreign Territory...................................[X]
Home Video Distribution in the
Domestic Territory..................................[X]
Home Video Distribution in the
Foreign Territory...................................[X]
Non-Theatrical Distribution in the
Domestic Territory and the Foreign
Territory...........................................[X]
4
<PAGE>
Theatrical Distribution in the Domestic
Territory...........................................[X]
Theatrical Distribution in the Foreign
Territory...........................................[X]
All other Gross Receipts from the
Domestic Territory and the Foreign
Territory...........................................[X]
Fox agrees to notify Licensor at any time that the standard
distribution fee charged by Fox for any one of the categories
listed above is lower than the distribution fee set forth above
for such category. In such event, the parties agree to negotiate
in good faith with respect to the amount of such fee.
(c) Distribution Expenses: With respect to any particular Program,
---------------------
the aggregate of Distribution Expenses, as defined in Exhibit
"A," incurred in connection with Fox's exercise of Distribution
Rights in respect of such Program.
The computation of Gross Receipts shall be as set forth in Exhibit "A"
hereto. In connection therewith, the term "Participant's Percentage
Participation" as used in Exhibit "A" is synonymous with Licensor's
Share of Net Profits as defined in Paragraph 6.(a) above.
7. DELIVERY:
--------
(a) Delivery Date: The date on which delivery of all of the Delivery
-------------
Items set forth in subparagraph (b) of this Paragraph 7. is completed
is referred to herein as the "Delivery Date."
(b) Delivery: Delivery of each Program shall consist of the
--------
completion of the delivery of all of the following Delivery Items with
respect to such Program (to the extent that the relevant Program is a
Television Series, Licensor shall deliver the Delivery Items set forth
below with respect to each Episode of such Television Series):
(i) Laboratory Access Letters: Such number of fully-executed
-------------------------
laboratory access letters, substantially in the form of Exhibit
"B" hereto, as are necessary to enable Fox to obtain all of the
following physical materials with respect to each Program:
5
<PAGE>
(A) Masters:
-------
(1) NTSC: 1 new one-inch (1") first generation high
----
band color videotape of each Program conformed to NTSC
specifications (523 line) in 1.33:1 ratio and suitable
for the reproduction of videotape copies therefrom of a
first-class quality, with picture and sound; and
(2) PAL: 1 new C-Format first generation color
---
videotape of each Program conformed to PAL
specifications (625 line) in 1.33:1 ratio and suitable
for the reproduction of videotape copies therefrom of a
first-class quality, with picture and sound.
Collectively, the foregoing first generation videotapes
shall be referred to herein as the "Masters."
(B) Sound Tracks:
------------
(1) Dialogue-Voice Track: A dialogue-voice track which
--------------------
is in perfect synchronization with each Master; and
(2) Music and Effects Track: A music and effects
-----------------------
track, including all music and effects in such Program,
which is in perfect synchronization with each Master.
Collectively, the foregoing sound tracks shall be referred
to herein as the "Sound Tracks." Sound Tracks shall be in
either 16mm optical or 1/4 magnetic version, containing a
new-pilot sync pulse and able to perform at 60 cycles and 7
1/2 inches per second or 60 cycles and 15 inches per
second, or, for tape materials, 59.9 cycles and 7 1/2
inches per second.
(ii) Documentation: As specified in subparagraph (c) of this
-------------
Paragraph 7.
(iii) Advertising Materials: As specified in subparagraph (d) of
---------------------
this Paragraph 7.
(iv) Exclusive License: A fully-executed Exclusive License with
-----------------
respect to each Program in the form of Exhibit "C" hereto, which is
incorporated herein by this reference.
6
<PAGE>
Collectively, the laboratory access letters, together with the
Documentation, Advertising Materials and Exclusive License, are
referred to herein as the "Delivery Items."
(c) Documentation: Licensor shall deliver promptly to Fox the
-------------
following documents ("Documentation"):
(i) One copy of the music cue sheet for each Program:
(ii) Evidence of Errors and Omissions Insurance (as required
under Paragraph 8.(a) below) for each Program:
(iii) One copy of the final script, credit list and title list
for each Program; and
(iv) Statements setting forth (A) contractual restrictions (if
any) on the exercise of the Distribution Rights, and (B)
restrictions (if any) on the editing and dubbing of any
Program.
All of the foregoing materials shall be delivered to Fox at the
address set forth for notices in Paragraph 13. below, Attention: Legal
Department, Television Distribution. In addition, upon Fox's request,
Licensor shall deliver to Fox any other documentation of rights
requested by Fox that may in the reasonable opinion of Fox be
necessary for Fox to effectuate the purposes and intents of this
Agreement or the exercise of the Distribution Rights in the Territory.
(d) Advertising Materials: Licensor shall deliver to Fox still
---------------------
photographs and color transparencies, synopses, cast lists, trailers
and pressbooks for each Program as are available ("Advertising
Materials") at the address set forth for notices in Paragraph 13.
below. Attention: Creative Services, Television Distribution. If Fox
determines that additional materials are necessary for the advertising
and promotion of any Program in connection with Fox's exercise of the
Distribution Rights, Fox may request that Licensor deliver such
materials and Licensor shall inform Fox of the estimated cost of
preparing and delivering any such materials. If Fox so requests.
Licensor shall promptly prepare and deliver such materials to Fox or
its Subdistributor, provided, however, that Licensor's failure or
inability to provide any such materials to Fox or its Subdistributor
shall not constitute a breach of this Agreement. Fox shall reimburse
Licensor for the actual cost of preparing such materials, provided,
however, that such reimbursement shall not exceed 110% of the
estimated cost. Any such items so paid for by Fox shall be owned by
Fox but may only be used by Fox or its Subdistributor in accordance
with the terms and conditions of this Agreement.
7
<PAGE>
(e) Disposition of Physical Materials Upon Expiration: Fox may retain
-------------------------------------------------
any and all Motion Picture Copies in its possession relating to a
particular Program during such Program's Term. All Motion Picture
Copies made by or for Fox shall be Fox's property. Upon expiration of
a particular Program's Term, all Motion Picture Copies, Advertising
Materials and other materials relating to such Program delivered to
Fox by Licensor which are existing and within Fox's control at the
time of such expiration (other than Documentation) shall, at Fox's
election, be returned to licensor to such place as Licensor shall
designate at Licensor's sole cost and expense or shall be destroyed
with certificates of destruction furnished to Licensor.
8. WARRANTIES AND INDEMNIFICATIONS:
-------------------------------
(a) Rights/Payments/Quality: Licensor warrants, represents and
-----------------------
agrees as follows:
(i) it has and shall continue to have during the Term,
exclusively, all rights necessary to enter into this Agreement
free and clear of any and all restrictions, claims, litigation,
encumbrances, impairments or defects of any kind;
(ii) it has not and will not commit or omit to perform any act
by which any of the Distribution Rights could or will be
encumbered, diminished or impaired;
(iii) neither the execution by Fox of this Agreement nor
anything contained in any Program nor the exercise by Fox of any
of the Distribution Rights will violate or infringe upon any
rights of any kind of any Party nor require Fox, its
Subsidiaries, Affiliates, Subdistributors or any of their
licensees or agents to make any payment of any kind to any Party
for any reason (such payments, if any, being the sole
responsibility and obligation of Licensor); and
(iv) each of Fox, its Subsidiaries, Affiliates and
Subdistributors and each of its and their licensees and agents
will peacefully enjoy and possess each and all of the rights and
licenses granted or purported to be granted herein throughout the
Term without impairment and without hindrance on the part of any
third Party.
(b) Guild Payments and Royalties: Licensor warrants, represents and
----------------------------
agrees that all payments required under applicable collective
bargaining agreements, including employer fringe benefits and taxes
payable with respect thereto, by reason of or as a condition to any
exhibition of any Program or any part thereof,
8
<PAGE>
or any use or reuse thereof for any purposes or in any media
whatsoever, as well as the costs of all licenses required to permit
exhibition, distribution or other use of any Program or any part
thereof, including fees for use of any patented equipment or process,
synchronization, recording or performing royalties and fees with
respect to performance of lyrics and music and literary material,
shall be, have been and will be promptly paid as due by Licensor and
shall be the sole responsibility and obligation of Licensor.
(c) Copyright: Licensor warrants, represents and agrees as follows:
---------
(i) the copyright in each Program or any part thereof and in the
literary, dramatic and musical material upon which each Program
or any part thereof is based or which is contained therein will
be valid and subsisting during the Term throughout the Territory,
and no part of any Program or of any such literary, dramatic or
musical material is or will be in the public domain; and
(ii) it will secure, register, renew and extend all copyrights in
each Program and any part thereof and all related properties upon
eligibility for copyright registration, renewal and extension.
Licensor hereby irrevocably designates Fox as its attorney-in-
fact to do so if Licensor fails to do so, and also designates Fox
as its attorney-in-fact to take reasonable steps to defend said
copyrights against any and all infringements thereof. Licensor
agrees that the foregoing designations constitute powers coupled
with an interest, are irrevocable throughout the Term and may be
exercised at Fox's sole discretion. Fox shall not be liable to
Licensor for any action or failure to act on behalf of Licensor
within the scope of authority conferred on Fox under this
Paragraph 8.(c) unless such action or omission was performed or
omitted fraudulently or in bad faith or constituted wanton and
willful misconduct or gross negligence.
(d) Indemnity: Licensor agrees to indemnify and hold Fox, its parent
---------
company, Subsidiaries, Affiliates and Subdistributors and their
respective officers, agents, directors, employees and licensees
harmless from and against any kind and all claims, actions or
proceedings of any kind and from any and all damages, liabilities,
costs and expenses (including reasonable attorneys' fees) relating to
or arising out of any violation of any of the warranties,
representations or agreements or any error or omission in any of the
material or information furnished to Fox in accordance with this
Agreement. If Licensor shall fail to do so promptly upon Fox's
written request, Fox shall have the right to adjust, settle, litigate
and take any other action Fox deems necessary or desirable for the
disposition thereof. In any such event, Licensor shall reimburse Fox
on demand for all amounts paid or incurred by Fox, including
reasonable attorneys' fees, and
9
<PAGE>
Fox shall have the right to deduct the amount thereof from sums
accruing to Licensor under this Agreement.
(e) Errors and Omissions Insurance: Licensor has as of the Effective
------------------------------
Date and shall maintain throughout the Term of this Agreement a policy
of Motion Picture Producers and Distributors Errors and Omissions
Insurance covering each Program in a form acceptable to Fox from a
qualified insurance company acceptable to Fox naming Fox and each and
all of the Parties indemnified herein as additional named insureds.
The insurance which is afforded by such policy shall be for a minimum
of $1 million for any single party's claim arising out of a single
occurrence and $4 million for all claims arising out of a single
occurrence. Such insurance shall provide for 30 days prior notice to
Fox in the event of any revision, modification or cancellation and
shall be deemed to afford primary insurance such that any insurance
coverage obtained by Fox shall be excess insurance not subject to
exposure until the coverage afforded under Licensor's policy shall be
exhausted in its entirety.
9. DISTRIBUTION AND EXPLOITATION: Fox shall have complete, exclusive and
-----------------------------
unqualified discretion and control as to the time, manner and terms of
distribution, exhibition and exploitation of any Program in accordance with
such policies, terms and conditions and through such Parties as Fox in its
sole business judgment may determine proper or expedient. Fox makes no
express or implied warranty or representation as to the manner or extent of
any distribution or exploitation of any Program, nor the amount of money to
be derived therefrom or expended in connection therewith. Fox does not
guarantee the performance of any Party in connection with the distribution
or exploitation of any Program.
10. MPEAA: Licensor acknowledges that Fox is a member of the Motion
-----
Picture Export Association of America, Inc. ("MPEAA"), and agrees that Fox
may, in Fox's sole discretion, abide by any regulations or directives of
the MPEAA, including but not limited to directives to its members not to
license or ship Motion Pictures for distribution or exhibition in any
geographic area of the world.
11. FOX'S DEFAULT: Licensor shall not have any right to terminate or
-------------
rescind this Agreement because of any default or breach of any kind by Fox,
its Subsidiaries, Affiliates, Subdistributors or their licensees. Licensor
shall not be entitled to seek or obtain any injunctive relief with respect
to the exercise of the Distribution Rights granted hereunder by reason of
any alleged default or breach by Fox or its Subsidiaries, Affiliates,
Subdistributors or their licensees, it being agreed that the only remedy of
Licensor in any such event shall be an action for an accounting or for
damages.
10
<PAGE>
12. CHOICE OF LAW/VENUE: This Agreement will be interpreted in accordance
-------------------
with the Laws of the State of California applicable to contracts made
therein, but without regard to any principles of conflict of laws.
Licensor agrees that any legal action or proceeding relating to this
Agreement may be instituted in any State or Federal court in the County of
Los angeles, State of California and irrevocably submits to the
jurisdiction of such courts.
13. NOTICES: All notices to Licensor or Fox shall be in writing and shall
-------
be sent by registered or certified mail to the respective address set forth
below or such other address as shall be designated by written notice. The
address for all notices to Fox shall be as follows:
Twentieth Century Fox Film Corporation
P.O. Box 900
Beverly Hills, California 90213
Attention: Vice President, Business Affairs
Twentieth Television - Television Distribution
with an additional copy sent to the following person at the above address:
Attention: Vice President, Legal Affairs
Twentieth Television - Television Distribution
The address for all notices to Licensor shall be as follows:
Fox Children's Network
P.O Box 900
Beverly Hills, California 90213
Attention: Senior Vice President, Business Affairs
with an additional copy sent to the following person at the above address:
Attention: Legal Affairs
14. RELATIONSHIP OF PARTIES: Neither Fox nor Licensor is an agent or
-----------------------
representative of the other, and neither shall be liable for or bound by
any representation, act or omission whatever of the other. This Agreement
shall in no way create a joint venture or partnership nor be for the
benefit of any third Party. Neither Fox nor Licensor shall have the
authority to bind the other or the other's representatives in any way.
11
<PAGE>
15. ENTIRE AGREEMENT: This Agreement and each of the Exhibits and
----------------
Schedules attached hereto embody the entire agreement between Fox and
Licensor as to the subject matter hereof, and expressly and unequivocally
supersedes all previous agreements, warranties or representations, oral or
written, which may have been made between Fox and Licensor as to the
subject matter hereof. This Agreement may only be amended by a written
agreement duly signed by Fox and Licensor.
By signing in the spaces provided below, Fox and Licensor accept and agree
to all of the terms and conditions of this Agreement.
FOX CHILDREN'S NETWORK, INC. TWENTIETH CENTURY FOX FILM
("Licensor") CORPORATION ("Fox")
By /s/ By /s/
-------------------------- ----------------------------
Its Its
[Executed by an authorized officer of each party to the agreement; however, the
signatures are illegible]
12
<PAGE>
EXHIBIT "A"
Exhibit "A" to the Distribution Rights Acquisition Agreement dated as of
September 1, 1990 ("Agreement") between TWENTIETH CENTURY FOX FILM CORPORATION
("Fox") and FOX CHILDREN'S NETWORK, INC. (referred to as "Licensor" in the
Agreement and as "Participant" herein).
1. DEFINED TERMS: All words appearing within the text of this Exhibit
-------------
with initial letters capitalized (except the first word of a sentence and
proper nouns) and all words appearing within underlined paragraph captions
with initial letters capitalized and within quotation marks are
specifically defined terms for purposes of this Exhibit, the definitions
for which are set forth within the text of this Exhibit or the Glossary
attached hereto as Schedule "1." Words which appear within parenthesis
with initial letters capitalized and within quotation marks are
specifically defined terms for purposes of this Exhibit defined by the text
immediately preceding the parenthesis.
2. "PARTICIPANT'S PERCENTAGE PARTICIPATION": Participant's Percentage
----------------------------------------
Participation refers to the share of monies to which Participant is
entitled under the Agreement and which shall be accounted for and paid as
provided in the Agreement and this Exhibit.
3. "GROSS RECEIPTS": Gross Receipts means the aggregate of the following
----------------
received with respect to each Program:
(a) [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXX]
(b) [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]
(i) [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]
(ii) [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
1
<PAGE>
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]
(iii) [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]
(A) [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXX]
(B) [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXX]
[XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXX]
(c) [XXXXXXXXXXXXXXXXX]
(i) [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
2
<PAGE>
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]
(ii) [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXX]
4. EXCLUSIONS FROM GROSS RECEIPTS: In no event shall the following be
------------------------------
included in Gross Receipts:
(a) Advances/Guarantees: Returnable advance payments and security
-------------------
deposits, until earned or forfeited, provided, however, that non-
returnable advances and guarantees shall be included in Gross Receipts
upon receipt.
(b) Rebates/Refunds/Adjustments: All adjustments, refunds or rebates
---------------------------
given by Distributor or Subdistributors to licensees of a Program. To
the extent any such amounts represent a return of amounts previously
included in Gross Receipts, an appropriate adjustment in Gross
Receipts and Fox Distribution Fees shall be made.
(c) Collected Taxes: Any amounts collected by Distributor of a
---------------
Subdistributor or licensee of a Program as taxes or for payment as
taxes, such as admission, sales and value-added taxes.
(d) Salvage: All monies received by Distributor of a Subdistributor
-------
from the scrapping or disposal of Motion Picture Copies or other
materials.
5. "DISTRIBUTION EXPENSES": The aggregate of the following:
-----------------------
(a) [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
3
<PAGE>
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]
(b) [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXX]
(c) [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXX]
6. ACCOUNTING PRACTICES: Books of account which pertain to the
--------------------
distribution of each Program shall be maintained by Fox or under its
supervision at such place or laces as may from time to time be customary
with Fox pursuant to its ordinary business practices. All financial matters
shall be determined, accounted for an calculated in all respects pursuant
to participation accounting practices customarily used by Fox. Fox may
establish reasonable reserves for anticipated Distribution Expenses. If Fox
incurs any costs and/or receives any receipts pertaining to a Program
together with other matters, a portion of such costs and/or receipts shall
be allocated to such Program in accordance with the participation
accounting practices customarily used by Fox.
7. FOREIGN REMITTANCES: No monies shall be included in Gross Receipts
-------------------
unless and until such sums have been received in U.S. Dollars in the United
States. All Gross Receipts received in a foreign currency will be
converted into United States Dollars and remitted to Fox in the United
States as promptly as applicable Laws will permit. As to funds received in
a foreign country which are not includable in Gross Receipts as a result of
being in a Restricted Currency ("Restricted Proceeds"), Fox shall notify
Participant of the amount of such funds on the appropriate Participation
Statement. As and when Participant's Percentage Participation becomes
payable to Participant. Participant may notify Fox in writing that
Participant elects to require settlement of Participant's share of the
Restricted Proceeds remaining in any country (not yet converted
4
<PAGE>
into United States Dollars and therefore not includable in Gross Receipts)
in the currency of such country, by designating a bank or other
representative in such country, to whom payment may be made for
Participant's account. Subject to the applicable laws affecting such
transactions, such payment shall be made to such bank or representative at
Participant's expenses and shall fully satisfy Fox's obligations to
Participant as to such funds and Participant's share thereof. Any taxes or
expenses incurred in connection with the making of such payments shall be
deducted from amounts paid, or otherwise charged to or paid by the
Participant, in advance, if so required. In no event shall Fox be obligated
to apply Gross Receipts not actually received by Fox in United States
Dollars in the United States to the recoupment of any costs deductible from
Gross Receipts hereunder.
8. STATEMENTS: Fox shall render to Participant periodic Participation
----------
Statements showing, in summary form, Gross Receipts for each Program during
the Term thereof and permitted deductions therefrom, accompanied by payment
of the amount, if any, shown thereon to be due Participant by check drawn
to the order of Participant. The initial Participation Statement shall be
rendered for the period ending as of the close of the calendar quarter
during which delivery of any Programs to Fox occurs. Participation
Statements shall be rendered for periods of 3 months in length following
the end of the period covered by the first Participation Statement for 2
years, and then for periods of 6 months in length for 3 years and
thereafter for periods of 12 months in length. The period covered by a
Participation Statement is referred to as a Statement Period during which
no Gross Receipts are received. Each Participation Statement shall be
furnished 90 days after the close of the Statement Period for which the
Participation Statement is rendered. Any Participation Statement may be
changed from time to time to effectuate year-end adjustments made by Fox's
Accounting Department or its certified public accountants or to correct any
errors or omissions. Each Participation Statement will be mailed to
Participant at Participant's then current address for Notices under the
Agreement.
9. WITHHOLDINGS: There shall be deducted from payments to or for the
------------
account of Participant hereunder, the amount of any tax or other
withholding which, pursuant to applicable Laws, is required to be made by
Fox, based upon, measured by, or resulting from payments to or for the
account of Participant. Such deduction shall be in accordance with the
good faith interpretation by Fox of such Laws. Fox shall not be liable to
Participant for the amount of such deductions because of the payment of
said amount to the Party involved. Participant shall make and prosecute
any and all claims which it may have as to such tax deductions and/or
withholdings directly with the Party involved.
10. OVERPAYMENT/OFFSET: If Fox makes an overpayment to Participant
------------------
hereunder for any reason or if Participant is indebted to Distributor for
any reason relating to the Agreement, Participant shall pay Fox such
overpayment or indebtedness
5
<PAGE>
on demand, or at the election of Fox, Fox may deduct and retain for its own
account an amount equal to any such overpayment or indebtedness from any
sums that may become due or payable by Fox to Participant for the account
of Participant, or to any company owned by, owning, or under common
ownership with Participant.
11. AUDIT: If Participant requests, Fox shall permit during the Term of a
-----
Program, at the sole cost and expense of Participant, a first class and
reputable firm of certified public accountants to examine Fox's books of
account which relate to the Participation Statements rendered to
Participant in respect to such Program which have not become incontestable.
Participant may make copies of or make excerpts from only such part of
Fox's books of account which relate tot he matters subject to examination
as herein provided. Such examination shall be only at such place where
said books of account are maintained and during reasonable business hours
in such manner as not to interfere with Fox's normal business activities
and not more frequently than once each calendar year. NO examination may
last for more than 30 days. A true copy of all reports made by
Participant's representative pursuant to the foregoing provisions shall be
delivered to Fox at the same time as delivered to Participant. Such right
to examine is limited to the Programs and under no circumstances shall
Participant or its authorized representatives have the right to examine
records relating to Fox's business generally or which respect to any other
Motion Pictures for purposes of comparison or otherwise.
12. INCONTESTABILITY: All information on Participation Statements
----------------
rendered to Participant will be deemed conclusive and binding on
Participant unless a written statement specifying the transactions on items
to which Participant objects is delivered to Fox within 36 months after the
date of the first Participation Statement reflecting the transaction or
item in question. If Participant's objections are not resolved amicably,
Participant may maintain or institute an action with respect to an
objection raised and not resolved amicably if commenced within 6 months
after the expiration of said 36-month period or the expiration of the
period of the applicable statute of limitations established by Law as to
such transactions or items, whichever first occurs. The Fox books of
account and all supporting documentation need not be retained and may be
destroyed after the expiration of said 36-month period unless Participant
has duly objected prior thereto and instituted an action as herein
provided.
13. OTHER TERMS AND CONDITIONS:
--------------------------
(a) Creditor - Debtor Relationship: Participant expressly
------------------------------
acknowledges the relationship between Participant and Fox to be that
of creditor and debtor with respect to the payment of any monies due
Participant hereunder. Nothing contained herein shall be construed to
create a trust or specific fund as to Gross Receipts of any Program or
Participant's share thereof or any other monies, or to prevent or
preclude Fox from commingling Gross Receipts or any monies due
6
<PAGE>
Participant with any other monies or to give Participant a lien on any
Program or an assignment of the proceeds thereof.
(b) Litigation: Participant waives any right which Participant may
----------
have at law or equity to revoke, terminate, diminish or enjoin any
rights granted or acquired by Fox hereunder by reason of any claim
which Participant may assert for non-payment of any monies claimed due
and payable hereunder, it being agreed that Participant shall be
limited to an action at law for recovery of any such monies claimed
and for damages (if any) as a result of non-payment.
(c) No Joint Venture or Partnership: Nothing contained herein shall
-------------------------------
be construed so as to create a joint venture or partnership between
Participant and Fox, or a third Party beneficiary relationship as to
any third Party. Except as otherwise specifically set forth herein,
neither Participant nor Fox shall be authorized or empowered to make
any representation or commitment or to perform any act which shall be
binding on the other unless expressly unauthorized or empowered in
writing.
(d) No Representations: Fox has not made any express or implied
------------------
representation, warranty, guarantee or agreement that any Program will
be distributed or that the quality of any Program will equal or exceed
any minimum standard of quality, or that any Program will earn a
minimum amount of Gross Receipts, Net Profits, or any minimum amount
of monies will be expended in connection therewith or that
Participant's Percentage Participation will equal or exceed any
minimum amount or that any program will be distributed or exploited in
any particular manner.
(e) Assignment of Participant: Subject to all applicable laws and to
-------------------------
the rights of Distributor hereunder, Participant may assign the rights
to Participant's Percentage Participation at any time after the
Delivery Date, provided that a Notice of Irrevocable Authority and
Acceptance in Fox's usual form shall be executed by Participant and by
the assignee and delivered to Fox. Fox shall not be obligated to pay
in accordance with any partial assignment if the formula or basis of
computation creates any doubt of interpretation whereby Fox takes any
risk whatsoever and/or it all the assignees fail to execute and
deliver an agreement in Fox's usual form appointing a single person as
a disbursing agent, to whom Fox may make all such payments thereafter
regardless of any further assignment(s). Fox's payment in accordance
with any such assignment or designation shall be deemed to be
equivalent of payment to Participant hereunder and shall please and
discharge Fox from any further liability or obligation to Participant
for the payment of monies hereunder. Participant's right to inspect
and audit Fox's books of account shall not be assignable without Fox's
prior written consent.
7
<PAGE>
(f) Captions: Captions and paragraphs hereof are inserted for
--------
reference and convenience only and in no way define, limit or
prescribe the scope or intent of any provision hereof.
8
<PAGE>
SCHEDULE "1"
GLOSSARY
Schedule "1" of Exhibit "A" of the Distribution Rights Acquisition Agreement
("Agreement") dated as of September 1, 1990 between TWENTIETH CENTURY FOX FILM
CORPORATION ("Fox") and FOX CHILDREN'S NETWORK, INC. (referred to as "Licensor"
in the Agreement and as "Participant" in Exhibit "A").
As used in Exhibit "A" and the Agreement, the following words and phrases have
the defined meanings set forth below:
A. "Affiliate": A joint venture or partnership or other entity, other than a
-----------
corporation, with respect to which Fox shares in the actual management,
operation, and expenses thereof, or a corporate entity in which Fox or a
Subsidiary has a financial interest represented by stock ownership in excess of
20%, but not more than 50%. of the total issued and outstanding voting stock of
such corporate entity.
B. "Barter Sales": The sale by Distributor of commercial time in connection
--------------
with Free Television Distribution of the Programs.
C. "Canada": Canada and military installations, aircraft and/or ships flying
--------
the Canadian flag, and aircraft and/or ships owned or operated by any entity
whose principal administrative office is located within any of the
aforementioned Territories but excluding territorial areas and possessions.
D. "Cassettes": Motion Picture Copies in the form of a cassette, cartridge,
-----------
videogram, video disc, tape or other similar device now known or hereafter
devised and designed to be used in conjunction with a reproduction apparatus
which causes a Motion Picture to be visible on the screen of a television
receiver, television monitor or comparable device now known or hereafter
devised.
E. "Distributor": Fox and Subsidiaries and Affiliates engaged in the
-------------
distribution of the Programs for exhibition by other Parties. The term
"Distributor" shall not include the following: theaters, television broadcast
stations, electronic transmission systems (including cable, direct broadcast
satellite, microwave and master antenna), program delivery services and radio
stations (or other exhibitors of Motion Pictures by any means now known or
hereafter devised), or laboratories producing and/or distributing Motion Picture
Copies, or merchandisers, manufacturers, sellers, wholesale dealers or retail
dealers of Cassettes or any other products, or book or music publishers, or
Parties producing or selling phonograph records, or advertising agencies, or
agents for barter sales, or any Parties similar to any of the foregoing excluded
Parties (whether or not any of the foregoing excluded parties are Subsidiaries
of Affiliates), or Subdistributors.
1
<PAGE>
F. "Domestic Territory": The United States and Canada.
--------------------
G. "Episode": Each episodic program of a Television Series or Television
---------
Motion Picture, including a Pilot.
H. "Force Majeure": The interpretation of or material interference with the
---------------
preparation, production, completion, or distribution of any of the Programs or
of a substantial number of Motion Pictures produced and/or distributed or
proposed to be produced and/or distributed by Distributor or Home Video
Distributor by any cause or occurrence beyond the control of Fox or Participant
as the case may be, including fire, flood, epidemic, earthquake, explosion,
accident, riot, war (declared or undeclared), blockade, embargo, act of public
enemy, civil disturbance, labor dispute, strike, lockout, inability to secure
sufficient labor, power, essential commodities, necessary equipment or adequate
transportation or transmission facilities, failure or non-availability of any
means for electronic transmission or reception of Motion Pictures, any
applicable Law, or any act of God.
I. "Foreign Territory": All Territories other than the United States and
-------------------
Canada.
J. "Free Television Distribution": The lease or license of a Motion Picture
------------------------------
to one or more Parties with the right to engage in the Free Television
Exhibition of the Motion Picture and/or to grant licenses to other Parties to
engage in the Free Television Exhibition and/or Free Television Distribution of
the Motion Picture.
K. "Free Television Exhibition": Television Exhibition, other than Pay
----------------------------
Television Exhibition, without any fee being charged to the viewer for the
privilege of unimpaired reception of such exhibition. For purposes of this
definition, any government imposed fees or taxes applicable to the use of
television receivers generally or a regulate periodic access, carriage or
equipment fee (but not any optional premium subscription charge or fee paid with
respect to Pay Television Exhibition) paid by a subscriber to a cable television
transmission service or agency for the privilege of unimpaired reception shall
not be deemed a fee charged to the viewer.
L. "Home Video Distribution": The lease or license of a Motion Picture to one
-------------------------
or more Parties with the right to engage in the manufacture, distribution,
rental and/or sale of Cassettes of the Motion Picture to one or more Parties for
Home/Video Exhibition of the Motion Picture and/or to engage in the further
lease or license of the Motion Picture to other parties with the right to engage
in the manufacture, distribution, rental and/or sale of Cassettes of the Motion
Picture for Home Video Exhibition of the Motion Picture.
M. "Home Video Distributor": Home Video Distributor means Fox, a Subsidiary,
------------------------
or an Affiliate engaged in Home Video Distribution including Home Video
Distribution directly to wholesale dealers which sell Cassettes embodying the
Picture to retail outlets.
2
<PAGE>
N. "Home Video Exhibition": The non-public exhibition of a Motion Picture by
-----------------------
means of a Cassette in a private residence for viewing at the place of origin of
such exhibition.
O. "Including": Whenever examples are used after the word "including," such
-----------
examples are intended to be illustrative only and shall not limit the generality
of the words preceding the word "including."
P. "In perpetuity": The most extensive period of time permitted, including
---------------
renewal and extension periods, if any, by any applicable Law.
Q. "Law": Any present or future statute or ordinance, whether municipal,
-----
county, state, national or territorial; any executive, administrative or
judicial regulation, order, judgment or decree; any treaty or international
convention, any rule or principle of common law or equity, or any requirement
with force of law.
R. "Literary Material": Written matter, whether published or unpublished, in
-------------------
any form, including a novel, treatment, outline, screenplay, teleplay, story,
manuscript, play or otherwise, which may be included in a Motion Picture or upon
which a Motion Picture may be based.
S. "Literary Publishing Rights": The right to publish and distribute for sale
----------------------------
to the public hardcover or soft-cover printed publications (including
novelizations, screenplays and teleplays) of all or any part of the Literary
Material or other material (other than music and/or lyrics) used in connection
with a Motion Picture, including artwork, logos or photographic stills (but
solely to the extent that the right to make such use of such other material has
been separately obtained from the owner thereof), other than the publications
included within Merchandising Rights.
T. "Merchandising Rights": The right to license, manufacture, distribute, and
----------------------
sell articles of merchandise and/or products (including toys, board and video
games, novelties, trinkets, souvenirs, wearing apparel, fabric, foods, beverages
and cosmetics) and the right to license, distribute, and sell services which
embody on or in such merchandise, products or services characters, designs,
visual representations, names, likenesses and/or characteristics of artists,
physical properties or other materials appearing or use in or in connection with
a Motion Picture or all or any part of the Literary Material and the right to
publish, distribute, and sell services, which embody on or in such merchandise,
products or services characters, designs, visual representations, names,
likenesses and/or characteristics of artists, physical properties or other
materials appearing or used in or in connection with a Motion Picture or all or
any part o the Literary Material and the right to publish, distribute, and sell
souvenir programs, pictures books, comic books, post cards, movie novels, photo
novels, illustration books, and activity books or booklets which embody on or in
the foregoing any or all of the characters, designs, visual representations,
names, likenesses and/or characteristics of artists, physical properties or
other materials appearing or used in or in connection with a Motion Picture or
all or any part of the Literary Material.
3
<PAGE>
U. "Motion Picture": Pictures of every kind and character whatsoever,
----------------
including all present and future technological developments, whether produced by
means of any photographic, electrical, electronic, mechanical or other processes
or devices now known or hereafter devised, and their accompanying devices and
processes whereby pictures, images, visual and aural representations are
recorded or otherwise preserved for projection, reproduction, exhibition, or
transmission by any means or media now known or hereafter devised in such manner
as to appear to be in motion or in sequence, including computer-generated
pictures and graphics other than video games.
V. "Motion Picture Copy": Any negative or positive Motion Picture film in any
---------------------
gauge, video or electronic tape recording, Cassette, disc or other physical
material or substance of any kind produced by means of any photographic,
electrical, electronic, mechanical or other process or device now known or
hereafter devised, on or with respect to which a Motion Picture or any part
thereof is printed, imprinted, recorded, reproduced, duplicated or otherwise
preserved.
W. "Network": Each group of television stations affiliated with either
---------
Capitol Cities/ABC, Inc. ("ABC"), CBS, Inc. ("CBS"), or National Broadcasting
Company ("NBC") which transmits programs included in the program services of
ABC, CBS or NBC, respectively.
X. "Network Exhibition": The Free Television Exhibition of a Motion Picture
--------------------
by a Network.
Y. "Network Television": The transmission of the program services of ABC, CBS
--------------------
and NBC (as the case may be) by each Network.
Z. "Non-Theatrical Distribution": The lease or license of a Motion Picture to
-----------------------------
one or more Parties with the right to engage in the Non-Theatrical Exhibition of
the Motion Picture and/or to grant licenses to other Parties to engage in the
Non-Theatrical Exhibition and/or Non-Theatrical Distribution of the Motion
Picture.
AA. "Non-Theatrical Exhibition": The exhibition of a Motion Picture using any
---------------------------
form of Motion Picture Copy in any manner now known or hereafter devised by any
medium or process now known or hereafter devised, other than Theatrical
Exhibition, Television Exhibition, or Home Video Exhibition. Non-Theatrical
Exhibition includes the exhibition of a Motion Picture (1) in private residences
(other than Television Exhibition and Home Video Exhibition), (2) on airplanes,
trains, ships and other common carriers, (3) in schools, colleges and other
educational institutions, libraries, governmental agencies, business and service
organizations and clubs, churches and other religious oriented groups, museums,
and film societies (including transmission of the exhibition by closed circuit
within the immediate area of the origin of such exhibition), and (4) in
permanent or temporary military installations, shut-in institutions, prisons,
retirement centers, offshore drilling rigs, logging camps, and remote forestry
and construction camps (including transmission of the exhibition by closed
circuit within the immediate are of the origin of such exhibition).
4
<PAGE>
AB. "Outright Sale": The exclusive leasing or licensing of a Motion Picture to
---------------
any Party for a fixed period of time solely for a fixed price without such fixed
price being computed and paid with respect to any monies or levels thereof
actually derived or expenses actually incurred by such Party from the
distribution or exhibition of the Motion Picture.
AC. "Party": Any individual, corporation, partnership, joint venture,
-------
organization or any other business entity or firm or governmental agency.
AD. "Pay Television Distribution": The lease or license of a Motion Picture to
-----------------------------
one or more Parties with the right to engage in the Pay Television Exhibition of
the Motion Picture and/or to grant licenses to other Parties to engage in the
Pay Television Exhibition and/or Pay Television Distribution of the Motion
Picture.
AE. "Pay Television Exhibition": Television Exhibition which is available on
---------------------------
the basis of the payment of a premium subscription charge or fee (as
distinguished from an access, carriage or equipment fee) for the privilege of
unimpaired reception of a transmission for viewing in a private residence or in
a hotel, motel, hospital or other living accommodation or non-public area,
whether (1) such transmission is on a pay-per-view, pay-per-show, pay-per-
channel or pay-per-time period basis, or (2) such premium subscription charge or
fee is charged to the operator of a hotel, motel, hospital or other living
accommodation.
AF. "Pilot": A Television Motion Picture produced as a prototype for the
-------
purpose of interesting an exhibitor, sponsor or distributing entity in ordering
a Television Series based upon such Television Motion Picture.
AG. "Restricted Currency": A currency which is or becomes subject to
---------------------
moratorium, embargo, banking or exchange restrictions or restrictions against
remittances, or which in the business judgment of Fox is commercially
impracticable to remit.
AH. "Subdistributor": A party licensed by Distributor to distribute or license
----------------
the Programs for exhibition in any portion of the Territory, other than a
Subsidiary, Affiliate, exhibitor, a licensee of an Outright Sale transaction, or
a licensee which is a program delivery service for Television Exhibition (such
as a network system for over-the-air television broadcast stations and/or for
cable systems and/or for direct broadcast satellite service and/or for hotels
and/or for hospitals).
AI. "Subsidiary": A Party in which Fox has a financial interest represented by
------------
stock ownership in excess of 50% of the total issued and outstanding voting
stock of such Party.
AJ. "Television Distribution": The lease or license of a Motion Picture to one
-------------------------
or more Parties with the right to engage in the Television Exhibition of the
Motion Picture and/or to grant licenses to other Parties to engage in the
Television Exhibition and/or Television Distribution of the Motion Picture.
5
<PAGE>
AK. "Television Exhibition": The exhibition of a Motion Picture using any form
-----------------------
of Motion Picture Copy for transmission by any means now known or hereafter
devised (including over-the-air, cable, wire, fiber, master antenna, satellite,
microwave, closed circuit, laster, multi-point distribution services or direct
broadcast systems) which transmission is received, directly or indirectly by
retransmission or otherwise, impaired or unimpaired, for viewing the motion
Picture on the screen of a television receiver or comparable device now known or
hereafter devised (including high definition television), other than Home Video
Exhibit or Theatrical Exhibition.
AL. "Television Motion Picture": A Motion Picture primarily intended to be
---------------------------
initially distributed for Television Exhibition, including a mini-series or any
other form of television program other than a Television Series. Where the
context required, "Television Motion Picture" shall mean each and every Episode
of such Television Motion Picture.
AM. "Television Series": Related Episodes intended to be distributed as a
-------------------
group in episodic format (in which a continuing cast of characters performs
roles in different factual situations in each Episode in accordance with an
established story line) or anthology format (in which there is no continuing
cast of characters performing roles and no continuing established story line) or
a combination of an episodic and an anthology format. Where the context
requires. "Television Series" shall mean each and every Episode in such
Television Series.
AN. "Territory": Any specific geographic area constituting a nation, country,
-----------
state, governmental entity or any subdivision thereof located anywhere in the
universe.
AO. "Theatrical Distribution": The lease or license of a Motion Picture to one
-------------------------
or more Parties with the right to engage in Theatrical Exhibition of the Motion
Picture and/or to grant licenses to other Parties to engage in the Theatrical
Exhibition and/or Theatrical Distribution of the Motion Picture.
AP. "Theatrical Exhibition": The exhibition of a Motion Picture using any form
-----------------------
of Motion Picture Copy by any process now known or hereafter devised in walk-in
or drive-in theaters open to the general public on a regularly scheduled basis
where a fee is charged for admission to vide the Motion Picture.
AQ. "United States": The continental United States of America, including the
---------------
District of Columbia, the States of Alaska and Hawaii, Puerto Rico, Guam, Samoa
and the U.S. Virgin Islands, and military installations, aircraft and/or ships
flying the United States flag, and aircraft and/or ships owned or operated by
any entity whose principal administrative office is located within any of the
aforementioned Territories.
6
<PAGE>
EXHIBIT 10.24
ADMINISTRATION AGREEMENT
------------------------
Agreement made as of February 7, 1990, between Fox Broadcasting Company ("FBC")
and Fox Children's Network, Inc., ("FCN"), relating to administrative services
to be provided to FCN by FBC.
FBC and FCN hereby agree as follows:
1. In consideration of the fee paid to FBC pursuant to Paragraph 2 below, FBC
shall provide the following services to FCN: network national advertising sales
and the administration thereof, commercial trafficking and broadcast operations
(including program delivery to FCN affiliates) and overhead charges (i.e.,
indirect expenses) related to FBC in-house administrative support in the areas
of research, promotion, business affairs, legal affairs and accounting.
2. FCN shall pay to FBC a fee equal to 15% of 100% of the net advertising
revenue (i.e., the gross advertising revenue, reduced by advertising agency
commissions, but without any other deductions of any kind) derived in connection
with national commercials, commercial material or other advertising matter
included in or used in connection with any of the programs exhibited over FCN.
Payment of the fee due to FBC hereunder with respect to each fiscal quarter
shall be paid to FBC not later than 30 days following the end of that quarter.
FBC shall have the right to deduct its fee from the advertising revenue received
by FBC on behalf of FCN.
3. Except to the extent expressly included within the services to be provided
by FBC under Paragraph 1 above: (1) all expenses, costs, fees and other outlays
advanced, paid or incurred by FBC by reason of, in connection with, or relative
to FBC's rendition of services for FCN shall be promptly reimbursed to FBC by
FCN, and (2) without limitation to the foregoing, FCN shall promptly pay FBC, at
such reasonable rate as is charged by FBC, for all facilities, equipment,
personnel or services provided by FBC to FCN.
4. This Agreement may be terminated by either party hereto on 30 days prior
written notice to the other party.
FOX BROADCASTING COMPANY FOX CHILDREN'S NETWORK, INC.
By /s/ Signed by Authorized Individual
Illegible Signature By /s/ Margaret Loesch
----------------------------------- ----------------------
Its Sr. V.P. - Administration & Its President
- -------------------------------- ----------------------
Finance
-------
<PAGE>
AMENDMENT TO ADMINISTRATION AGREEMENT
-------------------------------------
As of February 7, 1990, Fox Broadcasting Company ("FBC") and Fox Children's
Network, Inc. ("FCN") hereby agree as follows with respect to the Agreement
between FBC and FCN, dated February 7, 1990, relating to the administrative
services to be provided to FCN by FBC (the "Agreement"):
From the commencement of term of the Agreement through the commencement of FCN's
fiscal year in which FCN's annual operating cash flow, excluding all payments
for management fees and interest expenses, reaches break-even (as shall be
determined by FBC), FBC shall waive 72% of the 15% fee otherwise due to it under
Paragraph 2 of the Agreement. From said commencement of said fiscal year, FBC
shall be entitled to 100% of its 15% fee.
FOX BROADCASTING COMPANY FOX CHILDREN'S NETWORK, INC.
By /s/ Signed by Authorized Individual
Illegible Signature By /s/ Margaret Loesch
----------------------------------- -------------------
Its Sr. V.P. - Administration & Its President
- --- --------------------------- -------------------
Finance
-------
2
<PAGE>
EXHIBIT 10.25
REGISTRATION AGREEMENT
THIS REGISTRATION AGREEMENT (the "Agreement") is made and entered into as
of December 22, 1995 by and among Saban Entertainment Inc., a Delaware
corporation ("SEI"), Haim Saban ("Saban"), each of the entities listed on
Schedule "A" hereto (the "SEI Entities" and, with Saban, the "SEI
Stockholders"), Fox Broadcasting Company, Inc., a Delaware corporation ("FBC"
and, together with the SEI Stockholders, the "Shareholders") and FCN Holding,
Inc., a Delaware corporation ("FCNH").
R E C I T A L S
- - - - - - - -
A. Concurrent with the execution of this Agreement, the parties have
entered into that certain Strategic Stockholders Agreement, which agreement is
intended, among other things, to enable the SEI Stockholders and FBC to maximize
the long-term strategic values of their respective corporations. Such
agreement, as the same may be amended from time to time, is referred to herein
as the "Strategic Stockholders Agreement." Terms defined in the Strategic
Stockholders Agreement which are not defined herein shall have the same meanings
when used herein.
B. Under the provisions of Section 6 of the Strategic Stockholders
Agreement, the parties have agreed, on the terms and conditions therein set
forth, to form a Successor Entity (herein, regardless of the form of such
Successor Entity, the "Corporation") in connection with the Initial Public
Offering.
C. In connection therewith, the parties have agreed that the
Corporation will provide to each of the Shareholders certain registration
rights, as set forth in this Agreement. The execution and delivery of this
Agreement by each of the parties hereto are conditions concurrent to the
performance by each of the parties of their respective obligations under the LLC
Formation Agreement and the Other Alliance Agreements.
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, in consideration of foregoing premises and of the mutual
covenants and agreements contained in this Agreement, and subject to the terms
and conditions set forth herein, the parties to this Agreement hereby agree as
follows:
1. DEFINITIONS.
(a) Definitions. For the purposes of this Agreement, the following
-----------
words have the meanings set forth below:
<PAGE>
(i) "Commission" means the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
(ii) "Corporation" shall include the Successor Entity, whether
such entity is in the form of a corporation, limited liability company,
partnership, limited partnership, trust or other Person, and any successor
thereto.
(iii) "Securities" shall initially refer to the Successor Entity
Equity Security outstanding at the Effective Time. Any beneficial interests
in the Securities are referred to in this Agreement as "shares" of the
Securities.
(iv) "Incidental Securities Registration" shall mean any
registration of shares of any Securities of any class of the Corporation,
whether for its own account or the account of another, effected pursuant to
a form of registration statement adopted by the Commission which does not
by its terms prohibit the concurrent registration of Registrable Stock, but
excluding (x) Required Registrations under Paragraph 2 hereof and (y)
registrations relating solely to employee benefit plans of the Corporation.
(v) "Long-Form Registration Statement" means a registration
statement under the Securities Act on Form S-1, Form S-2, Form SB-1 or Form
SB-2, or Regulation A or any form of registration statement requiring
disclosure of a scope similar to that required in any of such forms adopted
by the Commission after the date of this Agreement.
(vi) The terms "register," "registered" and "registration" each
refer to a registration of securities effected by preparing and filing a
registration statement as to such securities in compliance with the
Securities Act, and the subsequent effectiveness of such registration
statement.
(vii) "Registrable Stock" means (x) any and all Securities
acquired by any of the Shareholders under and pursuant to the Strategic
Stockholders Agreement, or any and all Securities which were acquired by a
Shareholder from any other Shareholder; (y) any Securities issued or
issuable with respect to the securities described in clause (x) above by
reason of a share dividend or share split or similar transaction, or in
connection with a combination of shares, recapitalization, merger,
consolidation, other reorganization or other transaction, including
transactions described in Section 6(b) of the Strategic Stockholders
Agreement and (z) any other Securities now held or hereafter acquired by
Persons holding the Securities described in clauses (x) or (y) above.
(viii) "Securities Act" means the Securities Act of 1933.
(ix) "Short-Form Registration Statement" means a registration
statement on Form S-3 or any form of
2
<PAGE>
registration statement requiring disclosure of a scope similar to that
required in such form adopted by the Commission from and after the date of
this Agreement.
(b) Rules. The following rules of construction shall apply in
-----
interpreting this Agreement:
(i) A Person shall be deemed to be a holder of Registrable Stock
when such Person has an exercisable right to acquire such Registrable
Stock. Each share of Registrable Stock shall continue to be Registrable
Stock in the hands of each subsequent holder thereof; provided, however,
--------
that any such share shall cease to be Registrable Stock when transferred to
any Person who is not affiliated with a holder of Registrable Stock
pursuant to a registered public offering or in compliance with Rule 144
adopted by the Commission under the Securities Act; and for purposes of
this Agreement, the term "Shareholders" shall be deemed to include such
holders, and each of such holders shall have the right to exercise any and
all rights granted under this Agreement to the Shareholders; provided,
--------
however, that no holder of Registrable Stock may request a registration
under the provisions of Paragraph 2 of this Agreement unless such holder or
holders are then the beneficial owners of not less than 10% of the then
outstanding shares of Registrable Stock. For purposes of this clause, the
officers, directors and shareholders, in the case of a corporation, and the
partners, in the case of a partnership, of a holder of Registrable Stock,
without limitation, shall be deemed to be affiliated with such holder.
(ii) This Agreement has been entered into concurrently with the
execution of the Strategic Stockholders Agreement, and, unless the context
otherwise clearly requires, this Agreement shall be construed in a manner
consistent with the provisions of the Strategic Stockholders Agreement.
(iii) The rules of interpretation set forth in Section 11(a) of
the Strategic Stockholders Agreement shall have equal applicability to this
Agreement.
2. REQUIRED REGISTRATIONS.
(a) The election to effect an Initial Public Offering under the
provisions of Section 6(a) of the Strategic Stockholders Agreement shall
constitute a required registration under the provisions of this Paragraph 2,
even if no shares of Registrable Stock are included therein; provided, however,
-------- -------
that in the event of any conflict between the provisions of this Agreement and
the Strategic Stockholders Agreement, the terms of the Strategic Stockholders
Agreement shall take precedence.
(b) If Shareholders who are the beneficial owners of not less than
10% of the then outstanding shares of Registrable Stock propose to offer to
sell, or otherwise transfer at least the lesser of (x) 50% of the Registrable
Stock then outstanding or (y) a number of shares of Registrable Stock which such
holders in their
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good faith discretion determine would have an anticipated aggregate offering
price (net of underwriting discounts and commissions) of at least [$15] million
pursuant to a Long-Form Registration Statement not less than six months after
the effective date of the Initial Public Offering, then such Shareholders may
request the registration of shares of Registrable Stock and such request shall
include the form of registration statement under the Securities Act to be used,
the number of shares of Registrable Stock to be disposed of and the intended
method of disposition of such shares.
(c) If the Corporation is then entitled to file registration
statements under the Securities Act relating solely to outstanding securities to
be offered for the account of Persons other than the issuer on a Short-Form
Registration Statement, and Shareholders who are the beneficial owners of not
less than 5% of the then outstanding shares of Registrable Stock propose to
offer to sell or otherwise transfer any shares of Registrable Stock pursuant to
a Short-Form Registration Statement, then such Shareholders may request the
registration of shares of Registrable Stock and such request shall include the
form of registration statement under the Securities Act to be used, the number
of shares of Registrable Stock to be disposed of and the intended method of
disposition of such shares.
(d) Upon receipt of the request of any of the Shareholders pursuant
to Paragraphs 2(a), 2(b) or 2(c), above, the Corporation shall give prompt
written notice thereof to all other holders of Registrable Stock and to all
other holders of Securities who have the contractual right to include all or any
portion of their shares in the registration (the "Other Holders"). Subject to
the provisions of Paragraph 3 below, the Corporation shall use its best efforts
promptly to effect the registration under the Securities Act of all shares of
Registrable Stock specified in the requests of such Shareholders or the requests
of such additional Shareholders, and all Securities specified in the requests of
such Other Holders; provided, the requests of such additional Shareholders, or
--------
the requests of such Other Holders are delivered to the Corporation within 10
days after receipt of such notice from the Corporation, and indicate the number
of shares of Registrable Stock or Securities, as the case may be, to be sold by
such additional Shareholders or such Other Holders.
(e) Notwithstanding anything to the contrary contained in this
Paragraph 2, no person (as defined, for these purposes, in Rule 144(a)(2) of the
Commission) who then beneficially owns 1% or less of the then outstanding
Securities (including the Registrable Stock) may request (either as a
Shareholder or Other Holder) that any of its shares of Registrable Stock be
included in any registration statement filed by the Corporation pursuant to this
Paragraph 2 unless, in the opinion of counsel for the Corporation, such person's
intended disposition of Registrable Stock could not be effected within 365 days
of the date of said opinion without registration of such shares under the
Securities Act (assuming, for this purpose, that if "current public information"
(as defined in
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Rule 144(c) of the Commission under the Securities Act) is available with
respect to the Corporation as of the date of such opinion, it will remain so
available for such 365-day period).
3. LIMITATIONS ON REQUIRED REGISTRATION.
(a) Maximum Number of Effective Registrations. The Corporation shall
-----------------------------------------
not be required to prepare and file in any year more than two Long-Form
Registration Statements which actually become or are declared effective,
pursuant to Paragraph 2(b) of this Agreement ("Corporation-Paid Long-Form
Registrations") for which the Corporation shall pay all Registration Expenses
(defined in Paragraph 8 hereof), and shall not be required to file any more than
three Short-Form Registration Statements in any calendar year requested by the
Shareholders pursuant to Paragraph 2(c) of this Agreement, for which the
Corporation shall pay all Registration Expenses; provided, that in the case of a
Corporation-Paid Long-Form Registration, if the Shareholders are unable to
register and sell at least 80% of the Registrable Stock requested to be included
in any such registration, then the number of Corporation-Paid Long-Form
Registrations which may be requested by the Shareholders in any year under
Paragraph 2(b) of this Agreement shall be increased by one for each such
registration.
(b) Firmly Underwritten. The Corporation shall not be required to
-------------------
effect a Corporation-Paid Long-Form Registration unless it has been advised by
the Shareholders requesting such registration at the time of the receipt of the
request pursuant to Paragraph 2(b) of this Agreement that the Registrable Stock
to be included in such registration will be disposed of only pursuant to a
firmly underwritten offering.
(c) Scale-Back Procedures. In the event that the managing
---------------------
underwriters of an offering advise the Corporation in writing that the number of
shares of Registrable Stock requested to be included exceeds the number which
can be sold in such offering, the Corporation shall include in such registration
the Registrable Stock requested to be included which in the opinion of the
managing underwriters can be sold, pro rata among the Shareholders and the Other
--- ----
Holders on the basis of the aggregate number of shares of Registrable Stock then
held by each; provided that if any such Shareholder or Other Holder would thus
--------
be entitled to include more shares than such holder requested to be registered,
the excess will be allocated among the other Shareholders and Other Holders on
the basis of the number of shares of Registrable Stock or Securities then held
by each. If any Shareholder or Other Holder disapproves of the terms of the
underwriting, such Person may elect to withdraw therefrom by written notice to
the Corporation and the managing underwriters. The Registrable Stock so
withdrawn shall also be withdrawn from registration.
(d) The Corporation shall not be required to prepare and file a
registration statement pursuant to Paragraph 2(b) or 2(c) hereof (x) which
would, except for the initial right to require registration after the
Corporation's Initial Public Offering, become effective within 270 days
following the effective date of a
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registration statement (other than a registration statement filed on Form S-8)
filed by the Corporation with the Commission pertaining to a firmly underwritten
public offering of securities for cash for the account of the Corporation or its
other holders of Securities or (y) if the Corporation in good faith gives
written notice to the holders of Registrable Stock that the Corporation has
determined to prepare a Corporation-initiated registration statement in which,
on the terms and subject to the conditions of Paragraphs 4 and 5 hereof, holders
of Registrable Stock may participate, and the Corporation is actively employing
in good faith reasonable efforts to cause such registration statement to be
filed and thereafter to become effective, and if the Board of Directors of the
Corporation determines for any reason that it would not be in the best interest
of the Corporation to file such registration statement at the time of the
receipt of the request, the Corporation may defer such filing for up to 120
days.
4. INCIDENTAL REGISTRATION.
(a) If the Corporation at any time (including in connection with the
Initial Public Offering) proposes to register any securities pursuant to an
Incidental Securities Registration, it shall each such time give written notice
of such proposed Incidental Securities Registration (the "Corporation's
Notice"), at its expense, to each of the Shareholders and Other Holders at least
30 days prior to the filing of a registration statement with respect to such
Incidental Registration with the Commission. Upon written request of any of the
Shareholders (each, a "Shareholder's Notice") or Other Holder (a "Holder's
Notice") given within 15 days after receipt of the Corporation's Notice, stating
the number of shares of Registrable Stock to be disposed of by the Shareholder
delivering such Shareholder's Notice, or the number of shares of Securities to
be disposed of by the Other Holder delivering such Holder's Notice, the
Corporation shall use its best efforts promptly to cause all shares of
Registrable Stock specified in each such Shareholder's Notice, or shares of
Securities specified in each such Holder's Notice, to be registered under the
Securities Act so as to permit the sale or other disposition (in accordance with
the intended methods thereof as aforesaid) of such shares, subject, however, to
the limitations set forth in Paragraph 5 of this Agreement.
(b) Notwithstanding anything to the contrary contained in this
Paragraph 4, no person (as defined, for these purposes, in Rule 144(a)(2) of the
Commission) who then beneficially owns 1% or less of the outstanding Securities
(including the Registrable Stock) may request that any of its shares of
Registrable Stock be included in any registration statement filed by the
Corporation pursuant to this Paragraph 4 unless, in the opinion of counsel for
such person, such person's intended disposition of Registrable Stock could not
be effected within 365 days of the date of said opinion without registration of
such shares under the Securities Act (assuming, for this purpose, that if
"current public information" (as defined in Rule 144(c) of the Commission under
the Securities Act) is available with respect to the Corporation as of
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<PAGE>
the date of such opinion, it will remain so available for such 365-day period).
5. LIMITATIONS ON INCIDENTAL SECURITIES REGISTRATION.
(a) In Firm Commitment Offerings. If any Incidental Securities
----------------------------
Registration is for a firm commitment underwritten offering, only securities of
the class and series which are to be included in the underwriting may be
included in the registration, the issuance and sale of securities by the
Corporation shall have priority as to sales to and by the underwriters in the
registration, and the Shareholders hereby agree that they shall withdraw their
securities from such registration if and to the extent requested to do so in
good faith by the managing underwriters of the offering to facilitate the
complete sale of the securities being registered.
(b) Scale-Back Procedures. Whenever the number of shares which may
---------------------
be registered pursuant to Paragraph 4 of this Agreement is limited by the
provisions of Paragraph 5(a), above, the Corporation will include in such
registration (i) first, the securities the Corporation proposes to sell, and
(ii) second, the securities requested to be sold pro rata among the Shareholders
--- ----
and all Other Holders, allocated on the basis of the number of shares owned by
each; provided, that if any such Shareholder or Other Holder would thus be
--------
entitled to include more shares than such holder requested to be registered, the
excess will be allocated to the other Shareholders and Other Holders, until the
full amount of shares requested by any such holder has been registered for sale.
The Corporation shall cause any other affected holders to withdraw from such
registration to the extent necessary to comply with the foregoing priority
provisions.
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<PAGE>
6. DESIGNATION OF UNDERWRITERS.
With respect to the Initial Public Offering, the managing underwriter
or underwriters shall be selected pursuant to the procedures set forth in
Section 6 of the Strategic Stockholders Agreement. In the case of any
registration initiated pursuant to the provisions of Paragraph 2(b) of this
Agreement, which relates to a Long-Form Registration Statement, the Corporation
shall have the right to designate the managing underwriter or underwriters
(which underwriters shall be reasonably acceptable to the Shareholders), and all
holders of Securities participating in the registration shall sell their shares
only pursuant to such underwriting. In the case of any registration subject to
the provisions of Paragraph 4 of this Agreement which is proposed to be effected
pursuant to a firm commitment underwriting, the Corporation shall have the right
to designate the managing underwriter or underwriters, and all holders of
Securities participating in the registration shall sell their shares only
pursuant to such underwriting.
7. REGISTRATION PROCEDURES.
(a) Obligations of the Corporation. If and whenever the Corporation
------------------------------
is required by the provisions of this Agreement to use its best efforts to
effect the registration of shares (herein, the "Shares") of Registrable Stock
held by any Person (each, a "Prospective Seller") under the Securities Act, the
Corporation shall:
(i) carefully and expeditiously prepare and file with the
Commission a registration statement with respect to the Shares and use its
diligent best efforts to cause such registration statement to become and
remain effective as provided herein;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectuses used in
connection therewith as may be necessary to keep such registration
statement effective and current for up to 90 days and to comply with the
provisions of the Securities Act with respect to the sale or other
disposition of all Shares covered by such registration statement;
(iii) furnish to each Prospective Seller such number of copies of
each prospectus, including preliminary prospectuses, in conformity with the
requirements of the Securities Act, and such other documents, as the
Prospective Seller may reasonably request in order to facilitate the public
sale or other disposition of the Shares owned by it;
(iv) use its best efforts to register or qualify the Shares
covered by the registration statement under such other securities or blue
sky or other applicable laws of such jurisdictions as each Prospective
Seller shall reasonably
8
<PAGE>
request, to enable each Prospective Seller to consummate the sale or other
disposition of the Shares owned by it;
(v) furnish to each Prospective Seller a signed counterpart,
addressed to the Prospective Seller and its underwriters, if any, of:
(A) an opinion of counsel for the Corporation, dated the
effective date of the registration statement and, if requested, the date of
each closing of sales pursuant to the registration; and
(B) if and to the extent then available under FASB and
related pronouncements, a "comfort" letter signed by the independent public
accountants who have certified the Corporation's financial statements
included in the registration statement, similarly dated;
covering substantially the same matters with respect to the registration
statement (and the prospectuses included therein) and (in the case of the
accountants' letter) with respect to the events subsequent to the date of
the financial statements, as are customarily covered (at the time of such
registration) in the opinions of issuers' counsel and in accountants'
letters delivered to the underwriters in connection with underwritten
public offerings of securities;
(vi) cause all Shares to be listed on each securities exchange on
which similar securities issued by the Corporation are then listed;
(vii) provide a transfer agent and registrar for all Shares not
later than the effective date of the registration statement;
(viii) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such customary
actions as the holders of a majority of the Shares being sold may
reasonably request in order to expedite or facilitate the disposition of
the Shares; and
(ix) make available for inspection by each Prospective Seller,
any underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent
retained by any Prospective Seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Corporation,
and use its best efforts to cause the Corporation's officers, directors and
employees to supply all information reasonably requested by any Prospective
Seller, underwriter, attorney, accountant or agent in connection with such
registration statement.
(b) Obligations of the Prospective Sellers. Each Prospective Seller
--------------------------------------
shall furnish to the Corporation such information as the Corporation may
reasonably require from each
9
<PAGE>
Prospective Seller for inclusion in the registration statement (and the
prospectus included therein).
(c) Qualified Stand-Off. If a registration statement covering any
-------------------
shares has become effective, no Prospective Seller shall (until further notice)
effect sales thereof after receipt of telegraphic or written notice from the
Corporation to all Prospective Sellers, advising such Persons that the
Corporation has received a written opinion from its counsel to the effect that
the registration statement or prospectus in the form then filed with the
Commission must be amended, corrected, updated or supplemented, to suspend sales
to permit the Corporation to correct or update a registration statement or
prospectus; and the Corporation shall, as expeditiously as possible, make all
such amendments, corrections, updates and supplements as shall be necessary in
order to allow the Prospective Sellers to resume sales of the Shares at the
earliest practicable date.
8. EXPENSES OF REGISTRATION.
All expenses incurred in effecting any registration under this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, expenses of compliance with blue sky laws, fees and
disbursements of counsel for the Corporation, fees and disbursements of counsel
for the Prospective Sellers (but not more than one counsel representing all of
the SEI Stockholders who are Prospective Sellers, and not more than one counsel
representing all FCNH Stockholders who are Prospective Sellers), and expenses of
any audits incidental to or required by any such registration ("Registration
Expenses") shall be borne by the Corporation; provided, that all underwriting
--------
discounts or brokerage fees or commissions relating to the sale of the Shares
included in the registration shall be separately borne by the sellers thereof.
9. INDEMNIFICATION.
(a) Indemnity. In the event of any registration of any of its
---------
securities under the Securities Act pursuant to this Agreement, the Corporation
shall indemnify and hold harmless each Prospective Seller, each underwriter (as
defined in the Securities Act) and each controlling person (within the meaning
of the Securities Act), if any, of any holder or underwriter (collectively,
"Indemnified Parties" or an "Indemnified Party"), against any losses, claims,
damages or liabilities, joint or several (or actions in respect thereof), to
which the Indemnified Parties may be subject under the Securities Act or any
other statute or at common law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arising out of or are based upon (i)
any untrue statement (or alleged untrue statement) of any material fact
contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any summary prospectus issued in connection
with any securities being registered, or any amendment or supplement thereto, or
any other document, or (ii) any omission (or alleged omission) to state therein
a material fact required to be
10
<PAGE>
stated therein or necessary to make the statements therein not misleading, or
(iii) any violation of the Securities Act or any Blue Sky law, or any rule or
regulation promulgated under the Securities Act or any Blue Sky law, or any
other law, in connection with any such registration, qualification or
compliance, and shall reimburse the Indemnified Parties for any legal or other
expenses incurred by the Indemnified Parties in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
--------
that the Corporation shall not be liable to any Indemnified Party in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon any untrue statement or omission made in such registration
statement, preliminary prospectus, summary prospectus, prospectus, or amendment
or supplement thereto, or any other document, in reliance upon and in conformity
with information furnished to the Corporation by that Indemnified Party, or
party controlling or controlled by that Indemnified Party within the meaning of
the Securities Act specifically for use therein. The indemnity provided for
herein shall remain in full force and effect regardless of any investigation
made by or on behalf of any Indemnified Party and shall survive transfer of such
securities by the Indemnified Party.
(b) Prospective Sellers. In the event of any registration of any of
-------------------
the Corporation's securities under the Securities Act in which a Prospective
Seller participates pursuant to this Agreement, each such Prospective Seller
agrees to indemnify and hold harmless the Corporation, its directors, each
underwriter (as defined in the Securities Act) and each controlling person
(within the meaning of the Securities Act) of the Corporation or underwriter, if
any, against any losses, claims, damages or liabilities, joint or several (or
actions in respect thereof), to which the Corporation, director, underwriter or
controlling person may be subject under the Securities Act, under any other
statute or at common law, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement (or alleged untrue statement) of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus or final prospectus contained
therein, or any summary prospectus issued in connection with any securities
being registered, or any amendment or supplement thereto, or any other document
used to sell the securities, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and shall reimburse the Corporation, its
directors, each underwriter, and each controlling person, for any legal or other
expenses reasonably incurred by such persons in connection with investigating or
defending any loss, claim, damage, liability or action; in each case, to the
extent, and only to the extent, that such untrue statement or omission is
contained in any information or affidavit furnished in writing to the
Corporation by such Prospective Seller specifically for use in such
registration. The indemnity provided for herein shall survive transfer of such
securities by said Prospective Seller.
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(c) Contribution. If the indemnification provided for in Paragraph
------------
9(a) or (b) is unavailable to an indemnified party in accordance with its terms
in respect of any losses, claims, damages or liabilities referred to therein,
then the indemnitor in lieu of indemnifying such indemnified party thereunder
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities, in such proportion as is
appropriate to reflect the relative fault of the indemnitor on the one hand and
of the indemnified parties on the other in connection with the statements or
omissions which resulted in such losses, claims, damages, or liabilities, as
well as any other relevant equitable considerations. The relative fault of the
indemnitor and of the indemnified parties shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of as
material fact or the omission to state a material fact relates to information
supplied by the indemnitor, or the indemnified parties, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Corporation and the other parties hereto agree that it would not
be just and equitable if contribution pursuant to this Paragraph 9(c) were
determined by pro rata allocation or by any other method of allocation which
--- ----
does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by any indemnified
party as a result of the losses, claims, damages and liabilities or actions in
respect thereof referred to in the immediately preceding paragraph shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Paragraph 9(c), no holder of Registrable Stock, no
underwriter thereof, and no controlling party of any of them, shall be required
to contribute any amount in excess of the amount by which the total price at
which its Registrable Stock was sold exceeds the amount of any damages which
such Person has otherwise been required to pay and has actually paid by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of a fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(d) Procedures. Promptly after receipt by any Indemnified Party of a
----------
complaint, claim or other written notice of any loss, claim, damage, liability
or action giving rise to a claim for indemnification under this Paragraph 9, the
party claiming indemnification under this Paragraph 9 shall notify the
indemnifying party of such complaint, notice, claim or action, and the
indemnifying party shall have the right to investigate and defend any such loss,
claim, damage, liability or action; provided, that the failure of the
--------
Indemnified Party to promptly notify the indemnifying party shall not relieve
the indemnifying party from any liability which it may have to the Indemnified
Party otherwise than under Paragraph 9, or under Paragraph 9 to the extent that
the
12
<PAGE>
indemnifying party has not been materially prejudiced as a proximate result of
such failure. The Indemnified Party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and expenses of such counsel shall not be at the expense of the
indemnifying party. If the defendants in any action shall include more that one
Indemnified Party, and any such Indemnified Party shall reasonably conclude that
counsel selected by the Corporation has a conflict of interest which under the
Rules of Professional Conduct of the California State Bar Association would
prohibit the representation because of the availability of different or
additional defenses to any such Indemnified Party, such Indemnified Party shall
have the right to select separate counsel reasonably acceptable to the
Corporation to participate in the defense of such claim on its behalf, at the
expense of the indemnifying party who would otherwise be liable for the losses
under this Section 9, it being understood, however, that the indemnifying party
shall not, in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys at any time for
such Indemnified Parties; provided, however, that if the parties shall not agree
-------- -------
that a conflict of interest between the Indemnified Parties shall exists, then
the parties shall submit the issue to the State Bar of California to determine
whether such conflict of interest exists, and the determination of the State Bar
of California shall be binding on the parties. The Indemnified Parties shall
cooperate fully in the defense of any claim hereunder and each Indemnified Party
shall make available to the Corporation pertinent information under such
Indemnified Party's control relating thereto. In no event shall the
indemnifying party be obligated to indemnify any party for any settlement of any
claim or action effected without the indemnifying party's consent.
10. INCLUSION OF ADDITIONAL SHARES IN CORPORATION-PAID LONG-FORM
REGISTRATIONS; OTHER CORPORATION INITIATED REGISTRATIONS.
The Corporation shall not register securities for sale for its own
account or for the account of any other Person in any registration requested by
the Shareholders pursuant to Paragraph 2(b) or 2(c) hereof unless permitted to
do so by the written consent of such Shareholders. The Corporation may not
cause any other registration of securities for sale for its own account or for
the account of any other Person to become effective within 180 days after the
effective date of any registration requested by the Shareholders pursuant to
Paragraph 2 hereof.
11. RIGHTS WHICH MAY BE GRANTED TO OTHER PERSONS.
The Corporation shall not grant any Person registration rights with
priority as to registration or sale to Underwriters which are greater than or
pari passu to the registration rights granted to the Shareholders in this
- ---- -----
Agreement.
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12. RULE 144 REQUIREMENTS.
At all times after the close of business on the earliest of such date
as (a) a registration statement filed by the Corporation under the Securities
Act becomes effective, (b) the Corporation registers a class of securities under
Section 12 of the Securities Exchange Act of 1934, as amended, or (c) the
Corporation issues an offering circular meeting the requirements of Regulation A
under the Securities Act, the Corporation shall undertake to make publicly
available, and available to the Shareholders, such information as is necessary
to enable the Shareholders to make sales of Registrable Stock pursuant to Rule
144 of the Commission under the Securities Act. The Corporation shall from time
to time furnish to each of the Shareholders, upon request, a written statement
executed by the Corporation as to the steps it has taken to comply with the
current public information requirements of Rule 144.
13. HOLD-BACK AGREEMENTS.
(a) By the Shareholders. Each of the Shareholders agrees not to
-------------------
effect any public sale or distribution of equity securities of the Corporation,
or securities convertible into or exchangeable or exercisable for such
securities, during the seven days prior to and the period of 180 days, or such
longer period (which shall not, in any event, exceed 270 days) as may be
requested by the underwriters, beginning on the effective date of any Required
Registration which involves a firmly underwritten offering, or any Incidental
Registration which includes a firmly underwritten offering, except, in each
case, as part of such offering.
(b) By Corporation and Other Shareholders. The Corporation agrees
-------------------------------------
(i) not to effect the public sale or distribution of its equity securities, or
of any securities convertible into or exchangeable or exercisable for any of
such securities, during the seven days prior to and the period of 180 days, or
such longer period (which shall not, in any event, exceed 270 days) as may be
requested by the underwriters, beginning on the effective date of any Required
Registration which includes a firmly underwritten offering or any Incidental
Registration which includes a firmly underwritten offering, and (ii) to use its
best efforts to cause each holder of its equity securities, or of any securities
convertible into or exchangeable or exercisable for securities purchased from
the Corporation at any time on or after the date of this Agreement (other than
in a registered public offering) and who is an officer, director or general
partner of the Corporation, or owns more than 5% of any class of its then
outstanding equity securities, to agree not to effect any public sale or
distribution of any such securities during such period, except as part of such
underwritten offering.
14. EFFECTIVENESS. This Agreement has been executed and delivered by the
parties to the Strategic Stockholders Agreement in anticipation of the creation
of the Successor Entity pursuant to the provisions of Section 6(b) of the
Strategic Stockholders Agreement, and each of the parties hereto agrees that, in
14
<PAGE>
connection with the formation of the Successor Entity, they shall take any and
all actions necessary in order to cause the Successor Entity, effective upon its
formation, to agree to, and to be bound by, all of the obligations of the
Successor Entity (referred to herein as the "Corporation") under and pursuant to
this Agreement.
15. MISCELLANEOUS.
(a) Adjustments Affecting Registrable Stock. The Corporation shall
---------------------------------------
not at any time subsequent to the Initial Public Offering and prior to the
closing of the sale of shares pursuant to the Options provided in Section 7 of
the Strategic Stockholders Agreement, effect a stock split or combination of
shares or take any other action, or permit any change to occur, with respect to
its equity securities, which would adversely affect at such time the ability of
the Shareholders to include Registrable Stock in a registration statement
undertaken pursuant to this Agreement or which would adversely affect the
marketability of such Registrable Stock in any such registration.
(b) Notices. All notices, demands or other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given if delivered in
person, or by United States mail, certified or registered, return receipt
requested or otherwise actually delivered.
(i) if to any of the Shareholders, at the address set forth in
the Strategic Stockholders Agreement, marked for attention as therein
indicated; and
(ii) if to the Corporation to the attention of each of the
Shareholders at the addresses as set forth for such Shareholders in the
Strategic Stockholders Agreement, marked for attention as therein
indicated;
or such other address as may have been furnished by such Person in writing to
the other parties. Any such notice, demand or other communication shall be
deemed to have been given on the date actually delivered or as of the date
mailed, as the case may be.
(c) Severability and Governing Law. Should any Paragraph or any part
------------------------------
of a Paragraph within this Agreement be rendered void, invalid or unenforceable
by any court of law for any reason, the invalidity or unenforceability shall not
void or render invalid or unenforceable any other Paragraph or part of a
Paragraph in this Agreement. THIS AGREEMENT IS MADE AND ENTERED IN THE STATE OF
CALIFORNIA AND THE LAWS OF SAID STATE APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED IN SUCH STATE SHALL GOVERN THE VALIDITY AND INTERPRETATION HEREOF AND
THE PERFORMANCE BY THE PARTIES HERETO OF THEIR RESPECTIVE DUTIES AND OBLIGATIONS
HEREUNDER.
(d) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
15
<PAGE>
(e) Captions and Paragraph Headings. Paragraph titles or captions
-------------------------------
contained in this Agreement are inserted as a matter of convenience and for
reference purposes only, and in no way define, limit, extend or describe the
scope of this Agreement or the intent of any provision hereof.
(f) Amendments and Waivers. Neither this Agreement nor any term
----------------------
hereof may be changed, waived, discharged or terminated orally or in writing,
except that any term of this Agreement may be amended and the observance of any
such term may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of the parties
hereto that are materially affected by such change, waiver, discharge or
termination (and in the case of the SEI Stockholders, by Saban); provided,
--------
however that (i) no such amendment or waiver shall affect the provisions of this
- -------
Paragraph 14(f); (ii) no waiver shall extend to or affect any other obligation
not expressly waived; (iii) any provision of this Agreement relating to any of
the Shareholders or the Registrable Stock may be amended with the consent of the
Corporation and Persons then holding in excess of 80% of the Registrable Stock
then outstanding. No delay or omission to exercise any right, power or remedy
accruing to any party hereto shall impair any such right, power or remedy of
such party nor shall the same be construed to be a waiver of any such right,
power for remedy nor constitute any course of dealing or performance hereunder.
(g) Successors and Assigns. All rights, covenants and agreements of
----------------------
the parties contained in this Agreement shall, except as otherwise provided
herein, be binding upon and inure to the benefit of their respective successors
and assigns.
(h) Specific Performance. The parties hereto agree that the
--------------------
securities of the Corporation cannot be purchased or sold in the open market and
that, for these reasons, among others, the parties will be irreparably damaged
in the event that this Agreement is not specifically enforceable. Accordingly,
in the event of any controversy concerning the securities which are the subject
of this Agreement, or any right or obligation to register such securities, such
right or obligation shall be enforceable in a court of equity by specific
performance. The rights granted in this Paragraph 14(h) shall be cumulative and
not exclusive, and shall be in addition to any and all other rights which the
parties hereto may have hereunder, at law or in equity.
(i) Entire Agreement. This Agreement contains the entire
----------------
understanding of the parties with respect to the registration of securities of
the Corporation, and there are no further or other agreements or understandings,
written or oral, in effect between the parties relating to the subject matter
hereof unless expressly referred to herein.
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.
SABAN ENTERTAINMENT, INC.
By: /s/ Haim Saban
-----------------------------------
Haim Saban
Its: Chief Executive Officer
/s/ Haim Saban
----------------------------------------
HAIM SABAN
QUARTZ ENTERPRISES, L.P.
By: /s/ Stan Golden
-----------------------------------
___________________________________
MERLOT INVESTMENTS
By: /s/ Bill Josey
-----------------------------------
___________________________________
SILVERLIGHT ENTERPRISES, L.P.
By: /s/ Mel Woods
-----------------------------------
___________________________________
[SIGNATURES CONTINUED ON NEXT PAGE]
17
<PAGE>
CELIA ENTERPRISES, L.P.
By: /s/ Matthew Krane
-----------------------------------
___________________________________
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.
FOX BROADCASTING COMPANY, INC.
By: /s/ Jay Itzkowitz
-----------------------------------
Its: Senior Vice President
FCN Holding, Inc.
By: /s/ Jay Itzkowitz
-----------------------------------
Its: Senior Vice President
19
<PAGE>
Schedule A
----------
ENTITIES
--------
SEI STOCKHOLDERS NUMBER OF SHARES
- ---------------- ----------------
<TABLE>
<CAPTION>
<S> <C>
HAIM SABAN 377.56
QUARTZ ENTERPRISES, L.P. 76.80
MERLOT INVESTMENTS 65.19
SILVERLIGHT ENTERPRISES, L.P. 278.76
CELIA ENTERPRISES, L.P. 1.69
</TABLE>
20
<PAGE>
Exhibit 10.26
AMENDMENT NO. 1
TO
REGISTRATION AGREEMENT
This Amendment No. 1 to Registration Agreement (the "Amendment") is made
and entered into as of September 27, 1996, by and among Saban Entertainment,
Inc., a Delaware close corporation ("SEI"), Haim Saban ("Saban"), each of the
entities listed on Schedule "A" hereto (the "SEI Entities" and, with Saban, the
"SEI Stockholders"), Fox Broadcasting Company, a Delaware corporation ("FBC,"
and, together with the SEI Stockholders, the "Shareholders"), FCN Holding, Inc.,
a Delaware close corporation ("FCNH") and Allen & Company Incorporated, a New
York corporation ("Allen").
R E C I T A L S
- - - - - - - -
A. SEI, the Shareholders and FCNH are parties to that certain Registration
Agreement, dated as of December 22, 1995 as amended by this Amendment, (the
"Agreement"). All terms defined in the Agreement which are not defined in this
Amendment shall have the same meanings when used in this Amendment.
B. Pursuant to a letter agreement, dated as of September 26, 1996, but
effective as of April 3, 1996 (the "Allen Agreement") between FCNH and Allen,
FCNH has, concurrently with the execution and delivery of this Amendment, issued
and sold to Allen 16 16/99 shares (the "Allen Shares") of the Common Stock,
without par value, of FCNH.
C. The parties desire to amend the Agreement in order, inter alia, to
----- ----
provide for the manner in which the Allen Shares are to be treated pursuant to
the provisions of the Agreement.
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, in consideration of the foregoing facts, and the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
EXHIBIT B
---------
<PAGE>
1. Definitions. All references in the Agreement to a "Shareholder" or the
-----------
"Shareholders" shall include Allen; and all references in the Agreement to
"Registerable Stock" shall include the Allen Shares, and any Securities issued
or issuable with respect to the Allen Shares.
2. Required Registrations. Paragraph 2(b) of the Agreement is amended by
----------------------
removing the brackets which surround the number 15 in the eighth line of the
Paragraph.
3. Paragraphs 2(e) and 4(b). Each of Paragraphs 2(e) and 4(b) of the
------------------------
Agreement are amended by inserting on the fifth line thereof, immediately
following the phrase "...(including the Registrable Stock) may...", the
following:
", subsequent to the second anniversary of this Agreement,"
4. Agreement of Allen. The Agreement is amended by adding thereto the
------------------
following Paragraph 16:
"16. Agreement of Allen. By executing Amendment No. 1 to the
------------------
Agreement, Allen agrees to be bound by all of the provisions of the
Agreement, including, without limitation, any provision included
therein applicable to the Allen Shares, or Allen as a "Shareholder" or
"party" to the Agreement.
5. Effective Date of Amendment. While this Amendment has been executed
---------------------------
as of its date, it shall be deemed to be effective as of April 3, 1996.
6. Effect of Amendment. Except as expressly modified herein, all terms
-------------------
of the Agreement remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the day
and year first above written.
SABAN ENTERTAINMENT, INC.
By: /s/ Haim Saban
--------------------
Haim Saban
Its: Chief Executive Officer
QUARTZ ENTERPRISES, L.P.
By: /s/ Stan Golden
--------------------
Its:
--------------------
2
<PAGE>
MERLOT INVESTMENTS
By: /s/ Bill Josey
--------------------
Its:
--------------------
SILVERLIGHT ENTERPRISES, L.P.
By: /s/ Mel Woods
--------------------
Its:
--------------------
CELIA ENTERPRISES, L.P.
By: /s/ Matthew Krane
--------------------
Its:
--------------------
FOX BROADCASTING COMPANY
By: /s/ Larry Jacobson
--------------------
Its: EVP
--------------------
FCN HOLDING, INC.
By: /s/ Larry Jacobson
--------------------
Its: EVP
--------------------
ALLEN & COMPANY INCORPORATED
By: /s/ Stanley S. Shuman
-----------------------
Its: EVP
-----------------------
The undersigned hereby consents and agrees to the foregoing Amendment, as of the
date first above written.
/s/ Haim Saban
-------------------------
HAIM SABAN
3
<PAGE>
SCHEDULE "A"
SEI STOCKHOLDERS
----------------
Haim Saban
Quartz Enterprises, L.P.
Merlot Investments
Silverlight Enterprises, L.P.
Celia Enterprises, L.P.
4
<PAGE>
EXHIBIT 10.27
CONTRIBUTION AND EXCHANGE AGREEMENT
BY AND AMONG
LIBERTY MEDIA CORPORATION,
LIBERTY IFE, INC.
AND
FOX KIDS WORLDWIDE, INC.
JUNE 11, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Definitions........................................................... 1
-----------
2. The Contribution...................................................... 5
----------------
2.1 The Contribution............................................... 5
2.2 Exchange of Stock Certificates................................. 6
2.3 Filing of Charter Amendments................................... 6
3. Closing Date.......................................................... 7
------------
4. Representations and Warranties of Liberty and LIFE.................... 7
--------------------------------------------------
4.1 Organization and Standing; Articles and By-Laws................ 7
4.2 Authorization.................................................. 7
4.3 No Conflicts; Required Filings and Consents.................... 7
4.4 Litigation; Compliance with Laws............................... 8
4.5 Title to the IFE Notes......................................... 8
4.6 Title to the IFE Stock......................................... 8
4.7 No Other Agreements Relating to IFE Securities................. 9
4.8 Investment Intent.............................................. 9
4.9 No Brokers..................................................... 9
4.10 Full Disclosure................................................ 9
5. Representations and Warranties of Fox Kids............................ 9
------------------------------------------
5.1 Organization and Standing; Articles and By-Laws................ 9
5.2 Authorization.................................................. 10
5.3 No Conflicts; Required Filings and Consents.................... 10
5.4 Capital Stock.................................................. 11
5.5 The Fox Kids and NPAL Preferred Stocks......................... 11
5.6 Compliance with Applicable Laws................................ 12
5.7 Newly Formed Corporation....................................... 12
5.8 NPAL Financial Statements; Primary US Holding Company.......... 12
5.9 TNCL SEC Filings; TNCL Financial Statements.................... 13
5.10 Investment Intent.............................................. 13
5.11 No Brokers..................................................... 14
5.12 Full Disclosure................................................ 14
6. Pre-Closing Covenants of Fox Kids, LIFE and Liberty................... 14
---------------------------------------------------
</TABLE>
(i)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
6.1 Filings and other Actions..................................... 14
6.2 Public Announcements.......................................... 14
6.3 Substitution of Consideration in Certain Circumstances........ 14
6.4 Notification of Certain Matters............................... 15
6.5 H-S-R Filings; Best Efforts to Close.......................... 16
7. Conditions to Each Party's Obligation to Effect the Contribution.... 16
----------------------------------------------------------------
7.1 No Stop Order................................................. 17
7.2 Consummation of Share Exchange................................ 17
7.3 H-S-R Act..................................................... 17
8. Additional Conditions to Obligations of Fox Kids.................... 17
------------------------------------------------
8.1 Accuracy of Representations and Warranties.................... 17
8.2 Performance of Agreements..................................... 17
8.3 Officer's Certificates........................................ 17
8.4 Opinion of Counsel for Liberty and LIFE....................... 18
8.5 Amended Affiliation Agreement................................. 18
8.6 IFE Shareholders Agreement.................................... 18
9. Additional Conditions to the Obligations of Liberty and LIFE........ 18
------------------------------------------------------------
9.1 Accuracy of Representations and Warranties.................... 18
9.3 Officer's Certificate......................................... 18
9.4 Tax Matters................................................... 18
9.5 Funding Agreement and Exchange Agreement...................... 19
9.6 Assets of NPAL................................................ 19
9.7 Opinion of Counsel for Fox Kids............................... 19
9.8 Registration Rights Agreement................................. 19
10. Termination......................................................... 19
-----------
10.1 Termination.................................................. 19
10.2 Effect of Termination........................................ 20
11. Indemnification..................................................... 21
---------------
11.1 Survival..................................................... 21
11.2 Certain Actions.............................................. 21
11.3 Indemnification by Liberty and LIFE.......................... 21
11.4 Indemnification by Fox Kids.................................. 21
11.5 Claims....................................................... 22
</TABLE>
(ii)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
12. Miscellaneous Provisions............................................ 23
------------------------
12.1 Notices...................................................... 23
12.2 Severability................................................. 24
12.3 Governing Law................................................ 24
12.4 No Adverse Construction...................................... 24
12.5 Counterparts................................................. 24
12.6 Fees and Expenses............................................ 24
12.7 Successors and Assigns....................................... 25
12.8 Amendment.................................................... 25
12.9 Waiver....................................................... 25
12.10 Entire Agreement............................................. 25
</TABLE>
EXHIBITS AND SCHEDULES
Exhibit A Share Exchange Agreement
Exhibit B Amended Affiliation Agreement
Exhibit C Exchange Agreement
Exhibit D Funding Agreement
Exhibit E NPAL Certificate of Amendment
Exhibit F Fox Kids Certificate of Designations
Exhibit G Press Release
Exhibit H Opinion by Counsel for Liberty and LIFE
Exhibit I Opinion by Counsel for Fox Kids
Exhibit J Certificates regarding Tax Matters
Schedule 5.8 NPAL Subsidiaries
Schedule 9.8 Terms of Registration Rights Agreement
(iii)
<PAGE>
CONTRIBUTION AND EXCHANGE AGREEMENT
Contribution and Exchange Agreement (this "Agreement"), dated as of June
11, 1997, by and among Liberty Media Corporation, a Delaware corporation
("Liberty"), Liberty IFE, Inc., a Colorado corporation and a wholly owned
subsidiary of Liberty ("LIFE"), and Fox Kids Worldwide, Inc., a Delaware
corporation ("Fox Kids").
RECITALS
A. LIFE owns of record 7,088,732 shares of Class C non-voting Common
Stock, par value $.01 per share (the "IFE Stock"), of International Family
Entertainment, Inc., a Delaware corporation ("IFE"), and 6% Convertible Secured
Notes due 2004 of IFE in the principal amount of $23,000,000 which, as of the
date hereof, are convertible into 2,587,500 shares of IFE Stock (the "IFE Notes"
and, together with the IFE Stock, the "IFE Securities").
B. LIFE wishes to contribute the IFE Securities to Fox Kids in exchange
for the Consideration (as hereinafter defined) (collectively, the
"Contribution").
C. The Contribution is to be made concurrently with the exchange of
shares of capital stock (the "Share Exchange") contemplated by that certain
Agreement, dated as of the date hereof, among Fox Kids, Saban Entertainment,
Inc., Fox Broadcasting Company, Fox Broadcasting Sub, Inc., Allen & Company
Incorporated, Haim Saban and the other entities parties thereto, a copy of
which is attached to this Agreement as Exhibit A (the "Share Exchange
Agreement").
D. The Contribution and the Share Exchange are intended to qualify as a
tax-free exchange pursuant to Section 351 of the Internal Revenue Code of 1986,
as amended (the "Code"), except to the extent that the Exchange Right (as
hereinafter defined) constitutes taxable "boot" under the Code.
AGREEMENT
In consideration of the premises and of the mutual representations,
warranties, covenants and agreements contained herein, and in order to set forth
the terms and conditions of the Contribution, the parties to this Agreement
hereby agree as follows:
1. DEFINITIONS: As used in this Agreement, terms defined in the preamble
-----------
and recitals shall have the respective meanings specified therein and the terms
set forth below shall have the meanings indicated:
"AFFILIATE" means, when used with reference to a specified Person, any
Person that directly or indirectly through one or more intermediaries controls
or is controlled by, or is under
1
<PAGE>
common control with, such specified Person. For the purposes of this definition,
control (including the terms controlled by and under common control with), as
used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise. For purposes of this Agreement, (i) neither IFE nor any
of its Subsidiaries shall be deemed an Affiliate of Liberty, LIFE, Fox Kids or
any of their respective Affiliates and (ii) each of NPAL and Saban
Entertainment, Inc., a Delaware corporation, and their respective Affiliates
shall be deemed an Affiliate of Fox Kids.
"AMENDED AFFILIATION AGREEMENT" means that certain affiliation
agreement between Satellite Services, Inc. and IFE in the form of Exhibit B
hereto.
"CLOSING" has the meaning set forth in Section 3.
"CLOSING DATE" has the meaning set forth in Section 3.
"CONSIDERATION ADJUSTMENT PERIOD" means the period commencing
immediately following the Closing and ending on the date the transactions
contemplated by the Merger Agreement are consummated; provided, however, that
if the Merger Agreement is terminated, the "Consideration Adjustment Period"
shall mean the last to occur of (i) such termination, (ii) November 30, 1997
and (iii) the consummation or termination of the sale of the IFE Class A Stock
pursuant to the Robertsons Class A Purchase Agreement.
"$" means the United States dollar.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE AGREEMENT" means that certain Exchange Agreement, dated as
of the Closing Date, among Liberty, LIFE and NPAL, in the form of Exhibit C
hereto.
"EXCHANGE RIGHT" means the exchange right granted to Liberty and LIFE
under the Exchange Agreement.
"FOX KIDS CERTIFICATE OF DESIGNATIONS" has the meaning set forth in
Section 2.3.
"FOX KIDS DISCLOSURE LETTER" has the meaning set forth in Section 5.
"FOX KIDS PREFERRED STOCK" means the Series A Preferred Stock, par
value $.001 per share, of Fox Kids.
"FULLY DILUTED SHARE NUMBER" means the sum of (i) the number of shares
of IFE Stock owned by LIFE plus (ii) the number of shares of IFE Stock into
which the IFE Notes owned by LIFE are convertible, in each case as of the
Closing Date.
2
<PAGE>
"FUNDING AGREEMENT" means that certain Funding Agreement, dated as of
the date hereof, among Fox Kids, NPAL and TNCL, in the form of Exhibit D hereto.
"GOVERNMENTAL AUTHORITY" has the meaning set forth in Section 4.3.
"HIGHEST PER SHARE AMOUNT" means the highest amount paid, or agreed to
be paid, by Fox Kids, or any Affiliate of Fox Kids, for a share of capital stock
of IFE (including without limitation for any shares of any class of common stock
of IFE) (i) from M.G. "Pat" Robertson, the Robertson Charitable Remainder
Unitrust, the Gordon P. Robertson Irrevocable Trust, the Elizabeth F. Robinson
Irrevocable Trust, the Ann R. Lablanc Irrevocable Trust, Lisa N. Robertson,
Timothy B. Robertson (individually and as custodian to and for each of Abigail
H. Robertson, Laura N. Robertson, Elizabeth C. Robertson, Willis H. Robertson
and Caroline S. Robertson), the Timothy and Lisa Robertson Children's Trust, the
Timothy B. Robertson Charitable Trust, any other charitable, revocable or
irrevocable trust created by or for the benefit of the Robertsons, their
children or their respective heirs, The Christian Broadcasting Network, Inc. or
Regent University (and, in each case, from any of their respective Affiliates),
(ii) pursuant to a tender offer made to the public shareholders of IFE, (iii)
pursuant to a merger, binding share exchange or similar agreement involving IFE
(including without limitation the Merger Agreement) (other than an amount paid
in respect of a share of capital stock of IFE to any IFE stockholder pursuant to
Section 262 of the Delaware General Corporation Law), (iv) in any transaction
involving any holder or "group" (within the meaning of Rule 13d-5(b)(1) under
the Exchange Act) that owns, or has the right to dispose of, or to direct the
disposition of, 2 1/2 % or more of the outstanding shares of any class of
common stock of IFE or (v) in any transaction, or series of related or unrelated
transactions (excluding for purposes of this clause (v) any transaction referred
to in clauses (i) through (iii) above), involving, in the aggregate (between
January 1, 1997 and the end of the Consideration Adjustment Period), 5% or more
of the outstanding shares of any class of common stock of IFE, in each case
appropriately adjusted to take into account any stock dividend, subdivision,
split, or combination involving the capital stock of IFE during any relevant
period.
"IFE CLASS A STOCK" means the Class A Voting Common Stock, par value
$.01 per share, of IFE.
"IFE CLASS B STOCK" means the Class B Common Stock, par value $.01
per share, of IFE.
"IFE SHAREHOLDERS AGREEMENT" means that certain Amended and Restated
Shareholder Agreement, dated as of September 1, 1995, by and among M.G. "Pat"
Robertson, Timothy B. Robertson, the Robertson Charitable Remainder Unitrust,
the Timothy and Lisa Robertson Children's Trust, the Christian Broadcasting
Network, LIFE and IFE.
"LIEN" means any mortgage, pledge, lien, security interest or other
encumbrance.
3
<PAGE>
"MATERIAL NPAL SUBSIDIARY" means each direct or indirect Subsidiary of
NPAL that constitutes a "Significant Subsidiary" of NPAL within the meaning of
Rule 1-02 of Regulation S-X of the SEC.
"MATERIAL TNCL SUBSIDIARY" means each direct or indirect Subsidiary of
TNCL that constitutes a "Significant Subsidiary" of TNCL within the meaning of
Rule 1-02 of Regulation S-X of the SEC.
"MERGER AGREEMENT" means that certain Agreement and Plan of Merger,
dated as of the date hereof, among Fox Kids, Fox Kids Merger Corporation and
IFE, as the same may be amended, supplemented or otherwise modified; provided,
however, that if the Merger Agreement is terminated and the Purchaser or any of
its Affiliates subsequently enters into, prior to the end of the Consideration
Adjustment Period, another merger agreement, binding share agreement, asset
purchase agreement or other agreement with IFE that requires the approval of
shareholders of IFE in order to consummate the transactions contemplated
thereby, then the term "Merger Agreement" shall be deemed to refer to such
agreement, as the same may be amended, supplemented or otherwise modified.
"NPAL" means News Publishing Australia Limited, a Delaware
corporation.
"NPAL CERTIFICATE OF AMENDMENT" means the Certificate of Amendment to
the Certificate of Incorporation of NPAL that creates the NPAL Preferred Stock,
in the form of Exhibit E hereto.
"NPAL FINANCIAL STATEMENTS" means the unaudited consolidated balance
sheets of NPAL as of June 30, 1996 and December 31, 1996, and the related
unaudited operating statement and profit and loss for the six-month period ended
December 31, 1996 and the one-year period ended June 30, 1996 (without
footnotes).
"NPAL PREFERRED STOCK" means the Preferred Stock, par value $.001 per
share, of NPAL.
"OUTSIDE DATE" means July 30, 1997; provided, however, that if a
request for additional information is made of Fox Kids (or any of its
Affiliates) in connection with the filings to be made under the H-S-R Act
contemplated by Section 6.5(a) hereof, then "Outside Date" shall mean the
earlier of (i) November 30, 1997 and (ii) the later of (x) July 30, 1997 and (y)
the second business day after receipt by Fox Kids (or the Affiliate of Fox Kids
that makes the filings) of clearance or authorization to effect the transactions
referred to in the first sentence of Section 6.5(a).
"PERSON" means any individual, corporation, general or limited
partnership, limited liability company, trust, joint venture, association or
unincorporated entity of any kind.
4
<PAGE>
"RESTRICTION" means, when used with respect to any specified security,
any shareholders or other trust agreement, option, warrant, escrow, proxy, buy-
sell agreement, power of attorney or other contract, agreement or arrangement
which (i) grants to any Person the right to purchase or otherwise acquire, or
obligates any Person to sell or otherwise dispose of, such specified security or
any interest therein, or (ii) restricts the transfer of, or the exercise of any
rights or the enjoyment of any benefits arising by reason of, the ownership of
such specified security.
"ROBERTSONS CLASS A PURCHASE AGREEMENT" means that certain Stock
Purchase Agreement, dated as of the date hereof, by and among Fox Kids, M.G.
"Pat" Robertson, the Robertson Charitable Remainder Unitrust, the Gordon P.
Robertson Irrevocable Trust, the Elizabeth F. Robinson Irrevocable Trust, the
Ann R. Lablanc Irrevocable Trust, Lisa N. Robertson, Timothy B. Robertson
(individually and as custodian to and for each of Abigail H. Robertson, Laura N.
Robertson, Elizabeth C. Robertson, Willis H. Robertson and Caroline S.
Robertson), the Timothy and Lisa Robertson Children's Trust and the Timothy B.
Robertson Charitable Trust.
"SEC" means the United States Securities and Exchange Commission.
"SUBSIDIARY" of a specified Person means (i) any corporation of which
equity securities possessing a majority of the ordinary voting power in electing
the board of directors are, at the time as of which such determination is being
made, owned or controlled by such specified Person either directly or indirectly
through or in combination with one or more Subsidiaries of such specified
Person, or (ii) any Person (other than a corporation) in which such specified
Person either directly or indirectly through or in combination with one or more
Subsidiaries, at the time as of which such determination is being made, (x) is a
general partner or (y) owns or controls more than a 50% ownership interest and
has the right to elect a majority of the members of the governing authority of
such Specified Person.
"SUBSTITUTE SECURITY" has the meaning set forth in Section 6.3(a).
"TCI" means Tele-Communications, Inc., a Delaware corporation.
"TNCL" means The News Corporation Limited, a corporation organized and
existing under the laws of South Australia, Australia.
2. THE CONTRIBUTION.
----------------
2.1 THE CONTRIBUTION. (a) At the Closing, and subject to the terms
and conditions hereinafter set forth, LIFE shall contribute the IFE Securities
to Fox Kids in exchange for shares of Fox Kids Preferred Stock (or, if
applicable, the Substitute Security) with an aggregate initial liquidation
preference (the "Initial Liquidation Preference") equal to the greater of (i)
$345 million or (ii) the sum of (x) $6.33 million plus (y) the amount
determined by multiplying (x) the Highest Per Share Amount paid during the
period commencing on January 1, 1997 and ending at the time of the Closing by
(y) the Fully Diluted Share Number (the "Consideration"). The Consideration
shall
5
<PAGE>
be adjusted in accordance with the provisions of subsection (b) below. It
is the intention of the parties that the Consideration equal the amount (rounded
to the nearest thousand to avoid the issuance of fractional shares) derived by
multiplying the Highest Per Share Amount (which as of the date of this Agreement
is understood by Liberty and LIFE to be $35) by the Fully Diluted Share Number,
and then adding thereto $6.33 million, which represents (A) $3.5 million of
interest income forfeited by LIFE as a result of its contribution of the IFE
Notes to Fox Kids as provided herein and (B) $2.83 million to partially
compensate Liberty and LIFE for the fact that the Exchange Right constitutes
"boot" for Federal income taxes purposes.
(b) If (i) during the Consideration Adjustment Period a Highest Per
Share Amount is paid (a "Post-Closing Highest Per Share Amount") which is
greater than the Highest Per Share Amount paid prior to or at the time of the
Closing, and (ii) the Initial Liquidation Preference would have been higher had
such Post-Closing Highest Per Share Amount been paid immediately prior to the
Closing, then LIFE (or its nominee) shall receive, within 5 business days of
such Post-Closing Highest Per Share Amount having been paid, additional shares
of Fox Kids Preferred Stock (rounded up to the nearest whole number) with an
aggregate initial liquidation preference equal to the difference between (x) the
aggregate Initial Liquidation Preference that the Fox Kids Preferred Stock would
have had if the Post-Closing Highest Per Share Amount had been paid immediately
prior to the Closing and (y) the aggregate Initial Liquidation Preference of
the Fox Kids Preferred Stock received by LIFE (or its nominee) at the Closing.
This Section 2.1(b) shall apply with respect to each Post-Closing Highest Per
Share Amount paid subsequent to the time of the Closing; provided, however, that
if any adjustment is made pursuant to this Section 2.1(b), then any subsequent
calculation pursuant to this subsection (b) due to a higher Post-Closing Highest
Per Share Amount being paid shall be based on the aggregate Initial Liquidation
Preference of all shares of Fox Kids Preferred Stock received by LIFE (or its
nominee) under this Section 2.1 and the aggregate Initial Liquidation Preference
for the Fox Kids Preferred Stock that LIFE would have received had such higher
Post-Closing Highest Per Share Amount been paid immediately prior to the
Closing.
2.2 EXCHANGE OF STOCK CERTIFICATES. At the Closing, Fox Kids shall
deliver, or cause to be delivered, to LIFE, against delivery to Fox Kids of the
IFE Notes and the certificate or certificates evidencing the IFE Stock (together
with duly executed stock powers in blank and with all requisite stock and bond
transfer tax stamps duly affixed thereto), a certificate, registered in the name
of LIFE or its nominee, representing the shares of Fox Kids Preferred Stock to
which LIFE is entitled pursuant to Section 2.1 hereof.
2.3 FILING OF CHARTER AMENDMENTS. The Fox Kids Preferred Stock
delivered to LIFE or its nominee at the Closing shall have the preferences and
relative participating, optional and other special rights, qualifications,
limitations and restrictions set forth in the form of Certificate of
Designations attached hereto as Exhibit F (the "Fox Kids Certificate of
Designations"). Fox Kids shall cause the Fox Kids Certificate of Designations
and the NPAL Certificate of Amendment to be filed with the Delaware Secretary of
State prior to or at the time of the Closing.
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3. CLOSING DATE. The closing of the Contribution (the "Closing") shall
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(unless the parties hereto agree otherwise) take place at the offices of Baker &
Botts, L.L.P., 599 Lexington Avenue, New York, New York, at 11:00 a.m., local
time, on the day on which the last of the conditions set forth in Sections 7, 8
and 9 hereof is fulfilled or waived (subject to applicable law) (the "Closing
Date"). The parties covenant and agree, subject to Section 6.3(b), that they
will in any event effect the Closing on the second business day after the
satisfaction of the condition set forth in Section 7.3 hereof, if the other
conditions to the obligations of the parties under Sections 7, 8 and 9 hereof
are capable of being satisfied at that time.
4. REPRESENTATIONS AND WARRANTIES OF LIBERTY AND LIFE. Liberty and
--------------------------------------------------
LIFE, jointly and severally, represent and warrant to Fox Kids as follows:
4.1 ORGANIZATION AND STANDING; ARTICLES AND BY-LAWS. Each of Liberty
and LIFE is a corporation duly organized, validly existing and in good standing
under the laws of the state of its incorporation. LIFE has all requisite power
and authority and all necessary governmental approvals, permits and other
authorizations necessary to own the IFE Securities (which constitute its only
assets, other than cash paid from time to time on the IFE Securities) and to
carry on its business in the manner and in the locations it is now being
conducted.
4.2 AUTHORIZATION. Each of Liberty and LIFE has the requisite
corporate power and authority to enter into and carry out the terms and
conditions of this Agreement. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by the Board of Directors of Liberty and LIFE. Liberty, in its
capacity as the sole stockholder of LIFE, has approved this Agreement, and no
other corporate action on the part of Liberty or LIFE is necessary to authorize
the execution, delivery or performance by either Liberty or LIFE of this
Agreement. This Agreement has been duly executed and delivered by Liberty and
LIFE and constitutes the valid and binding obligation of each of Liberty and
LIFE, enforceable against Liberty and LIFE in accordance with its terms.
4.3 NO CONFLICTS; REQUIRED FILINGS AND CONSENTS. The execution and
delivery of this Agreement by each of Liberty and LIFE do not, and the
performance of this Agreement by each of Liberty and LIFE will not, (i) conflict
with or violate the certificate or articles of incorporation or bylaws of
Liberty or LIFE, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to either Liberty or LIFE or by which any property
or asset of either is bound or affected, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, result in the loss of a material benefit under,
or give to others any right of termination, amendment, acceleration, increased
payments or cancellation of, or result in the creation of a lien or other
encumbrance on the IFE Securities pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument to which Liberty, LIFE or any other Subsidiary of Liberty is a party.
The execution and delivery of this Agreement by each of Liberty and LIFE do not,
and the performance of this Agreement by each of Liberty and LIFE will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority,
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domestic or foreign (each, a "Governmental Authority"), except for such filings
as may be required under Section 13(d) of the Exchange Act.
4.4 LITIGATION; COMPLIANCE WITH LAWS. There are no actions, suits or
proceedings of any nature pending, or, to the knowledge of Liberty or LIFE,
threatened, against Liberty or LIFE arising out of (i) LIFE's ownership of the
IFE Securities or (ii), as of the date hereof, this Agreement, or any action
taken or to be taken by Liberty or LIFE in connection with this Agreement.
Neither Liberty nor LIFE is subject to any order, judgment, ruling, or decree of
any competent authority relating to Liberty or LIFE's ownership of the IFE
Securities. Neither Liberty nor LIFE has received notice of any violation of
any applicable statute, regulation, code, ordinance, rule, order, judgment,
decree or requirement relating to LIFE's ownership of the IFE Securities and, to
Liberty's and LIFE's knowledge, no such violation exists. Each of Liberty and
LIFE is in compliance with all applicable laws, rules and regulations relating
to LIFE's ownership of the IFE Securities.
4.5 TITLE TO THE IFE NOTES. LIFE owns good and valid title to the
IFE Notes, free and clear of any Lien or Restriction. At the Closing, subject
to the terms and conditions of this Agreement, Fox Kids will acquire good and
valid title to the IFE Notes, free and clear of any Liens or Restrictions other
than those (i) arising under the Securities Act of 1933, as amended (the
"Securities Act") and "blue sky" laws of applicable jurisdictions or (ii)
created by or with the consent of Fox Kids or any of its Affiliates. As of the
date hereof, the IFE Notes are convertible into an aggregate of 2,587,500 shares
of IFE Stock which, if issued on the date hereof upon conversion of the IFE
Notes, would be convertible into shares of IFE Class B Stock on a one-for-one
basis. Neither Liberty nor LIFE has entered into any agreements, understandings
or undertakings (other than this Agreement) with respect to the IFE Notes under
which Liberty or LIFE is or may become obligated, directly or indirectly, to
transfer, dispose of, convert or assign the IFE Notes, or which would result in
a Lien or Restriction upon the IFE Notes. The IFE Notes are the only debt
securities of IFE legally or beneficially owned by Liberty.
4.6 TITLE TO THE IFE STOCK. LIFE has good and valid title to the
7,088,732 shares of IFE Stock owned by it on the date hereof, free and clear of
any Lien or Restriction. At the Closing, subject to the terms and conditions of
this Agreement, Fox Kids will acquire good and valid title to the shares of IFE
Stock owned by LIFE, free and clear of all Liens or Restrictions other than
those (i) arising under the Securities Act and "blue sky" laws of applicable
jurisdictions or (ii) created by or with the consent of Fox Kids or any of its
Affiliates. As of the date hereof, the shares of IFE Stock owned by LIFE are
convertible into shares of IFE Class B Stock on a one-for-one basis. Neither
Liberty nor LIFE has entered into any agreements, understandings or undertakings
(other than this Agreement) with respect to the IFE Stock owned by LIFE under
which Liberty or LIFE is or may become obligated, directly or indirectly, to
transfer, dispose of, convert or assign such IFE Stock, or which would result in
a Lien or Restriction upon such IFE Stock. The IFE Stock owned of record by
LIFE are the only equity securities of IFE legally or beneficially owned by
Liberty.
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4.7 NO OTHER AGREEMENTS RELATING TO IFE SECURITIES. There are (i) no
options, warrants, calls, subscriptions, convertible securities or other rights
(including preemptive rights), agreements or commitments of any character (other
than this Agreement) obligating Liberty or LIFE now or at any time in the future
to sell, transfer or otherwise dispose of any of the IFE Securities and (ii)
there are no voting trusts, proxies or other agreements to which Liberty or LIFE
is a party with respect to the IFE Securities other than this Agreement, the IFE
Shareholders Agreement and the purchase agreements pursuant to which LIFE
acquired the IFE Stock and the IFE Notes from IFE.
4.8 INVESTMENT INTENT. The shares of Fox Kids Preferred Stock to be
acquired by LIFE pursuant to this Agreement are being acquired by LIFE for its
own account for investment and with no present intention of distributing or
reselling such shares or any part thereof in any transaction which would
constitute a "distribution" within the meaning of the Securities Act. Liberty
and LIFE understand and acknowledge that the offer and sale of the Fox Kids
Preferred Stock have not been, and as of the Closing will not have been,
registered under the Securities Act or any state securities laws.
4.9 NO BROKERS. No broker or finder is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Liberty or LIFE.
4.10 FULL DISCLOSURE. No statement herein or in the Exchange
Agreement or in any certificate delivered pursuant to the requirements of this
Agreement by or on behalf of Liberty or LIFE contains or will contain any untrue
statement of a material fact concerning Liberty or LIFE or omits or will omit to
state a material fact concerning Liberty or LIFE necessary in order to make the
statements made herein or therein, in light of the circumstances under which
they were made, not misleading.
5. REPRESENTATIONS AND WARRANTIES OF FOX KIDS. Except as set forth in
------------------------------------------
the disclosure letter delivered at or prior to the execution of this Agreement
by Fox Kids, which refers to the relevant Sections of this Agreement (the "Fox
Kids Disclosure Letter"), Fox Kids represents and warrants to Liberty and LIFE
as follows:
5.1 ORGANIZATION AND STANDING; ARTICLES AND BY-LAWS. Each of Fox
Kids, NPAL, each Material NPAL Subsidiary, TNCL and each Material TNCL
Subsidiary is a corporation, partnership or other legal entity duly organized,
validly existing and, if applicable, in good standing under the laws of the
jurisdiction of its incorporation or organization. Fox Kids, NPAL and each
Material NPAL Subsidiary is qualified, licensed or domesticated as a foreign
corporation, partnership or other legal entity and is in good standing in all
jurisdictions where the character of its properties owned or held under lease or
the nature of its activities make such qualification necessary, except where the
failure to be so qualified, licensed or domesticated would not have a material
adverse effect on the business, assets, results of operations or financial
position of (i), in the case of Fox Kids, of Fox Kids, and (ii) in the case of
NPAL, NPAL and its Subsidiaries taken as a whole. Each of Fox Kids, NPAL, each
Material NPAL Subsidiary, TNCL and each Material TNCL
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Subsidiary has all requisite power and authority and all necessary governmental
approvals, permits and other authorizations necessary to own, lease and operate
its properties and assets and to carry on its business in the manner and in the
locations it is now being conducted, except where the failure to have such
power, authority and governmental approvals, permits and authorizations would
not have a material adverse effect on the business, assets, results of
operations or financial position (x), in the case of Fox Kids, of Fox Kids, (y),
in the case of NPAL and any Material NPAL Subsidiary, of NPAL and its
Subsidiaries taken as a whole, and (z), in the case of TNCL and any Material
TNCL Subsidiary, of TNCL and its Subsidiaries taken as a whole. True and correct
copies of the Certificate of Incorporation and Bylaws of each of Fox Kids and
NPAL, as amended to the date hereof, have been delivered to Liberty.
5.2 AUTHORIZATION. Fox Kids has the requisite corporate power and
authority to enter into and carry out the terms and conditions of this
Agreement. Each of Fox Kids, NPAL and TNCL has the requisite corporate power
and authority to enter into and carry out the terms and conditions of the
Funding Agreement. NPAL has the requisite corporate power and authority to
enter into and carry out the terms of the Exchange Agreement. The execution and
delivery of this Agreement and the Funding Agreement and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
the Board of Directors of Fox Kids and by any required shareholder or other
action required under the charter documents of, or any shareholder agreement
relating to, Fox Kids. All necessary corporate action on the part of each of
NPAL and TNCL to authorize and approve the due execution, delivery and
performance of the Funding Agreement by NPAL and TNCL, respectively, has been
taken. All necessary corporate action on the part of NPAL to authorize and
approve the due execution, delivery and performance of the Exchange Agreement by
NPAL has been taken. This Agreement has been duly executed and delivered by Fox
Kids and constitutes its valid and binding obligation, enforceable against it in
accordance with its terms. Upon the execution and delivery of the Funding
Agreement by Fox Kids, NPAL and TNCL at the Closing, the Funding Agreement will
constitute the legal, valid and binding obligation of each of Fox Kids, NPAL and
TNCL, enforceable against each in accordance with its terms, and will not be
void or voidable by TNCL under Australian law. Upon the execution and delivery
of the Exchange Agreement by NPAL at the Closing, the Exchange Agreement will
constitute the legal, valid and binding obligation of NPAL, enforceable against
NPAL in accordance with its terms.
5.3 NO CONFLICTS; REQUIRED FILINGS AND CONSENTS. The execution and
delivery of this Agreement by Fox Kids does not, and the performance of this
Agreement by Fox Kids, the execution, delivery and performance of the Funding
Agreement by each of Fox Kids, NPAL and TNCL, and the execution, delivery and
performance of the Exchange Agreement by NPAL will not, (i) conflict with or
violate the certificate of incorporation, by-laws or other organizational
documents of, or, to the knowledge of Fox Kids, any shareholder agreement
relating to, Fox Kids, NPAL or TNCL, (ii) conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to any of Fox Kids, NPAL,
any Material NPAL Subsidiary, TNCL or any Material TNCL Subsidiary or by which
any property or asset of any thereof is bound or affected, or (iii) result in
any breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, result in the loss of a material
benefit under, or give to others any right of termination,
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amendment, acceleration, increased payments or cancellation of, or result in the
creation of a lien or other encumbrance on any material property or asset of Fox
Kids, NPAL, any Material NPAL Subsidiary, TNCL or any Material TNCL Subsidiary
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument to which Fox Kids, NPAL, any
Material NPAL Subsidiary, TNCL or any Material TNCL Subsidiary is a party,
except, in the cases of clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which would not prevent or
delay the consummation of the transactions contemplated by this Agreement or
otherwise prevent (x) Fox Kids from timely performing its obligations under this
Agreement or, following the Closing, exercising its rights, or timely performing
its obligations, under the terms of the Fox Kids Preferred Stock, (y), following
the Closing, any of Fox Kids, NPAL or TNCL from exercising its rights, or timely
performing its respective obligations, under the terms of the Funding Agreement
or (z), following the Closing, NPAL from timely performing its obligations under
the terms of the Exchange Agreement. The execution and delivery of this
Agreement by Fox Kids does not, and the performance of this Agreement by Fox
Kids, the execution, delivery and performance of the Funding Agreement by each
of Fox Kids, NPAL and TNCL, and the execution, delivery and performance of the
Exchange Agreement by NPAL will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Authority, except for (i) the filing of the Fox Kids Certificate of Designations
and the NPAL Certificate of Amendment with the Delaware Secretary of State prior
to or at the time of the Closing and (ii) such filings as may be required under
Section 13(d) of the Exchange Act. All required filings under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "H-S-R Act") have
been made, and the waiting period thereunder has expired or terminated, with
respect to the transactions contemplated by the Share Exchange Agreement.
5.4 CAPITAL STOCK. As of the date hereof, the authorized capital
stock of Fox Kids consists of 10,000,000 shares of Class A Common Stock, par
value $.001 per share, 10,000,000 shares of Class B Common Stock, par value
$.001 per share, and 20,000,000 shares of "blank check" preferred stock, par
value $.001 per share. Immediately prior to the Closing, there will be a number
of shares of Fox Kids Preferred Stock duly authorized as shall be sufficient for
Fox Kids to deliver to LIFE (or its nominee) at the Closing the number of
validly issued, fully paid and nonassessable shares of Fox Kids Preferred Stock
to which LIFE is entitled pursuant to Section 2.1 hereof. As of the Closing
Date, no shares of capital stock of Fox Kids will rank senior to the Fox Kids
Preferred Stock as to dividend rights, rights of redemption, or rights on any
liquidation, dissolution or winding up of Fox Kids. All of the shares of capital
stock of Fox Kids to be issued pursuant to the terms of the Share Exchange
Agreement will be, upon such issuance in accordance with the terms of the Share
Exchange Agreement, duly authorized, validly issued, fully paid and
nonassessable.
5.5 THE FOX KIDS AND NPAL PREFERRED STOCKS. The resolution set
forth in the Fox Kids Certificate of Designations has been approved by the Board
of Directors of Fox Kids and, upon the filing of the Fox Kids Certificate of
Designations with the Delaware Secretary of State, the Fox Kids Preferred Stock
will have all of the preferences and relative participating, optional and other
special rights, qualifications, limitations and restrictions set forth in the
Fox Kids Certificate
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of Designations. The shares of Fox Kids Preferred Stock to be received by LIFE
or its nominee at the Closing will be, upon such receipt at the Closing in
accordance with the terms and conditions of this Agreement, duly authorized,
validly issued, fully paid and non-assessable and LIFE or such nominee will have
all of the rights of a registered holder thereof under Delaware law. LIFE or
such nominee will receive good and valid title to the Fox Kids Preferred Stock
at the Closing, free and clear of all Liens and Restrictions other than those
(i) arising under the Securities Act and "blue sky" laws of applicable
jurisdictions or (ii) created by or with the consent of LIFE, Liberty or any of
their respective Affiliates. Liberty will not be liable for any stamp duty or
other issuance or transfer taxes or duties in connection with the issuance and
delivery of the Fox Kids Preferred Stock at the Closing. The NPAL Certificate of
Amendment has been approved by the Board of Directors and the stockholders of
NPAL and, upon the filing of the NPAL Certificate of Amendment with the Delaware
Secretary of State, the NPAL Preferred Stock will have all of the preferences
and relative participating, optional and other special rights, qualifications,
limitations and restrictions set forth in the NPAL Certificate of Amendment. The
shares of NPAL Preferred Stock that may be received by a holder of shares of Fox
Kids Preferred Stock upon the valid exercise of the Exchange Right included in
the Exchange Agreement will be, upon surrender of the certificates representing
such shares of Fox Kids Preferred Stock to NPAL or its agent, duly authorized,
validly issued, fully paid and non-assessable. No authorization, approval or
consent of any Australian Governmental Authority is currently required in order
for (i) Fox Kids to declare or pay dividends on or to redeem the Fox Kids
Preferred Stock, (ii) NPAL to perform its obligations under the Exchange
Agreement, (iii) NPAL to declare or pay dividends on or to redeem the shares of
NPAL Preferred Stock exchanged for shares of Fox Kids Preferred Stock, or (iv)
Fox Kids, NPAL or TNCL to exercise or perform their respective rights or
obligations under the Funding Agreement.
5.6 COMPLIANCE WITH APPLICABLE LAWS. Each of Fox Kids, NPAL, each
Material NPAL Subsidiary, TNCL and each Material TNCL Subsidiary is in
compliance with all applicable laws, ordinances, regulations, decrees and orders
of any Governmental Authority, the breach or violation of which, individually or
in the aggregate, could reasonably be expected to have a material adverse effect
on the business, assets, results of operations or financial condition (i), in
the case of Fox Kids, of Fox Kids and its Subsidiaries taken as a whole, (ii),
in the case of NPAL and any Material NPAL Subsidiary, of NPAL and its
Subsidiaries taken as a whole, and (iii), in the case of TNCL and any Material
TNCL Subsidiary, of TNCL and its Subsidiaries taken as a whole.
5.7 NEWLY FORMED CORPORATION. Fox Kids is a recently organized
corporation and, as of the date hereof, has engaged in no operating activities.
As of the date hereof, Fox Kids has no material assets or liabilities (other
than agreements relating to its acquisition of securities of IFE).
5.8 NPAL FINANCIAL STATEMENTS; PRIMARY US HOLDING COMPANY. (a) The
NPAL Financial Statements delivered to Liberty prior to the date hereof were
prepared in accordance with Australian generally accepted accounting principles
(except that there are no footnotes) applied on a consistent basis throughout
the periods indicated and fairly present the consolidated financial position and
results of operations of NPAL and its consolidated subsidiaries as at the
respective dates
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thereof and for the respective periods indicated therein. Since December 31,
1996, there has been no change in any of the significant accounting (including
tax accounting) policies, practices or procedures of NPAL. Since December 31,
1996, there has not been any material adverse change in the financial condition,
results of operations or businesses of NPAL and its Subsidiaries taken as a
whole.
(b) NPAL is the primary United States holding company for TNCL and
owns not less than 75 % (in value) of the total assets of TNCL and its
Subsidiaries located in the United States. NPAL owns, directly or indirectly,
not less than 75% (in value and voting power) of the equity securities of the
Subsidiaries listed on Schedule 5.8 hereto, except to the extent otherwise
specified in such schedule.
5.9 TNCL SEC FILINGS; TNCL FINANCIAL STATEMENTS. (a) TNCL has filed
all forms, reports and documents required to be filed by it with the SEC since
December 31, 1995, and has heretofore made available to Liberty, in the form
filed with the SEC (excluding any exhibits thereto), its Annual Report on Form
20-F for the fiscal year ended December 31, 1996 (the "TNCL Annual Report").
The TNCL Annual Report, and any other forms, reports and other documents filed
by TNCL with the SEC since December 31, 1995, (x) were or will be prepared in
accordance with the requirements of the Securities Act, and the Exchange Act,
and the rules and regulations thereunder and (y) did not at the time they were
filed, or will not at the time they are filed, contain any untrue statements of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(b) The consolidated financial statements (including the notes
thereto) contained in the TNCL Annual Report were prepared in accordance with
Australian generally accepted accounting principles applied on a consistent
basis throughout the periods indicated (except as may be indicated in the notes
thereto) and fairly present the consolidated financial position, results of
operations and cash flows of TNCL and its consolidated subsidiaries as at the
respective dates thereof and for the respective periods indicated therein, and
such financial statements and the reconciliations to U.S. generally accepted
accounting principles comply as to form in all material respects with applicable
accounting requirements and the rules and regulations of the SEC. Since
December 31, 1996, there has been no change in any of the significant accounting
(including tax accounting) policies, practices or procedures of TNCL. Since
December 31, 1996, there has not been any material adverse change in the
financial condition, results of operations or businesses of TNCL and its
Subsidiaries taken as a whole.
5.10 INVESTMENT INTENT. The IFE Securities, and any shares of IFE
common stock acquired upon exercise of the conversion privileges set forth in
such securities, are and will be acquired by Fox Kids for its own account for
investment and with no present intention of distributing or reselling such
shares or any part thereof in any transaction which would constitute a
"distribution" within the meaning of the Securities Act. Fox Kids understands
and acknowledges that
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the offer and sale of the IFE Securities have not been, and as of the Closing
will not have been, registered under the Securities Act or any state securities
laws.
5.11 NO BROKERS. No broker or finder is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Fox Kids.
5.12 FULL DISCLOSURE. No statement herein or in the Fox Kids
Disclosure Letter, the Funding Agreement or the Exchange Agreement or in any
certificate delivered pursuant to the requirements of this Agreement by or on
behalf of Fox Kids, NPAL or TNCL contains or will contain any untrue statement
of a material fact concerning Fox Kids, NPAL or TNCL or omits or will omit to
state a material fact necessary in order to make the statements made herein or
therein concerning Fox Kids, NPAL or TNCL, in light of the circumstances under
which they were made, not misleading.
6. PRE-CLOSING COVENANTS OF FOX KIDS, LIFE AND LIBERTY. During the
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period commencing on the date hereof and ending at the time of the Closing:
6.1 FILINGS AND OTHER ACTIONS. (a) Upon the terms and subject to the
conditions of this Agreement, each of the parties hereto agrees to use its
reasonable commercial efforts to take, or cause to be taken, all appropriate
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations or otherwise to consummate and
make effective the transactions contemplated by this Agreement.
(b) Each party shall use its commercially reasonable efforts not to
take any action, or enter into any transaction, which would cause any of its
representations or warranties contained in this Agreement to be untrue or result
in a breach of any covenant or agreement made by such party in this Agreement.
6.2 PUBLIC ANNOUNCEMENTS. Liberty and Fox Kids shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or any transaction contemplated hereby
and shall not, and shall not permit any Affiliate to, issue any such press
release or make any such public statement without the prior consent of the other
party, which consent shall not be unreasonably withheld; provided, however, that
a party may, without the prior consent of the other party, issue such press
release or make such public statement as may be required by law or any listing
agreement or arrangement to which TNCL or TCI is a party with a national
securities exchange or The Nasdaq Stock Market if it has used all reasonable
efforts to consult with the other party and to obtain such party's consent but
has been unable to obtain such consent in a timely manner. The parties hereto
have agreed to the issuance on the date hereof of the press release attached
hereto as Exhibit G.
6.3 SUBSTITUTION OF CONSIDERATION IN CERTAIN CIRCUMSTANCES. (a) If
Liberty determines, on the advice of counsel, that the condition to its
obligation to consummate the
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transactions contemplated by this Agreement set forth in Section 9.4(b) will not
be satisfied, then the parties shall negotiate in good faith the terms of a
substitute security (the "Substitute Security") for the Fox Kids Preferred Stock
to be received by LIFE pursuant to the Contribution. The Substitute Security
shall (i) have terms that are mutually acceptable to Fox Kids and Liberty, (ii)
at the election of Liberty, be exchangeable for a "mirror" security of NPAL or
another Affiliate of Fox Kids acceptable to Liberty, (iii) have an economic
value to Liberty not less, in any material respect, than, and an economic cost
to Fox Kids (and, in the case of an NPAL "mirror" security, an economic cost to
NPAL) not greater, in any material respect, than, the value and cost,
respectively, of the Fox Kids Preferred Stock (and the NPAL Preferred Stock),
(iv) not, in the sole judgment of Liberty based upon advice of counsel, upon
receipt by Liberty result in recognition by Liberty of taxable income or gain
for United States or Australian federal income tax purposes (except to the
extent any exchange right may constitute "boot"), and (v) not result in the
recognition by Fox Kids or NPAL, as the case may be, of taxable income or gain
for United States or Australian federal income tax purposes to a greater extent
than that which would be recognizable by Fox Kids or NPAL if the transactions
contemplated by this Agreement and the Exchange Agreement (including the
issuance of the NPAL Preferred Stock in exchange for shares of Fox Kids
Preferred Stock) were consummated on the date hereof. Any Substitute Security
shall have voting rights, or no voting rights, as may be determined by Fox Kids
in its sole discretion.
(b) If the terms of the Substitute Security require that filings be
made under the H-S-R Act, each of Fox Kids, Liberty and LIFE shall, or shall
cause its appropriate Affiliate(s) to, file an appropriate notification and
report form under the H-S-R Act within 5 business days of the date the terms of
the Substitute Security are determined. Each party shall cause, or shall cause
such appropriate Affiliate(s) to, supply promptly any additional information and
documentary material that may be requested pursuant to the H-S-R Act. If filings
are made under the H-S-R Act pursuant hereto, then (i) the obligations of each
of Liberty and LIFE, on the one hand, and Fox Kids, on the other hand, to
consummate the transactions contemplated by this Agreement (in addition to the
conditions set forth in Sections 7, 8 and 9 hereof) shall be subject to the
expiration (or earlier termination) of the waiting period under the H-S-R Act,
and (ii) the Outside Date shall be extended, if necessary, to the earlier of (x)
the second business day after the expiration (or earlier termination) of such
waiting period and (y) November 30, 1997.
6.4 NOTIFICATION OF CERTAIN MATTERS. Each of Liberty and LIFE, on
the one hand, and Fox Kids, on the other hand, shall give prompt notice in
writing to the other of: (i) any information that indicates that any of its
representations or warranties contained herein was not true and correct as of
the date hereof or will not be true and correct, in any material respect, as of
the Closing Date, (ii) the occurrence of any event which will result, or has a
reasonable prospect of resulting, in the failure to satisfy a condition
specified in Section 7, 8 or 9 hereof, or (iii) any notice of, or other
communication relating to, any claim, litigation, proceeding or investigation
that questions the validity or enforceability of this Agreement or any of the
transactions contemplated hereby.
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6.5 H-S-R FILINGS; BEST EFFORTS TO CLOSE. (a) As promptly as
practicable after the execution of this Agreement, but in any event within 5
business days, Fox Kids shall, or shall cause its appropriate Affiliate(s) to,
file an appropriate notification and report form under the H-S-R Act with
respect to (i) the conversion of the IFE Stock and the IFE Notes into voting
securities of IFE, (ii) the acquisition of voting securities of IFE under the
Robertsons Class A Purchase Agreement and from The Christian Broadcasting
Network, Inc. and Regent University and (iii) the merger contemplated by the
Merger Agreement; provided, however, that such five-business day period shall be
extended to the extent necessary for Fox Kids to obtain from IFE all information
reasonably necessary to complete such notification and report form that is not
in the public domain or available from IFE's periodic reports filed under the
Exchange Act. Fox Kids shall, or shall cause such Affiliate(s) to, request
early termination of the waiting period under the H-S-R Act. Fox Kids shall, or
shall cause such Affiliate(s) to, supply promptly any additional information and
documentary material that may be requested of it pursuant to the H-S-R Act and
use, or cause such Affiliate(s) to use, its commercially reasonable efforts to
obtain clearance or authorization under the H-S-R Act to consummate the
transactions described in the immediately preceding sentence as promptly as
practicable. Fox Kids shall not, and shall not permit any Affiliate to, take
any action that will have the effect of delaying, impairing or impeding the
receipt of early termination or such clearance or authorization under the H-S-R
Act. Fox Kids shall use its commercially reasonable efforts to cause IFE, as
soon as reasonably practicable, (i) to provide Fox Kids, or its appropriate
Affiliate(s), with such information as may be reasonably necessary for Fox Kids,
or such Affiliate(s), to complete and submit its notification and report form
under the H-S-R Act, (ii) to file its own (or its appropriate Affiliate's)
notification and report form under the H-S-R Act in connection with the
transactions referred to in the first sentence of this Section 6.5(a) and (iii)
to supply promptly any additional information and documentary material that may
be requested of it (or such Affiliate) pursuant to the H-S-R Act.
(b) Fox Kids covenants and agrees with Liberty and LIFE to use its
best efforts to effect the Contribution prior to the consummation of the merger
contemplated by the Merger Agreement. Fox Kids acknowledges and agrees that a
failure to effect the Contribution prior to such merger would result in Liberty
and LIFE suffering significant damages, and agrees to indemnify and hold
harmless Liberty and LIFE from and against any and all monetary damages suffered
by either of them arising out of the failure of the Contribution to be effected
prior to such merger. Such monetary value shall be deemed to equal the
difference between the amount received by LIFE in the merger and the value of
the Consideration (assuming for this purpose no change in applicable tax laws or
regulations from those in effect on the date of this Agreement).
Notwithstanding the foregoing, Fox Kids shall not be liable to Liberty or LIFE
pursuant to this Section 6.5(b) if the failure of the Contribution to be
effected prior to such merger is due to a material breach by Liberty or LIFE of
any of its covenants, agreements, representations or warranties set forth in
this Agreement.
7. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE CONTRIBUTION. The
----------------------------------------------------------------
respective obligations of each party to effect the Contribution and the other
transactions contemplated by this Agreement shall be subject to the fulfillment
at or prior to the Closing of the following conditions, any or all of which may
be waived, in whole or in part, to the extent permitted by applicable law:
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7.1 NO STOP ORDER. There shall be no effective injunction, writ or
preliminary restraining order or any order of any nature issued by any court of
competent jurisdiction or by any Governmental Authority directing that the
transactions provided for herein, or any of them, not be consummated as herein
provided; provided, however, that the parties shall use their reasonable
commercial efforts to prevent the entry of, or, if entered, to cause to be
vacated or lifted as promptly as practicable, any such injunction or other
order.
7.2 CONSUMMATION OF SHARE EXCHANGE. All of the conditions precedent
to the consummation of the transactions contemplated by the Share Exchange
Agreement shall have been satisfied or, to the extent permitted by applicable
law, waived by the parties thereto, and the Share Exchange shall be consummated
and become effective concurrently with the consummation and effectiveness of the
Contribution.
7.3 H-S-R ACT. The waiting period applicable to the filings made
under the H-S-R Act pursuant to Section 6.5(a) hereof shall have expired or been
terminated.
7.4 NO ADVERSE ENACTMENTS. There shall not have been any statute,
rule, regulation or order promulgated, enacted or issued or deemed applicable to
the Contribution by any Governmental Authority or court of competent
jurisdiction which would make the consummation of the Contribution illegal.
8. ADDITIONAL CONDITIONS TO OBLIGATIONS OF FOX KIDS. The obligation of
------------------------------------------------
Fox Kids to consummate the transactions contemplated by this Agreement is also
subject to the satisfaction, at or prior to the Closing Date, of each of the
following conditions, any or all of which may be waived by Fox Kids, in whole or
in part, to the extent permitted by applicable law:
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties of Liberty and LIFE contained herein 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, except for changes
permitted or contemplated by this Agreement.
8.2 PERFORMANCE OF AGREEMENTS. Each of Liberty and LIFE shall have
performed in all material respects all obligations and agreements, and complied
in all material respects with all covenants and conditions, contained in this
Agreement to be performed or complied with by it prior to or at the Closing
Date.
8.3 OFFICER'S CERTIFICATES. Fox Kids shall have received
certificates of Liberty and LIFE, signed by officers of Liberty and LIFE,
respectively, evidencing compliance with the conditions set forth in Sections
8.1 and 8.2 above.
8.4 OPINION OF COUNSEL FOR LIBERTY AND LIFE. Fox Kids shall have
received from counsel to Liberty and LIFE an opinion, dated the Closing Date, to
the effect set forth on Exhibit H hereto. In rendering their opinions such
counsel may rely as to factual matters upon
17
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certificates or other documents furnished by officers and directors of Liberty
and LIFE and by government officials, and upon such other documents and data as
such counsel deem appropriate as a basis for their opinions. Such counsel may
specify the jurisdiction or jurisdictions in which they are admitted to
practice, that they are not admitted to practice in any other jurisdiction or
experts in the law of any other jurisdiction and that, to the extent their
opinions concern the laws of any other jurisdiction or pertain to matters beyond
the scope of such counsel's engagement, such counsel may rely upon the opinion
of counsel admitted to practice in such other jurisdiction. Any opinion relied
upon by such counsel shall be delivered together with the opinion of such
counsel, which shall state that such counsel believes that their reliance
thereon is justified.
8.5 AMENDED AFFILIATION AGREEMENT. The Amended Affiliation Agreement,
in the form of Exhibit B hereto, shall have been duly executed and delivered.
8.6 IFE SHAREHOLDERS AGREEMENT. The IFE Shareholders Agreement shall
have been terminated or LIFE shall have irrevocably waived all of its rights and
obligations thereunder such that LIFE has no further rights or obligations under
the IFE Shareholders Agreement.
9. ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF LIBERTY AND LIFE. The
------------------------------------------------------------
obligation of each of Liberty and LIFE to consummate the transactions
contemplated by this Agreement is also subject to the satisfaction, at or prior
to the Closing Date, of each of the following conditions, any or all of which
may be waived by Liberty and LIFE, in whole or in part, to the extent permitted
by applicable law:
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties of Fox Kids contained herein 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, except for changes permitted or
contemplated by this Agreement.
9.2 PERFORMANCE OF AGREEMENTS. Fox Kids shall have performed in all
material respects all obligations and agreements, and complied in all material
respects with all covenants and conditions, contained in this Agreement to be
performed or complied with by it prior to or at the Closing Date.
9.3 OFFICER'S CERTIFICATE. Liberty and LIFE shall have received a
certificate of Fox Kids, signed by officers of Fox Kids, evidencing compliance
with the conditions set forth in Sections 9.1 and 9.2 above.
9.4 TAX MATTERS. (a) Liberty and LIFE shall have received duly
executed copies of the certificates attached hereto as Exhibit J.
(b) Liberty shall have received from Baker & Botts, L.L.P. an opinion
of counsel to the effect that since June 11, 1997, there has been no amendment
to, change (including any announced prospective change) in, or effective date
set for any proposed amendment or change in,
18
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the laws (or any regulations thereunder) of the United States or Australia or
any political subdivision or taxing authority of either thereof or therein, or
any amendment to, change in, or effective date set for any proposed amendment or
change in, an interpretation or application of such laws or regulations by any
legislative body, court, governmental agency or regulatory authority, which
would result in Liberty recognizing taxable income or gain for United States or
Australian federal income tax purposes by virtue of the Contribution or the
consummation of any of the transactions contemplated by this Agreement (except
to the extent the Exchange Right constitutes "boot" for federal income tax
purposes).
9.5 FUNDING AGREEMENT AND EXCHANGE AGREEMENT. The Funding Agreement,
in the form attached hereto as Exhibit D, shall have been duly executed and
delivered by Fox Kids, NPAL and TNCL and the Exchange Agreement, in the form
attached hereto as Exhibit C, shall have been duly executed and delivered by
NPAL.
9.6 ASSETS OF NPAL. Liberty shall have received evidence reasonably
satisfactory to it that NPAL owns, as of the Closing Date, directly or
indirectly through one or more Subsidiaries of NPAL, not less than 75% (in
value) of the assets of TNCL and its Subsidiaries located in the United States.
9.7 OPINION OF COUNSEL FOR FOX KIDS. Liberty and LIFE shall have
received an opinion of counsel to Fox Kids, dated the Closing Date,
substantially to the effect set forth on Exhibit I. In rendering their opinions
such counsel may rely as to factual matters upon certificates or other documents
furnished by officers and directors of Fox Kids and by government officials, and
upon such other documents and data as such counsel deem appropriate as a basis
for their opinions. Such counsel may specify the jurisdiction or jurisdictions
in which they are admitted to practice, that they are not admitted to practice
in any other jurisdiction or experts in the law of any other jurisdiction and
that, to the extent their opinions concern the laws of any other jurisdiction or
pertain to matters beyond the scope of such counsel's engagement, such counsel
may rely upon the opinion of counsel admitted to practice in such other
jurisdiction. Any opinion relied upon by such counsel shall be delivered
together with the opinion of such counsel, which shall state that such counsel
believes that their reliance thereon is justified.
9.8 REGISTRATION RIGHTS AGREEMENT. Liberty and LIFE shall have
entered into a registration rights agreement with Fox Kids having the terms set
forth on Schedule 9.8 hereto.
10. TERMINATION.
-----------
10.1 TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time:
10.1.1 by the mutual written consent of Liberty and Fox Kids;
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10.1.2 by Fox Kids if there has been a breach of any covenant or
agreement on the part of Liberty or LIFE set forth in this Agreement, or if any
representation or warranty of Liberty or LIFE shall have become untrue in any
material respect, in either case such that such breach or untruth is incapable
of being cured by the Outside Date; provided, however, that Fox Kids shall not
have the right to terminate this Agreement pursuant to this Section 10.1.2 if
Fox Kids, at such time, is in material breach of any of its covenants,
agreements, representations or warranties set forth in this Agreement;
10.1.3 by Liberty if there has been a breach of any covenant or
agreement on the part of Fox Kids set forth in this Agreement, or if any
representation or warranty of Fox Kids shall have become untrue in any material
respect, in either case such that such breach or untruth is incapable of being
cured by the Outside Date; provided, however, that Liberty shall not have the
right to terminate this Agreement pursuant to this Section 10.1.3 if Liberty or
LIFE, at such time, is in material breach of any of its covenants, agreements,
representations or warranties set forth in this Agreement;
10.1.4 by either Fox Kids or Liberty if the Contribution shall not
have been consummated on or before the Outside Date, unless the absence of such
consummation shall be due to the failure of the party seeking termination to
perform each of its obligations under this Agreement required to be performed by
it at or prior to the Closing Date; or
10.1.5 by either Fox Kids or Liberty if a court of competent
jurisdiction or a Governmental Authority shall have issued a non-appealable
final order, decree or ruling or taken any other action, in each case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Contribution or any of the other transactions contemplated hereby.
10.2 EFFECT OF TERMINATION. If this Agreement is terminated pursuant
to Section 10.1, this Agreement shall become void and of no effect with no
liability on the part of any party hereto, or any of their respective officers
or directors, to the others and all rights and obligations of each party hereby
shall cease, except that (a) the agreements contained in Section 6.5(b), this
Section 10.2 and in Sections 11.2 and 12.6 shall survive the termination hereof
and (b) nothing herein shall relieve any party from liability for the willful
breach of any of its representations, warranties, covenants or agreements set
forth in this Agreement. If this Agreement is terminated, Fox Kids covenants and
agrees to cause the Robertsons Class A Purchase Agreement to be terminated,
unless (i) such termination is the result of a court of competent jurisdiction
or a Governmental Authority having issued a non-appealable final order, decree
or ruling or taken any other action, in each case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Contribution or
(ii) such termination was due to a material breach by Liberty or LIFE of any of
its covenants, agreements, representations or warranties set forth in this
Agreement.
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11. INDEMNIFICATION.
---------------
11.1 SURVIVAL. All representations and warranties and covenants and
agreements contained herein shall survive until the first anniversary of the
date of this Agreement; provided, however, that such limitation shall not apply
to (i) the representations set forth in Sections 4.5, 4.6 and 5.5 and (ii) the
covenants and agreements set forth in Section 2.1, in this Section 11 and in
Sections 12.2, 12.6 and 12.7, each of which shall survive without limitation.
11.2 CERTAIN ACTIONS. Fox Kids agrees to indemnify and hold harmless
each Liberty Party (as defined below) from and against any and all losses,
claims, damages, liabilities, judgments, costs, disbursements and expenses of
any kind or nature (including reasonable fees and disbursements of counsel)
arising out of any suit, action or proceeding instituted by any Person not a
party to this Agreement that in any manner results from, arises out of, is based
upon or is related or attributable to any action taken by TNCL, NPAL, Fox Kids
or any of their respective Affiliates (each, a "News Corp Party") with respect
to any transaction or proposed transaction involving any News Corp Party, on the
one hand, and any of M.G. "Pat" Robertson, the Robertson Charitable Remainder
Unitrust, the Gordon P. Robertson Irrevocable Trust, the Elizabeth F. Robertson
Irrevocable Trust, the Ann R. Lablanc Irrevocable Trust, Lisa N. Robertson,
Timothy B. Robertson (individually and as custodian to and for each of Abigail
H. Robertson, Laura N. Robertson, Elizabeth C. Robertson, Willis H. Robertson
and Caroline S. Robertson), the Timothy and Lisa Robertson Children's Trust, the
Timothy B. Robertson Charitable Trust, any other charitable, revocable or
irrevocable trust created by or for the benefit of the Robertsons, their
children or their respective heirs, The Christian Broadcasting Network, Inc. or
Regent University, on the other hand. All fees, costs and expenses of a Liberty
Party which are reimbursable pursuant to this Section 11.2 shall be reimbursed
as they are incurred. Fox Kids shall not be liable for any settlement of any
suit, action or proceeding effected without its written consent, but if settled
with its written consent, or if there be a final judgment for the plaintiff in
any such suit, action or proceeding, Fox Kids shall indemnify and hold harmless
each Liberty Party from and against any damage, loss or liability by reason of
such settlement or judgment. As used in this Section 11.2, the term "Liberty
Party" means (i) LIFE, Liberty and TCI, (ii) the respective directors, officers,
employees and agents of the Persons specified in clause (i) of this sentence,
and (iii) the respective successors, assigns, executors, heirs and legal
representatives of the foregoing.
11.3 INDEMNIFICATION BY LIBERTY AND LIFE. Subject to the other
terms and conditions of this Agreement, Liberty and LIFE shall, jointly and
severally, indemnify Fox Kids against and hold Fox Kids harmless from all
demands, claims, losses, costs, fines, liabilities, damages (excluding
consequential damages) and expenses, including reasonable fees and expenses
incurred in the investigation and defense of claims and actions (collectively,
"Losses"), arising out of the breach of any representation, warranty, covenant
or agreement of Liberty or LIFE contained herein.
11.4 INDEMNIFICATION BY FOX KIDS. Subject to the other terms and
conditions of this Agreement, Fox Kids shall indemnify each of Liberty and LIFE
against and hold each of Liberty
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and LIFE harmless from all Losses arising out of (i) the breach of any
representation, warranty, covenant or agreement of Fox Kids contained herein or
(ii) the invalidity or unenforceability, or alleged invalidity or
unenforceability, of any provision of the Fox Kids Certificate of Designations,
the NPAL Certificate of Amendment, the Exchange Agreement or the Funding
Agreement.
11.5 CLAIMS. If any claim or assertion of liability is made or
asserted against a party entitled to be indemnified pursuant to Section 11.3 or
11.4 (an "Indemnified Party") by any Person who is not a party to this
Agreement, the Indemnified Party shall give to the other party (an "Indemnifying
Party") prompt written notice of such claim or assertion, or of any event or
proceeding by or in respect of a third party of which it has knowledge,
concerning any liability or damage as to which it may request indemnification
hereunder. The failure by an Indemnified Party to give notice as provided in
this Section 11.5 shall not relieve the Indemnifying Party of its obligations
under this Section 11.5 except to the extent that the failure results in a
failure of actual notice to the Indemnifying Party and the Indemnifying Party is
damaged solely as a result of the failure to give notice. The Indemnifying Party
shall have the right to direct, through counsel chosen by the Indemnifying Party
and reasonably satisfactory to the Indemnified Party, the defense or settlement
of any such claim or proceeding at its own expense. If the Indemnifying Party
elects to assume the defense of any such claim or proceeding, the Indemnified
Party may participate in such defense, but in such case the expenses of the
Indemnified Party shall be paid by the Indemnified Party; provided, however,
that if the Indemnified Party asserts that there exists a conflict of interest
that would make it inappropriate for the same counsel to represent the
Indemnifying Party and the Indemnified Party and the counsel for the
Indemnifying Party concurs with such assertion, then the Indemnifying Party
shall reimburse the Indemnified Party for the reasonable fees and expenses of
separate counsel, to the extent such fees and expenses are incurred solely in
connection with the matters with respect to which the counsel for the
Indemnifying Party agrees there is a conflict of interest. The Indemnified Party
shall provide the Indemnifying Party with access to its records and personnel
relating to any such claim, assertion, event or proceeding during normal
business hours and shall otherwise cooperate with the Indemnifying Party in the
defense or settlement thereof, and the Indemnifying Party shall reimburse the
Indemnified Party for all its reasonable out-of-pocket expenses in connection
therewith, as such expenses are incurred. If the Indemnifying Party elects to
direct the defense of any such claim or proceeding, the Indemnified Party shall
not pay, or permit to be paid, any part of any claim or demand arising from such
asserted liability, unless the Indemnifying Party, subject to the penultimate
sentence of this Section 11.5, withdraws from the defense of such asserted
liability, or unless a final judgment from which no appeal may be taken by or on
behalf of the Indemnifying Party is entered against the Indemnified Party for
such liability. If the Indemnifying Party fails to defend, or if, after
commencing or undertaking any such defense, the Indemnifying Party fails to
prosecute or withdraws from such defense, the Indemnified Party shall have the
right to undertake the defense or settlement thereof, at the Indemnifying
Party's expense. If the Indemnified Party assumes the defense of any such claim
or proceeding pursuant to this Section 11.5 and proposes to settle such claim or
proceeding prior to a final judgment thereon or to forego appeal with respect
thereto, then the Indemnified Party shall give the Indemnifying Party prompt
written notice thereof and the Indemnifying Party shall have the right to
participate in the settlement or assume or reassume the defense of such claim or
proceeding. The Indemnifying Party shall not settle
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any claim or assertion unless the Indemnified Party consents in writing to such
settlement, which consent shall not be unreasonably withheld.
12. MISCELLANEOUS PROVISIONS.
------------------------
12.1 NOTICES. All notices or other communications hereunder shall be
in writing and shall be deemed to have been duly given or made if (i) delivered
in person, on the date actually delivered, (ii) by United States mail, certified
or registered, with return receipt requested, on the date which is two business
days after the date of mailing, or (iii) if sent by telex or facsimile
transmission, with a copy mailed on the same day in the manner provided in (ii)
above, on the date transmitted provided receipt is confirmed by telephone:
If to Fox Kids:
c/o News America Publishing Incorporated
1211 Avenue of the Americas
New York, New York 10036
Attention: Arthur M. Siskind, Esq.
Telecopy No.: 212-768-2027
With copies to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attention: Joel I. Papernik, Esq.
Telecopy No.: 212-697-6686
Saban Entertainment
10960 Wilshire Boulevard
Los Angeles, California 90024
Attention: Haim Saban/Mel Woods
Telecopy No.: 310-235-5108
Troop Meisinger Steuben & Pasich, LLP
10940 Wilshire Boulevard
Los Angeles, California 90024
Attention: Dick Troop, Esq.
Telecopy No.: 310-443-8503
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If to Liberty or LIFE:
Liberty Media Corporation
8101 East Prentice Avenue
Englewood, Colorado 80111
Attention: President
Telecopy No.: 303-721-5415
With a copy to:
Baker & Botts, L.L.P.
599 Lexington Avenue
New York, New York 10022
Attention: Robert W. Murray Jr., Esq.
Telecopy No.: 212-705-5125
or at such other address as may have been furnished by a party in writing to the
other parties.
12.2 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other terms and provisions of this Agreement shall nonetheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon any such determination that a term or other provision
is invalid, illegal or incapable of being enforced, the parties shall negotiate
in good faith to modify this Agreement so as to effect the original intent of
the parties as closely as possible to the fullest extent permitted by applicable
law in an acceptable manner to the end that the transactions contemplated hereby
are fulfilled to the extent possible.
12.3 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
12.4 NO ADVERSE CONSTRUCTION. The rule that a contract is to be
construed against the party drafting the contract is hereby waived, and shall
have no applicability in construing this Agreement or any provision hereof.
12.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
12.6 FEES AND EXPENSES. All costs and expenses, including without
limitation fees and disbursements of counsel, incurred by the parties hereto
shall be borne solely and entirely by the party which has incurred such costs
and expenses; provided, however, that if pursuant to Section 6.3
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the terms of a Substitute Security are negotiated, and such terms require that
filings be made under the H-S-R Act, then Fox Kids shall pay all filing fees
required to be paid under the H-S-R Act in connection with such filings.
12.7 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns, but neither this Agreement nor any of the rights,
interests or other obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties.
12.8 AMENDMENT. This Agreement may be amended by the parties hereto
at any time prior to the Closing. This Agreement may be not be amended except by
an instrument in writing signed by each of the parties hereto.
12.9 WAIVER. Any party hereto may (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties of the other
parties contained herein or in any document delivered pursuant hereto, and (iii)
waive compliance by the other parties with any of the agreements or conditions
contained herein; provided, however, that neither Liberty nor LIFE may waive the
condition to their respective obligations to effect the Contribution set forth
in Section 9.4. Any such extension or waiver shall be valid only if set forth
in an instrument in writing signed by the party or parties to be bound thereby.
12.10 ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules attached hereto, the Fox Kids Disclosure Letter and other documents
referred to herein and which form a part hereof) constitutes the entire
agreement among the parties hereto and supersedes all prior agreements and
understandings, oral and written, among the parties with respect to the subject
matter hereof.
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The parties hereto have executed and delivered this Agreement as of
the date first above written.
LIBERTY MEDIA CORPORATION
By: /s/ David Koff
----------------------------
Name: David Koff
Title: Vice President
LIBERTY IFE, INC.
By: /s/ David Koff
----------------------------
Name: David Koff
Title: Vice President
FOX KIDS WORLDWIDE, INC.
By: /s/ Mel Woods
----------------------------
Name: Mel Woods
Title: President
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EXHIBIT 10.28
GUARANTEE
THIS GUARANTEE (the "Guarantee") dated as of December 22, 1995, is made by
The News Corporation Limited, a corporation organized under the laws of South
Australia ("Guarantor").
R E C I T A L S
- - - - - - - -
A. Guarantor directly or indirectly owns all of the issued and
outstanding capital stock of Fox Broadcasting Company, a Delaware corporation
("FBC"), FCN Holding, Inc., a Delaware corporation ("FCNH"), and Fox Children's
Network, Inc., a Delaware corporation ("FCN").
B. This Guarantee is delivered in connection with the formation of Fox
Kids Worldwide L.L.C., a Delaware limited liability company (the "Management
Company"), by Saban Entertainment, Inc., a Delaware corporation ("SEI"), FBC and
FCNH.
C. In connection with the formation of the Management Company, SEI and/or
its Affiliates and certain Affiliates of Guarantor are entering into related
agreements, contracts, documents and instruments listed on Exhibit A hereto
---------
(hereinafter collectively referred to as the "Alliance Agreements"), including
that certain Strategic Stockholders Agreement, dated as of December 22, 1995, by
and among SEI, Haim Saban ("Saban"), each of the Persons (including Saban)
defined therein as "SEI Stockholders," FBC and FCNH (the "Stockholders
Agreement"), that certain Stock Ownership Agreement dated as of the date hereof
by and among the SEI Stockholders and the Management Company (the "Stock
Ownership Agreement") and that certain Asset Assignment Agreement dated as of
the date hereof, by and among, inter alia, the Management Company, FBC and FCN
----- ----
(the "Asset Assignment Agreement").
G U A R A N T E E
- - - - - - - - -
As a material inducement to the SEI Stockholders to enter into the
Stockholders Agreement, and as a material inducement to SEI to form the
Management Company and enter into and to perform its obligations under the
Alliance Agreements to which it is a party, and for other good and valuable
consideration, the receipt, adequacy and legal sufficiency of which Guarantor
hereby acknowledges, Guarantor hereby agrees as follows:
1. DEFINITIONS. In addition to the words, terms and phrases defined
elsewhere herein, the following words, terms and phrases
1
<PAGE>
(and variations thereof) shall have the following meanings for purposes of this
Guarantee: "Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by, or under direct or indirect common
control with, such specified Person; "control" when used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; "SEI Stockholders" shall include the SEI Stockholders
which are parties to the Stockholders Agreement, and all Persons, other than
FBC, who thereafter hold "Shares" (as defined in the Stockholders Agreement)
subject to "Options" (as defined in the Stockholders Agreement); and "Person"
shall mean any individual, corporation, association, partnership, trust, estate
or other entity or organization.
2. UNCONDITIONAL GUARANTEE. Guarantor hereby unconditionally, absolutely
and irrevocably guarantees to the SEI Stockholders, and each of them, the full
and timely payment of all amounts payable by FBC under Section 7 of the
Stockholders Agreement and the full and timely payment of all amounts payable to
the SEI Stockholder under the Stock Ownership Agreement (the "Obligations"), all
in accordance with the terms and provisions thereof, and as if Guarantor were
the primary obligor with respect to each and all of the Obligations.
3. CONTINUING GUARANTEE, SEPARATE OBLIGATION. Guarantor's covenants,
agreements, duties and obligations under this Guarantee (a) shall be of a
continuing nature; (b) shall cover the Obligations as if each and all of the
Obligations were the primary obligations of Guarantor; and (c) shall be
irrevocable and unconditional irrespective of the validity or enforceability of
any of the Obligations. In the event of a breach by FBC of any of the
Obligations, a separate action may be brought and prosecuted by Saban or any
other SEI Stockholder against Guarantor hereunder, whether or not such action or
actions are brought against FBC or whether FBC is joined in any such action or
actions.
4. WAIVERS. Except as prohibited by applicable law, Guarantor waives any
right to require Saban or any other SEI Stockholder to (a) make any presentment,
protest, demand, or notice to Guarantor of any kind, including notice of change
of any terms of performance of the Obligations, default by FBC or any other
Person, or any action or nonaction taken by FBC or any other Person; (b) proceed
against any Person including FBC before proceeding against Guarantor; (c)
proceed against any collateral for the Obligations before proceeding against
Guarantor; (d) disclose to Guarantor any information about the Obligations of
FBC; or (e) pursue any remedy or course of action in a SEI Stockholder's or any
other Person's power whatsoever. Guarantor also waives any and all rights or
defenses arising by reason of (f) any disability of FBC or any other Person; (g)
the cessation from any cause
2
<PAGE>
whatsoever, other than payment or performance in full, of the Obligations; (h)
any statute of limitations in any action on the Obligations (but not any statute
of limitations in any action on this Guarantee); or (i) any modification or
change in terms of the Obligations, whatsoever, including without limitation,
the renewal, extension, acceleration, or other change in the time payment or
performance of the Obligations is due. Until all Obligations are paid in full or
otherwise fully performed, (j) Guarantor shall have no right of subrogation and
Guarantor waives any defense Guarantor may have based upon any election of
remedies by Saban or any other SEI Stockholder which destroys Guarantor's
subrogation rights or Guarantor's right to proceed against FBC for
reimbursement; (k) Guarantor waives any right to enforce any remedy Saban or any
other SEI Stockholder may have against FBC or any other person; and (l)
Guarantor waives any right to participate in any collateral for the Obligations
now or hereafter held by Saban or any other SEI Stockholder.
5. NON-IMPAIRMENT BY BANKRUPTCY. Guarantor's liability hereunder shall
continue notwithstanding, and shall be unaltered, unaffected and unimpaired by
(a) the bankruptcy, insolvency, reorganization, merger, liquidation,
dissolution, winding-up or cessation of existence of FBC or any other Person;
(b) any fraudulent, illegal or improper act by FBC or any other Affiliate
thereof; and/or (c) any payment made on the Obligations which the recipient
repays or is liable to repay to FBC or any other Person pursuant to any court
order or as otherwise required by law.
6. AGREEMENT REGARDING GUARANTOR'S AFFILIATES. Guarantor agrees that it
shall take all action necessary to cause each of its Affiliates which are not
controlled, directly or indirectly, by FBC, to comply in all material respects
with all provisions of the Asset Assignment Agreement, and the agreements
attached as exhibits thereto, which by their terms are binding upon Affiliates
of FBC.
7. LEGAL FEES. In the event that any action, suit, or other proceeding
is brought to enforce the obligations of Guarantor under this Guarantee, the
prevailing party shall be entitled to recover all of such party's costs and
expenses (including, without limitation, court costs and attorneys' fees)
incurred in each and every such action, suit or other proceeding, including any
and all appeals or petitions therefrom. As used herein, "attorneys' fees" shall
mean the full and actual costs of any legal services actually rendered in
connection with the matters involved, calculated on the basis of the usual fee
charged by the attorneys performing such services, and shall not be limited to
"reasonable attorneys' fees" as defined by any statute or rule of court.
8. GOVERNING LAW. THE TERMS OF THIS GUARANTEE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO
CONTRACTS MADE WITHIN, AND TO BE
3
<PAGE>
PERFORMED WITHIN, SUCH STATE, EXCLUDING CHOICE OF LAW PRINCIPLES OF SUCH STATE
THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH
STATE.
9. ENFORCEABILITY BY SEI STOCKHOLDERS. This Guarantee is made and
delivered by Guarantor to Saban for the express benefit of Saban, each of the
other SEI Stockholders, SEI and the Management Company. Each of the SEI
Stockholders, SEI and the Management Company shall have the right (which
Guarantor hereby agrees shall not, directly or indirectly, be challenged or
otherwise disputed by Guarantor in any manner whatsoever) to enforce this
Guarantee in its own name and on its own behalf directly against Guarantor as if
such SEI Stockholder or other Person were in direct contractual privity with
Guarantor hereunder and were the direct contractual obligee of each and every
covenant, agreement, representation, warranty, duty and obligation of Guarantor
hereunder.
10. BINDING EFFECT. All terms and provisions of this Guarantee shall be
binding upon Guarantor and its successors and permitted assigns and shall inure
to the benefit of, and shall be fully enforceable by, each of the SEI
Stockholders, SEI and the Management Company and each of its respective
successors and assigns.
11. ABILITY TO ASSERT CERTAIN DEFENSES. Notwithstanding any other
provision hereof, Guarantor shall have the benefit of all of the respective
rights and defenses of FBC under the Stockholders Agreement (but not rights and
defenses resulting from the application of the Federal Bankruptcy Code) to
assert that any Obligation guaranteed hereby has not been breached by, or has
been performed by, FBC.
12. EFFECT OF WAIVERS. Guarantor warrants and agrees that each of the
waivers set forth in this Guarantee is made with Guarantor's full knowledge of
its significance and consequences and that, under the circumstances, the waivers
are reasonable and not contrary to public policy or law. If any such waiver is
determined to be contrary to any applicable law or public policy, such waiver
shall be effective only to the extent permitted by law or public policy.
13. ENTIRE AGREEMENT. This Guarantee embodies the entire understanding of
Saban, the other SEI Stockholders, SEI, the Management Company and Guarantor
with respect to Guarantor's obligation to guarantee the full payment,
performance and satisfaction of the Obligations and there are no further or
other agreements or understandings, written or oral, in effect between said
parties relating to the guarantee by Guarantor of the Obligations unless
otherwise referred to herein or in any Alliance Agreement. Whenever possible,
each provision of this Agreement shall be interpreted in such manner as to be
effective and valid
4
<PAGE>
under applicable law. If any provision of this Agreement shall be invalid or
unenforceable under applicable law, such provision shall be ineffective only to
the extent of such invalidity or unenforceability without invalidating or
rendering unenforceable the remainder of such provision or of the remaining
provisions of this Agreement.
5
<PAGE>
IN WITNESS WHEREOF, this Guarantee has been executed and delivered by
Guarantor on December 22, 1995.
"GUARANTOR"
THE NEWS CORPORATION LIMITED
By: /s/ Arthur Siskind
______________________________
Its:__________________________
6
<PAGE>
ACCEPTED December 22, 1995.
/s/ Haim Saban
- ---------------------------------
HAIM SABAN
SABAN ENTERTAINMENT, INC.
By: /s/ Haim Saban
------------------------------
Haim Saban
Its: Chief Executive Officer
QUARTZ ENTERPRISES, L.P.
By: /s/ Stan Golden
------------------------------
______________________________
MERLOT INVESTMENTS
By: /s/ Bill Josey
----------------------------
____________________________
SILVERLIGHT ENTERPRISES, L.P.
By: /s/ Mel Woods
----------------------------
____________________________
7
<PAGE>
CELIA ENTERPRISES, L.P.
By: /s/ Matthew Krane
----------------------------
____________________________
8
<PAGE>
EXHIBIT A
The "Alliance Agreements," as that term is used in the Guarantee Agreement
to which this Exhibit A is attached, shall include each and all of the
following, and each and all of the agreements, documents and instruments
executed and delivered pursuant to the terms of any of the following:
1. LLC Formation Agreement dated November 1, 1995, by and among
Saban Entertainment, Inc., a Delaware corporation ("SEI"), FCN
Holding, Inc., a Delaware corporation ("FCNH") and Fox
Broadcasting Company, a Delaware corporation ("FBC").
2. Operating Agreement dated December 22, 1995, by and among SEI,
FCNH and FBC.
3. Management Agreement dated December 22, 1995 by and among Fox
Kids Worldwide, L.L.C. (the "Management Company"), a Delaware
limited liability company, SEI and FCNH Sub Inc., a Delaware
corporation ("FCNH Sub").
4. Strategic Stockholders Agreement dated December 22, 1995, by and
among SEI, Haim Saban ("Saban"), Quartz Enterprises, L.P., Merlot
Investments, Silverlight Enterprises, L.P., Celia Enterprises,
L.P. (the "SEI Entities"), FBC, FCNH and FCNH Sub.
5. Registration Agreement dated December 22, 1995, by and among SEI,
Saban, the SEI Entities, FBC and FCNH.
6. Asset Assignment Agreement dated December 22, 1995, by and
between the Management Company, on the one hand, and Fox, Inc., a
Delaware corporation, FBC, Twentieth Century Fox Film
Corporation, a Delaware corporation, Fox Television Stations,
Inc., a Delaware corporation and FCNH, on the other hand.
7. Stock Ownership Agreement dated December 22, 1995 by and among
Saban, the SEI Entities and the Management Company.
9
<PAGE>
EXHIBIT 10.29
EXECUTED
ORIGINAL
FIRST AMENDMENT TO OFFICE LEASE
-------------------------------
BEACON PROPERTIES, L.P.
10880 Wilshire Boulevard
Suite 880
Los Angeles, California 90024
Date: August 1, 1997
Saban Entertainment, Inc.
10960 Wilshire Boulevard
Suite 2400
Los Angeles, California 90024
Re: Office Lease (the "LEASE"), dated July 17, 1995, between 10960
Property Corporation, a California corporation, predecessor-in-interest to
Beacon Properties, L.P., a Delaware limited partnership ("LANDLORD"), and
Saban Entertainment, Inc., a Delaware corporation ("TENANT"), for
approximately 111,225 rentable square feet of space (the "EXISTING
PREMISES") located in the building located at 10960 Wilshire Boulevard, Los
Angeles, California (the "BUILDING").
Ladies and Gentlemen:
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Landlord and Tenant hereby agree as follows.
1. DEFINED TERMS. Except as explicitly set forth in this First
-------------
Amendment to Office Lease (this "FIRST AMENDMENT"), each initially capitalized
term when used herein shall have the same respective meaning as is set forth in
the Lease.
2. PREMISES. Effective as of the "3RD FLOOR EXPANSION PREMISES
--------
COMMENCEMENT DATE," as that term is defined in Section 3.1, below, the
"PREMISES," as that term is defined in the Lease, shall contain approximately
134,729 rentable square feet of space in the Building and shall consist of
(a)the Existing Premises, and (b). 23,504 rentable square feet of space known as
------
Suite 300, located on the third (3rd) floor of the Building (the "3RD FLOOR
EXPANSION PREMISES"). The 3rd Floor Expansion Premises are further set forth on
Exhibit A, attached hereto. Except as specifically set forth in Section 5 of
this First Amendment, Tenant shall
<PAGE>
accept the 3rd Floor Expansion Premises on the 3rd Floor Expansion Commencement
Date in their existing, "as is" condition and Landlord shall not be obligated to
provide or pay for any improvement work or services related to the improvement
of the 3rd Floor Expansion Premises. Tenant also acknowledges that neither
Landlord nor any agent of Landlord has made any representation or warranty
regarding the condition of the 3rd Floor Expansion Premises or with respect to
the suitability of the 3rd Floor Expansion Premises for the conduct of Tenant's
business.
3. LEASE TERM.
----------
3.1 3RD FLOOR LEASE TERM. The term of Tenant's lease of the 3rd
--------------------
Floor Expansion Premises (the "3RD FLOOR LEASE TERM") shall commence on January
1, 1998 (the "3RD FLOOR EXPANSION PREMISES COMMENCEMENT DATE"), and shall
continue through and including the Lease Expiration Date (which is March 31,
2006), unless the Lease, as amended by this First Amendment, is sooner
- -----
terminated or extended as provided in the Lease. Tenant shall have the right to
occupy the 3rd Floor Expansion Premises prior to the 3rd Floor Expansion
Premises Commencement Date (the "EARLY OCCUPANCY PERIOD"), provided that (A)
Tenant shall give Landlord at least one (1) days' prior notice of any such
occupancy of the 3rd Floor Expansion Premises, (B) a temporary certificate of
occupancy or the equivalent, to the extent required, shall have been issued by
the appropriate governmental authorities for each such portion to be occupied,
and (c) all of the terms and conditions of the Lease shall apply, other than
Tenant's obligation to pay Base Rent with respect to the 3rd Floor Expansion
Premises and Tenant's obligation to pay Tenant's Share of Direct Expenses with
respect to the 3rd Floor Expansion Premises, as though the 3rd Floor Expansion
Premises Commencement Date had occurred (although the 3rd Floor Expansion
Premises Commencement Date shall not actually occur until the occurrence of the
same pursuant to the terms of the first sentence of this Section 3.1) upon such
occupancy of the 3rd Floor Expansion Premises by Tenant.
3.2 TERMINATION RIGHT. The terms of Section 2.3.1 of the Lease shall
-----------------
be applicable to the 3rd Floor Expansion Premises as if such space were included
in the Initial Premises leased by Tenant, provided that the Termination Fee
applicable to the 3rd Floor Expansion Premises shall equal the sum of (I) the
"Unamortized Value as of the Termination Date" of the "Concessions" applicable
to the 3rd Floor Expansion Premises, as calculated pursuant to the term of
Section 2.3.2 of the Lease, and (ii) the excess, if any, of (a) the product of
the number of calendar months during the 3rd Floor Lease Term which will occur
prior to the Termination Date, and $2.30, minus (b) the total Base Rent payable
by Tenant pursuant to the terms of Section 4.1, below, prior to the Termination
Date with respect to the 3rd Floor Expansion Premises.
4. RENT.
----
4.1 BASE RENT. Commencing on the 3rd Floor Expansion Premises
---------
Commencement Date (which date will be extended one (1) day for each day Tenant
is delayed in constructing improvements in 3rd Floor Expansion Premises because
of a "Lease
2
<PAGE>
Commencement Date Delay," as that term is defined in Section 5.1 of the Tenant
Work Letter) and continuing throughout the 3rd Floor Lease Term, Tenant shall
pay to Landlord Base Rent as set forth below on or before the first day of each
month in accordance with the terms of Article 3 of the Lease.
<TABLE>
<CAPTION>
Monthly Installment
Annual Base Rent or Base Rent
---------------- ------------
<S> <C> <C>
3rd Floor Commencement Date
through February 15, 2002 $620,505.60 $51,708.80
February 16, 2002 through
Lease Expiration Date $676,915.20 $56,409.60
</TABLE>
4.2 DIRECT EXPENSES. During the 3rd Floor Lease Term, Tenant shall
---------------
pay Tenant's Share of Direct Expenses attributable to the 3rd Floor Expansion
Premises in accordance with the terms of Article 4 of the Lease; provided,
however, that for purposes of calculating Tenant's obligations with respect to
the 3rd Floor Expansion Premises, (I) Tenant's Share shall be equal to 4.41%,
and (ii) the Base Year shall mean the calendar year 1998.
5. IMPROVEMENT ALLOWANCE. Tenant shall be entitled to a one-time
---------------------
allowance for the purchase, installation and design of (i) improvements which
are permanently affixed to the 3rd Floor Expansion Premises (the "3RD FLOOR
IMPROVEMENTS") and (ii) furniture, fixtures and equipment to be utilized in the
3rd Floor Expansion Premises ("3RD FLOOR FF&E"), and (iii) tenant improvements
previously installed in the Initial Premises pursuant to the terms of the Lease
(the "INITIAL PREMISES IMPROVEMENTS") in an aggregate amount equal to Seven
Hundred Five Thousand One Hundred Twenty and No/100 Dollars ($705,120.00) (the
"3RD FLOOR IMPROVEMENT ALLOWANCE"), provided that in no event shall in excess of
Two Hundred Thirty-Five Thousand Forty and No/100 Dollars ($235,040.00) of the
3rd Floor Improvement Allowance, in the aggregate (the "FIRST DISBURSEMENT"), be
utilized for 3rd Floor FF&E and the Initial Premises Improvements. The
construction and installation of the 3rd Floor Improvements shall be made in
accordance with the terms of Article 8 of the Lease, except that the review
periods shall be shortened as applicable, from twenty (20) days to ten (10)
business days and from ten (10) days to five (5) business days. Landlord shall
disburse the 3rd Floor Improvement Allowance in accordance with the disbursement
procedure set forth in Section 2.2.2 of the Tenant Work Letter. Notwithstanding
anything in this Section 5 to the contrary, in no event shall Landlord's
disbursements pursuant to this Section 5 exceed the 3rd Floor Improvement
Allowance. The First Disbursement shall be paid by Landlord to Tenant within
thirty (30) days of the full execution and delivery of this First Amendment in
recognition of the fact that Tenant has already expended more than $235,040.00
in excess of all Allowances paid by Landlord to Tenant pursuant to the Tenant
Work Letter.
3
<PAGE>
6. RELEASE OF LC; GUARANTY OF LEASE. Concurrently with Tenant's
--------------------------------
execution of this First Amendment, Tenant shall deliver a Guaranty of Lease (the
"GUARANTY"), executed by The News Corporation Limited, a South Australian
corporation, and News Publishing Australia Limited, a Delaware corporation
(collectively, "GUARANTORS"), in the form attached hereto as Exhibit B. In
consideration of Tenant's delivery of the Guaranty, following the full execution
and delivery of this First Amendment, Landlord deliver to Tenant the LC held by
Landlord pursuant to the terms of Section 21.1 of the Lease. Tenant hereby
expressly waives any and all of the benefits under the second sentence of
California Civil Code Section 2822(a) with respect to the Guaranty, and agrees
that Landlord (not Tenant) may designate the portion of Tenant's lease
obligations that is satisfied by a partial payment by Tenant.
7. PARKING. Tenant shall be entitled to parking passes in connection
-------
with Tenant's lease of the 3rd Floor Expansion Premises based upon the ratios
and other terms and conditions set forth in the Lease. Notwithstanding anything
in the Lease, as amended by this First Amendment to the contrary, Tenant shall
be required to pay for parking passes utilized by Tenant during the Early
Occupancy Period. Landlord and Tenant hereby acknowledge and agree that Tenant
shall pay for the parking passes rented by Tenant in connection with the 3rd
Floor Expansion Premises at the same rate as Tenant pays for parking passes in
connection with the Initial Premises leased by Tenant.
8. BROKERS. Landlord and Tenant hereby warrant to each other that they
-------
have had no dealings with any real estate broker or agent in connection with the
negotiation of this Third Amendment, excepting only Hines Interests Limited
Partnership and Les Small & Company, a Division of Entertainment Realty Corp.
(the "BROKERS"), and that they know of no other real estate broker or agent who
is entitled to a commission in connection with this First Amendment. Each party
agrees to indemnify and defend the other party against and hold the other party
harmless from any and all claims, demands, losses, liabilities, lawsuits,
judgments, and costs and expenses (including, without limitation, reasonable
attorneys' fees) with respect to any leasing commission or equivalent
compensation alleged to be owing on account of the indemnifying party's dealings
with any real estate broker or agent other than the Brokers. The terms of this
Section 8 shall survive the expiration or earlier termination of this First
- ----------
Amendment.
9. BINDING EFFECT. The provisions of this First Amendment shall be
--------------
binding upon and inure to the benefit of the heirs, representatives, successors
and permitted assigns of the parties hereto.
Except as explicitly set forth in this First Amendment, all of the terms
and provisions of the Lease are unmodified and shall remain in full force and
effect.
4
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have caused this First Amendment to
be executed on the day and date first above written.
"Landlord":
BEACON PROPERTIES, L.P.,
a Delaware limited partnership,
By: Beacon Properties Corporation,
a Maryland corporation,
Its General Partner
By: /s/ Jeremy B. Fletcher
--------------------------
Jeremy Fletcher
Senior Vice President
The Foregoing Is Accepted And
Agreed To:
"Tenant":
SABAN ENTERTAINMENT, INC.,
a Delaware corporation
By: /s/ Mel Woods
-------------------------
Its:
---------------------
By:
-------------------------
Its:
---------------------
5
<PAGE>
EXHIBIT A
---------
OUTLINE OF 3RD FLOOR EXPANSION PREMISES
---------------------------------------
[FLOOR PLAN]
EXHIBIT A - Page 1
10960 WILSHIRE BOULEVARD
[Saban Entertainment, Inc.]
<PAGE>
EXHIBIT 10.30
GUARANTY OF LEASE
-----------------
THIS GUARANTY OF LEASE (this "GUARANTY") is made as of August 1, 1997, by
The News Corporation Limited, a South Australian corporation, and News
Publishing Australia Limited, a Delaware corporation (collectively,
"GUARANTOR"), in favor of BEACON PROPERTIES, L.P., a Delaware limited
partnership ("Landlord"), whose address is 10880 Wilshire Boulevard, Suite 880,
Los Angeles, California 90024.
RECITALS:
---------
WHEREAS, 10880 Property Corporation, a Delaware corporate, predecessor-in-
interest to Landlord, and Saban Entertainment, Inc., a Delaware corporation
("TENANT"), entered into that certain Office Lease, dated July 17, 1995, as
amended by that certain First Amendment to Lease (the "First Amendment"), dated
August 1, 1997 (collectively, the "LEASE") concerning premises located at 10960
Wilshire Boulevard, in the City of Los Angeles, County of Los Angeles, State of
California;
WHEREAS, Guarantor has a financial interest in the Tenant.
AGREEMENT:
---------
NOW, THEREFORE, for and in consideration of the execution of the foregoing
Lease by Landlord and as a material inducement to Landlord to execute said
Lease, Guarantor hereby jointly, severally and absolutely, presently,
continually, unconditionally and irrevocably guarantees the prompt payment by
Tenant of all rentals and other sums payable by Tenant under said Lease and the
faithful and prompt performance by Tenant of each and every one of the terms,
conditions and covenants of said Lease to be kept and performed by Tenant, and
further agrees as follows:
1. It is specifically agreed and understood that the terms, covenants
and conditions of the Lease may be altered, affected, modified, amended,
compromised, released or otherwise changed by agreement between Landlord and
Tenant, or by course of conduct and Guarantor does guaranty and promise to
perform all of the obligations of Tenant under the Lease as so altered,
affected, modified, amended, compromised, released or changed and the Lease may
be assigned by or with the consent of Landlord or any assignee of Landlord
without consent or notice to Guarantor and that this Guaranty shall thereupon
and thereafter guaranty the performance of said Lease as so changed, modified,
amended, compromised, released, altered or assigned.
2. This Guaranty shall not be released, modified or affected by failure
or delay on the part of Landlord to enforce any of the rights or remedies of
Landlord under the Lease, whether pursuant to the terms thereof or at law or in
equity, or by any release of any person liable under the terms of the Lease
(including, without limitation, Tenant) or any other guarantor, including
without limitation, any other Guarantor named herein, from any liability with
respect to Guarantor's obligations hereunder.
1
<PAGE>
3. Guarantor's liability under this Guaranty shall continue until all
rents due under the Lease have been paid in full in cash and until all other
obligations to Landlord have been satisfied, and shall not be reduced by virtue
of any payment by Tenant of any amount due under the Lease. If all or any
portion of Tenant's obligations under the Lease is paid or performed by Tenant,
the obligations of Guarantor hereunder shall continue and remain in full force
and effect in the event that all or any part of such payment(s) or
performance(s) is avoided or recovered directly or indirectly from Landlord as a
preference, fraudulent transfer or otherwise.
4. Guarantor warrants and represents to Landlord that Guarantor now has
and will continue to have full and complete access to any and all information
concerning the Lease, the value of the assets owned or to be acquired by Tenant,
Tenant's financial status and its ability to pay and perform the obligations
owed to Landlord under the Lease. Guarantor further warrants and represents
that Guarantor has reviewed and approved copies of the Lease and is fully
informed of the remedies Landlord may pursue, with or without notice to Tenant,
in the event of default under the Lease. So long as any of the Guarantor's
obligations hereunder remains unsatisfied or owing to Landlord, Guarantor shall
keep fully informed as to all aspects of Tenant's financial condition and the
performance of said obligations.
5. Guarantor hereby covenants and agrees with Landlord that if a default
shall at any time occur in the payment of any sums due under the Lease by Tenant
or in the performance of any other obligation of Tenant under the Lease,
Guarantor shall and will forthwith upon demand pay such sums and any arrears
thereof, to Landlord in legal currency of the United States of America for
payment of public and private debts, and take all other actions necessary to
cure such default and perform such obligations of Tenant.
6. The liability of Guarantor under this Guaranty is a guaranty of
payment and performance and not of collectibility, and is not conditioned or
contingent upon the genuineness, validity, regularity or enforceability of the
Lease or the pursuit by Landlord of any remedies which it now has or may
hereafter have with respect thereto, at law, in equity or otherwise.
7. Guarantor hereby waives and agrees not to assert or take advantage of
to the extent permitted by law: (i) all notices to Guarantor, to Tenant, or to
any other person, including, but not limited to, notices of the acceptance of
this Guaranty or the creation, renewal, extension, assignment, modification or
accrual of any of the obligations owed to Landlord under the Lease and, except
to the extent set forth in Paragraph 9 hereof, enforcement of any right or
-----------
remedy with respect thereto, and notice of any other matters relating thereto;
(ii) notice of acceptance of this Guaranty; (iii) demand of payment,
presentation and protest; (iv) any right to require Landlord to apply to any
default any security deposit or other security it may hold under the Lease; (v)
any statute of limitations affecting Guarantor's liability hereunder or the
enforcement thereof, (vi) any right or defense that may arise by reason of the
incapability, lack of authority, death or disability of Tenant or any other
person; and (vii) all principles or provisions of law which conflict with the
terms of this Guaranty. Guarantor further agrees that Landlord may enforce this
Guaranty upon the occurrence of a default under the Lease, notwithstanding any
dispute between Landlord and Tenant with respect to the existence of said
default or performance of the obligations under the Lease or any counterclaim,
set-off or other claim which Tenant may allege against Landlord with
2
<PAGE>
respect thereto. Moreover, Guarantor agrees that Guarantor's obligations shall
not be affected by any circumstances which constitute a legal or equitable
discharge of a guarantor or surety.
8. Guarantor agrees that Landlord may enforce this Guaranty without the
necessity of proceeding against Tenant or any other guarantor. Guarantor hereby
waives the right to require Landlord to proceed against Tenant, to proceed
against any other guarantor, to exercise any right or remedy under the Lease or
to pursue any other remedy or to enforce any other right.
9. (a) Guarantor agrees that nothing contained herein shall prevent
Landlord from suing on the Lease or from exercising any rights available to
it thereunder and that the exercise of any of the aforesaid rights shall
not constitute a legal or equitable discharge of Guarantor. Without
limiting the generality of the foregoing, Guarantor hereby expressly waives
any and all benefits under California Civil Code (S) (S) 2809, 2810, 2819,
2845, 2847, 2848, 2849 and 2850, and the second sentence of California
Civil Code (S) 2822(a). In addition, each Guarantor agrees that Landlord
(not Tenant) shall have the right to designate the portion of Tenant's
obligations under the Lease that is satisfied by a partial payment by
Tenant.
(b) Guarantor agrees that Guarantor shall have no right of
subrogation against Tenant or any right of contribution against any other
guarantor unless and until all amounts due under the Lease have been paid
in full and all other obligations under the Lease have been satisfied.
Guarantor further agrees that, to the extent the waiver of Guarantor's
rights of subrogation and contribution as set forth herein is found by a
court of competent jurisdiction to be void or voidable for any reason, any
rights of subrogation Guarantor may have against Tenant shall be junior and
subordinate to any rights Landlord may have against Tenant, and any rights
of contribution Guarantor may have against any other guarantor shall be
junior and subordinate to any rights Landlord may have against such other
guarantor.
(c) The obligations of Guarantor under this Guaranty shall not be
altered, limited or affected by any case, voluntary or involuntary,
involving the bankruptcy, insolvency, receivership, reorganization,
liquidation or arrangement of Tenant or any defense which Tenant may have
by reason of order, decree or decision of any court or administrative body
resulting from any such case. Landlord shall have the sole right to accept
or reject any plan on behalf of Guarantor proposed in such case and to take
any other action which Guarantor would be entitled to take, including,
without limitation, the decision to file or not file a claim. Guarantor
acknowledges and agrees that any payment which accrues with respect to
Tenant's obligations under the Lease (including, without limitation, the
payment of rent) after the commencement of any such proceeding (or, if any
such payment ceases to accrue by operation of law by reason of the
commencement of such proceeding, such payment as would have accrued if said
proceedings had not been commenced) shall be included in Guarantor's
obligations hereunder because it is the intention of the parties that said
obligations should be determined without regard to any rule or law or order
which may relieve Tenant of any of its obligations under the Lease.
Guarantor hereby permits any trustee in bankruptcy, receiver, debtor-in-
possession,
3
<PAGE>
assignee for the benefit of creditors or similar person to pay Landlord, or
allow the claim of Landlord in respect of, any such payment accruing after
the date on which such proceeding is commenced. Guarantor hereby assigns to
Landlord Guarantor's right to receive any payments from any trustee in
bankruptcy, receiver, debtor-in-possession, assignee for the benefit of
creditors or similar person by way of dividend, adequate protection payment
or otherwise.
10. Any notice, statement, demand, consent, approval or other
communication required or permitted to be given, rendered or made by either
party to the other, pursuant to this Guaranty or pursuant to any applicable law
or requirement of public authority, shall be in writing (whether or not so
stated elsewhere in this Guaranty) and shall be deemed to have been properly
given, rendered or made only if hand-delivered or sent by first-class mail,
postage pre-paid, addressed to the other party at its respective address set
forth below, and shall be deemed to have been given, rendered or made on the day
it is hand-delivered or one day after it is mailed, unless it is mailed outside
of Los Angeles County, California, in which case it shall be deemed to have been
given, rendered or made on the third business day after the day it is mailed.
By giving notice as provided above, either party may designate a different
address for notices, statements, demands, consents, approvals or other
communications intended for it.
To Guarantor: The News Corporation Limited
News Publishing Australia Limited
10201 West Pico Boulevard
Building 88, Room 142
Los Angeles, California 90035
Attention: Jay Itzkowitz, Esq.
To Landlord: Beacon Properties, L.P.
c/o Beacon Properties Corporation
10880 Wilshire Boulevard
Suite 880
Los Angeles, California 90024
Attention: Property Manager
and
Beacon Properties Corporation
50 Rowes Wharf
Boston, Massachusetts 02110
Attention: General Counsel
11. Guarantor represents and warrants to Landlord as follows:
(a) No consent of any other person, including, without
limitation, any creditors of Guarantor, and no license, permit, approval or
authorization of, exemption by, notice or report to, or registration,
filing or declaration with, any governmental authority is required by
Guarantor in connection with this Guaranty or the execution, delivery,
4
<PAGE>
performance, validity or enforceability of this Guaranty and all
obligations required hereunder. This Guaranty has been duly executed and
delivered by Guarantor, and constitutes the legally valid and binding
obligation of Guarantor enforceable against such Guarantor in accordance
with its terms.
(b) The execution, delivery and performance of this Guaranty
will not violate any provision of any existing law or regulation binding on
Guarantor, or any order, judgment, award or decree of any court, arbitrator
or governmental authority binding on Guarantor, or of any mortgage,
indenture, lease, contract or other agreement, instrument or undertaking to
which Guarantor is a party or by which Guarantor or any of Guarantor's
assets may be bound, and will not result in, or require, the creation or
imposition of any lien on any of Guarantors property, assets or revenues
pursuant to the provisions of any such mortgage, indenture, lease,
contract, or other agreement, instrument or undertaking.
12. The obligations of Tenant under the Lease to execute and deliver
estoppel statements, as therein provided, shall be deemed to also require the
Guarantor hereunder to do and provide the same relative to Guarantor.
13. This Guaranty shall be binding upon Guarantor, Guarantor's heirs,
representatives, administrators, executors, successors and assigns and shall
inure to the benefit of and shall be enforceable by Landlord, its successors,
endorsees and assigns. Any married person executing this Guaranty agrees that
recourse may be had against community assets and against his separate property
for the satisfaction of all obligations herein guaranteed. As used herein, the
singular shall include the plural, and the masculine shall include the feminine
and neuter and vice versa, if the context so requires. In the event that more
than one guarantor comprise the Guarantor, the obligations imposed upon such
guarantors shall be joint and several.
14. The term "Landlord" whenever used herein refers to and means the
Landlord specifically named in the Lease and also any assignee of said Landlord,
whether by outright assignment or by assignment for security, and also any
successor to the interest of said Landlord or of any assignee in the Lease or
any part thereof, whether by assignment or otherwise. So long as the Landlord's
interest in or to the Premises (as that term is used in the Lease) or the rents,
issues and profits therefrom, or in, to or under the Lease, are subject to any
mortgage or deed of trust or assignment for security, no acquisition by
Guarantor of the Landlord's interest in the Premises or under the Lease shall
affect the continuing obligations of Guarantor under this Guaranty, which
obligations shall continue in full force and effect for the benefit of the
mortgagee, beneficiary, trustee or assignee under such mortgage, deed of trust
or assignment, or any purchaser at sale by judicial foreclosure or under private
power of sale, and of the successors and assigns of any such mortgagee,
beneficiary, trustee, assignee or purchaser.
15. The term "Tenant" whenever used herein refers to and means the Tenant
in the Lease specifically named and also any assignee or sublessee of said Lease
and also any successor to the interests of said Tenant, assignee or sublessee of
such Lease or any part thereof, whether by assignment, sublease or otherwise.
5
<PAGE>
16. In the event of any dispute or litigation regarding the enforcement or
validity of this Guaranty, Guarantor shall be obligated to pay all charges,
costs and expenses (including, without limitation, reasonable attorneys' fees)
incurred by Landlord, whether or not any action or proceeding is commenced
regarding such dispute and whether or not such litigation is prosecuted to
judgment.
17. This Guaranty shall be governed by and construed in accordance with
the laws of the State of California, and in a case involving diversity of
citizenship, shall be litigated in and subject to the jurisdiction of the courts
of California. Any dispute under this Guaranty shall be resolved exclusively in
the Los Angeles Superior Court, Central District. Each guarantor hereby
acknowledges and agrees that, and hereby consents to, service of process to
Guarantor at the address set forth in Section 10 of this Guaranty.
18. Every provision of this Guaranty is intended to be severable. In the
event any term or provision hereof is declared to be illegal or invalid for any
reason whatsoever by a court of competent jurisdiction, such illegality or
invalidity shall not affect the balance of the terms and provisions hereof,
which terms and provisions shall remain binding and enforceable.
19. This Guaranty may be executed in any number of counterparts each of
which shall be deemed an original and all of which shall constitute one and the
same Guaranty with the same effect as if all parties had signed the same
signature page. Any signature page of this Guaranty may be detached from any
counterpart of this Guaranty and re-attached to any other counterpart of this
Guaranty identical in form hereto but having attached to it one or more
additional signature pages.
20. No failure or delay on the part of Landlord to exercise any power,
right or privilege under this Guaranty shall impair any such power, right or
privilege, or be construed to be a waiver of any default or any acquiescence
therein, nor shall any single or partial exercise of such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.
21. This Guaranty shall constitute the entire agreement between Guarantor
and the Landlord with respect to the subject matter hereof. No provision of
this Guaranty or right of Landlord hereunder may be waived nor may Guarantor be
released from any obligation hereunder except by a writing duly executed by an
authorized officer, director or trustee of Landlord.
22. The liability of Guarantor and all rights, powers and remedies of
Landlord hereunder and under any other agreement now or at any time hereafter in
force between Landlord and Guarantor relating to the Lease shall be cumulative
and not alternative and such rights, powers and remedies shall be in addition to
all rights, powers and remedies given to Landlord by law.
23. Limitation Of Aggregate Liability. The aggregate liability of the
----------------------------------
Guarantor under this Guaranty shall be limited to Eight Million Five Hundred
Sixty-Five Thousand Three Hundred Sixty-Seven and 50/100 Dollars ($8,565,367.50)
(the "MAXIMUM LIABILITY AMOUNT"). Notwithstanding the foregoing, provided that
an Event of Default in not then in existence under the Lease, on each: of July
17, 1998, July 17, 1999, July 17, 2000, July 17, 2001 and July 17,
6
<PAGE>
2002, the Maximum Liability Amount under this Guaranty shall be reduced on a
straight line basis, in five (5) equal installments. Notwithstanding anything to
the contrary set forth in this Guaranty, the Maximum Liability Amount under this
Guaranty (A) shall not be reduced by amounts recovered or collected by Landlord
from Tenant or Guarantor, to the extent such amounts are reimbursement for (i)
expenses incurred by Landlord in collecting or attempting to collect amounts due
Landlord under the Lease or this Guaranty, including but not limited to,
attorneys' fees and costs, and (ii) late charges and interest due under the
Lease, and (B) shall not decrease asset forth above if, as of the date of any
scheduled decrease, an Event of Default exists under the Lease, provided that
upon the cure of any such Event of Default, at that time, the Maximum Liability
Amount under this Guaranty shall be appropriately reduced as if such default had
not occurred.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the day and
year first above written.
"Guarantor":
THE NEWS CORPORATION LIMITED, a South Australian corporation
By: /s/ Signed - Illegible signature
-------------------------------
Its:
--------------------------
By: /s/ Signed - Illegible signature
-------------------------------
Its:
--------------------------
NEWS PUBLISHING AUSTRALIA LIMITED, a Delaware corporation
By: /s/ Signed - Illegible signature
-------------------------------
Its:
--------------------------
By: /s/ Signed - Illegible signature
-------------------------------
Its:
--------------------------
7
<PAGE>
EXHIBIT 10.33
FINAL
FUNDING AGREEMENT
This FUNDING AGREEMENT (this "Agreement"), dated as of June 11, 1997,
by and among The News Corporation Limited, a corporation organized and existing
under the laws of South Australia, Australia ("TNCL"), News Publishing Australia
Limited, a Delaware corporation ("NPAL"), and Fox Kids Worldwide, Inc., a
Delaware corporation ("FKW").
WHEREAS, NPAL is a wholly owned subsidiary of TNCL; and
WHEREAS, Liberty IFE, Inc. ("LIFE"), a Colorado corporation and a
wholly owned subsidiary of Liberty Media Corporation, a Delaware corporation
("Liberty"), Liberty and FKW have entered into a Contribution and Exchange
Agreement, dated as of June 11, 1997 (the "Contribution Agreement"), which
provides for the contribution of certain securities of International Family
Entertainment, Inc., a Delaware corporation ("IFE"), owned by LIFE (the "IFE
Securities") to FKW in exchange for shares of Series A Preferred Stock of FKW
(the "FKW Preferred Stock") as set forth in the Contribution Agreement; and
WHEREAS, Liberty, LIFE and NPAL have entered into the Exchange
Agreement, dated as of the date hereof (the "Exchange Agreement"), which
provides for the exchange by LIFE (and any other holder of FKW Preferred Stock)
of its FKW Preferred Stock for the Preferred Stock of NPAL (the "NPAL Preferred
Stock") as set forth in the Exchange Agreement; and
WHEREAS, to induce Liberty and LIFE to accept the FKW Preferred Stock
as the consideration for all of the IFE Securities, TNCL, NPAL and FKW are
entering into this Agreement; and
WHEREAS, each of TNCL and NPAL has determined that the transactions
contemplated by the Contribution Agreement and the execution, delivery and
performance of this Agreement will directly benefit and are within the corporate
purpose and the best interests of each of TNCL and NPAL; and
WHEREAS, it is a condition precedent to the obligations of Liberty and
LIFE to consummate the transactions contemplated by the Contribution Agreement
that this Agreement be executed;
NOW, THEREFORE, in consideration of these premises and to induce
Liberty and LIFE to enter into the Contribution Agreement and consummate the
transactions contemplated by the Contribution Agreement, TNCL, NPAL and FKW
hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, all capitalized
-------------
terms used in this Agreement have the meanings assigned thereto either (a) in
the Certificate of Designations
<PAGE>
of the FKW Preferred Stock (the "FKW Certificate of Designations"), the form of
which is attached hereto as Exhibit A, or (b) in the Certificate of
Incorporation of NPAL, as amended on the date hereof (the "NPAL Certificate of
Incorporation"), the form of which is attached hereto as Exhibit B, as
specifically referenced herein in each case.
2. Funding of Certain Preferred Stock Obligations of FKW and NPAL.
--------------------------------------------------------------
(a) Each of TNCL and NPAL, jointly and severally, hereby agrees, upon the
occurrence and during the continuation of an Event of Default under the FKW
Certificate of Designations, to promptly provide FKW with an amount of cash
sufficient under Delaware law for FKW to timely pay, in full, (i) the applicable
redemption price (as adjusted pursuant to Section 8 of the FKW Certificate of
Designations) for all shares of FKW Preferred Stock that FKW is required to
redeem under Section 5 or 8 of the FKW Certificate of Designations and (ii) any
other outstanding amounts that FKW is obligated to pay to the holders of shares
of FKW Preferred Stock under the FKW Certificate of Designations.
(b) TNCL hereby agrees, upon the occurrence and during the
continuation of an Event of Default under the NPAL Certificate of Incorporation,
to promptly provide NPAL with an amount of cash sufficient under Delaware law
for NPAL to timely pay, in full, (i) the applicable redemption price (as
adjusted pursuant to Article FOURTH, Section 8 of the NPAL Certificate of
Incorporation) for all shares of NPAL Preferred Stock that NPAL is required to
redeem under Article FOURTH, Section 5 or 8 of the NPAL Certificate of
Incorporation and (ii) any other outstanding amounts that NPAL is obligated to
pay to the holders of shares of NPAL Preferred Stock under the NPAL Certificate
of Incorporation.
(c) Each of TNCL and NPAL, jointly and severally, hereby agree upon
the occurrence of a Liquidation under the FKW Certificate of Designations to
promptly provide FKW with an amount of cash sufficient under Delaware law for
FKW to pay a liquidating distribution in an amount per share of FKW Preferred
Stock equal to the redemption price that would be payable under the FKW
Certificate of Designations at the time of such distribution.
(d) TNCL hereby agrees, upon the occurrence of a Liquidation under
Article FOURTH of the NPAL Certificate of Incorporation, to promptly provide
NPAL with an amount of cash sufficient under Delaware law for NPAL to pay a
liquidating distribution in an amount per share of NPAL Preferred Stock equal to
the redemption price that would be payable under Article FOURTH of the NPAL
Certificate of Incorporation at the time of such distribution.
(e) TNCL and NPAL hereby agree, jointly and severally, to promptly
supply FKW with an amount of cash sufficient for FKW to satisfy its obligations
under Section 11 of the Contribution Agreement.
(f) All amounts payable to FKW or NPAL hereunder, to the extent such
amounts are available for use to make payments (i) to the holders of the FKW
Preferred Stock or the NPAL Preferred Stock in accordance with the provisions of
Section 2(a) through 2(d) above, inclusive, or (ii) payable by FKW to satisfy
its obligations under Section 11 of the
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<PAGE>
Contribution Agreement, shall be deposited by TNCL or NPAL, as applicable, in
trust for the benefit of the holders of the FKW Preferred Stock, NPAL Preferred
Stock or the beneficiaries of FKW's obligations under Section 11 of the
Contribution Agreement, as the case may be, pending distribution of such amounts
to such holders or beneficiaries. Distributions from such trust shall occur as
promptly as practicable to the intended holders or beneficiaries. All amounts so
deposited in trust shall not be considered property of FKW or NPAL, as the case
may be, for any purpose.
3. Funding Obligations Not Affected by Certain Events. The
--------------------------------------------------
obligations and agreements of TNCL and NPAL under this Agreement shall not be
affected or impaired by reason of the happening of any of the following:
(a) any failure, omission or delay on the part of FKW or NPAL to
enforce, assert, or exercise any right or remedy available to FKW or NPAL under
this Agreement; or
(b) any invalidity of, or defect or deficiency in, the FKW Preferred
Stock or NPAL Preferred Stock; or
(c) the voluntary or involuntary liquidation, dissolution, sale of
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt or
other similar proceedings affecting FKW, TNCL or NPAL or their respective
assets; or
(d) the exchange of the FKW Preferred Stock for NPAL Preferred Stock
under the Exchange Agreement.
4. TNCL and NPAL Dividends. TNCL and NPAL shall not declare or pay
-----------------------
any dividend on, or make any distribution with respect to, shares of any class
or series of their respective capital stock (including without limitation on
TNCL's or NPAL's ordinary shares and preferred shares) following the occurrences
and during the continuance of an Event of Default under the FKW Certificate of
Designations or Article FOURTH of the NPAL Certificate of Incorporation, or at
any time that dividends have been cumulatively added to and remain a part of the
Liquidation Price of the FKW Preferred Stock or NPAL Preferred Stock pursuant to
the FKW Certificate of Designations or Article FOURTH of the NPAL Certificate of
Incorporation, respectively.
5. NPAL Assets. (a) For so long as any shares of FKW Preferred
-----------
Stock or NPAL Preferred Stock remain outstanding, either (i) NPAL, together with
its consolidated subsidiaries (collectively, with NPAL, the "NPAL Consolidated
Group"), shall own not less than 50% of the fair market value of the total
assets of TNCL, together with its consolidated subsidiaries (the "TNCL
Consolidated Group"), located in the United States as of the date hereof and the
proceeds of any disposition of any such assets subsequent to [date of original
issuance of the FKW Preferred Stock] or (ii) the total assets of NPAL, its
consolidated subsidiaries and its investments accounted for by the equity method
(collectively, the "NPAL Group"), as
-3-
<PAGE>
determined on the basis of their fair market value, shall at all times exceed
the Liabilities of the NPAL Group by not less than US$2.5 billion (the "Minimum
Asset Balance"). Notwithstanding the foregoing and for so long as any shares of
FKW Preferred Stock or NPAL Preferred Stock are outstanding, if at any time
after [date of original issuance of the FKW Preferred Stock] TNCL shall own,
directly or indirectly, less than 50% of each outstanding class or series of
capital stock of NPAL (other than the NPAL Preferred Stock), or less than 50% of
the voting power of all outstanding shares of capital stock of NPAL (other than
the NPAL Preferred Stock), then from and after such time NPAL shall maintain not
less than the Minimum Asset Balance.
(b) The Board of Directors of NPAL (or an authorized committee
thereof consisting of not less than two (2) directors) shall determine in good
faith, not less often than annually, whether the covenant set forth in Section
5(a) hereof is being complied with by NPAL. For the purposes of this covenant,
(i) the term "fair market value" of an asset (other than cash) means the price
at which a willing seller would sell, and a willing buyer would buy, such asset
in an arm's length auction transaction, having full knowledge of the facts
(including any liabilities relating to such assets) and (ii) the term
"Liabilities" means, with respect to NPAL and the NPAL Group, all obligations
for money borrowed, all obligations evidenced by bonds, debentures or similar
instruments, all obligations upon which interest payments are customarily paid,
all obligations issued or assumed as the deferred purchase price of property or
services, all liabilities of others secured by any lien or security interest on
property owned or acquired by NPAL or the NPAL Group, all obligations required
to be accounted for as capital leases under Australian generally accepted
accounting principles, all guarantees (solely to the extent that such guarantees
would be required to be quantified and set forth on a balance sheet of NPAL
prepared in accordance with Australian generally accepted accounting principles)
and the liquidation preference of all mandatorily redeemable preferred stock of
NPAL and any of the other entities in the NPAL Group. If, at any time, but not
more often than once in any 12-month period, FKW notifies NPAL that it disputes
that NPAL is in compliance with the covenant set forth in Section 5(a) hereof (a
"Dispute Notice"), then NPAL shall provide to FKW such information ("Compliance
Information") as NPAL may, in its sole discretion, deem sufficient to evidence
NPAL's compliance with such covenant. If FKW does not withdraw its Dispute
Notice within 10 Business Days after giving such notice, then NPAL shall
promptly (but in any event within 10 Business Days after the expiration of such
10 Business Day period) appoint a nationally-recognized investment bank
designated by NPAL, subject to the consent of FKW which shall not be
unreasonably withheld; provided, however, that Merrill Lynch & Co. and its
affiliates shall in any event be an acceptable investment bank for this purpose.
The investment bank shall then determine, at the election of NPAL, either or
both of (i) the fair market value of the United States assets of the TNCL
Consolidated Group (the "Appraised TNCL U.S. FMV") and the fair market value of
the assets of the NPAL Consolidated Group (the "Appraised NPAL FMV" and,
together with the Appraised TNCL U.S. FMV, the "Appraised Fair Market Values")
and/or (ii) the total fair market value of the assets minus the Liabilities of
the NPAL Group ("Appraised Excess Amount"). NPAL and TNCL shall cooperate with
all reasonable requests made by the investment bank for information that is
materially relevant to its determination; provided, however, that the investment
bank shall be required to execute a confidentiality agreement in a customary
form acceptable to NPAL and TNCL with respect to any such information. NPAL
-4-
<PAGE>
shall use reasonable efforts to cause its designated investment bank to deliver
its report setting forth the Appraised Fair Market Values and/or the Appraised
Excess Amount, as the case may be, to FKW and NPAL within thirty days of its
selection.
(c) Each determination of the Appraised Fair Market Values and/or the
Appraised Excess Amount, as the case may be, in accordance with the appraisal
procedures set forth in Section 5(b) hereof shall be final, binding and
conclusive on FKW and NPAL. The fees and expenses of the investment bank in
connection with any valuation performed pursuant to Section 5(b) shall be paid
by NPAL; provided, however, that if it can be reasonably determined from the
Compliance Information that NPAL is in compliance with the covenant set forth in
Section 5(a), then FKW shall be responsible for such fees and expenses.
6. Compliance Certificate. Each of TNCL and NPAL shall furnish to
----------------------
FKW, on each December 31, a certificate of a responsible officer of such company
stating that during the preceding 12-month period ending on the immediately
preceding June 30 (or, if no such certificate has previously been delivered,
during the period from the date hereof to June 30, 1998), such company has
complied with its covenants set forth in Sections 4 and 5 (as applicable) of
this Agreement, except to the extent specified in such certificate. Each of
TNCL and NPAL shall, upon becoming aware that any of its covenants set forth in
Section 4 or 5 has been breached, shall promptly notify FKW of such breach.
7. Representations and Warranties. Each of TNCL and NPAL represents
-------------------------------
and warrants, jointly and severally, to FKW that the representations and
warranties made by FKW with respect to TNCL and NPAL, respectively, set forth in
Section 5 of the Contribution Agreement were true and correct when made, and are
true and correct on and as of the date hereof.
8. Enforcement. Each of TNCL, NPAL and FKW acknowledges and agrees
-----------
that (i) the holders of a majority of the shares of FKW Preferred Stock issued
and outstanding at the time of occurrence of an Event of Default under the FKW
Certificate of Designations shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to FKW following
such Event of Default in respect of this Agreement and (ii) the holders of a
majority of the shares of NPAL Preferred Stock issued and outstanding at the
time of occurrence of an Event of Default under the NPAL Certificate of
Incorporation shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to NPAL following such Event
of Default in respect of this Agreement.
9. Termination. This Agreement shall terminate immediately (i) in
-----------
the event there are no outstanding shares of FKW Preferred Stock or NPAL
Preferred Stock or (ii) as to any shares of FKW Preferred Stock that are
registered for offer and sale under the Securities Act of 1933, as amended,
pursuant to the terms of the Registration Rights Agreement in a form to be
entered into between Liberty and FKW. Notwithstanding clause (i) above, this
Agreement shall continue to be effective or will be reinstated, as the case may
be, if at any time any holder of shares of FKW Preferred Stock or NPAL Preferred
Stock must restore payment to FKW or
-5-
<PAGE>
NPAL of any sums paid to such holder that it is entitled to receive under the
FKW Certificate of Designations or NPAL Certificate of Incorporation,
respectively.
10. Amendments and Waivers. This Agreement may not, nor may any of
----------------------
its terms or provisions, be amended, modified or waived.
11. Notices. All notices, requests, consents, demands, elections and
-------
other communications required or permitted hereunder shall be in writing and
shall be given to the intended recipients at their addresses as set forth on
Exhibit C attached hereto or at such other addresses provided in writing by such
respective recipients.
Any such notice, request, consent, demand, election or other
communication shall be deemed to have been duly given if personally delivered or
sent by registered or certified mail, return receipt requested, by Federal
Express, Express Mail or similar overnight delivery service or by facsimile
transmission confirmed by letter, and will be deemed given, unless earlier
received (a) if sent by certified or registered mail, return receipt requested,
five (5) calendar days after being deposited in the United States mail, postage
prepaid; (b) if sent by overnight delivery service for next business day
delivery, the next business day after being entrusted to such service, with
delivery charges prepaid or charged to the sender's account; (c) if sent by
facsimile transmission, on the date sent; provided confirmatory notice is sent
by any other method specified in clause (a),(b), or (d); and (d) if delivered by
hand, on the date of delivery.
12. Severability. In case any one or more of the provisions
------------
contained in this Agreement shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or impaired
thereby, provided, that if any provision hereof or the application thereof shall
be so held to be invalid, void or unenforceable by a court of competent
jurisdiction, then such court may substitute therefor a suitable and equitable
provision in order to carry out, so far as may be valid and enforceable, the
intent and purposes of the invalid, void or unenforceable provision and if such
court shall fail or decline to do so, the parties shall negotiate in good faith
a suitable and equitable substitute provision. To the extent that any provision
shall be judicially unenforceable in any one or more states, such provision
shall not be affected with respect to any other states, each provision with
respect to each state being construed as several and independent.
13. Paragraph Headings. The paragraph headings used herein are for
------------------
convenience of reference only, are not part of this Agreement and are not to
affect the construction of or be taken into consideration in interpreting this
Agreement.
14. Successors and Assigns. This Agreement and all covenants
----------------------
contained herein shall be binding upon the parties hereto and their respective
successors (including, without limitation, by merger or by the acquisition of
all or substantially all of the assets of the party) and shall inure to the
benefit of the holders of the FKW Preferred Stock and NPAL Preferred Stock.
Except with respect to successors and the foregoing sentence, none of the
parties hereto may assign, delegate or transfer any of its rights or obligations
hereunder.
-6-
<PAGE>
15. Governing Law and Jurisdiction. This Agreement shall be
------------------------------
construed in accordance with and governed by the internal laws of the State of
New York without giving effect to any conflicts of laws principles. Each party
hereto hereby irrevocably submits to the jurisdiction of any New York State
court sitting in the Borough of Manhattan or any federal court sitting in the
Borough of Manhattan in respect of any suit, action or proceeding arising out of
or relating to this Agreement and the transactions pursuant hereto and in
connection herewith, and irrevocably agrees that all claims in respect of any
such suit, action or proceeding shall be heard and determined in any such court.
Each party irrevocably waives any objection which it may now or hereafter have
to the laying of the venue of any such suit, action or proceeding brought in any
such court and any claim that any such suit, action or proceeding brought in any
such court has been brought in an inconvenient forum.
16. Specific Performance. Without intending to limit the remedies
--------------------
available to FKW, each of TNCL and NPAL acknowledges and agrees that a violation
by TNCL or NPAL of any terms of this Agreement will cause irreparable injury for
which an adequate remedy at law is not available. Therefore, the parties agree
that FKW shall be entitled to an injunction, restraining order or other form of
equitable relief from any court of competent jurisdiction compelling TNCL or
NPAL, and their respective successors, to specifically perform, and restraining
such party from committing any breach of, or threatened breach of, any provision
of this Agreement.
-7-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be
duly executed by its duly authorized officer as of the day and year first above
written.
THE NEWS CORPORATION LIMITED
By: /s/ Arthur Siskind
--------------------------------
Name:
Title:
NEWS PUBLISHING AUSTRALIA LIMITED
By: /s/ P. Wardynski
--------------------------------
Name:
Title:
FOX KIDS WORLDWIDE, INC.
By: /s/ Jay Itzkowitz
--------------------------------
Name:
Title:
-8-
<PAGE>
Exhibit C
Notices
-------
The News Corporation Limited
c/o News America Publishing Incorporated
1211 Avenue of the Americas
New York, New York 10036
Attention: Arthur M. Siskind, Esq.
Senior Executive Vice President
and Group General Counsel of
The News Corporation Limited
Fax: (212) 768-2029
News Publishing Australia Limited
c/o News America Publishing Incorporated
1211 Avenue of the Americas
New York, New York 10036
Attention: Arthur M. Siskind, Esq.
Senior Executive Vice President
and Group General Counsel of
The News Corporation Limited
Fax: (212) 768-2029
Fox Kids Worldwide, Inc.
10960 Wilshire Boulevard
Los Angeles, CA 90024
Attention: President
Fax: (310) 235-5102
-9-
<PAGE>
THE NEWS CORPORATION LIMITED
c/o NEWS AMERICA PUBLISHING INCORPORATED
122 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
August 1, 1997
News Publishing Australia Limited
c/o News America Publishing Incorporated
1211 Avenue of the Americas
New York, New York 10036
Fox Kids Worldwide, Inc.
10960 Wilshire Boulevard
Los Angeles, California 90024
Dear Sirs:
Annexed hereto is the Funding Agreement, dated as of June 11, 1997 (the
"Funding Agreement"), among The News Corporation Limited, a corporation
organized and existing under the laws of South Australia, Australia ("TNCL"),
News Publishing Australia Limited, a Delaware corporation ("NPAL"), and Fox Kids
Worldwide, Inc., a Delaware corporation ("Fox Kids"), which bears the following
document code in the upper left-hand corner of each page:
":\SSDOCS\SQUAD01\BB\COGENER2\183490-1.WPD".
The Funding Agreement represents the valid and binding obligation of each of
TNCL, NPAL and Fox Kids. The Funding Agreement constitutes the entire agreement
among such parties and supersedes all prior agreements and understandings, oral
and written, among such parties with respect to the subject matter thereof.
Your signature below will evidence your agreement with the foregoing.
Very truly yours,
THE NEWS CORPORATION LIMITED
By: /s/ Arthur Siskind
--------------------------------
Name:
Title:
Accepted and agreed to as of the date hereof:
NEWS PUBLISHING AUSTRALIA LIMITED
By: /s/ P. Wardynski
--------------------------------
Name:
Title:
FOX KIDS WORLDWIDE, INC.
By: /s/ Jay Itzkowitz
---------------------------------
Name:
Title:
<PAGE>
EXHIBIT 10.34
GUARANTY
--------
This GUARANTY is made as of June 11, 1997, by THE NEWS CORPORATION LIMITED,
a corporation organized and existing under the laws of South Australia,
Australia (the "Guarantor"), in favor of INTERNATIONAL FAMILY ENTERTAINMENT,
---------
INC., a Delaware corporation (the "Company").
-------
WHEREAS, as of the date hereof, FOX KIDS WORLDWIDE, INC., a Delaware
corporation and an affiliate of the Guarantor ("FKWW"), and Fox Kids Merger
----
Corporation, a Delaware corporation and an affiliate of the Guarantor ("FKW
---
Sub") have agreed, subject to the execution and delivery of this Guaranty, to
enter into that certain Agreement and Plan of Merger, dated of even date
herewith, with the Company, relating to the merger of FKW Sub with and into the
Company, with the Company being the surviving corporation, attached hereto as
Exhibit A (the "Guaranteed Agreement");
- --------- --------------------
WHEREAS, M.G. "Pat" Robertson, individually and as trustee of each of the
Robertson Charitable Remainder Unitrust, u/t/a dated January 22, 1990 (the "PR
--
Charitable Trust"), the Gordon P. Robertson Irrevocable Trust, u/t/a dated
- ----------------
December 18, 1996, the Elizabeth F. Robinson Irrevocable Trust, u/t/a dated
December 18, 1996, and the Ann R. Lablanc Irrevocable Trust, u/t/a dated
December 18, 1996 (the Gordon P. Robertson Irrevocable Trust, the Elizabeth F.
Robinson Irrevocable Trust and the Ann R. Lablanc Irrevocable Trust, together,
the "Irrevocable Trusts"), Lisa N. Robertson and Timothy B. Robertson ("Tim
------------------ ---
Robertson") as joint tenants, and Tim Robertson, individually, as trustee of
- ---------
each of the Timothy and Lisa Robertson Children's Trust, u/t/a dated September
18, 1995 (the "TR Family Trust") and the Timothy B. Robertson Charitable Trust,
---------------
u/t/a dated December 30, 1996 (the "TR Charitable Trust"), and as custodian to
-------------------
and for each of Abigail H. Robertson, Laura N. Robertson, Elizabeth C.
Robertson, Willis H. Robertson and Caroline S. Robertson under the Virginia
Uniform Transfers to Minors Act, have agreed to sell to FKWW all of the
outstanding shares of Class A Common Stock, par value $0.01 per share, of the
Company, in the form of shares of Class B Common Stock, par value $0.01 per
share, of the Company (the "Class B Stock") issuable upon conversion thereof,
-------------
and shares of Class B Stock owned by them or issuable to them upon exercise of
outstanding stock options, pursuant to that certain Stock Purchase Agreement,
dated of even date herewith, by and among FKWW, on the one hand, and Pat
Robertson, the PR Charitable Trust, the Irrevocable Trusts, Lisa N. Robertson,
Tim Robertson, the TR Family Trust, and the TR Charitable Trust, on the other
hand (the "Robertson Purchase Agreement");
----------------------------
WHEREAS, The Christian Broadcasting Network, Inc., a Virginia corporation
("CBN"), has agreed to sell to FKWW, all of the Class B Stock owned by it,
---
pursuant to the terms of that
1
<PAGE>
certain Stock Purchase Agreement, dated of even date herewith, by and between
FKWW and CBN (the "CBN Purchase Agreement");
----------------------
WHEREAS, Regent University, a Virginia corporation ("Regent"), has agreed
------
to sell to FKWW all of the Class B Stock owned by it, pursuant to the terms of
that certain Stock Purchase Agreement, dated of even date herewith, by and
between FKWW and Regent (the "Regent Purchase Agreement");
-------------------------
WHEREAS, Liberty IFE, Inc., a Colorado corporation ("LIFE"), has agreed to
----
contribute to FKWW all of the shares of Class C Common Stock, par value $0.01
per share, of the Company, and $23 million principal amount of 6% Convertible
Secured Notes due 2004 of the Company, in exchange for shares of Series A
Preferred Stock, of FKWW pursuant to that certain Contribution and Exchange
Agreement, dated of even date herewith, by and between LIFE and FKWW (the
"Contribution Agreement", and, collectively with the Robertson Purchase
- -----------------------
Agreement, the CBN Purchase Agreement, the Regent Purchase Agreement, and any
other agreements referred to in any of the foregoing to which Guarantor or any
affiliate or associate of Guarantor is a party, the "Other Transaction
-----------------
Agreements");
- ----------
WHEREAS, the Board of Directors of Guarantor has determined that it is the
best interest of Guarantor to guarantee the payment and performance of the
obligations of FKWW and FKW Sub in the Guaranteed Agreement; and
WHEREAS, this Guaranty is being furnished by Guarantor to guarantee the
payment and performance by FKWW and FKW Sub of FKWW's and FKW Sub's obligations
under the Guaranteed Agreement.
NOW, THEREFORE, in consideration of the foregoing, Guarantor agrees as
follows:
1. Guaranty. Guarantor hereby unconditionally and irrevocably guarantees
--------
to the Company (a) the due and punctual observance, performance and discharge by
FKWW of each item, provision, duty, obligation, covenant and agreement contained
in the Guaranteed Agreement, and (b) the due and punctual payment, when and as
the same may become due and payable, of any amount which FKWW or FKW Sub may
become obligated to pay under or pursuant to the Guaranteed Agreement. The
obligations of FKWW and FKW Sub guaranteed in this Section 1 are hereinafter
referred to as the "Obligations." Guarantor agrees that if FKWW or FKW Sub
-----------
shall fail to pay any Obligation when and as the same shall be due and payable,
or shall fail to observe, perform or discharge any Obligation, in accordance
with the terms of the Guaranteed Agreement, Guarantor shall forthwith pay,
observe, perform or discharge such Obligation, as the case may be, and shall pay
any and all damages that may be incurred or suffered by the Company in
consequence thereof, and any and all costs and expenses, including attorneys'
and arbitrators' fees and expenses, that may be incurred by the Company in
collecting
2
<PAGE>
or enforcing such Obligations or in preserving or enforcing any rights under
this Guaranty or under the Guaranteed Agreement or both.
2. Absolute Guaranty. The liability of Guarantor under this Guaranty
-----------------
with respect to each and all of the Obligations shall be absolute and
unconditional, irrespective of any matter or circumstances, including, without
limitation, any waiver of, amendment to, modification of, or consent to
departure from, the Guaranteed Agreement, including, without limitation, any
waiver or consent involving a change in the time, manner or place of payment of,
or in any other term of, all or any of the Obligations.
3. Continuing Guaranty. This Guaranty is a guaranty of payment,
-------------------
performance and compliance. This Guaranty is a continuing guaranty and shall
(a) remain in full force and effect until all of the Obligations, including,
without limitation, all amounts payable under this Guaranty, have been paid,
observed, performed or discharged in full, (b) be binding upon Guarantor and its
successors and assigns, (c) inure to the benefit of and be enforceable by the
Company and any of its successors, (d) be binding upon and against Guarantor
without regard to the insolvency, bankruptcy or reorganization of Guarantor or
FKWW or FKW Sub or otherwise and (e) continue to be effective or be reinstated,
as the case may be, if at any time any payment of any of the Obligations is
rescinded or must otherwise be returned by the Company upon the insolvency,
bankruptcy or reorganization of FKWW or otherwise, all as though such payment
had not been made.
4. Waiver by Guarantor. Guarantor hereby waives promptness, diligence,
-------------------
presentment, demand, protest and notice of any kind as to the Obligations and
acceptance of or reliance on this Guaranty.
5. Miscellaneous
-------------
5.1 Governing Law. This Guaranty shall be governed by construed in
-------------
accordance with laws of the State of Delaware applicable to agreements made and
to be completely performed within such State.
5.2 Reasonable Efforts. Subject to the terms and conditions of this
------------------
Guaranty, Guarantor agrees to use all reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective the transactions contemplated by
the Guaranteed Agreement and each of the Other Transaction Agreements.
Guarantor hereby agrees, while this Guaranty is in effect, not to take, or cause
or permit to be taken, any action with the intention and knowledge that such
action would reasonably be expected to have the effect of preventing or
disabling (i) it from performing its obligations under this Guaranty, or (ii) it
or any of its affiliates or associates from performing their respective
obligations under the Other Transaction Agreements.
3
<PAGE>
5.3 Specific Performance. Guarantor recognizes and acknowledges that
--------------------
a breach by it of any of the provisions of this Guaranty will cause the Company
to sustain damages for which it would not have an adequate remedy at law for
money damages, and therefore Guarantor hereto agrees that in the event of any
such breach the Company shall, without the posting of bond or other security, be
entitled to the remedy of specific performance of such provision and injunctive
and other equitable relief in addition to any other remedy to which it may be
entitled, at law or in equity.
5.4 Jurisdiction. Guarantor irrevocably submits to the non-exclusive
------------
jurisdiction of the state and federal courts located in Delaware for the
purposes of any suit, action or other proceeding arising out of this Guaranty
(and agrees not to commence any action, suit or proceeding relating hereto
except in such courts). Guarantor hereby irrevocably designates CT Corporation
System as its designee, appointee and agent to receive, for and on behalf of it,
service of process in Delaware in any legal action or proceeding with respect to
this Guaranty or any document related thereto. It is understood that a copy of
such process serviced on such agent will be promptly forwarded by mail to it at
its address set forth under its signature below, but the failure to receive such
copy shall not affect in any way the service of such process. Guarantor hereto
further irrevocably consents to the service of process of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to it at its said
address, such service to become effective upon confirmed delivery. Guarantor
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Guaranty or the transactions
contemplated hereby in any state or federal court located in Delaware, and
hereby further irrevocably and unconditionally waives and agrees not to plead or
claim in any such action, suit or proceeding brought in any such court that such
action, suit or proceeding has been brought in an inconvenient forum.
5.5 Severability. If any provision or any portion of any provision
------------
of this Guaranty shall be held to be void or unenforceable, the remaining
provisions of this Guaranty and the remaining portion of any provision held void
or unenforceable in part shall continue in full force and effect.
5.6 Modifications, Amendment, Waivers. No modifications or amendment
---------------------------------
of this Guaranty and no waiver of any of the terms or conditions hereof, shall
be valid or binding unless made in writing and signed by a duly authorized
officer of Guarantor, or in the case of a waiver, by the Company, subject to
Section 6.8 of the Guaranteed Agreement, as applicable. No delay on the part of
the Company in exercising any right, power, privilege hereunder shall operate as
a waiver thereof. No waiver by the Company of any breach hereof or of any
default hereunder, shall constitute a continuing waiver of such provision or any
other provision of this Guaranty.
4
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Guaranty as of the
date first above written.
GUARANTOR:
---------
THE NEWS CORPORATION LIMITED
By: /s/ Arthur Siskind
---------------------------------
Name: Arthur Siskind
-------------------------------
Title: Senior Executive V.P.
------------------------------
1211 Avenue of the Americas
New York, NY 10036
5
<PAGE>
Exhibit 10.35
Portions of this exhibit have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment. The redacted portions are identified by brackets with the character
"x" indicating deleted information.
<PAGE>
EXHIBIT 10.35
PROGRAM: "Che Je Yu Ranger"
a/k/a "Galaxy Rangers"
DATE: August 21, 1992
DISTRIBUTION AGREEMENT
----------------------
THIS AGREEMENT ("Agreement") is made as of the above date between SABAN
INTERNATIONAL SERVICES, INC. ("SISI") at 4000 W. Alameda Avenue, Burbank, CA
91505 and SABAN INTERNATIONAL N.V. ("SINV") at 6 Abraham de Veerstraat, Curacao,
Netherlands Antilles (SISI and SINV shall collectively be referred to herein as
"Licensee"), on the one hand, and TOEI COMPANY LTD. ("Licensor") at 2-17, 3
chrome Ginza, Chuo-ku, Tokyo 104, Japan, on the other hand.
1. PROGRAM. A minimum of forty-fine (49) and a maximum of fifty-two (52)
-------
half-hour episodes of the live action children's television series entitled "Che
Je Yu Ranger" a/k/a "Galaxy Rangers".
2. TERM. The term of this Agreement shall commence upon the above date and
----
shall continue for a period of ten (10) years from the date that all Delivery
requirements have been satisfied ("Initial Term"). Licensee shall have the
option, exercisable by written notice to Licensor prior to the expiration of the
Initial Term, to extend the Initial Term for an additional fifteen (15) years
principally under the same terms and conditions contained herein (the Initial
Term plus extensions thereof, if any, shall hereinafter be referred to as the
"Term"). Upon expiration of the Term, Licensor shall honor and be bound by all
third party agreements entered into by Licensee during the Term which extend
beyond the Term and Licensee shall be entitled to retain its share of
compensation with respect thereto, provided, however, that Licensee shall not
enter into any third party agreements which extend more than one (1) year beyond
the Term.
3. TERRITORY. The "Territory" shall include:
---------
(a) SISI TERRITORY: The United States of America, its territories,
commonwealths and possessions, U.S. Military Installations located outside of
the U.S. and the U.S. Armed Forces Radio and Television Network.
(b) SINV TERRITORY: The Universe excluding the SISI Territory, Brazil,
Japan, Singapore, Thailand, Hong Kong, Malaysia, China, Korea, Taiwan,
Indonesia, Laos, Vietnam and Cambodia.
4. DELIVERY DATE. The episodes shall be delivered by Licensor to Licensee
-------------
on the following schedule:
(a) First 26 episodes prior to September 30, 1992;
(b) Next 8 episodes prior to October 31, 1992;
(c) Next 5 episodes prior to November 30, 1992;
(d) Next 4 episodes prior to December 31, 1992;
(e) Next 5 episodes prior to January 31, 1993;
<PAGE>
(f) Next 4 episodes prior to February 28, 1993.
5. LICENSE FEE. [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX] per episode payable
-----------
as follows:
(a) [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX] executed by Licensor;
(b) The [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX] upon Delivery of each such
episode in accordance with the delivery schedule in Paragraph 4 above as
follows:
(i) First 26 episodes: [XXXXXX]
(ii) Next 8 episodes: [XXXXXX]
(iii) Next 5 episodes: [XXXXXX]
(iv) Next 4 episodes: [XXXXXX]
(v) Next 5 episodes: [XXXXXX]
(vi) Next 4 episodes: [XXXXXX]
6. MERCHANDISING PARTICIPATION. Provided that Licensor is not in material
---------------------------
default hereunder, Licensor shall receive an amount equal to [XXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX] Notwithstanding
anything to the contrary contained in this Agreement, this Agreement, including
without limitation the rights and obligations of the parties herein,
[XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]
7. LICENSED RIGHTS. Licensor hereby grants to SISI in the SISI Territory
---------------
and SINV in the SINV Territory the sole and exclusive rights ("Licensed
Rights"), under copyright or otherwise, during the Term, to: (a) adapt the
Program to be suitable for exploitation in the Territory, including, without
limitation, shooting new footage, adapting story lines and dialogue to
accommodate Licensee's international version, and incorporating existing footage
of the Program or other programs, all at Licensee's cost and responsibility and
at Licensee's discretion, and of a quality which is at least equal to that of
the original Program; (b) distribute, exhibit, lease, license, market, sell,
publicize, advertise, promote, perform and exploit the Program, and all dubbed
and other versions thereof and all elements, parts, characters,
characterizations or character names therein, either apart from or in
conjunction with the work, by way of All Media now known or hereafter devised,
including, without limitation, by way of Television Use, Theatrical Use, Non-
Theatrical Use, Video Cassette/Disc Distribution and Ancillary Distribution Use,
including, without limitation, by way of soundtrack albums and phonorecords,
music publishing, literary publishing, so-called "merchandising rights",
amusement and theme parks, and musical groups; (c) cut, edit, alter, add to,
subtract from, translate, dub in any languages and use outtakes of the Program
(specifically including, without limitation, the right to substitute all or part
of the music, effects and title). It is acknowledged that the music shall be
replaced for creative reasons and that consideration for the creators of the
original music is included in the License Fee; (d) include on the prints of the
Program and trailers thereof and in all
2
<PAGE>
advertising and publicity related thereto: (i) Licensee's name, trademark, logo,
presentation announcement and copyright notice; (ii) the designation of Licensee
or any of its licensees as the distributor of the Program; and (iii) any
additional credits in connection with any adaptation of the Program; and (e) use
and license others to use Licensor's name and the name, voice, likeness and
biographical material concerning all persons and characters appearing in or
connected with the Program for advertising, publicity and trade purposes of
Licensee and its licensees and any sponsors of the Program.
8. DELIVERY. "Delivery" means the receipt and acceptance by Licensee (as
--------
being in first class technical condition free from scratch or injury and, for
episodes # 21 - 50, that such episodes have production quality equal to that of
episodes # 1 - 20) of all of the physical items and documents set forth below.
Licensor shall (at Licensee's cost) deliver to Licensee before the Delivery Date
for the Program (including, if the Program is a series, for each episode
thereof) and each version thereof, all materials necessary for Licensee's
exploitation of the Program hereunder, including, without limitation, the
following: one 35mm. or 16mm. (whichever is available) color composite print,
fully timed and color corrected, never before used and of acceptable broadcast
quality; one separate 35mm. or 16mm. (the same format as the print) magnetic
effects-only track; one separate 35mm. or 16mm. (the same format as the print)
magnetic music-only track; one 35mm. or 16mm. (the same format as the print)
textless color print of the opening and closing credits; one English translation
script; all existing costumes; and all available promotional material,
including, without limitation, 35mm. color slides (with negatives) and cels (if
the Program contains animation) of each recurring character and of a variety of
scenes and character combinations, backgrounds, a style guide, a synopsis and
printed sales/promotion sheets and brochures (with original artwork). In
addition, Licensee shall have access to all Program materials (e.g., film, video
tape and audio tape) in Licensor's possession or accessible to Licensor for the
purpose of ordering duplicate and additional materials at Licensee's cost.
Licensee may accept incomplete delivery of the Program (with the right to
proportionately reduce the License Fee and have any amounts which were paid in
excess of such reduced License Fee returned by Licensor), but this will not be a
waiver of Licensee's right to require complete Delivery of the Program at a
later time. In the event that Delivery of the Program shall not have been fully
completed by the Delivery Date, Licensee shall have the right at any time
thereafter, by notice in writing, to terminate this Agreement without prejudice
to any claim which Licensee may have for breach of this Agreement by Licensor in
failing to make such Delivery. Any sums theretofore paid by Licensee to
Licensor shall be immediately reimbursed by Licensor with interest on such sums
at the prime lending rate from time to time of Licensee's principal lending
institution, calculated from the date of receipt of such sums by Licensor to the
date of receipt of reimbursement by Licensee. Time is of the essence hereof.
9. WARRANTIES. Licensor hereby represents and warrants as follows: (a) It
----------
has the full right, power and authority to enter into and completely perform
this Agreement and to grant all rights herein granted; (b) Neither the Program
nor any part thereof, nor any materials contained therein or synchronized
therewith, nor the exercise of any right herein granted, does or will violate or
infringe upon the rights of any third party whatsoever; (c) There are no rights,
licenses or commitments of any nature outstanding in favor of anyone that would
or might impair, interfere with or infringe upon the rights herein granted, and
it has obtained or will obtain all proper and effective licenses or grants of
authority with respect to any elements
3
<PAGE>
provided by any party owning any rights therein for any and all uses provided
for herein; (d) It has paid or discharged or will pay or discharge all
obligations (except those expressly assumed by Licensee hereunder) incurred by
reason of development, production, distribution or exploitation of the Program;
(e) The synchronization, performing and mechanical rights to the music contained
in the Program are or by Delivery will be (i) owned or controlled by Licensor
sufficiently to allow free exploitation of the Program herein, (ii) in the
public domain or (iii) controlled by a performing rights society having
jurisdiction; (f) It has not or will not sell, assign, transfer, license, convey
or incumber in any way rights in the Program granted to Licensee; and (g) All
materials Delivered to Licensee will be of the highest first-class technical
quality suitable for exploitation of the Program in all media and territories
for which rights have been granted to Licensee.
10. INDEMNITY. Each party hereby indemnifies and holds the other and its
---------
affiliate companies and its and their respective officers, directors, employees,
agents, licensees, successors and assigns, harmless from and against any and all
claims, costs, damages, expenses (including reasonable outside attorneys' fees),
liabilities and causes of action of any kind arising out of any breach or any
alleged breach of any of the indemnifying party's representations, warranties or
agreements hereunder. Licensee shall have the right to set off against any
monies payable to Licensor by Licensee the amount of any liability of Licensor
to Licensee. In addition, pending the final determination of such liability,
Licensee may withhold from any monies payable to Licensor such reasonable
amounts as Licensee may deem necessary to cover Licensor's potential liability
on account of any such claim or action.
11. COPYRIGHT. Licensee is authorized (but not obligated) to take such
---------
steps as it may deem advisable to register copyright and protect Licensee's
rights in the Program in the Territory and for such purposes Licensee is
irrevocably appointed the attorney-in-fact of Licensor, such appointment being
coupled with an interest. Upon Licensee's request, Licensor shall duly execute,
acknowledge and deliver to Licensee any and all further assignments or other
instruments which Licensee may deem necessary, expedient or proper to carry out
and effectuate the purposes and intent of this Agreement. [XXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXX]
12. SUBDISTRIBUTION AND ASSIGNMENT. Licensee may freely assign this
------------------------------
Agreement and may freely sublicense or assign any of Licensee's Licensed Rights
in the Program, provided that no such assignment shall relieve Licensee of its
obligations to Licensor hereunder. Licensor may not assign this Agreement or
any of Licensor's rights or obligations under it.
13. CONFIDENTIALITY. All elements of this Agreement, including, but not
---------------
limited to, prior negotiations and the content of the Program ("Information"),
shall be strictly confidential between the parties. No dissemination of this
Information to private or public persons or entities including, among others,
broadcast media, print media and the like shall take place without the prior
written consent of Licensee. Any publicity, paid advertisements, press
4
<PAGE>
notices or other Information with respect to the Program in the Territory shall
be under the sole control of Licensee.
14. ADDITIONAL EPISODES AND PRODUCTIONS. Licensor grants to Licensee the
-----------------------------------
exclusive option to acquire under the same terms and conditions herein: (a)
additional episodes of the Program; (b) each remake, sequel, prequel, spin-off,
series spin-off and feature film based on the Program or its underlying literary
material (including, without limitation, any character(s) therein); and (c) each
live action series which Licensor either presently owns or controls, or produces
or otherwise acquires within the period ("Option Period") commencing upon the
date hereof and ending eighteen (18) months after the first U.S. broadcast of
the Program (provided, however, that such eighteen (18) months shall commence no
later than September, 1993), such options to be exercisable by Licensee during
the Option Period.
15. ADDITIONAL. All other terms and conditions shall be in accordance with
----------
Licensee's Standard Terms applicable to agreements of this nature, which shall
be deemed to be incorporated herein (subject only to such changes as are agreed
upon in writing by the parties after good faith negotiation), including, without
limitation, force majeure, default, remedies, invalidity, California law,
Licensor's waiver of equitable relief and survival of representations,
warranties and indemnities. This Agreement shall constitute the entire agreement
of the parties regarding the subject matter herein contained, shall supersede
all prior agreements regarding the subject matter herein contained, and shall
not be modified or supplemented except in a writing signed by the party to be
charged.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
Licensor Licensee
TOEI COMPANY LIMITED SABAN INTERNATIONAL SERVICES, INC.
By: /s/ Osamu Fukunaka By: /s/ Mel Woods
--------------------- ---------------------
Its: Executive Director Int'l Its: President
Sales & Purchasing
SABAN INTERNATIONAL N.V.
By: /s/ R.A. de Meza
---------------------
Its: Managing Director
5
<PAGE>
DATE: August 21, 1992
AMENDMENT
---------
This amendment ("Amendment") is made as of the above date by and between
Saban International Services, Inc. ("SISI") and Saban International N.V.
("SINV"), (SISI and SINV shall collectively be referred to herein as
"Licensee"), on the one hand, and Toei Company, Ltd. ("Licensor"), on the other
hand.
Reference is made to the Distribution Agreement ("Agreement") dated August
21, 1992 between Licensee and Licensor with respect to "Galaxy Rangers".
For good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties hereby agree to and do amend the Agreement as
follows:
1. The series "Metalder" a/k/a "Megaman" shall be included in the
Agreement, subject to all of the same terms and conditions as to "Galaxy
Rangers" therein, except as otherwise provided herein.
2. [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]
3. The Term for "Megaman" shall be the same as the term would have been
pursuant to the Distribution Agreement between Licensor and Saban Productions,
Inc. dated June 1, 1986, amended October 22, 1987, had such agreement not been
terminated by the parties pursuant to the Termination Agreement of even date
herewith. Notwithstanding anything to the contrary in the foregoing, Licensee
shall have the option to have the term for "Megaman" be identical to the Term
for "Galaxy Rangers" by paying Licensor the [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]
on or before the date six (6) months prior to the expiration (September 10,
1999) of the term for "Megaman", provided that in the event that Licensor does
not receive such payment by such due date, Licensor shall notify Licensee in
writing that it has not received such payment and Licensee shall have sixty (60)
days from such notice in which to pay Licensor.
Except as set forth above, the Agreement is ratified and confirmed in every
respect.
IN WITNESS WHEREOF, the parties hereto have signed this Amendment as of the
date written above.
SABAN INTERNATIONAL SERVICES, INC. SABAN INTERNATIONAL N.V.
By: /s/ Mel Woods By: /s/ R.A. DeMeza
------------------- -------------------
Its: President Its: Managing Director
<PAGE>
TOEI COMPANY LIMITED
By: /s/ Osamu Fukunaka
-------------------
Its: Executive Director Int'l
Sales & Purchasing
<PAGE>
SABAN INTERNATIONAL SERVICES, INC. SABAN INTERNATIONAL N.V.
4000 W. Alameda Avenue 6 Abraham de Veerstraat
Burbank, CA 91505 USA Curacao, Netherland Antilles
September 21, 1992
Toei Company, Ltd.
3-2-17, Ginza, Chuo-ku
Tokyo, 104, Japan
Re: Distribution Agreement dated August 21, 1992
regarding "Galaxy Rangers" and Megaman Agreement
dated June 1, 1986 and amended on October 22, 1987
Dear Sirs:
Regarding the above-mentioned agreements, we would appreciate it if you
would agree to the following:
(a) You will facilitate and cooperate with us in the hiring of the players
who perform the role of the Sorceress character and her disciples for shooting
in your studios in Tokyo, in order to shoot various sequences within two 8-hour
days (including a one-hour lunch break each day).
(b) You will deliver to us all existing costumes used for your production
of the Program.
(c) You agree that we may utilize the footage, not more than three minutes
per episode from the "Megaman" program, in which the Megaman character does not
appear, to make our version for international exploitation.
Please indicate your agreement and confirmation to the above on the space
provided below.
AGREED AND CONFIRMED: Sincerely yours,
TOEI COMPANY, LTD. SABAN INTERNATIONAL SERVICES, INC.
By: /s/ Osamu Fukunaka By: /s/ Mel Woods
------------------ ------------------
Its: Executive Director Its: President
Int'l Sales & Purchasing
<PAGE>
SABAN INTERNATIONAL N.V.
By: /s/ R.A. de Meza
------------------
Its: Managing Director
<PAGE>
AMENDMENT #3
This Amendment ("Amendment #3") is made as of January 30, 1994, to the
"Distribution Agreement" dated August 21, 1992, as previously amended on August
21, 1992, and on September 21, 1992, between Saban International Services, Inc.
("SISI") and Saban International N.V. ("SINV"), collectively "Saban", on the one
hand, and Toei Company, Ltd. ("Toei"), on the other hand, with respect to the
television series produced by Toei entitled Che Je Yu Ranger a/k/a Galaxy
Rangers upon which Saban's television series Mighty Morphin Power Rangers a/k/a/
Power Rangers is based.
Saban and Toei agree to amend the Distribution Agreement such that Toei hereby
[XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX] payment to be made
promptly upon execution of the Amendment.
[XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXX]
In addition, [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]
The Distribution Agreement, as amended herein, is hereby retitled and confirmed.
AGREED AND ACCEPTED:
TOEI COMPANY LIMITED SABAN INTERNATIONAL SERVICES, INC.
By: /s/ Osamu Fukunaka By: /s/ William Josey
------------------ -----------------
Its: Executive Director Its: Senior Vice President
Int'l Sales & Purchasing
SABAN INTERNATIONAL N.V.
By: /s/ R.A. de Meza
----------------
Its: Managing Director
<PAGE>
AMENDMENT #4
This Amendment ("Amendment #4") is made as of April 5, 1994, to the
"Distribution Agreement dated August 31, 1992, as previously amended on August
21, 1992, on September 21, 1992, and on January 30, 1994, between Saban
International Services, Inc., and Saban International N.V. (collectively,
"Saban"), on the one hand, and Toei Company, Ltd. ("Toei"), on the other hand,
with respect to the television series produced by Toei entitled Galaxy Rangers
and Metalder a/k/a Megaman.
Saban and Toei agree to amend the August 21, 1992, Amendment to the Distribution
Agreement such that paragraph 3 of the Amendment is changed to read:
"The Term for the series Metalder a/k/a Megaman ("Metalder") shall be the
same as the term for the series Spielvan pursuant to paragraph 3 of that
certain letter dated February 28, 1994, as of February 8, 1994, between
Saban and Toei. In consideration thereof, Saban shall pay Toei
[XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]
The Distribution Agreement, as amended herein, is hereby ratified and confirmed.
AGREED AND ACCEPTED:
TOEI COMPANY, LTD. SABAN INTERNATIONAL SERVICES, INC.
By: /s/ Osamu Fukunaka By: /s/ William Josey
------------------ -----------------
Its: Executive Director Its: Senior Vice President
Int'l Sales & Purchasing
SABAN INTERNATIONAL N.V.
By: /s/ R.A. de Meza
----------------
Its: Managing Director
<PAGE>
[Saban Entertainment Letterhead]
August 26, 1994
Mr. Masoyoshi Endo
Deputy Director
Toei Company, Ltd.
2-17, 3-Chome, Ginza
Chuo-Ku, Tokyo 104 Japan
Re: Kaku Rangers
Dear Mr. Endo:
Toei Company, Ltd. ("Toei") hereby licenses the television series Kaku Rangers
to Saban International Services, Inc. ("SISI"), and Saban International N.V.
("SINV"), collectively "Saban", on the following terms:
1. Programs Granted to Saban: All episodes of Kaku Rangers produced now and in
the future.
2. Territory Granted to Saban:
a. SISI's Territory: The United States and its territories, possessions,
and commonwealths.
b. SINV's Territory: The universe, except (i) SISI's Territory, and (ii)
Brunei, Burma, Cambodia, China, Hong Kong, Indonesia, Japan, Laos,
Macao, Malaysia, the Philippines, Singapore, Taiwan, Thailand, Vietnam,
Sri Lanka, Pakistan, Nepal, Buthan and Korea.
3. Term Granted to Saban: [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]
4. Licensed Rights Granted to Saban: All present and future media and forms of
exploitation, with full rights to edit and adapt the Programs in any way Saban
determines in the same style as Saban edited and adapted Che Je Yu Ranger a/k/a
Galaxy Rangers for Mighty Morphin Power Rangers.
5. Exclusivity Granted to Saban: All elements of the Programs, including
characters therein, will be exclusive to Saban during the Term and in the
Territory.
<PAGE>
Mr. Masoyoshi Endo
Toei Company, Ltd.
Re: Kaku Rangers
August 26, 1994
Page 2
6. Delivery: As a material condition to this agreement, Toei will deliver to
Saban at the same time as delivery to Saban of each episode the complete costume
for the monster appearing in such episode and the Japanese-language script for
such episode. Toei also will deliver to Saban the same materials delivered to
Saban for Che Je Yu Ranger. Toei will deliver all episodes currently completed
promptly upon signing this agreement, and, thereafter, will deliver episodes in
groups of five (5).
7. License Fee: Saban will pay Toei [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXX]
8. Exploitation Rights Granted to Toei: In addition, [XXXXXXXXXXXXXXXXXXXXXX
-----------------------------------
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]
a. a 1" NTSC color videotape copy (with separate voice and M&E tracks) of
each such episode when completed; and,
b. an "as recorded" English-language script for each Series episode.
9. Other Terms: All terms and conditions set forth in the Distribution
-----------
Agreement dated August 21, 1992, as amended, between SISI, SINV, and Toei, with
respect to Che Je Yu Ranger a/k/a Galaxy Rangers that are not inconsistent with
the terms and conditions set forth herein also will apply.
<PAGE>
Mr. Masoyoshi Endo
Toei Company, Ltd.
Re: Kaku Rangers
August 26, 1994
Page 3
Please return three signed copies of this agreement. Thereafter, we will return
a fully-executed copy for your files.
Thank you.
Sincerely,
/s/ Bill Josey
- --------------
Bill Josey
Senior Vice President
Business Affairs
AGREED TO AND ACCEPTED:
TOEI COMPANY LIMITED SABAN INTERNATIONAL SERVICES, INC.
By: /s/[Signed by an authorized By: /s/ William Josey
------------------------------ -------------------------------
officer; signature illegible] Its: _____________________________
------------------------------
Its: ____________________________
SABAN INTERNATIONAL N.V.
By: /s/ R.A. de Meza
-------------------------------
Its: Managing Director
<PAGE>
[LOGO OF SABAN ENTERTAINMENT]
August 26, 1994
Mr. Masoyoshi Endo
Deputy Director
Toei Company, Ltd.
2-17, 3-Chome, Ginza
Chuo-Ku, Tokyo 104 Japan
Dear Mr. Endo:
Saban International N.V. and Saban International Services, Inc. (collectively,
"Saban"), and Toei Company, Ltd. ("Toei"), have entered into a Distribution
Agreement dated August 21, 1992, and thereafter have entered into additional
distribution agreements pursuant to which Toei has granted Saban exclusive
rights in Che Je Yu Ranger a/k/a Galaxy Rangers, Metalder, Dai Ranger, Spielvan,
and Kaku Rangers. Pursuant to these agreements, Saban includes action footage
from Toei's programs in new programs produced by Saban. For example, action
footage from Galaxy Rangers and Dai Ranger is included Mighty Morphin Power
Rangers.
Saban has granted Toei the right to exploit, in Toei's reserved territories, the
new episodes Saban creates using Toei's material. Saban's term of rights in
Toei's material is ten years with an option to renew for an additional fifteen
years; Toei's rights in the episodes Saban creates using Toei's materials, such
as Mighty Morphin Power Rangers, is for the same term as Saban has from Toei.
Toei and Saban now agree that Saban's term of rights under the distribution
agreements mentioned above and under future distribution agreements for Toei
live-action series will be in perpetuity and that Toei's term of rights, in
Toei's reserved territories, in the programs Saban produces using Toei's
material also will be in perpetuity.
Thank you.
Sincerely,
/s/ Bill Josey
Bill Josey
Senior Vice President
Business Affairs
<PAGE>
Mr. Masoyoshi Endo
Toei Company, Ltd.
August 26, 1994
Page 2
ALL TERMS AND CONDITIONS SET FORTH ON THE PRECEDING PAGE ARE AGREED TO AND
ACCEPTED:
TOEI COMPANY, LTD. SABAN INTERNATIONAL SERVICES, INC.
By By /s/ Bill Josey
---------------------- --------------------------------
Its Its
[signed by an authorized signatory; SABAN INTERNATIONAL N.V.
signature illegible]
By /s/ R.A. de MEZA
--------------------------------
Its Managing Director
<PAGE>
[Saban Entertainment Letterhead]
October 7, 1994
Mr. Masoyoshi Endo
Deputy Director
Toei Company, Ltd.
2-17, 3-Chome, Ginza
Chuo-Ku, Tokyo 104 Japan
Dear Mr. Endo:
Saban International N.V. and Saban International Services, Inc. (collectively,
"Saban"), and Toei Company, Ltd. ("Toei"), have entered into a Distribution
Agreement dated August 21, 1992, granting Saban certain rights in Toei's live
action children's television series entitled "Che Je Yu Ranger" a/k/a "Galaxy
Rangers".
Paragraph 14 of the Distribution Agreement grants Saban the option to acquire
additional live action series owned or controlled by Toei. Saban and Toei
hereby agree that the Option Period set forth in paragraph 14 will be extended
automatically by one year for each Toei series acquired by Saban, including Dai
Ranger, Spielvan, and Kaku Rangers.
Thank you.
Sincerely,
/s/ Bill Josey
Bill Josey
Senior Vice President
Business Affairs
ALL TERMS AND CONDITIONS SET FORTH ON THE PRECEDING PAGE ARE AGREED TO AND
ACCEPTED:
TOEI COMPANY LIMITED SABAN INTERNATIONAL SERVICES, INC.
By: /s/ [Signed by an authorized officer; By: /s/ Haim Saban
------------------------------------ -------------------------------
signature illegible] Its: ______________________________
------------------------------------
Its: __________________________________
<PAGE>
Mr. Masoyoshi Endo
Toei Company, Ltd.
October 7, 1994
Page 2
SABAN INTERNATIONAL N.V.
By: /s/ R.A. de Meza
--------------------------
Its: Managing Director
<PAGE>
[Saban Entertainment Letterhead]
February 27, 1995
Mr. Masayoshi Endo
Deputy Director
Toei Company, Ltd.
2-17, 3-Chrome,
Chuo-Ku, Tokyo 104 Japan
Dear Endo-San,
Reference is made to the Distribution Agreement, as amended, dated August 21,
1992 between Saban International N.V. and Saban International Services, Inc. and
its successor in interest Saban Entertainment, Inc. (collectively "Saban") and
Toei Company, Ltd. ("Toei"). Saban and Toei desire to amend paragraphs 5. and 6.
of the Distribution Agreement whereby Saban will pay Toei upon execution of this
amendment [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX] For purposes of
video cassettes and video games, "Licensee's gross merchandising income" shall
include an amount equal to [XXXXXXXXXXXXXXXXXXXXXXXXX] Commencing October 1,
1997, Toei's merchandising participation pursuant to paragraph 6. of the
Distribution Agreement will resume based on Licensee's gross merchandising
income earned after September 30, 1997.
/s/ Mel Woods
- -------------------------
Saban Entertainment, Inc.
/s/ [Signed by an authorized officer;
-------------------------------------
signature illegible]
-----------------------
Toei Company, Ltd.
/s/ R.A. de Meza
- ------------------------
Saban International N.V.
<PAGE>
Exhibit 10.36
Portions of this exhibit have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment. The redacted portions are identified by brackets with the character
"x" indicating deleted information.
<PAGE>
EXHIBIT 10.36
MEMORANDUM OF AGREEMENT
Agreement made as of January 19, 1996, between Saban Merchandising, Inc.
("Saban"), and Ventura Film Distributors, B.V. ("Ventura"), on the one hand, and
Bandai America Incorporated ("Bandai"), on the other hand. Saban and Ventura are
sometimes collectively referred to herein as "Licensor".
The parties hereto hereby agree that, in consideration of Bandai's payment
to Licensor of the Advances and Royalties set forth hereinbelow, Licensor hereby
licenses Bandai the exclusive rights, during the Term and in the Territory, as
set forth hereinbelow, to manufacture, market, and sell Products using the
Licensed Items, as set forth hereinbelow.
1. Property: "Property" means "Beetle Fighter", and such sequels thereto
--------
acquired by Saban Entertainment, Inc. ("SEI"), and Saban International N.V.
("SINV") or any affiliate thereof, each of which is produced by Toei Company,
Limited ("Toei"), and all or parts of which are used in any children's
television series tentatively entitled "Big Bad Beetleborgs" ("Series") and
theatrical features based thereon (collectively, "Works"). "Property" also
includes any materials created by Saban and which are included in the Works.
2. Licensed Items: "Licensed Items" means the fictional characters and
--------------
additional fictional characters and the names, likenesses, designs, creations,
and personae thereof (collectively, "Series Characters"), and all fictional
places, props, and materials (collectively, "Series Elements") which appear in
the Property and any feature film (live action or animated) and any other
television programs or feature films based on the Property which Saban or any
affiliate of Saban obtains the right to exploit together with any products or
line of products based upon the Series Characters and/or Series Elements,
including any trademarks and copyrights Licensor may own or have the right to
license with regard to all of the foregoing.
3. Products: "Products" are set forth in Schedule "A" attached hereto and by
--------
this reference made a part hereof.
4. Territory: "Territory" means the universe, excluding Brunei, Burma,
---------
Cambodia, China, Hong Kong, Indonesia, Japan, Korea, Laos, Macao, Malaysia, the
Philippines, Singapore, Taiwan, Thailand, and Vietnam. Rights granted to Bandai
herein for exercise in the United States of America ("U.S.") are granted by
Saban, and rights granted to Bandai herein for exercise in the balance of the
Territory are granted by Ventura.
5. Advance: "Advance" means the fully-recoupable and (except as set forth
-------
hereinbelow) [XXXXXXXXXXXXXXXXXXXXXX] which Bandai shall pay to Licensor in the
following installments:
a. [XXXXXXXX] on signing of this memorandum of agreement;
<PAGE>
b. [XXXXXXXX] on February 15, 1996;
c. [XXXXXXXX] on May 15, 1996;
d. [XXXXXXXX] on August 15, 1996;
e. [XXXXXXXX] on October 15, 1996; and
f. [XXXXXXXX] on December 15, 1996.
[XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX] Any unearned portion
of the Advance paid to Licensor shall be refunded if the Series based on the
Property is not broadcast in the U.S. over the Fox Children's Network ("FCN")
Mondays through Fridays between 3 p.m. and 5 p.m. during a three and one-half
month period beginning September 1, 1996, and ending December 31, 1996 ("Fourth
Quarter 1996"). FCN may occasionally substitute a Saturday morning exhibition
for one weekday exhibition, which nonetheless will be deemed to meet the
requirements set forth in the preceding sentence. Bandai acknowledges and
agrees that the above-mentioned requirement that the Series be broadcast between
3 p.m. and 5 p.m. will be satisfied if at least [X] of FCN's clearance for the
Series falls within such time period; provided, however, that if during Fourth
Quarter 1996 the average FCN clearance for the Series is less than [X]
("clearance shortfall"), the Advance shall be reduced by [XXXXXXXXXXXXXX] for
each percentage point of clearance shortfall. By way of example, if the average
FCN clearance for the Series is [X], the Advance shall be reduced by
[XXXXXXXXXXXXXXXXXXXXXXXX XXXXXX]; if the average FCN clearance is [X] the
Advance shall be reduced by [XXXXXXXXXXXXXXXXXXXXX]; or if the average FCN
clearance is [X] or less, the Advance shall be reduced by [X], resulting in
elimination of the Advance. [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX] If fewer than [X],
but at least [X] new Series episodes are broadcast during Fourth Quarter 1996,
the Advance shall be reduced pro-rata [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX] If fewer
than [X] new Series episodes are broadcast during Fourth Quarter 1996, if the
Series is broadcast in U.S. syndicated television rather than over FCN during
Fourth Quarter 1996, the [XXXXXXXXXXXXXXXX] and [XXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]
6. Royalties: "Royalties" means the following percentages of sales throughout
---------
the Territory of Products (except "Apparel" as set forth in Schedule "B" hereto)
by Bandai and its affiliates, which Bandai shall pay to Saban with respect to
the U.S. and to Ventura with respect to the balance of the Territory:
2
<PAGE>
a. On aggregate worldwide sales of up to [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XX]
b. On aggregate worldwide sales of more than [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXX]
c. On aggregate worldwide sales of more than [XXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXX]
d. On aggregate worldwide sales of more than [XXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]; and,
e. On aggregate worldwide sales of more than [XXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXX]
Bandai will account quarterly. Licensor will have customary audit rights.
Advances paid by Bandai to Licensor shall be recoupable from Royalties due and
payable to Licensor.
7. Term: "Term" means the period for which Licensor (or any of its affiliates)
----
has obtained exploitation rights in the Property from Toei (Licensor presently
has rights in the Property which run concurrently with Licensor's rights in the
Toei property Che Je Yu Ranger a/k/a Galaxy Rangers).
8. Copyright and Trademark Notices; Approvals: As between Saban and Bandai, all
------------------------------------------
copyrights, trademarks, trade dress, and related intellectual property rights in
the Property and Products shall belong to Saban. Bandai and its affiliates
shall include Saban's copyright and trademark notices, in the form(s) specified
by Saban, on all Products and advertising, promotion, POP materials, packaging,
hang tags, and other materials used in connection with the Products. The size of
such notices and other identifications of Saban shall be substantially the same
as those appearing on Mighty Morphin Power Rangers and Saban's Masked Rider
products. Saban will have the right of prior approval, not to be unreasonably
withheld, of all packaging, advertising, publicity, promotion, and commercials
for all Products. With respect to interactive software Products described in
Schedule "A", Saban will have the right of prior approval, not to be
unreasonably withheld, of all creative elements (including without limitation
game concept and design) and content. Approval shall be deemed given if Licensor
has not given its disapproval within ten (10) business days (or, with respect to
video games, within fifteen [15] business days) after its receipt of materials
for approval.
9. Scripts: Saban shall furnish all scripts for Series episodes to Bandai.
-------
10. Screen Credits: Licensee accepts the designation by Licensor of an "in
--------------
association with" production credit for Renaissance Atlantic Films ("RAF") and a
personal production credit for Frank Ward is appropriate.
3
<PAGE>
11. Provision of Documentation: Subject to confidentiality requirements imposed
--------------------------
on Licensor, Licensor will provide Bandai with a copy of the agreements between
Saban International Services, Inc., and Saban International N.V., on the one
hand, and Toei Company, Ltd., on the other hand, with respect to the Property,
and between Saban Entertainment, Inc., and Fox Children's Network, Inc., with
respect to broadcast of the Series.
12. Sublicensing: Bandai shall not sublicense any rights licensed herein except
------------
to Bandai's affiliates and subsidiaries, Apple Computer (with respect to the
Apple PowerPlayer game system), Nintendo, Sega, and Sony (each with respect to
its proprietary video game systems), and licensees of coin-operated arcade game
rights.
The parties agree that forthwith they will negotiate in good faith in order
to reach a more formal agreement containing the terms and conditions set forth
herein together with such other terms and conditions as are customarily found in
agreements of this nature and which are consistent with the terms and conditions
set forth in the agreement between Saban and Renaissance Atlantic Entertainment
Fund dated November 1, 1992. However, until a more formal agreement has been
fully executed, this Agreement shall constitute the understanding of the parties
and shall be binding upon the parties hereto and the successors and assigns of
each of them.
AGREED TO AND ACCEPTED:
BANDAI AMERICA INCORPORATED
By /s/ Paul Nojima
--------------------
Its Paul Nojima
President
SABAN MERCHANDISING, INC. VENTURA FILM DISTRIBUTORS, B.V.
By /s/ William Josey By /s/ Hector Grob
------------------------- ------------------------
Its SR. VICE PRESIDENT Its HECTOR GROB
ATTORNEY-IN-FACT
4
<PAGE>
Schedule "A"
"Products" means only:
1. Articulated and non-articulated figures, action figures, and bendables in
all sizes and materials;
2. Dolls and doll fashions in all sizes and materials;
3. Vehicles, environments, playsets, and other accessories scaled to figures,
action figures, bendables, and dolls, and (on a non-exclusive basis) collector
cards and mini-comic books only when packaged with such figures, action figures,
bendables, and dolls;
4. Non-powered vehicles, excluding (i) bicycles, tricycles, unicycles,
skateboards, and scooters and (ii) model kits with 20 or more pieces;
5. Role-playing toys, excluding (i) walkie-talkies and (ii) Halloween costumes
and masks;
6. Sidewalk chalk;
7. Collector trading cards sold only through vending machines; and,
8. Apparel, in accordance with the provisions of Schedule "B" attached hereto.
9. The following forms of interactive software:
(i) video games designed for play only on the Apple "Pippin" and Bandai
PowerPlayer video game systems;
(ii) all platforms of Nintendo-video game systems whether now in
existence, or hereafter created;
(iii) coin-operated arcade games and, on a non-exclusive basis, prizes (in
the nature of toys) for on-site redemption for coin-operated arcade games;
provided, however, that if Bandai has not entered into any agreement for
the exploitation of the coin-operated arcade game rights within one (1)
year after the initial U.S. broadcast of the Series, such coin-operated
arcade game rights will revert to Licensor ;
(iv) video games designed for play only on the Sega video game systems and
Sony Playstation video game systems, provided, however, that Bandai shall
pay Licensor [X XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]
of units of such video games; provided, however, that if active development
of Sega video games and/or Playstation video games has not commenced by
January
A-1
<PAGE>
1997 or if Sega video games and/or Playstation video games are not
released in the U.S. by November 1997, those individual Sega platforms
and/or Playstation platforms, as applicable, for which such video games
have not been developed or released thereupon will revert to Saban.
As used herein, "video game" and "arcade game" means an electronic game,
embodied in any electronic form (including without limitation cartridge,
computer chip, magnetic media, or optical disc), the distinguishing feature of
which is a competition between human players or between the game software and
one or more human players (the "Distinguishing Feature"), played by means of
images on a video screen. All other forms of software, multimedia, and
interactive media without the Distinguishing Feature (including without
limitation storytelling software, informational software, and so-called "screen
savers") are reserved to Licensor.
Notwithstanding anything to the contrary set forth herein, "Products" does
not mean or include:
A. Premium and promotional items distributed through customary premium
and promotional channels (such as fast-food restaurants and packaged foods and
drinks), provided, however, that such premium and promotional items shall not
consist of standalone figures and/or vehicles offered for sale to the consumer
individually or in combination with other figures and/or vehicles (but figures
and/or vehicles that are given to the consumer "free" or sold in combination
with other products are permitted) and Bandai shall have a right of consultation
with regard to the timing of distribution of such premium and promotional items;
B. Gift items distributed through customary gift channels;
C. Rack toys retailing at not more than US$4.00 or the equivalent
(adjusted annually for inflation), provided, however, that such rack toys shall
not consist of standalone figures and/or vehicles which have no usefulness other
than as toys;
D. Radio-controlled, remote-controlled, and racing track vehicles and
kid-sized ride-ons and ride-ins (regardless whether or not powered);
E. Arts and crafts;
F. Puzzles and games, including handheld tabletop pinball games, but
excluding coin-operated arcade games; and,
G. Musical instruments, sporting goods, and inflatables.
If, after January 15, 1997, Licensor desires to license any Product (other
than action figures, toy vehicles, transforming toys [similar to Zords], and
Nintendo video games) that is not then marketed by Bandai or its permitted
sublicensees, Licensor may notify Bandai in writing
A-2
<PAGE>
with respect thereto, and, Bandai will have sixty (60) days thereafter to notify
Licensor in writing whether or not Bandai intends to market such item. If Bandai
(i) fails to give notice within such sixty (60) day period, (ii) gives notice of
its intention not to market such Product, or (iii) fails to commence significant
marketing of such Product within one (1) year after its giving notice of its
intention to so market such item, upon the earlier occurrence thereof, Licensor
will have the right to manufacture and market and/or license any third party the
right to manufacture and market such item and such item shall be deemed excluded
from the definition of Product, and Licensor shall have no financial or other
obligation to in connection therewith.
A-3
<PAGE>
Schedule "B"
Apparel
Notwithstanding anything to the contrary set forth elsewhere in this
Agreement, the following terms and conditions shall apply to Apparel:
"Apparel" means only the following clothing categories:
T-shirts; and,
fleece sweat shirts and sweat pants.
The Term for Licensee's rights in Apparel terminates on December 31, 1997;
the parties shall negotiate renewal terms in good faith.
Licensee's rights in Apparel are for exercise only in the U.S.; provided,
however, that Licensee shall have a 90 day right of first negotiation,
subject to Licensor's (or its sublicensees') current licenses, to acquire
the right to manufacture, market, and sell Apparel in countries in Europe.
Licensee's rights in Apparel are limited to the following distribution
channels:
Mass merchandisers, such as K-Mart, Target, and Walmart; mid-tier
retailers, such as Sears, JCPenney, Wards, and Mervyns; and, so-called
"upstairs" department stores, such as Robinson-May, Macy's, and
Bloomingdales.
Licensee's rights in Apparel during the Term therefor are non-exclusive in
the mass merchandiser and mid-tier retailer distribution channels and
exclusive in the "upstairs" department store distribution channel.
[XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX] that Licensor currently
receives from any third party for a non-exclusive U.S. license for T-shirts
and fleece sweat shirts and sweat pants. [XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXX] Such royalty for Apparel shall be in lieu of
any other royalty rate set forth in paragraph 6 of this Agreement. All
royalties payable for Apparel are fully recoupable from Advances set forth
in paragraph 5 hereof.
Licensee's affiliate in Europe shall have a 90 day right of first
negotiation, subject to Licensor's (or its sublicensees') current licenses,
to acquire the non-exclusive right to manufacture, market, and sell
backpacks based on the Property in the U.K. and Europe.
B-1
<PAGE>
Licensee, or its designee shall have a right of first negotiation to
acquire Apparel as part of the grant of rights for the next Saban property
for which Licensee or its designee acquires a master toy license.
B-2
<PAGE>
EXHIBIT 10.38
10960 WILSHIRE BOULEVARD
------------------------
OFFICE LEASE
------------
10960 PROPERTY CORPORATION,
a Delaware corporation,
as Landlord,
and
SABAN ENTERTAINMENT, INC.,
a Delaware corporation,
as Tenant.
<PAGE>
SUMMARY OF BASIC LEASE INFORMATION
----------------------------------
This Summary of Basic Lease Information (the "Summary") is hereby
incorporated into and made a part of the attached Office Lease (this Summary and
the Office Lease to be known collectively as the "Lease") which pertains to the
office building described in Section 6.1 below (the "Building"). Each reference
in the Office Lease to any term of this Summary shall have the meaning as set
forth in this Summary for such term. In the event of a conflict between the
terms of this Summary and the Office Lease, the terms of the Office Lease shall
prevail. Any initially capitalized terms used herein and not otherwise defined
herein shall have the meaning as set forth in the Office Lease.
TERMS OF LEASE
(References are to
the Office Lease) DESCRIPTION
---------------- -----------
1. Dated as of: July 17, 1995.
2. Landlord: 10960 PROPERTY CORPORATION, a Delaware corporation.
3. Address of Landlord 10960 Wilshire Boulevard
(Section 29.14): Suite 1400
Los Angeles, California 90024
Attn: Property Manager
4. Tenant: SABAN ENTERTAINMENT, INC., a Delaware corporation.
5. Address of Tenant
(Section 29.14): Prior To Lease Commencement Date:
--------------------------------
4000 West Alameda
Burbank, California 91505
Attention: Mr. Mel Woods, President
and with a copy to:
4000 West Alameda
Burbank, California 91505
Attention: Bill Josey, Esq.
and
Pillsbury Madison & Sutro
725 South Figueroa Street
Suite 1200
Los Angeles, California 90017
Attention: Michael E. Meyer, Esq.
(ii)
<PAGE>
Subsequent to Lease Commencement Date:
-------------------------------------
10960 Wilshire Boulevard
Suite 2400
Los Angeles, California 90024
Attention: Mr. Mel Woods, President
and with a copy to:
10960 Wilshire Boulevard
Suite 2400
Los Angeles, California 90024
Attention: Bill Josey, Esq.
and
Pillsbury Madison & Sutro
725 South Figueroa Street
Suite 1200
Los Angeles, California 90017
Attention: Michael E. Meyer, Esq.
6. Premises (Article 1)
---------
6.1 Building: 10960 Wilshire Boulevard, consisting of 533,267
rentable square feet.
6.2 Premises: A total of 111,225 rentable square feet of space
(the "Initial Premises"), consisting of 14,817
rentable square feet located on the 2nd floor,
23,556 rentable square feet located on the 4th
floor, for a total of approximately 38,373 rentable
square feet located on the 2nd and 4th floors
(collectively, the "Low-Rise Floors"), and 24,303
rentable square feet located on the 22nd floor,
24,292 square feet located on the 23rd floor and
24,257 rentable square feet located on the 24th
floor, for a total of 72,852 rentable square feet
located on the 22nd, 23rd and 24th floors
(collectively, the "High-Rise Floors"), as set
forth in Exhibit A attached hereto, respectively,
known as Suites 200, 400, 2200, 2300 and 2400.
7, Term (Article 2).
---------
7.1 Lease Term: Ten (10) years subject to two (2) separate five (5)
year options to renew as set forth in Section 2.2.
7.2 Lease Commence- April 1, 1996; as may be extended for "Force
ment Date Majeure Delays" and
(iii)
<PAGE>
"Landlord Caused Delays," as those terms are
defined in Section 5 of the Tenant Work Letter,
attached hereto as Exhibit D.
---------
7.3 Lease Expiration The tenth (10th) anniversary of the Lease
Date: Commencement Date.
8. Base Rent
(Article 3):
---------
<TABLE>
<CAPTION>
Monthly Installment Monthly Installment
of Base Rent on a of Base Rent on a
Aggregate Rentable Square Foot Rentable Square Foot
Aggregate Monthly Installment Basis for the Low- Basis for the
Lease Year Annual Base Rent of Base Rent Rise Floors High-Rise Floors
---------- ---------------- ------------ ----------- ----------------
<S> <C> <C> <C> <C>
1st through 5th $3,157,232.40 $263,102.70 $2.30 $2.40
6th through 10th $3,757,847.40 $313,153.95 $2.75 $2.85
</TABLE>
9. Additional Rent
(Article 4).
---------
9.1 Base Year: The calendar year of 1996.
9.2 Tenant's Share of
Direct Expenses: Approximately 20.86%, as calculated pursuant to the
terms of Section 4.2.6 of the Office Lease.
10. Letter of Credit;
Guaranty Letter of Credit initially in the amount of
(Article 21): $5,005,125.00; Guaranty initially in the amount of
---------- $988,742.80 given by Haim Saban, as Guarantor.
11. Parking Pass Ratio
(Article 28): Three and one-third (3.333) parking passes for
---------- every one thousand (1,000) rentable square feet of
the Premises, which ratio is subject to the terms
of Article 28 of the Office Lease (the "Parking
----------
Pass Ratio"). Included in the allocation of the
number of parking passes determined pursuant to the
Parking Pass Ratio are: (i) one (1) reserved
parking space for every one thousand (1,000)
rentable square feet of the Premises, and (ii)
sixty (60) unreserved parking passes which shall be
located, during the first thirty-six (36) months of
the Lease Term, on both the uncovered roof-top and
covered floor one level below the roof-top, and,
thereafter, shall be located solely on the
uncovered roof-top (the "Roof-Top Spaces"). Tenant
may, from time to time, upon thirty (30) days
notice to Landlord, convert reserved parking spaces
to unreserved parking passes and unreserved parking
passes to reserved parking spaces as set forth in
(iv)
<PAGE>
Article 28 of the Office Lease; provided that in no
----------
event shall any conversion exceed the restrictions
on the number of parking passes set forth in items
(i) and (ii) above. Except as otherwise provided in
Article 28 of the Office Lease, the parking passes
------------------------------
rented by Tenant from Landlord shall be located in
the Parking Garage.
12. Brokers (Section 29.19):Hines Interests Limited Partnership
------------- 10880 Wilshire Boulevard
Suite 444
Los Angeles, California 90024
Les Small & Company,
a Division of Entertainment Realty Corp.
10100 Santa Monica Boulevard
Suite 100B
Los Angeles, California 90067
13. Permitted Use General office use consistent with the character of
(Article 5): a first-class office building, and uses in
--------- connection with film, television and music pre-
production, production and post-production,
including without limitation, studio facilities,
editing facilities and tape storage relating to
such uses.
(v)
<PAGE>
INDEX
-----
<TABLE>
<CAPTION>
ARTICLE SUBJECT MATTER PAGE
- ------- -------------- ----
<S> <C> <C>
ARTICLE 1 REAL PROPERTY, BUILDING, PREMISES,EXPANSION SPACE AND RIGHT OF FIRST OFFER
SPACE........................................................................... 1
ARTICLE 2 LEASE TERM; OPTION TERMS; TERMINATION RIGHTS.................................... 10
ARTICLE 3 BASE RENT....................................................................... 17
ARTICLE 4 ADDITIONAL RENT................................................................. 18
ARTICLE 5 USE OF PREMISES................................................................. 30
ARTICLE 6 SERVICES AND UTILITIES.......................................................... 31
ARTICLE 7 REPAIRS......................................................................... 35
ARTICLE 8 ADDITIONS AND ALTERATIONS....................................................... 37
ARTICLE 9 COVENANT AGAINST LIENS.......................................................... 39
ARTICLE 10 INSURANCE....................................................................... 40
ARTICLE 11 DAMAGE AND DESTRUCTION.......................................................... 43
ARTICLE 12 NONWAIVER....................................................................... 46
ARTICLE 13 CONDEMNATION.................................................................... 46
ARTICLE 14 ASSIGNMENT AND SUBLETTING....................................................... 47
ARTICLE 15 SURRENDER OF PREMISES; REMOVAL OF TRADE FIXTURES................................ 52
ARTICLE 16 HOLDING OVER.................................................................... 53
ARTICLE 17 ESTOPPEL CERTIFICATES........................................................... 54
ARTICLE 18 SUBORDINATION................................................................... 54
ARTICLE 19 DEFAULTS; REMEDIES.............................................................. 55
</TABLE>
(vi)
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 20 ATTORNEYS' FEES................................................................. 59
ARTICLE 21 LETTER OF CREDIT; GUARANTY...................................................... 59
ARTICLE 22 REASONABLE CONSENT.............................................................. 61
ARTICLE 23 SIGNS........................................................................... 61
ARTICLE 24 COMPLIANCE WITH LAW............................................................. 68
ARTICLE 25 LATE CHARGES.................................................................... 69
ARTICLE 26 LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT............................ 69
ARTICLE 27 ENTRY BY LANDLORD............................................................... 70
ARTICLE 28 TENANT PARKING.................................................................. 70
ARTICLE 29 MISCELLANEOUS PROVISIONS........................................................ 72
</TABLE>
(vii)
<PAGE>
EXHIBITS
A OUTLINE OF PREMISES
B RULES AND REGULATIONS
C NOTICE OF LEASE TERM DATES
D TENANT WORK LETTER
E FORM OF TENANT'S ESTOPPEL CERTIFICATE
F ASBESTOS DISCLOSURE STATEMENT
G FORM OF LETTER OF CREDIT
H FORM OF GUARANTY OF LEASE
I TENANT'S SIGNAGE
J LIST OF SUPERIOR RIGHT HOLDERS AND IN-NEGOTIATION RIGHTS
K HVAC SPECIFICATIONS
L JANITORIAL SPECIFICATIONS
M LEASES WITH A RESTRICTIVE PROVISION
N INITIAL RENOVATIONS
0 DESIGNATION OF 20 RESERVED SPACES NOT TO BE RELOCATED
P FORM OF SHORT FORM OF LEASE
Q LOAD FACTORS
(viii)
<PAGE>
INDEX OF MAJOR DEFINED TERMS
----------------------------
<TABLE>
<CAPTION>
PAGE LOCATION
OF DEFINITION
DEFINED TERMS IN OFFICE LEASE
- ------------- ---------------
<S> <C>
$75,000 Cut-Off................................................................ 72
10880 Building................................................................. 7
10880 Property Corporation..................................................... 7
Abatement Event................................................................ 57
Abatement Event Termination Date............................................... 58
Abatement Event Termination Notice............................................. 58
ACM............................................................................ 78
ACM Work....................................................................... 78
Actual Cost.................................................................... 34
Additional Rent................................................................ 18
Affiliate...................................................................... 50
After Hours HVAC............................................................... 34
Alterations.................................................................... 37
Applicable Delivery Date....................................................... 4
Applicable Reassessment........................................................ 28
Arbitration Notice............................................................. 11
Availability Notice............................................................ 7
Availability Rent.............................................................. 7
Available Space................................................................ 8
Average of the Expansion Rent.................................................. 5
Awning Signage................................................................. 62
Base Rent...................................................................... 17
Base Year...................................................................... 18
BBDO........................................................................... 66
Blackened Windows.............................................................. 37
BOMA........................................................................... 3
Build-Out Time................................................................. 13
Building....................................................................... 1
Building Directory Signage..................................................... 63
Building Hours................................................................. 31
Building Structure............................................................. 35
Building Systems............................................................... 35
Business Affiliate............................................................. 51
Claims......................................................................... 40
Commission Agreement........................................................... 75
Comparable Buildings........................................................... 12
Comparable Transactions........................................................ 12
Competitor..................................................................... 67
Competitor List................................................................ 67
</TABLE>
(ix)
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Control........................................................................ 49
Cost Pools..................................................................... 23
Damage Termination Date........................................................ 45
Damage Termination Notice...................................................... 45
Delivery Date Notice........................................................... 4
Delivery Period................................................................ 3
Design Problem................................................................. 37
Direct Expenses................................................................ 18
Early Delivery Notice.......................................................... 5
Effective Date................................................................. 16
Eligibility Period............................................................. 57
Emergency...................................................................... 36
Entertainment Uses............................................................. 2
Estimate....................................................................... 26
Estimate Statement............................................................. 27
Estimated Excess............................................................... 27
Excess......................................................................... 26
Excess Consumption............................................................. 31
Excess Usage................................................................... 33
Excluded Square Footage Space.................................................. 2
Expansion Exercise Notice...................................................... 4
Expansion Option............................................................... 3
Expansion Rent................................................................. 6
Expansion Space................................................................ 3
Expansion Space................................................................ 14
Expansion Space................................................................ 24
Expense Year................................................................... 18
Exterior Plaza................................................................. 67
Fair Market Rental Value....................................................... 12
First Offer Commencement Date.................................................. 9
First Offer Exercise Notice.................................................... 8
First Offer Notice............................................................. 7
First Offer Rent............................................................... 9
First Offer Space.............................................................. 6
First Option Term.............................................................. 11
First Termination Date......................................................... 15
Footage Amount................................................................. 7
Force Majeure.................................................................. 75
Future Renovations............................................................. 77
Governmental Tenant............................................................ 49
Governmental Transferee........................................................ 48
Guaranty....................................................................... 60
Holdover Lease................................................................. 53
Holdover Period................................................................ 53
Holidays....................................................................... 31
</TABLE>
(x)
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
HVAC........................................................................... 33
In-Negotiation Rights.......................................................... 7
Initial Premises...............................................................iii
Initial Renovations............................................................ 77
Initial Staircase.............................................................. 39
Interest Rate.................................................................. 19
L-C............................................................................ 59
L-C Amount..................................................................... 59
L-C Bank....................................................................... 59
L-C Security Deposit........................................................... 60
Landlord....................................................................... 1
Landlord Parties............................................................... 40
Landlord Transfer.............................................................. 73
Lease.......................................................................... 1
Lease Commencement Date........................................................ 10
Lease Expiration Date.......................................................... 10
Lease Term..................................................................... 10
Lease Year..................................................................... 10
Load Factor.................................................................... 3
Main Lobby Signage............................................................. 63
Maximum Amount................................................................. 45
Maximum Liability Amount....................................................... 61
Mezzanine Level................................................................ 37
Midvale Parking Garage Signage................................................. 63
Midvale Parking Signage........................................................ 63
Modern Videofilm............................................................... 50
Negotiations................................................................... 8
New Tenant Identity............................................................ 65
Non-Recognized Subleases....................................................... 57
Non-Coterminous First Offer Space.............................................. 16
Notices........................................................................ 75
Operating Expenses............................................................. 18
Option Exercise Notice......................................................... 12
Option Interest Notice......................................................... 11
Option Rent.................................................................... 12
Option Rent Notice............................................................. 12
Option Space................................................................... 11
Option Term.................................................................... 11
Original Tenant................................................................ 10
Other Tenants' Signs........................................................... 66
Outside Agreement Date......................................................... 13
Outside Date................................................................... 16
Overlap Period................................................................. 58
Overpayment Amount............................................................. 26
Parking Garage................................................................. 1
</TABLE>
(xi)
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Parking Taxes.................................................................. 71
Penthouse Signage.............................................................. 62
Philips........................................................................ 67
Philips Floors................................................................. 8
Philips Monument............................................................... 66
Philips Spandrel Sign.......................................................... 67
Pre-Occupancy Period........................................................... 10
Premises....................................................................... 1
Proposition 13................................................................. 24
Proposition 13 Protection Amount............................................... 28
Proposition 13 Purchase Price.................................................. 28
Proposition 8.................................................................. 23
Quake.......................................................................... 79
Qualified Accountant........................................................... 29
Ratio Decrease Notice.......................................................... 71
Real Property.................................................................. 1
Reassessment................................................................... 28
Recognition Agreement.......................................................... 51
Recognized Space............................................................... 51
Reminder Notice................................................................ 4
Rent1.......................................................................... 7
rent........................................................................... 56
Rent Concessions............................................................... 12
Request Notice................................................................. 7
Reserved Space................................................................. 71
Restrictive Provision.......................................................... 49
Rochlin........................................................................ 66
Rules and Regulations.......................................................... 1
Second Option Term............................................................. 11
Second Termination Date........................................................ 15
Side Letter Agreement.......................................................... 1
Small.......................................................................... 75
Smith Sign..................................................................... 66
Southern Lobby Signage......................................................... 63
Special Costs.................................................................. 23
Specifications................................................................. 63
Statement...................................................................... 26
Subject Space.................................................................. 48
Sublease....................................................................... 51
Sublease Consideration......................................................... 57
Sublease Space................................................................. 51
Submitted Option Rent.......................................................... 12
Subsequent Leases.............................................................. 7
Subsequent Staircase........................................................... 37
Subtenant...................................................................... 51
</TABLE>
(xii)
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Summary........................................................................ 1
Superior Right Holders......................................................... 7
Superior Rights................................................................ 7
Tax Expenses................................................................... 23
Tax Increase................................................................... 28
Telecommunications Equipment................................................... 77
Tenant......................................................................... 1
Tenant Parties................................................................. 40
Tenant Provided Utilities...................................................... 78
Tenant's Property.............................................................. 52
Tenant's Security System....................................................... 33
Tenant's Share................................................................. 25
Tenant's Signage............................................................... 62
Tenant's Signage Name.......................................................... 62
Tenant's Taxes................................................................. 27
Termination Extension Notice................................................... 16
Termination Fee................................................................ 15
Termination Notice............................................................. 15
Transfer Notice................................................................ 48
Transferee..................................................................... 48
Transfers...................................................................... 48
Twelve Month Date.............................................................. 12
Unreserved Pass................................................................ 71
Unused Parking Space........................................................... 71
West Facing Parking Facility Signage........................................... 63
Wilshire Parking Signage....................................................... 63
</TABLE>
(xiii)
<PAGE>
OFFICE LEASE
------------
This Office Lease, dated as of the date set forth in Section 1 of the
---------
Summary, which includes the preceding Summary of Basic Lease Information
attached hereto as pages (ii) through (vi) (the "Summary"), Exhibits A through
Q, and that certain amendment to this Lease in the form of a side letter
agreement and executed concurrently herewith (the "Side Letter Agreement"), all
of which are incorporated herein by this reference (the Office Lease and Summary
to be known sometimes collectively hereafter as the "Lease"), is made by and
between, and is hereby agreed to by and between, "Landlord" and "Tenant," as
those terms are defined in Sections 2 and 4 of the Summary, respectively.
----------------
ARTICLE 1
---------
REAL PROPERTY, BUILDING, PREMISES,
----------------------------------
EXPANSION SPACE AND
-------------------
RIGHT OF FIRST OFFER SPACE
--------------------------
1.1 Definition of and Rights to the Real Property, Building and Premises.
--------------------------------------------------------------------
Upon and subject to the terms set forth in this Lease, Landlord hereby leases to
Tenant and Tenant hereby leases from Landlord the premises set forth in Section
-------
6.2 of the Summary (the "Premises"), which Premises are located in the building
- ---
(the "Building") set forth in Section 6.1 of the Summary, reserving, however, to
-----------
Landlord: (i) all of the Building, except for the space within the inside
surfaces bounding the Premises, and except as provided below in this Article 1,
---------
and (ii) the rights, interests and estates reserved to Landlord by provisions of
this Lease or operation of law. The outline of the Premises is set forth in
Exhibit A attached hereto and the space initially leased by Tenant as outlined,
- ---------
as of the date hereof, on Exhibit A, is occasionally referred to in this Lease
---------
as the "Initial Premises". The rentable square footage of the Initial Premises
is set forth in Section 6 of the Summary. The Building, the parking structure
---------
servicing the Building (the "Parking Garage"), the land upon which the Building
and the Parking Garage stands, and the land and improvements surrounding the
Building and the Parking Garage which are designated from time to time by
Landlord as appurtenant to or servicing the Building, are herein sometimes
collectively referred to herein as the "Real Property."
1.1.1 Condition, Use, Maintenance and Operation of the Real Property.
--------------------------------------------------------------
Tenant acknowledges that Landlord has made no representation or warranty to
Tenant regarding the condition of the Real Property, except as specifically set
forth in this Lease, and has no obligation to alter, remodel, improve, renovate,
repair or decorate the Premises, Building or any part thereof, except as
specifically set forth in this Lease or in the Tenant Work Letter, attached
hereto as Exhibit D. Tenant is hereby granted the right to the nonexclusive use
---------
of the common corridors and hallways, stairwells, elevators, restrooms and other
public or common areas located on the Real Property; provided, however, that the
manner in which such public and common areas are maintained and operated shall
be in accordance with the terms of Article 7 of this Lease and the use thereof
---------
shall be subject to the rules, regulations and restrictions attached hereto as
Exhibit B (the "Rules and Regulations"). Notwithstanding the foregoing, the
- ---------
"Original Tenant," as that term is defined in Section 1.5.6 of this Lease, an
-------------
assignee of Tenant complying with the terms of Article 14, or an "Affiliate" of
----------
Tenant, as that term is defined in Section 14.4 below, may, upon reasonable
------------
prior notice to Landlord, and following Landlord's prior written consent, which
consent shall not be withheld if the conditions set
<PAGE>
forth below are satisfied, have the right, at no charge, to occasionally use the
common areas of the Real Property for the purposes of filming, taping and
hosting parties (collectively, or individually the "Entertainment Uses"), at
Tenant's sole cost and expense; provided that, except as otherwise provided
below, Landlord shall not charge Tenant a fee in order for Tenant to use the
common areas for the Entertainment Use; provided further that each Entertainment
Use shall be consistent with the operations of the Building as a first-class
office building, shall not unreasonably interfere with the use of the Building
by the other tenants and occupants of the Building, and shall be subject to (i)
Landlord's reasonable designation of the period of time and days of the week in
which Tenant may use the common areas for the Entertainment Use, (ii) Landlord's
reasonable designation of specific areas that may not be used for the
Entertainment Use, (iii) Tenant giving Landlord evidence of reasonable security
measures that Tenant will provide during the Entertainment Use, (iv) Tenant
paying for all costs and expenses in connection with the Entertainment Use and
reimbursing Landlord, upon Landlord's request, for all costs and expenses
incurred by Landlord in connection with the Entertainment Use, and (v) any other
reasonable rules and regulations imposed by Landlord on Tenant in connection
with the Entertainment Use. Subject to the terms of this Lease, Landlord
reserves the right to make alterations or additions to or to change the location
of elements of the Real Property and the common areas thereof, provided that
Landlord shall not make any material alterations or modifications to the common
areas, to the extent such material alterations or modifications would materially
and adversely (i) reduce the overall common areas and facilities available to
the Building, or (ii) be inconsistent with the appearance or operation of the
Building as a first-class office building.
1.1.2 Access. Except when and where Tenant's right of access is
------
specifically excluded above and elsewhere in this Lease, Tenant shall have the
fight of access to the Premises, the Building and the Parking Garage twenty-four
(24) hours per day, seven (7) days per week during the "Lease Term," as that
term is defined in Section 2.1 of this Lease, provided, however, Tenant's access
-----------
to the Building and the Parking Garage after the normal hours of business for
the Building and the Parking Garage may be via a card key system or such other
reasonable manner as Landlord elects from time to time. Landlord shall maintain
and operate the Building, the Parking Garage and the common areas of the Real
Property in a first-class manner.
1.2 Verification of Rentable Feet.
-----------------------------
1.2.1 Measurement of Initial Premises, Additional Space and the
---------------------------------------------------------
Building. Landlord and Tenant acknowledge that the rentable square footage of
- --------
the "Initial Premises," as that term is defined in Section 6.2 of the Summary,
-----------
and the rentable square footage of the Building, are as set forth in Sections
--------
6.2 and 6.1, respectively, of the Summary and are not subject to remeasurement
- -----------
or verification at any time. The rentable square footage calculation of 14,817
square feet for the second (2nd) floor of the Initial Premises does not include
the rentable square footage of approximately 862 square feet (plus or minus 200
rentable square feet) (the "Excluded Square Footage Space") which is set forth
and cross-hatched in Exhibit A. The Excluded Square Footage Space may be used by
---------
Tenant throughout the Lease Term, as may be extended, without the payment of
"Base Rent" or "Tenant's Share" of "Direct Expenses," as those terms are
respectively defined in Article 3 and Sections 4.2.6 and 4.2.2 of this Lease,
--------- ------------------------
and without increasing Tenant's Share of Direct Expenses; provided that, in
accordance with the terms of Section 6.1 of this Lease, Landlord shall provide
-----------
to the Excluded Square Footage Space, the applicable utilities and services set
forth in Section 6.1 of this Lease. The rentable
-----------
-2-
<PAGE>
square footage of any space to be added to the Initial Premises is subject to
remeasurement as set forth in this Section 1.2.
-----------
1.2.2 Measurement Standards for All Additional Space. The rental
----------------------------------------------
square feet of any portion of the "Expansion Space" or "First Offer Space," not
including the "Available Space" in the 10880 Building (as those terms are
defined in Sections 1.4 and 1.5 below, respectively) leased by Tenant which
--------------------
constitutes a full floor shall be equal to the product of (i) the applicable
load factor (the "Load Factor") set forth in Exhibit Q, attached hereto, and
---------
(ii) the number of usable square feet of the applicable space measured pursuant
to Standard Method for Measuring Floor Area in Office Buildings, ANSI Z65.1 -
1980 ("BOMA"); provided, however, that the measurement of usable square footage
under BOMA on a full floor occupancy basis shall not include restrooms, and core
electrical, mechanical and janitorial closets. The rentable square feet of any
portion of the Expansion Space or First Offer Space, not including the Available
Space in the 10880 Building, leased by Tenant on multi-tenant floors shall be
equal to the product of (i) the applicable Load Factor, and (ii) the number of
usable square feet of the applicable space measured pursuant to BOMA. The
determination of the rentable square feet of the Expansion Space, Available
Space and/or First Offer Space shall be determined by Landlord and shall be
subject to the reasonable verification by Tenant. The standard of measurement of
rentable square footage used for Available Space in the 10880 Building shall be
the standard then being used for new leases by the landlord of the 10880
Building.
1.3 [Intentionally Omitted]
1.4 Expansion Space. Landlord hereby grants to Tenant the right to lease
---------------
additional space in the Building upon the terms and conditions set forth in this
Section 1.4 and this Lease.
- -----------
1.4.1 Expansion Space/Delivery Periods. Tenant shall have the right
--------------------------------
to lease "Expansion Space 1" and "Expansion Space 2," as those terms are defined
below in this Section 1.4.1, at the times set forth below in this Section
------------- -------
1.4.1, and in the manner as set forth in this Section 1.4 (each, an "Expansion
- ----- ----------
Option"). Expansion Space 1 and Expansion Space 2 are individually or
collectively, as the context may require, referred to as the "Expansion Space."
In the event that the fourteenth (14th) floor of the Building is designated by
Landlord as Expansion Space 2, then Landlord shall convert the 14th floor of the
Building to a floor with access on all elevators servicing the high-rise
elevator bank of the Building and, at Landlord's sole discretion, the 14th floor
may continue to have access to the low-rise elevator bank of the Building.
Time Period (the "Delivery Period")
During Which Landlord Shall Deliver the
Expansion Space Expansion Space to Tenant.
- --------------- -------------------------
-3-
<PAGE>
A. Minimum of six thousand Any time from October 1, 1997 through
(6,000) rentable square feet September 30, 1998
and up to a maximum of an
entire floor (the exact amount
to be determined at Tenant's
option) located on any one (1)
floor of floors fifteen (15)
through twenty (20) of the
Building, the exact floor to
be designated by Landlord
("Expansion Space 1").
B. Minimum of six thousand Any time from August 1, 2001 through
(6,000) rentable square feet July 31, 2002.
and up to a maximum of an
entire floor (the exact amount
to be determined at Tenant's
option) located on any one (1)
floor of floors fourteen (14),
eighteen (18) or twenty (20)
of the Building, the exact
floor to be designated by
Landlord ("Expansion Space
2").
1.4.2 Method of Exercise. Landlord shall deliver notice (the
------------------
"Delivery Date Notice") to Tenant no later than twelve (12) months prior to the
"Applicable Delivery Date," as that term is defined below, stating Landlord's
good-faith reasonable estimate of the date within the applicable Delivery Period
on which Landlord will deliver the applicable Expansion Space to Tenant (the
"Applicable Delivery Date"), and, as to Expansion Space 1 and Expansion Space 2,
stating Landlord's determination of the floor which shall be deemed the
applicable Expansion Space. If Landlord fails to timely deliver the Delivery
Date Notice to Tenant, and, thereafter, Tenant requests Landlord to deliver such
Delivery Date Notice to Tenant ("Reminder Notice"), then if Landlord fails to
respond to Tenant's request within ten (10) business days after Tenant's
request, the Applicable Delivery Date shall be the later of the last day of the
applicable Delivery Period or six (6) months after Landlord delivers the
Reminder Notice to Tenant and Tenant shall have the right to select any floor
applicable to Expansion Space 1 or 2 (provided however, Landlord must always
have a full floor available within the parameters of the floors designated as
Expansion Space 1 or Expansion Space 2, as applicable, and Tenant shall select a
floor from among the one or more full floors that are available). Thereafter,
if Tenant desires to exercise Tenant's option to lease an Expansion Space,
Tenant shall deliver notice to Landlord (the "Expansion Exercise Notice") either
(i)no later than nine (9) months prior to the Applicable Delivery Date, or (ii)
if Tenant sends to Landlord a Reminder Notice because Landlord did not send the
Delivery Date Notice, within thirty (30) days after the date Tenant sends the
Reminder Notice to Landlord, stating that Tenant is interested in exercising its
option to lease either Expansion Space 1 or 2, as applicable, and stating the
amount and location of either Expansion Space 1 or 2, as applicable, that Tenant
desires to lease on the floor containing the Expansion Space and, when
appropriate, the location of the floor of Expansion Space 1 or 2, provided that
the amount of the applicable Expansion Space Tenant does not desire to lease
shall be in a commercially leasable and legally occupiable size and
configuration. If at the time Tenant gives Landlord the Expansion Exercise
Notice, Landlord and Tenant have not mutually agreed upon the "Expansion Rent,"
as that term is defined in Section 1.4.4 of this Lease, then the parties shall
-------------
follow the procedure, and the Expansion Rent for such Expansion Space shall be
determined, as set forth in Section 2.2.4 of this Lease.
-------------
-4-
<PAGE>
1.4.3 Delivery of Expansion Space.
---------------------------
1.4.3.1 Delivery Prior to Delivery Period. If after the
---------------------------------
initial leasing (including any renewal terms) of any Expansion Space but prior
to the commencement of the applicable Delivery Period, any Expansion Space
becomes available for lease to a third party and no current or future tenant of
the Building located on the floor on which the Expansion Space is located
desires to exercise a right, set forth in its lease, of expansion (including a
right to accelerate an expansion right similar to that set forth for Tenant in
this Section 1.4.3.1), first refusal, first offer, or similar right with respect
---------------
to such space, Landlord shall by notice (the "Early Delivery Notice") to Tenant
offer to lease the Expansion Space in question for a term commencing with the
date of availability of such space prior to the applicable Delivery Period and
expiring on the Lease Expiration Date and shall contain the rentable and usable
square feet of the applicable Expansion Space and Landlord's proposed Expansion
Rent, as determined pursuant to the terms of Section 1.4.4 of this Lease, and
-------------
Tenant shall, within ten (10) business days of receipt of such Early Delivery
Notice, accept or refuse such offer to lease. If Tenant does not elect to lease
the Expansion Space in question or fails to respond to Landlord's offer within
such ten (10) business day period, then Landlord shall have nine (9) months from
the date of the Early Delivery Notice to lease the Expansion Space to a third
party on any terms which Landlord desires (subject to Landlord's obligation to
deliver such Expansion Space to Tenant during the applicable Delivery Period);
provided, however, if Landlord fails to lease the Expansion Space within such
nine-month period and prior to the applicable Delivery Period, then Landlord
shall again give Tenant the Early Delivery Notice in accordance with, and
subject to, the terms of this Section 1.4.3.1. Notwithstanding Tenant's failure
---------------
to lease the Expansion Space prior to the applicable Delivery Period pursuant to
the terms of this Section 1.4.3.1, in the event Tenant exercises its option to
---------------
lease an Expansion Space pursuant to the terms of Section 1.4.2, above, then
-------------
Landlord shall deliver to Tenant the Expansion Space during the applicable
Delivery Period pursuant to the terms of Section 1.4.3.2, below. If Tenant so
---------------
elects to lease the Expansion Space prior to the applicable Delivery Period,
such lease shall be upon the terms and conditions set forth in the Early
Delivery Notice and in Sections 1.4.4, 1.4.5 and 1.4.6 of this Lease; provided
-------------------------------
however, that concurrent with Tenant's acceptance of such offer to Lease, Tenant
may object to Landlord's offered Expansion Rent set forth in the Early Delivery
Notice (including the calculation of the rentable square footage and/or the
usable square footage of the Expansion Space) by submitting Tenant's
determination of Expansion Rent to Landlord, and Landlord's and Tenant's
determination of the Expansion Rent, as set forth in their respective notices,
shall immediately be submitted to arbitration in accordance with the terms of
Section 2.2.4 of this Lease, provided further that in the event that the
- -------------
Expansion Rent has not been determined pursuant to the terms of Section 2.2.4 of
-------------
this Lease prior to the commencement of the term of such Expansion Space, then
until such Expansion Rent has been so determined the Rent payable by Tenant with
respect thereto shall (subject to retroactive adjustment when the actual
Expansion Rent has been established) be equal to the "Average of the Expansion
Rent," as that term is defined below, for such space submitted by Landlord and
Tenant to arbitration. The "Average of the Expansion Rent" shall be the average
of the common numerical components of the Expansion Rent figures submitted by
Landlord and Tenant to arbitration, and to the extent that the components of the
Expansion Rent figures are numerical, but not in common or are non-numerical,
then such components shall not be determined until such time that the same are
determined pursuant to arbitration, and then at such time such components of the
Expansion Rent shall be retroactively applied to any then expired term of the
Expansion Space. If Tenant elects to lease the Expansion Space pursuant to the
terms of this Section 1.4.3.1, then the
---------------
-5-
<PAGE>
maximum amount of the Expansion Space Tenant is allowed to lease during the
Delivery Period in connection with that particular option for Expansion Space
shall be reduced by an amount equal to the Expansion Space leased prior to the
Delivery Period pursuant to the terms of this Section 1.4.3.1.
---------------
1.4.3.2 Delivery During the Delivery Period. Landlord shall
-----------------------------------
deliver the Expansion Space to Tenant during the Delivery Period applicable to
such Expansion Space.
1.4.4 Expansion Rent. The rent payable by Tenant for the Expansion
--------------
Space (the "Expansion Rent") shall be equal to ninety-five percent (95%) of the
"Fair Market Rental Value," as that term is defined in Section 2.2.3 of this
-------------
Lease, for the Expansion Space.
1.4.5 Construction in Expansion Space. The applicable terms of the
-------------------------------
Tenant Work Letter (as designated in the Tenant Work Letter) shall govern the
construction of the Expansion Space, except the amount of the "Tenant
Improvement Allowance," as that term is defined in Section 2.1 of the Tenant
-----------
Work Letter, shall be determined as a component of the Expansion Rent.
1.4.6 Amendment to Lease. If Tenant timely exercises its right to
------------------
lease the Expansion Space as set forth herein, Landlord and Tenant shall within
fifteen (15) days thereafter execute an amendment adding such Expansion Space to
this Lease upon the terms and conditions set forth in this Section 1.4. For
-----------
purposes of calculating Tenant's obligations under Article 4 of this Lease,
---------
Tenant's Share shall be increased by an amount equal to the rentable square
footage of such Expansion Space leased by Tenant pursuant to this Section 1.4
-----------
divided by the total rentable square footage of the Building. Except to the
extent inconsistent with the determination of Expansion Rent, all provisions of
the Lease which vary based upon the rentable and usable square footage of the
Premises shall be adjusted to reflect the addition of such Expansion Space to
the Premises. The rentable and usable square footage of such Expansion Space
shall be determined in accordance with the terms of Section 1.2 of this Lease.
-----------
Tenant shall commence payment of the Expansion Rent (subject to any free rent
concession granted pursuant to the definition of Fair Market Rental Value as
defined in Section 2.2.3 below to Landlord upon the earlier of (i) the date when
-------------
Tenant commences business operations in the Expansion Space, and (ii) the date
occurring one hundred twenty (120) days after the date Landlord delivers to
Tenant the substantially completed "base building" of the Expansion Space (which
base building shall be determined pursuant to the terms of this Section 1.4),
-----------
which date shall be extended one (1) day for each day that a Force Majeure Delay
or a Landlord Caused Delay, as the same may be applicable, is deemed to have
occurred pursuant to the terms of Section 5 of the Tenant Work Letter.
---------
1.4.7 No Defaults. Tenant shall not have the right to lease the
-----------
Expansion Space, as provided in this Section 1.4, if, as of the date of the
-----------
attempted exercise of the expansion right by Tenant, or as of the scheduled date
of delivery of the Expansion Space to Tenant, an "Event of Default," as that
term is defined in Section 19.1 of this Lease, by Tenant exists under this
------------
Lease.
1.5 Right of First Offer/Right of Availability. Subject to the terms set
------------------------------------------
forth in this Section 1.5, during the Lease Term, Landlord hereby grants to
-----------
Tenant an ongoing right of first offer in connection with space located on the
third (3rd), fifth (5th), sixth (6th), seventh (7th), eighth (8th) and the
fifteenth (15th) through twenty-first (21st) floors of the Building not
including space which is then part of the Premises (the "First Offer Space");
provided that (i) prior to the Expansion Space Expiration
-6-
<PAGE>
Date for Expansion Space 1, the First Offer Space shall not include Expansion
Space 1, (ii) prior to the Expansion Space Expiration Date for Expansion Space
2, the First Offer Space shall not include Expansion Space 2, and (iii) to the
extent Tenant does not lease Expansion Space 1 or Expansion Space 2, pursuant to
the terms of Section 1.4 (but excluding Section 1.4.3.1) of this Lease, such
----------- ---------------
space not leased by Tenant will not become First Offer Space until after the
subsequent leasing of such space (collectively, the "Subsequent Leases"), and
the rights created by such Subsequent Leases shall also become the rights of
"Superior Right Holders," as that term is defined in this Section 1.5.
-----------
Notwithstanding the foregoing, such right of first offer shall be subordinate
to, and shall, therefore, only commence, following the expiration or earlier
termination of the contractual rights (the "Superior Rights") of tenants
including any renewal rights or any rights to expand their premises
(collectively, the "Superior Right Holders") in the First Offer Space which
exist as of the date of this Lease, or which are contained in the Subsequent
Leases, or which, as of the date of this Lease, are being negotiated for the
First Offer Space (the "In-Negotiation Rights"). As of the date of this Lease,
the tenants relating to the In-Negotiation Rights, and the Superior Right
Holders and their Superior Rights are set forth on Exhibit J, attached hereto.
---------
Tenant's right of first offer shall be on the terms and conditions set forth in
this Section 1.5 and, in addition, during the Lease Term, Tenant shall have a
-----------
right of availability to the "Available Space," as that term is defined in
Section 1.5.1.2, below, on the terms and conditions set forth in this Section
- --------------- -------
1.5.
- ---
1.5.1 Procedure for Offer.
-------------------
1.5.1.1 Procedure for First Offer. Landlord shall notify
-------------------------
Tenant (the "First Offer Notice") from time to time when the First Offer Space
or any portion thereof has or will become available, provided that no Superior
Right Holder wishes to lease such space pursuant to their respective Superior
Rights. The First Offer Notice shall describe the space so offered to Tenant
and shall set forth the "First Offer Rent," as that term is defined in Section
-------
1.5.3 below, and the other economic terms upon which Landlord is willing to
- -----
lease such space to Tenant.
15.1.2 Procedure for Availability Right. Tenant may inform
--------------------------------
Landlord (the "Request Notice"), not more than three (3) times in any Lease
Year, that Tenant desires to lease an amount of square footage (the "Footage
Amount"). Landlord shall, within ten (10) business days of receiving the
Request Notice, deliver to Tenant a notice (the "Availability Notice"), which
Availability Notice shall describe all Available Space (which shall include then
current Available Space, and space that Landlord reasonably believes will become
Available Space within the next twelve (12) months) which meets or exceeds the
Footage Amount and is located in the Building and, subject to compliance with
all the "10880 Building Conditions," as that term is defined in this Section
-------
1.5.1.2, below, is located in that certain office building located at 10880
- -------
Wilshire Boulevard (the "10880 Building"), and shall set forth the determination
of the measurement of the rentable square footage of the Available Space, the
rent and the other economic terms (collectively, the "Availability Rent") upon
which Landlord is willing to lease such space to Tenant. Landlord shall only be
obligated to give Tenant an Availability Notice with respect to space in the
10880 Building if, and only if, (a) the 10880 Building is then owned by 10880
Property Corporation, a Delaware corporation ("10880 Property Corporation"), or
by an entity which is controlled by, controls or is under common control with
Landlord or 10880 Property Corporation, and (b)the 10880 Building is then owned
by the same entity or entities that own Landlord. For purposes of this Section
1.5, "control" has the meaning set forth in Section 14.4 of this
-7-
<PAGE>
Lease and "Available Space" means space which (i) is not part of the Premises,
the Expansion Space or the First Offer Space, (ii) is not then subject to a
lease, (iii) is not then subject to any rights of any tenant to renew their
lease or expand their premises as set forth in their lease, and (iv) is not then
subject to any negotiations (the "Negotiations") between Landlord and a
prospective tenant or an existing tenant as evidenced by a mutually signed
letter of intent or lease proposal or a specifically prepared and tailored lease
document, which signed letter of intent, lease proposal, or specifically
prepared and tailored lease document is received by Landlord or such prospective
or existing tenant, as the case may be, within thirty (30) days prior to the
date that the Request Notice is given; provided that if the Available Space is
subject to one or more Negotiations, then the Request Notice shall only be
subject to the rights of the particular prospective or existing tenants then in
negotiation with Landlord.
1.5.2 Procedure for Acceptance. Except as those terms are used as
------------------------
set forth above in this Section 1.5, and except as otherwise referred to
-----------
specifically in this Lease (excluding the foregoing portion of this Section
-------
1.5), the term "First Offer Notice" shall be deemed to also mean the
"Availability Notice," the term "First Offer Rent" shall be deemed to also mean
"Availability Rent," and the term "First Offer Space" shall be deemed to also
mean "Available Space." If Tenant wishes to exercise Tenant's rights set forth
in this Section 1.5 with respect to the space described in the First Offer
-----------
Notice, then within ten (10) business days of delivery of the First Offer Notice
to Tenant, Tenant shall deliver notice to Landlord (the "First Offer Exercise
Notice") of Tenant's intention to exercise its rights set forth in this Section
1.5 with respect to the entire space described in the First Offer Notice on the
terms contained in such notice; provided that in the event that the space
described in the First Offer Notice includes one or more full floors of the
total amount of space on the fifth, sixth, seventh or eighth floors of the
Building (the "Philips Floors"), then Tenant may elect to lease one or more full
floors of such Philips Floors as long as any full floor that Tenant leases is
not contiguous on both sides to full floors which are Philips Floors and contain
space that Tenant does not then lease; provided further that if Tenant exercises
its right to lease the First Offer Space, but does not state that Tenant agrees
to the terms contained in the First Offer Notice, such failure shall be deemed
Tenant's rejection of such terms. In the event that concurrent with Tenant's
exercise of its rights under this Section 1.5, Tenant notifies Landlord that it
-----------
does not accept the First Offer Rent set forth in the First Offer Notice, or if
Tenant is deemed to have rejected the terms stated in the First Offer Notice,
the First Offer Rent shall be determined in accordance with the same procedure
as set forth in Section 2.2.4 of this Lease. If Tenant does not exercise its
-------------
right to lease the First Offer Space within the ten (10) business day period,
then Landlord shall be free to lease the space described in the First Offer
Notice to anyone to whom Landlord desires on any terms Landlord desires and as
to the First Offer Space, as opposed to the Available Space (which space is
governed by the terms of items (i) through (iv) of Section 1.5.1.2, above), the
---------------
rights created by such leasing that relates to the First Offer Space shall
become rights of Superior Right Holders; provided that if Landlord does not
lease such First Offer Space, disregarding for this purpose any Available Space,
for a period of nine (9) months after delivery of the First Offer Notice to
Tenant, Tenant's right of first offer set forth in this Section 1.5 shall again
-----------
be applicable to such First Offer Space. Notwithstanding anything to the
contrary contained herein, except as provided above as to the Philips Floors,
Tenant must elect to exercise its right of first offer, if at all, with respect
to all of the space offered by Landlord to Tenant at any particular time, and
Tenant may not elect to lease only a portion thereof. If Tenant does not elect
to exercise its right of first offer with respect to the First Offer Space, not
including the Available Space, then Landlord shall not offer or otherwise
-8-
<PAGE>
lease to another tenant or prospective tenant less than the entire First Offer
Space offered to Tenant and if Landlord desires to lease less than such entire
First Offer Space, not including the Available Space, offered to Tenant, Tenant
shall first have a further right to lease such smaller First Offer Space
pursuant to an additional First Offer Notice and upon the terms set forth in
this Section 1.5, provided that Tenant must exercise such additional first offer
-----------
right within five (5) business days of delivery of the additional First Offer
Notice.
1.5.3 First Offer Space Rent. The Rent payable by Tenant for the
----------------------
First Offer Space (the "First Offer Rent") shall be equal to ninety-five percent
(95%) of the Fair Market Rental Value for the First Offer Space.
1.5.4 Construction in First Offer Space. Tenant shall accept the
---------------------------------
First Offer Space in its "as is" condition following the completion of the
removal, encapsulation or entombment of any asbestos-containing material in the
First Offer Space by Landlord in accordance with Landlord's abatement program,
which abatement program shall be similar to and consistent with the program
applied by Landlord for the relevant portions of the initial Premises, and in
compliance with, and as required by, applicable governmental codes and
regulations. The construction of improvements in the First Offer Space shall
comply with the terms of Article 8 of this Lease, and the amount of any tenant
---------
improvement allowance to be granted to Tenant for the costs relating to the
initial design and construction of Tenant's improvements in the First Offer
Space shall be determined as a component of the Fair Market Rental Value in
accordance with the terms of Section 1.5.3, above.
-------------
1.5.5 Amendment to Lease. If Tenant timely exercises Tenant's right
------------------
to lease the First Offer Space upon the terms set forth herein, Landlord and
Tenant shall within fifteen (15) days thereafter execute an amendment to this
Lease for such First Offer Space upon the terms and conditions as set forth in
the First Offer Notice and this Section 1.5; provided that if the First Offer
-----------
Space is located in the 10880 Building, Landlord and Tenant shall, within thirty
(30) days thereafter, execute a separate lease for such space upon the
applicable terms and conditions set forth in the First Offer Notice and this
Lease, except to the extent such terms and conditions are inconsistent with or
not applicable to the physical constraints of the 10880 Building and the
improvements surrounding the 10880 Building. Tenant shall commence payment of
Rent (subject to the granting of free rent pursuant to the definition of Fair
Market Rental Value) for the First Offer Space, and the term of the First Offer
Space shall commence upon the earlier of (i) the date when Tenant commences
business operations in the First Offer Space and (ii) the date occurring one
hundred twenty (120) days (which time period will be increased by thirty (30)
days (as extended the "Expansion Construction Period"), for each full floor
leased by Tenant in excess of one (1) full floor, but in no event shall the
Expansion Construction Period exceed one hundred eighty (180) days in the
aggregate, unless a Force Majeure Delay or a Landlord Caused Delay, which is
deemed to have occurred, causes the Expansion Construction Period to exceed such
180-day period) after the date Landlord delivers to Tenant the substantially
completed "base building" of the First Offer Space (as such base building is
determined pursuant to the terms of this Section 1.5), which Expansion
-----------
Construction Period will be extended one (1) day for every day that a Force
Majeure Delay or a Landlord Caused Delay, as applicable, is deemed to have
occurred pursuant to the terms of Section 5 of the Tenant Work Letter (the
"First Offer Commencement Date"). The term of the First Offer Space shall
expire upon the date, which is the later of(i) the Lease Expiration Date,
-9-
<PAGE>
as may be extended pursuant to the terms of Section 2.2 of this Lease and (ii)
-----------
the date occurring eighteen (18) months after the First Offer Commencement Date.
1.5.6 Termination of Right of First Offer. The rights contained
-----------------------------------
in this Section 1.5 with respect to the First Offer Space and the Available
-----------
Space in the Building, but not including the Available Space in the 10880
Building, shall not be personal to the Tenant named in the Summary (the
"Original Tenant"). Notwithstanding the foregoing, the rights contained in this
Section 1.5 with respect to the Available Space in the 10880 Building shall be
- -----------
personal to the Original Tenant and may only be exercised by the Original Tenant
(and not any assignee, sublessee or other transferee of the Original Tenant's
interest in this Lease) if the Original Tenant occupies at least fifty percent
(50%) of the Premises. Tenant shall not have the right to lease the First Offer
Space, as provided in this Section 1.5, if, as of the date of the attempted
-----------
exercise of any such rights, or as of the scheduled date of delivery of such
First Offer Space to Tenant, an Event of Default by Tenant exists under this
Lease, or if during any "Option Term," as that term is defined in Section 2.2.1
-------------
of this Lease, Tenant does not lease at least 70,000 rentable square feet.
ARTICLE 2
---------
LEASE TERM; OPTION TERMS; TERMINATION RIGHTS
---------------------------------------------
2.1 Initial Lease Term. The terms and provisions of this Lease shall be
------------------
effective as of the date of this Lease. The term of this Lease, as may be
extended pursuant to the terms of Section 2.2 below (the "Lease Term"), shall be
as set forth in Section 7.1 of the Summary and shall commence on the date (the
-----------
"Lease Commencement Date") set forth in Section 7.2 of the Summary, as such date
-----------
may be extended for Force Majeure Delays and Landlord Caused Delays pursuant to
the terms of Section 5 of the Tenant Work Letter, and shall terminate on the
---------
date (the "Lease Expiration Date") set forth in Section 7.3 of the Summary,
-----------
unless this Lease is sooner terminated or is extended as hereinafter provided
Tenant shall have the right to occupy the Initial Premises on and after December
15, 1995 and prior to the Lease Commencement Date (the "Pre-Occupancy Period"),
and all of the terms and conditions of this Lease shall apply as though the
Lease Commencement Date had occurred (although the Lease Commencement Date shall
not actually occur until the date set forth in Section 7.2 of the Summary, as
-----------
such date may be extended pursuant to the terms of Section 5 of the Tenant Work
---------
Letter); provided that during such Pre-Occupancy Period, the terms of Articles 3
----------
and 4 of this Lease shall not apply to the Initial Premises, except commencing
- -----
on March 1, 1996, and continuing until the end of the Pre-Occupancy Period,
Tenant shall pay to Landlord, in accordance with the payment procedures set
forth in Section 3.1 of this Lease, Base Rent on a monthly basis for the Initial
Premises equal to the product of (i) Fifteen Cents ($0.15) and (ii) the rentable
square feet of the Initial Premises. For purposes of this Lease, the term
"Lease Year" shall mean each consecutive twelve (12) month period during the
Lease Term commencing on the Lease Commencement Date. Within three (3) months
following the Lease Commencement Date, Landlord shall deliver to Tenant a notice
in the form as set forth in Exhibit C, attached hereto, which Tenant may execute
---------
and return to Landlord within ten (10) days of receipt thereof (provided that if
said notice is not factually correct, then Tenant shall make such changes as are
necessary to make the notice factually correct and shall thereafter execute and
return such notice to Landlord within such ten (10) day period), and thereafter
the dates set forth on such notice shall be conclusive and binding upon Tenant.
Failure of Tenant to execute and deliver the Notice
-10-
<PAGE>
of Lease Term Dates within five (5) days after written notice of such failure
delivered by Landlord to Tenant after the expiration of the ten (10) day period
described above, shall constitute an acknowledgment by Tenant that the
statements included in such notice are true and correct, without exception.
2.2 Option Terms.
------------
2.2.1 Option Rights. Provided that, as of the date of delivery of
-------------
the "Option Exercise Notice," as that term is defined in Section 2.2.2, below,
-------------
an Event of Default by Tenant does not exist under this Lease, Landlord hereby
grants Tenant two (2) options to extend the Lease Term of the applicable "Option
Space," as that term is defined below, for a period of five (5) years each
(collectively the "Option Term," and individually, the "First Option Term" and
the "Second Option Term," respectively). The "Option Space" shall, at Tenant's
option, consist of either (i) the then existing entire Premises, or (ii) a
portion of the Premises, provided if the Option Space consists of a portion of
the Premises (A) that portion of the Premises shall consist of at least one full
floor of the Premises, (B) all the rentable square feet on any floor which is
part of the Premises and is also part of the Option Space must be included in
the Option Space, and (C) if the Option Space contains one of floors 23 or 24,
it must contain both of floors 23 and 24. The options shall be exercisable only
by written notice delivered by Tenant to Landlord as provided below. Upon the
failure of Tenant to properly exercise the option to extend the initial Lease
Term for the First Option Term, Tenant's option to extend the Lease Term for the
Second Option Term shall automatically terminate and be of no further force or
effect. Upon the proper exercise of such options to extend, and provided that
as of the end of the initial Lease Term, and/or the First Option Term, as the
case may be, an Event of Default by Tenant does not exist under this Lease, the
initial Lease Term, or the First Option Term, as the case may be, as it applies
to the applicable Option Space, shall be extended for a period of five (5) years
provided that the term of any First Offer Space which is not coterminous with
the First Option Term or the Second Option Term, as the case may be, shall be
extended only for a term which makes the term of such space coterminous with the
term of the remainder of the Premises.
2.2.2 Exercise of Options. The options contained in this Section 2.2
------------------- -----------
shall be exercised by Tenant, if at all, only in the following manner: (i)
Tenant, at its sole discretion, may deliver written notice to Landlord (the
"Option Interest Notice") not more than twenty-four (24) months nor less than
fifteen (15) months prior to the expiration of the initial Lease Term, or the
First Option Term, as the case may be, stating that Tenant is interested in
exercising its option with respect to the applicable Option Space Tenant
designates therein; (ii) if Tenant delivers to Landlord the Option Interest
Notice, after Landlord's receipt of the Option Interest Notice, Landlord shall
deliver notice (the "Option Rent Notice") to Tenant not less than thirteen (13)
months prior to the expiration of the initial Lease Term, or the First Option
Term, as the case may be, setting forth the "Option Rent," as that term is
defined in Section 2.2.3 below; provided that in no event shall Tenant's
-------------
delivery of the Option Interest Notice be a condition precedent to Tenant's
exercise of its options to extend the Lease Term, but shall instead be only a
condition precedent to Landlord's obligation to deliver the Option Rent Notice;
(iii) Tenant, at its sole discretion, may deliver written notice to Landlord
(the "Arbitration Notice"), within fifteen (15) days following Landlord's
delivery to Tenant of the Option Rent Notice or, if Tenant did not deliver to
Landlord the Option Interest Notice, then within the period not less than
thirteen (13) months prior to the expiration of the initial Lease Term, or the
First Option Term, as the case may be,
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<PAGE>
requesting Landlord's determination of the Option Rent that Landlord would
submit to arbitration if arbitration were to occur under Section 2.2.4 below,
-------------
and within ten (10) days of such request, Landlord and Tenant shall each deliver
to the other their determinations of the Option Rent that each would submit to
arbitration if arbitration were to occur under Section 2.2.4 below (individually
-------------
and collectively the "Submitted Option Rent"); and (iv) if Tenant desires to
exercise such option, then (a)if Tenant did not deliver the Option Interest
Notice, Tenant shall on or before the date occurring twelve (12) months prior to
the expiration of the initial Lease Term or the First Option Term, as the case
may be (the "Twelve Month Date"), exercise the option by delivering written
notice to Landlord stating that Tenant is exercising its option with respect to
the applicable Option Space Tenant designates therein (the "Option Exercise
Notice"), or (b) if Tenant did deliver the Option Interest Notice, Tenant shall
on or before the later of the Twelve Month Date and the date occurring thirty
(30) days after Tenant's receipt of the Option Rent Notice, exercise the option
by delivering the Option Exercise Notice to Landlord and upon, and concurrent
with, such exercise in items (a) or (b), above, Tenant may either, at its
option, (A) agree to such terms negotiated between Landlord and Tenant, (B) if
Tenant did not deliver the Arbitration Notice, object to the Option Rent
contained in the Option Rent Notice, in which case the parties shall follow the
procedure, and the Option Rent shall be determined, as set forth in Section
-------
2.2.4, below, or (C) if Tenant delivered the Arbitration Notice, object to
- -----
Landlord's Submitted Option Rent, in which case the parties shall follow the
procedure, and the Option Rent shall be determined, as set forth in Section
-------
2.2.4 below.
- -----
2.2.3 Option Rent. Subject to the terms of Section 2.2.4, below, the
----------- -------------
Rent payable by Tenant during each Option Term shall be equal to the Fair Market
Rental Value for the Option Space (the "Option Rent"). "Fair Market Rental
Value" shall mean ninety-five percent (95%) of the average rent (including
additional rent and considering any "base year" or "expense stop" applicable
thereto), including all escalations, for all non-renewal, non-sublease, non-
encumbered, non-equity leases of space, which leases were consummated no earlier
than the twelve (12) month period preceding the applicable Option Exercise
Notice (the "Comparable Transactions"), located in the Building and in the
comparable buildings located on Wilshire Boulevard in Los Angeles, California
between Westgate Avenue and Glendon Avenue (collectively, the "Comparable
Buildings"), which space is comparable in size, location and quality to the
Option Space, the Expansion Space or the applicable First Offer Space, as the
case may be, with adjustments to account for differences in such size, location
and quality of such space, projected to be in effect as of the first day of the
Option Term (or in the case of the Expansion Space, the first day of the term of
the Expansion Space, or in the case of the First Offer Space, the first day of
the term of the First Offer Space) for a term of five (5) years (or in the case
of the Expansion Space or the First Offer Space, as the case may be, for a term
comparable to the remaining initial Lease Term or First Option Term or the term
of the First Offer Space, as the case may be), in each case taking into
consideration the following concessions set forth in items (a), (b) and (c),
below (collectively, the "Rent Concessions"), and in each case deducting the
value of the concession provided in connection with the usage of heating,
ventilation and air conditioning for the Premises during the Option Term
pursuant to the terms of items (i) and (ii) of Section 6.1.1 of this Lease
-------------
except to the extent a similar concession is contained in the Comparable
Transactions: (a) rental abatement or reduced rental concessions, if any,
provided in connection with such comparable-space; (b) tenant improvements or
allowances provided or to be provided for such comparable space, taking into
account, and deducting the value of the existing improvements in the Option
Space, the Expansion Space or the First Offer Space, as the case may be, as
compared to the value of the existing improvements in the comparable space, with
such
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value in each case to be based upon the age, quality and layout of the
improvements and the extent to which the same would be valued by a new third
party general office user; and (c) any other monetary concessions granted in
connection with the leasing of such comparable space, including, but not limited
to, lease assumptions, signing bonuses and Proposition 13 protection for tenants
in the event of a change in ownership of the applicable building, that landlords
of the Comparable Buildings exclude from the payment of rent respectively;
provided, however, that in calculating the Fair Market Rental Value, no
consideration shall be given to the fact that (i) Landlord is or is not required
to pay a real estate brokerage commission in connection with Tenant's extension
of the Lease Term or lease of the Expansion Space or the First Offer Space, as
the case may be, (ii) landlords are or are not paying real estate brokerage
commissions in connection with such comparable space, and (iii) in connection
with Option Rent only, landlords do or do not grant rent abatement in connection
with the construction of tenant improvements in the applicable space. In the
event that the Comparable Transactions do not provide the same extent of
Proposition 13 protection granted to Tenant under Section 4.5 of this Lease (the
-----------
"Proposition 13 Concession"), or the same amount of construction time set forth
in Section 1.4.5 or 1.5.4 or of this Lease (the "Build-Out Time"), then Tenant
----------------------
shall nevertheless receive the Proposition 13 Concession and/or the applicable
Build-Out Time, as the case may be; provided that Landlord shall have the right
to increase the Fair Market Rental Value to reflect the additional cost to
Landlord to provide the Proposition 13 Concession and/or the applicable Build-
Out Time, as the case may be, to Tenant. In the event that Rent Concessions
shall be granted to Tenant with respect to the lease term of the Expansion Space
or the First Offer Space or the Option Term, then the Fair Market Rental Value
determination shall include a determination as to whether, and if so to what
extent, Tenant must provide Landlord with financial security, such as a letter
of credit or guaranty, for Tenant's Rent obligations during the lease term of
the Expansion Space or the First Offer Space or the Option Term in order to
secure repayment to Landlord of such Rent Concessions. Such determination shall
be made by reviewing the extent of financial security then generally being
imposed in Comparable Transactions (which Comparable Transactions include Rent
Concessions) from tenants of comparable financial condition and credit history
to the then-existing financial condition of Tenant (or with appropriate
adjustments to account for differences in the then-existing financial condition
of Tenant and such other tenants, and in the amount of the Rent Concessions
given in connection with the lease term of the Expansion Space or the First
Offer Space or the Option Term, as opposed to Rent Concessions given in such
Comparable Transactions).
2.2.4 Determination of Option Rent and/or First Offer Rent and/or
-----------------------------------------------------------
Expansion Rent. In the event Tenant exercises its option right, first offer
- --------------
right and/or expansion right, as the case may be, and objects, or is deemed to
have objected, to the Option Rent and/or First Offer Rent and/or Expansion Rent,
as the case may be, and requests a rent determination in accordance with this
Section 2.2.4, Landlord and Tenant shall further attempt to agree upon the
- -------------
Option Rent and/or the First Offer Rent and/or the Expansion Rent, as the case
may be, using their best good-faith efforts. If Landlord and Tenant fall to
reach agreement (i) by five (5) months prior to the initial Lease Expiration
Date, with respect to Tenant's option right or (ii) within ten (10) business
days following Tenant's objection, or deemed objection, to the First Offer Rent
or the Expansion Rent, as the case may be (in each instance an "Outside
Agreement Date"), then each party shall make a separate determination of the
applicable Fair Market Rental Value within five (5) business days after the
applicable Outside Agreement Date and such determinations shall be submitted to
arbitration in accordance with Sections 2.2.4.1 through 2.2.4.7, below;
---------------- -------
provided, however, that if Landlord and Tenant have delivered to the other party
their
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<PAGE>
Submitted Option Rent pursuant to the terms of Section 2.2(iii) above, then such
---------------
Submitted Option Rent shall be submitted to Arbitration in accordance with
Sections 2.2.4.1 through 2.2.4.7, below.
- ---------------- -------
2.2.4.1 Landlord and Tenant shall each appoint one arbitrator
(and Landlord or Tenant may consult with such arbitrator prior to his or her
appointment and such arbitrator shall be considered an advocate arbitrator) who
shall by profession be either a M.A.I. appraiser or a real estate attorney who
shall not have been previously employed by Landlord or Tenant over the five (5)
year period prior to the date of such appointment and who shall have been active
over the ten (10) year period prior to the date of such appointment in the
appraisal or the drafting and negotiation of leases, as the case may be, of
commercial high-rise properties in the West Los Angeles, California area. The
determination of the arbitrators shall be limited solely to the issue as to
whether Landlord's or Tenant's submitted applicable Fair Market Rental Value is
the closest to the actual applicable Fair Market Rental Value as determined by
the arbitrators, taking into account the applicable requirements of Section
-------
2.2.3 of this Lease. Each such arbitrator shall be appointed within thirty (30)
- -----
days after the applicable application Outside Agreement Date, as the case may
be.
2.2.4.2 The two arbitrators so appointed shall within ten
(10) days of the date of the appointment of the last appointed arbitrator agree
upon and appoint a third neutral arbitrator who shall be qualified under the
same criteria set forth hereinabove for qualification of the initial two
arbitrators; provided that neither party or either of the advocate arbitrators
may directly or indirectly, consult with or communicate with the neutral
arbitrator prior to his or her appointment except to inquire as to such
arbitrators willingness or availability to participate in the arbitration.
2.2.4.3 The three arbitrators shall within thirty (30) days
of the appointment of the third arbitrator reach a decision as to whether the
parties shall use Landlord's or Tenant's submitted applicable Fair Market Rental
Value, or Submitted Option Rent, as applicable, and shall notify Landlord and
Tenant thereof.
2.2.4.4 The decision of the majority of the three arbitrators
shall be binding upon Landlord and Tenant. If no decision is made by such
majority, then the decision of the third arbitrator shall be binding on Landlord
and Tenant. In making the decision, in no event shall the three arbitrators or
the third arbitrator have the right to amend, modify, compromise, average or
blend either of the first two determinations, it being the intent of Landlord
and Tenant that the three arbitrators or the third arbitrator, as the case may
be, shall simply select the one of two such determinations that in the third
arbitrator's judgment most accurately defines the applicable Fair Market Rental
Value.
2.2.3.5 The decision of the arbitrators pursuant to Section
-------
2.2.4.4 or Section 2.2.4.6 (as applicable) shall be final and binding upon
- ------- ---------------
Landlord and Tenant and judgment on such decision may be rendered in a court of
competent jurisdiction.
2.2.4.6 If either Landlord or Tenant fails to appoint an
arbitrator within thirty (30) days after the applicable Outside Agreement Date,
as the case may be, the arbitrator appointed by one of them shall reach a
decision, notify Landlord and Tenant thereof, and such arbitrator's decision
shall be binding upon Landlord and Tenant.
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<PAGE>
2.2.4.7 If the two arbitrators fail to agree upon and appoint
a third arbitrator, then the appointment of the third arbitrator shall be made
by the American Arbitration Association, but subject to the instruction set
forth in this Section 2.2.4.
-------------
2.2.4.8 The cost of (a) the arbitrators selected by Landlord
and Tenant shall be paid individually by the appointing party, and (b) the third
arbitrator's fees and the costs of the arbitration proceeding shall be paid by
Landlord and Tenant equally.
2.3 Tenant Termination Right During the Lease Term.
----------------------------------------------
2.3.1 Initial Premises; Termination Procedure. Provided that as of
---------------------------------------
the date of Tenant's delivery of the "Termination Notice," as that term is
defined below in this Section 2.3, an Event of Default by Tenant does not exit
-----------
under this Lease, Tenant shall have the right to terminate this Lease,
effective, at Tenant's option, either as of the last day of the sixth (6th)
Lease Year (the "First Termination Date") or the last day of the eighth (8th)
Lease Year (the "Second Termination Date"). The effectiveness of Tenant's
termination of this Lease pursuant to the terms of this Section 2.3 shall be
-----------
conditioned upon Landlord's receipt of written notice (the "Termination Notice")
from Tenant on or before the date which is twelve (12) months prior to the First
Termination Date or the Second Termination Date, as the case may be, stating
that Tenant elects to terminate this Lease pursuant to the terms and conditions
of this Section 2.3. In connection with the termination of this Lease, Tenant
shall pay to Landlord (A) fifty percent (50%) of the "Termination Fee," as that
term is defined in this Section 2.3 concurrent with Landlord's receipt of the
-----------
Termination Notice, and (B) the remaining portion of the Termination Fee upon
the First Termination Date or Second Termination Date, as applicable,
collectively as consideration for and as a condition precedent to such early
termination. Notwithstanding the foregoing, upon an Event of Default by Tenant
hereunder, all unpaid portions of the Termination Fee shall immediately become
due and payable and if paid within ten (10) business days of the Event of
Default, the termination shall remain effective. Further, upon Landlord's
receipt of the Termination Notice, Tenant's right to expand the Premises under
Section 1.4, above, Tenant's right of first offer under Section 1.5, above, and
- ----------- -----------
Tenant's right to extend the Lease Term under Section 2.2, above, shall each
-----------
terminate and be of no further force or effect. Provided that Tenant terminates
this Lease pursuant to the terms of this Section 2.3, this Lease shall
automatically terminate and be of no further force or effect and Landlord and
Tenant shall be relieved of their respective obligations under this Lease as of
the First Termination Date or the Second Termination Date, as the case may be,
except those obligations set forth in this Lease which specifically survive the
expiration or earlier termination of this Lease, including, without limitation,
the payment by Tenant of all amounts owed by Tenant under this Lease up to and
including the First Termination Date or the Second Termination Date, as the case
may be. In connection with the termination of this Lease upon the First
Termination Date, the "Termination Fee" shall be equal to the product of (A)
Thirty Dollars ($30.00) and (B) the number of rentable square feet in the
Initial Premises as of the date of the Termination Notice. In connection with
the termination of this Lease upon the Second Termination Date, the "Termination
Fee" shall be equal to the product of (A) Fifteen Dollars ($15.00) and (B) the
number of rentable square feet in the Initial Premises as of the date of the
Termination Notice. In addition, in the event that Tenant leases any First Offer
Space or Expansion Space, as the case may be, the Termination Fee shall be
increased by an amount, if any, equal to the unamortized value of the
"Concessions," as that term is defined in Section 2.3.2, below, for each portion
-------------
of the First Offer Space or the Expansion Space, as applicable, leased by
Tenant.
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<PAGE>
2.3.2 Unamortized Value as of the Termination Date of the Concessions
---------------------------------------------------------------
2.3.2.1 Concessions. For purposes of this Section 2.3,
----------- -----------
"Concessions" shall be equal to the sum of (A) the amount of any monetary
concessions, including improvement allowances granted by Landlord in connection
with the delivery of the applicable portion of the First Offer Space or the
Expansion Space, as applicable, by Landlord to Tenant, (B) the amount of the
real estate commissions paid to Tenant and/or a brokerage company representing
Tenant or Landlord in connection with the consummation of the lease by Tenant of
a portion of the First Offer Space or the Expansion Space, as applicable, if
any, and (C) the amount of the free rent or rent abatement granted to Tenant in
connection with the lease of such portion of the Expansion Space or First Offer
Space.
2.3.2.2 The Unamortized Value as of the Termination Date.
------------------------------------------------
The "Unamortized Value as of the Termination Date" of the applicable Concessions
shall be equal to the product of (x) a fraction, the numerator of which is 48
(in connection with the First Termination Date), or 24 (in connection with the
Second Termination Date), or as to any First Offer Space which is not
coterminous with the Lease Term of the remainder of the Premises (the "Non-
Coterminous First Offer Space"), the number of full or partial months from the
First Termination Date or Second Termination Date, as the case may be, to the
expiration of the term of such First Offer Space, and the denominator of which
is (i) 120 minus the number of months of the initial Lease Term for the Initial
Premises which expired prior to the applicable commencement date for the
applicable Expansion Space or First Offer Space, or (ii) as to any Non-
Coterminous First Offer Space, the number of full or partial months of the
entire lease term of such Non-Coterminous First Offer Space, and (y) the amount
of the applicable Concessions.
2.4 Occurrence of Ready for Construction Date.
-----------------------------------------
2.4.1 Outside Date for the Ready for Construction Date. If
------------------------------------------------
Landlord does not cause the Premises to be "Ready for Construction," as that
term is defined in Section 1.2 of the Tenant Work Letter on or before January 1,
-----------
1996 (the "Outside Date"), then the sole remedy of Tenant for such failure shall
be the right to deliver a notice to Landlord (a "Termination Notice") electing
to terminate this Lease effective upon the date occurring five (5) business days
following receipt by Landlord of the Termination Notice (the "Effective Date").
The Termination Notice must be delivered by Tenant to Landlord, if at all, not
earlier than the Outside Date (as the same may be extended pursuant to the terms
of Section 2.4.3 below) nor later than five (5) business days after the Outside
-------------
Date. The effectiveness of any such Termination Notice delivered by Tenant to
Landlord shall-be governed by the terms of this Section 2.4.
-----------
2.4.2 Extension of Outside Date After Delivery of the Termination
-----------------------------------------------------------
Notice. If Tenant delivers a Termination Notice to Landlord, then Landlord
- ------
shall have the right to suspend the occurrence of the Effective Date for a
period ending thirty (30) days after the Effective Date by delivering to Tenant,
prior to the Effective Date, a certificate of Landlord's contractor responsible
for the construction of the Tenant Improvements certifying that it is such
contractor's best good faith judgment that the Premises will be Ready for
Construction within thirty (30) days after the Effective Date (the "Termination
Extension Notice"). If the Premises are Ready for Construction prior to the
expiration of such thirty-day period, then the Termination Notice shall be of no
force or effect, but if the Premises
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<PAGE>
are not Ready for Construction within such thirty-day period, then this Lease
shall terminate upon the expiration of such thirty-day period.
2.4.3 Extension of Outside Date Prior to the Delivery of Termination
--------------------------------------------------------------
Notice. Additionally, if a Termination Notice has not been delivered by Tenant
- ------
to Landlord and, prior to the Outside Date, Landlord determines that the
Premises will not be Ready for Construction by the Outside Date, Landlord shall
have the right to deliver a written notice to Tenant stating Landlord's opinion
as to the date by which the Premises will be Ready for Construction, and Tenant
shall be required, within five (5) business days after receipt of such notice,
to deliver a notice to Landlord pursuant to which Tenant shall elect to either
terminate this Lease, in which case this Lease shall immediately terminate and
be of no further force and effect, or to agree to extend the Outside Date to
that date set forth in such notice delivered by Landlord. Failure by Tenant to
deliver such notice or to so elect shall be deemed Tenant's agreement to extend
the Outside Date set forth in Landlord's notice to Tenant. If Tenant agrees to
extend the Outside Date, Landlord shall have a continuing right to deliver a
notice to Tenant which requests Tenant to so elect to either terminate this
Lease or to further extend the Outside Date as set forth in this Section 2.4.3,
above, until the Premises are Ready for Construction or until this Lease is
terminated.
2.4.4 Other Terms. The Effective Date and the Outside Date shall be
-----------
extended to the extent of any delays beyond the reasonable control of Landlord,
including delays caused by Force Majeure (but not more than one-hundred eighty
(180) days for Force Majeure events). Upon any termination as set forth in this
Section 2.4, Landlord and Tenant shall be relieved from any
- -----------
and all liability to each other resulting hereunder except that Landlord shall
return to Tenant any prepaid rent. Tenant's rights to terminate this Lease, as
set forth in this Section 2.4, shall be Tenant's sole and exclusive remedy at
-----------
law or in equity for the failure of the Premises to be Ready for Construction as
set forth above. Work required by the January 17, 1994 earthquake and related
aftershocks occurring before the date of this Lease shall be deemed not to be
caused by Force Majeure.
ARTICLE 3
---------
BASE RENT
---------
Tenant shall pay, without notice or demand, to Landlord at the management
office of the Building, or at such other place as Landlord may from time to time
designate in writing, in the form of a check (which is drawn upon a bank which
is located in the State of California), base rent ("Base Rent") as set forth in
Section 8 of the Summary, payable in equal monthly installments as set forth in
- ---------
Section 8 of the Summary in advance on or before the first day of each and every
- ---------
calendar month during the Lease Term, without any setoff or deduction
whatsoever, except as otherwise provided in this Lease. If any "Rent," as that
term is defined in Section 4.1, below, payment date (including the Lease
-----------
Commencement Date) falls on a day of a calendar month other than the first day
of such calendar month or if any Kent payment is for a period which is shorter
than one calendar month such as during the last month of the Lease Term, the
Rent for any fractional calendar month shall accrue on a daily basis for the
period from the date such payment is due to the end of such calendar month or to
the end of the Lease Term at a rate per day which is equal to 1/365 of the Rent.
All other payments or adjustments
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<PAGE>
required to be made under the terms of this lease that required proration on a
time basic shall be prorated on the same basis.
ARTICLE 4
---------
ADDITIONAL RENT
---------------
4.1 Additional Rent. In addition to paying the Base Rent specified in
---------------
Article 3 of this Lease, Tenant shall pay as additional rent Tenant's Share of
the annual Direct Expenses which are in excess of the amount of Direct Expenses
applicable to the Base Year. Such additional rent, together with any and all
other amounts payable by Tenant to Landlord, as additional rent or otherwise
pursuant to the terms of this Lease, shall be hereinafter collectively referred
to as the "Additional Rent." The Base Rent and Additional Rent are herein
collectively referred to as the "Rent." All amounts due under this Article 4 as
---------
Additional Rent shall be payable in the same manner and place as the Base Rent.
Without limitation on other obligations of Tenant which shall survive the
expiration of the Lease Term, the obligations of Tenant to pay the Additional
Rent provided for in this Article 4 shall survive the expiration of the Lease
---------
Term, and if such payment requires proration on a time basis, then such payment
shall be prorated pursuant to the terms set forth in Article 3, above.
---------
4.2 Definitions. As used in this Lease, the following terms shall have
-----------
the meanings hereinafter set forth:
4.2.1 "Base Year" shall mean the period set forth in Section 9.1
-----------
of the Summary.
4.2.2 "Direct Expenses" shall mean "Operating Expenses" and "Tax
Expenses."
4.2.3 "Expense Year" shall mean each calendar year in which any
portion of the Lease Term falls, through and including the calendar year in
which the Lease Term expires.
4.2.4 "Operating Expenses" shall mean all expenses, costs and
amounts of every kind and nature which Landlord shall pay or incur during any
Expense Year because of or in connection with the management, maintenance,
repair, or operation of the Real Property, including, without limitation, any
amounts paid or incurred for (i) the cost of supplying all utilities, the cost
of operating, maintaining, repairing, and managing the utility systems,
mechanical systems, sanitary and storm drainage systems, communication systems,
and escalator and elevator systems, and the cost of supplies, tools, and
equipment and maintenance and service contracts in connection therewith; (ii)
the cost of licenses, certificates, permits and inspections and the cost of
contesting the validity or applicability of any governmental enactments which
may affect Operating Expenses, and the costs incurred in connection with the
implementation and operation of a governmentally mandated transportation system
management program or similar program; (iii) the cost of earthquake insurance
and other insurance carded by Landlord, in such amounts as Landlord may
reasonably determine; (iv) fees, charges and other costs, including management
fees (or amounts in lieu thereof), consulting fees (including but not limited to
any consulting fees incurred in connection with the procurement of insurance),
legal fees and accounting fees, of all persons engaged by Landlord or otherwise
reasonably incurred by Landlord in connection with the management, operation,
administration, maintenance and repair of the Real Property; (v) the
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<PAGE>
cost of utilities and insurance incurred in connection with the Parking Garage
and any other parking facilities servicing the Building; (vi) wages, salaries
and other compensation and benefits of all persons (other than persons generally
considered to be higher in rank than the positions of Building manager and
Building engineer) engaged in the operation, maintenance or security of the Real
Property, and employer's Social Security taxes, unemployment taxes or insurance,
and any other taxes which may be levied on such wages, salaries, compensation
and benefits; provided, that if any employees of Landlord or Landlord's agents
provide services for more than one building, then a prorated portion of such
employees' wages, benefits and taxes shall be included in Operating Expenses
based on the portion of their working time devoted to the Real Property, and
provided further, that no portion of any employee's wages, benefits, or taxes
allocable to time spent on the development or marketing of the Real Property
shall be included in Operating Expenses; (vii) payments under any easement,
license, operating agreement, declaration, restrictive covenant, or instrument
pertaining to the sharing of costs by the Building, which instruments are
applicable to the Building during the Base Year; (viii) amortization (including
interest on the unamortized cost at a rate equal to the lesser of (1) Landlord's
actual cost of funds, and (2) the commercial loan rate announced by Bank of
America, a national banking association, or its successor, as its prime rate,
plus 2% per annum (the "Interest Rate") fixed at the time of the acquisition or
rental of the personal property) of the cost of acquiring or the rental expense
of personal property used in the maintenance, operation and repair of the
Building and Real Property; (ix) the cost of Landlord's office in the Building
and office operation for the Building and the Real Property and all supplies and
materials used in connection therewith; and (x) the cost of capital repairs,
replacements or other improvements or other costs (I) which are intended to
effect economies in the operation or maintenance of the Real Property or
Building, or any portion thereof, to the extent of the reduction in other
Operating Expenses reasonably anticipated by Landlord at the time of such
expenditure to be incurred in connection therewith, or (II) that are required
under any governmental law or regulation which law or regulation was not enacted
prior to the Lease Commencement Date (whether or not such law or regulation is
being enforced prior to the Lease Commencement Date); provided, however, that if
any such cost described in (I) or (II) above is a capital expenditure, such cost
shall be amortized over its reasonable useful life, and the unamortized cost of
the same shall bear interest at the lesser of (1) Landlord's actual cost of
funds, and (2) the Interest Rate. Notwithstanding the foregoing, for purposes of
this Lease, Operating Expenses shall not, however, include:
(a) costs incurred in connection with the original construction of
the Building and, except as otherwise allowed under item (x), above, the
Real Property or in connection with any major change in the Building or the
Real Property, such as adding to or deleting from the Building full or
partial floors;
(b) costs in connection with the design and construction of tenant
improvements to the Premises of Tenant, the premises of other tenants, or
the non-leased space for prospective tenants;
(c) except as set forth in items (viii) and (x), above, depreciation,
interest, principal payments, points, loan fees, assumption fees, extension
fees and other costs associated with mortgages and other debt costs, if
any;
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(d) marketing costs, legal fees, space planners' fees and advertising
and promotional expenses, brokerage fees and other costs and expenses
incurred in connection with the development or leasing of the Building;
(e) costs for which the Landlord is reimbursed by (I) Tenant or any
other tenant or occupant of the Building (other than reimbursement through
the Operating Expenses pass-through provisions of their respective leases),
(II) insurance by its carrier or any tenant's or other carrier, or (III)
any other person or entity;
(f) any bad debt loss, rent loss, or reserves for bad debts or rent
loss or other reserves;
(g) costs associated with the operation of the business of the
partnership or entity which constitutes the Landlord, as the same are
distinguished from the costs of operation of the Real Property, including,
without limitation, partnership accounting and legal matters, costs of
defending any lawsuits with any mortgagee or others (except as the actions
of the Tenant may be in issue), costs of selling, syndicating, financing,
mortgaging or hypothecating any of the Landlord's interest in the Real
Property, and costs incurred in connection with any disputes between
Landlord and its employees, between Landlord and Building management, or
between Landlord and other tenants or occupants or others;
(h) the wages and benefits of any employee who does not devote
substantially all of his or her employed time to the Building unless such
wages and benefits are prorated to reflect time spent on operating and
managing the Building vis-a-vis time spent on matters unrelated to
operating and managing the Building;
(i) penalties, except as set forth in items (viii) and (x), above,
and interest;
(j) costs, including permit, license and inspection costs, incurred
with respect to the demolition or installation of tenant improvements made
for prospective tenants or tenants in the Building or, except as otherwise
permitted in item (x), above, incurred in renovating or otherwise
improving, decorating, painting or redecorating space for tenants or other
occupants of the Building or prospective tenants (excluding, however, such
costs relating to any common areas of the Building, and excluding costs
relating to maintenance and repair of the Building and tenant's space
therein, including the Building systems and equipment);
(k) costs of capital repairs, capital alterations, capital
improvements and capital equipment, except as set forth in items (viii) and
(x), above;
(l) expenses in connection with services, including maintenance and
repairs, or other benefits which are not offered to Tenant or for which
Tenant is charged directly but which are provided to another tenant or
occupant of the Building without a separate charge;
(m) overhead and profit increment paid to Landlord or to subsidiaries
or affiliates of Landlord for goods and services in the Building, or with
respect to the Real Property, to the extent
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the same exceeds the costs of such goods and services rendered by
qualified, unaffiliated third parties on a competitive basis;
(n) any compensation paid to clerks, attendants or other persons in
the Parking Garage or in commercial concessions operated by Landlord;
(o) rentals and other related expenses incurred in leasing air
conditioning systems, elevators or other equipment the cost of which if
purchased would be excluded from Operating Expenses as a capital cost (or
otherwise), except equipment not affixed to the Building which is used in
providing janitorial or similar services and, further excepting from this
exclusion such equipment rented or leased to remedy or ameliorate an
emergency condition in the Building not insured nor caused by Landlord or
its employees, agents, contractors or by a tenant, other than Tenant, of
the Building;
(p) costs, other than those incurred in ordinary maintenance and
repair, for sculpture, paintings, fountains or other objects of art;
(q) tax penalties incurred as a result of Landlord's negligence,
inability or unwillingness to make payments when due;
(r) management fees in excess of three and one-half percent (3-1/2%)
of the annual gross revenues for the Building and Real Property adjusted
and grossed up to reflect a one hundred percent (100%) occupancy of the
Building with all tenants paying rent at the average rental rate per
rentable square foot of the Building then being received by Landlord from
all rent-paying tenants (disregarding tenants receiving rent abatement and
rent reduction concessions), which management fees shall be included in the
Base Year;
(s) costs to repair or rebuild after casualty loss except that
Operating Expenses shall include costs of repairs which are paid for by
Landlord because of deductibles under insurance policies carried by
Landlord; provided, however, if such repair costs are excluded under item
(k), above, the same may be included in Operating Costs only to the extent
the cost does not exceed $25,000 in any one Expense Year;
(t) any costs expressly excluded from Operating Expenses elsewhere in
the Lease;
(u) rent for any office space occupied by-Building management
personnel to the extent the size or rental rate of such office space
exceeds the size or fair market rental value of office space occupied by
management personnel of the Comparable Buildings, with adjustment where
appropriate for the size of the applicable project;
(v) Landlord's general corporate overhead and general and
administrative expenses;
(w) all assessments and premiums which are not specifically charged
to Tenant because of what Tenant has done, which Landlord may pay in
installments, shall be included in Operating Expenses in the maximum number
of installments permitted by law and shall be included
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<PAGE>
as Operating Expenses in the year in which the assessment or premium
installment is actually paid, whether or not Landlord actually pays such
assessment or premium in installments or in the maximum number of
installments;
(x) costs to repair damage (I) arising from the negligence or wilful
misconduct of Landlord or its agents, employees, vendors, contractors, or
providers of materials or services, or other tenants of the Building, or
(II) from Landlord's failure to comply with applicable law in a timely
manner;
(y) subject to the terms of Article 24 of this Lease, costs incurred
----------
to comply with laws relating to the removal of hazardous material (as
defined under applicable law) which was in existence in the Building or on
the Real Property prior to the Lease Commencement Date, and was of such a
nature that a federal, state or municipal governmental authority, if it had
then had knowledge of the presence of such hazardous material, could have
then required the removal of such hazardous material or other remedial or
containment action with respect thereto under laws enacted prior to the
Lease Commencement Date; and costs incurred to remove, remedy, contain, or
treat hazardous material, which hazardous material is brought into the
Building or onto the Real Property after the date hereof by Landlord or any
other tenant of the Building and is of such a nature, at that time, that a
federal, state or municipal governmental authority, if it had then had
knowledge of the presence of such hazardous material, that it then exists
in the Building, could have then required the removal of such hazardous
material or other remedial or containment action with respect thereto;
(z) costs arising from Landlord's charitable or political
contributions;
(aa) costs arising from earthquake insurance, except to the extent
that (i) earthquake insurance was carded during the Base Year, or (ii) in
determining the Excess for any particular Expense Year the Operating
Expenses for the Base Year are retroactively adjusted to include the cost
which would have been incurred during the Base Year for such coverage if
such coverage (with the same policy limits and deductibles) had been carded
during the Base Year;
(bb) costs incurred to encapsulate, monitor, test, remove or otherwise
remedy any asbestos containing material in the Building or incurred in
connection with repairs to the Building necessitated by the "Quake," as
that term is defined in Section 29.27 of this Lease;
-------------
(cc) amounts paid under any ground lease for the Building or Real
Property;
(dd) costs incurred to comply with handicapped access, and fire-life
safety, laws and seismic codes (whether or not such laws or codes are being
enforced and whether or not Landlord was previously "grandfathered" and
excused from complying until subsequent alterations were made), which laws
and codes were enacted prior to the Lease Commencement Date;
(ee) except as specifically set forth in item number (v) of the
inclusions to Operating Expenses, above (as opposed to the item letter (v)
of the exclusions to Operating Expenses), and except as included in Tax
Expenses, cost and expenses relating to the Parking Garage; and
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<PAGE>
(ff) costs incurred by Landlord in attempting to obtain a reduction
in real estate taxes in connection with the California Revenue and Taxation
Code, Paragraph 51 ("Proposition 8").
If Landlord is not furnishing any particular work or service (the cost of
which, if performed by Landlord, would be included in Operating Expenses) to a
tenant who has undertaken to perform such work or service in lieu of the
performance thereof by Landlord, Operating Expenses shall be deemed to be
increased by an amount equal to the additional Operating Expenses which would
reasonably have been incurred during such period by Landlord if it had at its
own expense furnished such work or service to such tenant. If with respect to
the Base Year, repairs are made, or maintenance performed, to the Real Property,
Building and/or Systems and Equipment at no charge due to the existence of
warranties on such items, and the cost of such repairs and maintenance, but for
the existence of such warranties, would have been incurred by Landlord and
included in Direct Expenses for the Base Year, then the Direct Expenses for the
Base Year shall be increased to include the cost which Landlord would have
incurred and included in Operating Expenses for the Base Year for such repairs
but for the existence of such warranties. If the Building is not one hundred
percent (100%) occupied during all or a portion of any Expense Year, including
the Base Year, Landlord shall make an appropriate adjustment to the variable
components of Operating Expenses for such Expense Year, including the Base Year,
as reasonably determined by Landlord, on a consistent basis from Expense Year to
Expense Year, employing sound accounting and management principles, to determine
the amount of Operating Expenses that would have been paid had the Building been
one hundred percent (100%) occupied, and the amount so determined shall be
deemed to have been the amount of Operating Expenses for such Expense Year,
including the Base Year. Landlord shall not include in Operating Expenses for
any Expense Year after the Base Year any new, distinct category of Operating
Expenses (as opposed to an addition to an existing category, such as security or
janitorial) for new services provided to the Real Property and/or Building after
the Base Year unless such new services are (i) required to comply with
applicable governmental law or regulation enacted after the Lease Commencement
Date, (ii) provided to enhance the safe and/or secure occupancy and use of the
Premises, Building and/or Real Property by Tenant and the other tenants of the
Building, or (iii) then customarily provided at the Comparable Buildings and not
so provided as of the date of this Lease. Landlord shall have the right, from
time to time, to equitably allocate some or all of the Operating Expenses among
different tenants of the Building (the "Cost Pools"). Such Cost Pools may
include, but shall not be limited to, the office space tenants of the Building
and the retail space tenants of the Building. Notwithstanding anything to the
contrary set forth in this Article 4, when calculating Direct Expenses for the
Base Year, Operating Expenses shall exclude the following costs (collectively,
the "Special Costs") except when such Base Year is used to calculate Tenant's
Share of Direct Expenses for any Expense Year, occurring after the Base Year, in
which such Special Costs are also incurred: market-wide labor-rate increases due
to extraordinary circumstances, including, but not limited to, boycotts and
strikes; utility rate increases due to extraordinary circumstances including,
but not limited to, conservation surcharges, boycotts, embargoes or other
shortages.
4.2.5 "Tax Expenses" shall mean all federal, state, county, or
local governmental or municipal taxes, fees, charges or other impositions of
every kind and nature, whether general, special, ordinary or extraordinary
(including, without limitation, real estate taxes, general and special
assessments, transit taxes or charges, business or license taxes or fees, annual
or periodic license or use fees, open space charges, housing fund assessments,
leasehold taxes or taxes based upon the receipt of
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<PAGE>
rent, including gross receipts or sales taxes applicable to the receipt of rent,
unless required to be paid by Tenant, personal property taxes imposed upon the
fixtures, machinery, equipment, apparatus, systems and equipment, appurtenances,
furniture and other personal property used in connection with the Building),
which Landlord shall pay or incur during any Expense Year (without regard to any
different fiscal year used by such governmental or municipal authority) because
of or in connection with the ownership, leasing and operation of the Real
Property. For purposes of this Lease, Tax Expenses during each Expense Year,
including the Base Year, shall be calculated as if the tenant improvements in
the Building and the "Initial Renovations," as that term is defined in Section
-------
29.23 of this Lease, were fully constructed and the Real Property, the Building,
- -----
all tenant improvements in the Building and the Initial Renovations were fully
assessed for real estate tax purposes and accordingly, during each Expense Year,
including the Base Year, Tax Expenses shall be deemed to be increased
appropriately (including the gross receipts tax calculated as if all tenants
were paying full rent, disregarding free rent or any half-rent).
4.2.5.1 Tax Expenses shall include, without
limitation:
(i) Any assessment, tax, fee, levy or charge in
addition to, or in substitution, partially or totally, of any assessment,
tax, fee, levy or charge previously included within the definition of real
property tax, it being acknowledged by Tenant and Landlord that Proposition
13 was adopted by the voters of the State of California in the June 1978
election ("Proposition 13") and that assessments, taxes, fees, levies and
charges may be imposed by governmental agencies for such services as fire
protection, street, sidewalk and road maintenance, conservation, refuse
removal and for other governmental services formerly provided without
charge to property owners or occupants, and, in further recognition of the
decrease in the level and quality of governmental services and amenities as
a result of Proposition 13, Tax Expenses shall also include any
governmental assessments or the Project's contribution towards a
governmental cost-sharing agreement for the purpose of augmenting or
improving the quality of services and amenities normally provided by
governmental agencies. It is the intention of Tenant and Landlord that all
such new and increased assessments, taxes, fees, levies, and charges and
all similar assessments, taxes, fees, levies and charges be included within
the definition of Tax Expenses for purposes of this Lease;
(ii) Any assessment, tax, fee, levy, or charge
allocable to or measured by the area of the Premises or the rent payable
hereunder, including, without limitation, any gross income tax with respect
to the receipt of such rent, or upon or with respect to the possession,
leasing, operating, management, maintenance, alteration, repair, use or
occupancy by Tenant of the Premises, or any portion thereof,
(iii) Any assessment, tax, fee, levy or charge, upon
any document to which Tenant is a party, creating or transferring an
interest or an estate in the Premises; and
(iv) Any possessory taxes charged or levied in lieu
of real estate taxes.
4.2.5.1 Any expenses incurred by Landlord in
attempting to protest, reduce or minimize Tax Expenses shall, subject to
the terms of Section 4.2.4(ff), above, be included in
-----------------
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<PAGE>
Operating Expenses in the Expense Year such expenses are paid. Tax refunds
shall be deducted from Tax Expenses for the Expense Year to which such
refunded Tax Expenses were originally attributable, less any expenses
incurred by Landlord in connection with obtaining such refund; provided
that tax refunds under Proposition 8 shall not be deducted from Tax
Expenses, but rather shall be the sole property of Landlord. All special
assessments which may be paid in installments shall be paid by Landlord in
the maximum number of installments permitted by law and not included in Tax
Expenses except in the year in which the assessment is actually paid.
Notwithstanding anything to the contrary set forth in this Lease, the
amount of Tax Expenses for the Base Year and any Expense Year shall be
calculated without taking into account any decreases in real estate taxes
obtained in connection with Proposition 8, and, therefore, the Tax Expenses
in the Base Year and/or an Expense Year may be greater than those actually
incurred by Landlord, but shall, nonetheless, be the Tax Expenses due under
this Lease; provided that, notwithstanding the foregoing, upon a
"Reassessment," as that term is defined in Section 4.5 of this Lease, the
-----------
component of Base Year Tax Expenses which are attributable to the
assessed value of the Real Property under Proposition 13 prior to the
Reassessment (without taking into account any Proposition 8 reductions)
shall be reduced for purposes of comparison to all subsequent Expense Years
(commencing with the Expense Year in which the Reassessment took place) to
an amount equal to the real estate taxes based upon such Reassessment.
4.2.5.3 Notwithstanding anything to the contrary
contained in this Section 4.2.5 (except as set forth in Section 4.2.5.1 or
------------- ---------------
levied in whole or part in lieu of Tax Expenses), there shall be excluded
from Tax Expenses (i) all excess profits taxes, franchise taxes, gift
taxes, capital stock taxes, inheritance and succession taxes, estate taxes,
federal and state income taxes, and other taxes to the extent applicable to
Landlord's general or net income (as opposed to rents, receipts or income
attributable to operations at the Building), (ii) any items included as
Operating Expenses, and (iii) any items paid by Tenant under Section 4.4 of
this Lease. -----------
4.2.6 "Tenant's Share" shall mean the percentage set forth in
Section 9.2 of the Summary. Tenant's Share was calculated by dividing the
-----------
number of rentable square feet of the Premises by the total rentable square
feet in the Building. In the event the Premises is expanded, Tenant's Share
shall be appropriately adjusted, and, as to the Expense Year in which such
change occurs, Tenant's Share for such year shall be determined on the
basis of the number of days during such Expense Year that each such
Tenant's Share was in effect.
In the event Tenant or any "Transferee," as that term is defined
in Section 14.1 of this Lease, ceases to occupy, but still leases, the
------------
entire Premises, or one or more full floors of the Premises during an
entire Expense Year, Tenant shall receive a credit against Operating
Expenses equal to the cost of electricity, janitorial service, and water
that Landlord did not incur, as reasonably determined by Landlord, for such
Expense Year due to Tenant's vacation of such space.
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<PAGE>
4.3 Calculation and Payment of Additional Rent.
------------------------------------------
4.3.1 Calculation of Excess. If for any Expense Year ending or
---------------------
commencing within the Lease Term, Tenant's Share of Direct Expenses for
such Expense Year exceeds Tenant's Share of the amount of Direct Expenses
applicable to the Base Year, then Tenant shall pay to Landlord, in the
manner set forth in Section 4.3.2, below, and as Additional Rent, an amount
-------------
equal to the excess (the "Excess").
4.3.2 Statement of Actual Direct Expenses and Payment by Tenant.
--------------------------------------------------------
Commencing January 1, 1997, Landlord shall use its commercially reasonable
good faith efforts to give to Tenant a statement (the "Statement") within
one hundred twenty (120) days following the end of each Expense Year, which
Statement shall (i)be derived from an audit conducted by an independent
certified public accountant (which accountant is a member of a nationally
recognized accounting firm) or by Landlord's Building manager, (ii) state
the Direct Expenses, on a line item basis as to the general categories of
Direct Expenses, incurred or accrued (which accrual shall be done on a
consistent basis for each such preceding Expense Year and the Base Year)
for such Expense Year and the Base Year, and the "Estimate," as that term
is defined in Section 4.3.3, below, for such Expense Year, and (iii)
-------------
indicate the amount, if any, of any Excess. Commencing January 1, 1998,
upon receipt of the Statement for each Expense Year ending during the Lease
Term, if an Excess is present, Tenant shall pay, within thirty (30) days
after receipt of such Statement, the full amount of the Excess for such
Expense Year, less the amounts, if any, paid during such Expense Year as
Estimated Excess. In the event that a Statement shows that the amount paid
by Tenant under Section 4.3.3, below, exceeded Tenant's Share of the
-------------
increase in Direct Expenses for the Expense Year in question (the
"Overpayment Amount"), then Landlord shall credit the Overpayment Amount
against the next due installments of Base Rent and Additional Rent;
provided that, with respect to the final Expense Year of the Lease Term,
Landlord shall pay to Tenant, within thirty (30) days after Tenant's
receipt of such Statement, the Overpayment Amount. The failure of Landlord
to timely furnish the Statement for any Expense Year shall not prejudice
Landlord from enforcing its rights under this Article 4. Even though the
---------
Lease Term has expired and Tenant has vacated the Premises, when the final
determination is made of Tenant's Share of the Direct Expenses for the
Expense Year in which this Lease expires or earlier terminates, taking into
consideration that the Lease Expiration Date may have occurred prior to the
final day of the applicable Expense Year, if an Excess is present or if an
Overpayment Amount is due to Tenant, Tenant shall immediately pay to
Landlord, or when appropriate Landlord shall immediately repay to Tenant,
an amount as calculated pursuant to the provisions of Sections 4.3.1 and
--------------
4.3.2 of this Lease; provided that if the Lease Expiration Date, or the
-----
date of earlier termination of this Lease, occurs prior to the final day of
the applicable Expense Year, then Tenant's Share of the Direct Expenses for
the final Lease Year shall be prorated pursuant to the terms of Article 3
---------
of this Lease. The provisions of this Section 4.3.2 shall survive the
expiration or earlier termination of the Lease Term. Landlord shall have
the right to recalculate Direct Expenses and, in connection therewith,
Landlord shall deliver to Tenant a copy of the initial Statement previously
delivered to Tenant and the revised Statement setting forth the
recalculation of the Direct Expenses set forth in the initial Statement,
whereupon any increase in the Excess shall be paid by Tenant within thirty
(30) days after receipt of any such revised Statement, or any decrease in
the Excess shall be refunded to Tenant concurrent with Landlord's delivery
of such revised Statement; provided, however, except with regard to the
recalculation of those items of Direct Expenses which are not under
Landlord's reasonable control, specifically including Tax Expenses and
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<PAGE>
public utility charges, Landlord shall have no right to recalculate Direct
Expenses more than two (2) years following the end of the Expense Year to
which such Direct Expenses are attributable
4.3.3 Statement of Estimated Direct Expenses. In addition,
--------------------------------------
commencing with 1997, Landlord will give Tenant a yearly expense estimate
statement (the "Estimate Statement") which shall set forth (i) Landlord's
reasonable estimate (the "Estimate") of what the total amount of Direct
Expenses for the then-current Expense Year shall be, which Estimate, as it
relates to Operating Expenses, shall not exceed one hundred five percent
(105%) of the Operating Expense for the prior Expense Year (the "105% Cap")
unless Landlord also supplies Tenant with a reasonable explanation of such
excess and (ii) the estimated excess (the "Estimated Excess") as calculated
by comparing Direct Expenses, which shall be based upon the Estimate, to
the amount of Direct Expenses applicable to the Base Year, which Estimate
Statement may be revised and reissued by Landlord from time to time, even
if such revision exceeds the 105% Cap, as long as such reissuance is
accompanied by a reasonable explanation of the increase in the Estimated
Excess from the Estimated Excess set forth in the previous Estimate
Statement. The failure of Landlord to timely furnish the Estimate Statement
for any Expense Year shall not preclude Landlord from enforcing its rights
to collect any Estimated Excess under this Article 4. If pursuant to the
---------
Estimate Statement (or a revision thereof) an Estimated Excess is
calculated for the then-current Expense Year, Tenant shall pay, within
thirty (30) days after receipt of such Estimate Statement, a fraction of
the Estimated Excess (or the increase in the Estimated Excess if pursuant
to a revised Estimate Statement) for the then-current Expense Year (reduced
by any amounts paid pursuant to the last sentence of this Section 4.3.3).
-------------
Such fraction shall have as its numerator the number of months which have
elapsed in such current Expense Year to the month of such payment, both
months inclusive, and shall have twelve (12) as its denominator. Until a
new Estimate Statement is furnished, Tenant shall pay monthly, with the
monthly Base Rent installments, an amount equal to one-twelfth (1/12) of
the total Estimated Excess set forth in the previous Estimate Statement
delivered by Landlord to Tenant.
4.4 Taxes and Other Charges for Which Tenant Is Directly Responsible.
----------------------------------------------------------------
Tenant shall directly reimburse Landlord, as Additional Rent, within thirty
(30) days following demand for any and all taxes which are required to be
paid by Landlord, (which taxes shall be paid by Landlord not more than
forty-five (45) days in advance, and which taxes are not included by
Landlord in Tax Expenses) (collectively, "Tenant's Taxes"), excluding from
Tenant's Taxes state, local and federal personal or corporate income or
franchise taxes measured by the net income of Landlord from all sources and
estate and inheritance taxes, whether or not now customary or within the
contemplation of the parties hereto and any other taxes expressly excluded
pursuant to the terms of Section 4.2.5.3, above, when:
---------------
4.4.1 Said taxes are measured by or reasonably and
demonstratively attributable to the cost or value of Tenant's equipment,
furniture, trade fixtures and other personal property located in the
Premises, or by the cost or value of any leasehold improvements made in or
to the Premises by or for Tenant in excess of Forty-Five Dollars ($45.00)
per rentable square foot of the Premises; or
4.4.2 Said taxes are assessed upon or with respect to the use of
the Parking Garage by Tenant.
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<PAGE>
4.5 Tenant's Payment of Certain Tax Expenses. Notwithstanding
----------------------------------------
anything to the contrary contained in this Lease, in the event that on or
after the Lease Commencement Date and prior to the tenth (10th) anniversary
of the Lease Commencement Date, any sale, refinancing, or change in
ownership of the Real Property is consummated, and as a result thereof, and
to the extent that in connection therewith, the Real Property is reassessed
(the "Reassessment") for real estate tax purposes by the appropriate
governmental authority pursuant to the terms of Proposition 13 (as adopted
by the voters of the State of California in the June, 1978 election), then
the terms of this Section 4.5 shall apply.
4.5.1 The Tax Increase. For purposes of this Section 4.5, the
---------------- -----------
term "Tax Increase" shall mean that portion of the Tax Expenses, as
calculated immediately following the Reassessment, which is attributable
solely to the Reassessment. Accordingly, the term Tax Increase shall not
include any portion of the Tax Expenses, as calculated immediately
following the Reassessment, which (i) is part of the amount of Tax Expenses
incurred or deemed incurred during the Base Year as determined pursuant to
this Lease, (ii) is attributable to the initial assessment of the value of
the Real Property, the base, shell and core of the Building, or the tenant
improvements located in the Building, (iii) is attributable to assessments
pending immediately prior to the Reassessment, which assessments were
conducted during, and included in, such Reassessment, or which assessments
were otherwise rendered unnecessary following the Reassessment, or (iv) is
attributable to the annual inflationary increase to real estate taxes.
4.5.2 Tenant's Protection. During the first ten (10) Lease Years
-------------------
of the initial Lease Term only, Tenant shall not be obligated to pay in
connection with the Premises (including any Hold Space, Expansion Space,
First Offer Space and Available Space) any portion of the Tax Increase
relating to a Reassessment which occurs prior to the tenth (10th)
anniversary of the Lease Commencement Date.
4.5.3 Landlord's Right to Purchase the Proposition 13 Protection
----------------------------------------------------------
Amount Attributable to a Particular Reassessment. The amount of Tax
Expenses which Tenant is not obligated to pay or will not be obligated to
pay during the first ten (10) Lease Years of the initial Lease Term in
connection with a particular Reassessment which occurs prior to the tenth
(10th) anniversary of the Lease Commencement Date, shall sometimes be
referred to hereafter as a "Proposition 13 Protection Amount." If the
occurrence of a Reassessment is reasonably foreseeable by Landlord based
upon a fully executed and delivered purchase and sale agreement for the
Building and the Proposition 13 Protection Amount attributable to such
Reassessment can be reasonably quantified or estimated for each Lease Year
commencing with the Lease Year in which the Reassessment will occur, the
terms of this Section 4.5.3 shall apply to each such Reassessment. Upon
-------------
notice to Tenant, Landlord shall have the right to purchase the Proposition
13 Protection Amount relating to the applicable Reassessment (the
"Applicable Reassessment"), at any time during the Lease Term following the
execution and delivery of such purchase and sale agreement for the
Building, by paying to Tenant an amount equal to the "Proposition 13
Purchase Price," as that term is defined below, provided that the right of
any successor of Landlord to exercise its right of repurchase hereunder
shall not apply to any Reassessment which results from the event pursuant
to which such successor of Landlord became the Landlord under this Lease.
As used herein, "Proposition 13 Purchase Price" shall mean the present
value of the Proposition 13 Protection Amount remaining during the Lease
Term, as of the date of payment of the Proposition 13 Purchase
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Price by Landlord. Such present value shall be calculated (i) by using the
portion of the Proposition 13 Protection Amount attributable to each
remaining Lease Year (as though the portion of such Proposition 13
Protection Amount benefited Tenant at the middle of each Lease Year), as
the amounts to be discounted, and (ii) by using discount rates for each
amount to be discounted equal to the average rates of yield for United
States Treasury Obligations with maturity dates as close as reasonably
possible to the end of each Lease Year during which the portions of the
Proposition 13 Protection Amount would have benefited Tenant, which rates
shall be those in effect as of Landlord's exercise of its right to
purchase, as set forth in this Section 4.5.3. Upon such payment of the
-------------
Proposition 13 Purchase Price, the provisions of Section 4.5.2 of this
-------------
Lease shall not apply to any Tax Increase attributable to the Applicable
Reassessment. Since Landlord is estimating the Proposition 13 Purchase
Price because a Reassessment has not yet occurred and is estimating the
Proposition 13 Purchase Price based upon the then-current status of
Proposition 13 (or any successor statute to, replacement of or statute in
lieu of Proposition 13), then when such Reassessment occurs or Proposition
13 is modified, if Landlord has underestimated the Proposition 13 Purchase
Price, Tenant's Rent next due shall be credited with the amount of such
underestimation, and if Landlord overestimates the Proposition 13 Purchase
Price, then upon notice by Landlord to Tenant, Rent next due shall be
increased by the amount of the overestimation.
4.6 Landlord's Books and Records. Upon Tenant's written request
----------------------------
given not more than two (2) years after Tenant's receipt of the Statement
for a particular Expense Year, and not more than once with respect to any
particular Expense Year, and provided that an Event of Default by Tenant
under this Lease does not then exist, Tenant shall have the right to
conduct a review of the Statement by Tenant's employees and/or a "Qualified
Accountant," as that term is defined in this Section 4.6 below. In
-----------
connection with the foregoing review, Landlord shall furnish Tenant with
such reasonable supporting documentation in connection with the Statement
as Tenant may reasonably request, including without limitation, access at
Landlord's place of business in Los Angeles County to Landlord's books and
records. Landlord shall provide Tenant with access to the above information
within thirty (30) days after Tenant's written request therefor. For
purposes hereof, a "Qualified Accountant" shall mean an independent
certified public accountant reasonably approved by Landlord. If following
the review described above Tenant continues to dispute Tenant's Share of
Direct Expenses set forth in such Statement, then Tenant shall have the
right to cause an independent certified public accountant, mutually
selected in good faith by Landlord and Tenant to complete and deliver to
Landlord and Tenant an audit of the Statement within thirty (30) months
after Tenant's receipt of the Statement for the particular Expense Year in
dispute. If such audit reveals an error in Tenant's Share of Direct
Expenses, the parties shall make such appropriate payments or
reimbursements, as the case may be, to each other as are determined to be
owing. Any reimbursement amounts determined to be owing by Landlord to
Tenant shall be paid within thirty (30) days following such determination,
along with interest at the Interest Rate from the date the previously
stated Excess was paid, until the date of such reimbursement. If any audit
conducted by Tenant pursuant to this Section 4.6 discloses an overstatement
-----------
by Landlord of the Direct Expenses for the applicable Expense Year in
excess of two percent (2%), Landlord shall be responsible for the
reasonable, actual out-of-pocket costs incurred by Tenant for Tenant's
review and audit, including but not limited to the reasonable, actual out-
of-pocket cost incurred by Tenant for the Qualified Accountant. Otherwise,
Tenant shall be responsible for all costs of any review and/or audit
conducted hereunder. Landlord shall be required to maintain records of all
Direct Expenses set forth in each Statement delivered to Tenant for three
(3) years following Landlord's delivery of the applicable
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Statement. In the event that any other tenant in the Building audits the
Direct Expenses and an adjustment is made pursuant to such audit because of
an error in calculation or in allocation of the Direct Expenses, or an
error in inclusion or exclusion of any Direct Expenses which would also
constitute an error under this Lease, the results of such audit shall be
sent to Tenant, within thirty (30) days after Landlord's receipt of
Tenant's written request therefor (which Tenant may request not more than
twice each Expense Year), in order to allow Tenant to determine whether
Tenant is entitled to a corresponding adjustment pursuant to the terms of
this Section 4.6.
-----------
ARTICLE 5
---------
USE OF PREMISES
---------------
Tenant shall use the Premises solely for the "Permitted Use," as that
term is defined in Section 13 of the Summary, and Tenant shall not use or
----------
permit the Premises to be used for any other purpose or purposes whatsoever
without the prior written consent of Landlord, which consent will not be
unreasonably withheld if such use is comparable to the use permitted by
Landlord (pursuant to a lease executed by the Landlord named in this Lease
or its successor) of comparable space in the Building but which consent
otherwise may be withheld in Landlord's sole discretion if Tenant uses the
Premises for (i) offices of any health care professionals; (ii) schools or
other training facilities which are not ancillary to corporate, executive
or professional office use; (iii) retail or restaurant uses; or (iv)
communications facilities such as radio and/or television stations, except
to the extent such use is related to the Permitted Use, is consistent with
the character of a first-class office building, and does not materially
interfere with the use of the Building by other tenants and occupants
thereof. Tenant further covenants and agrees that (a) Tenant shall not use,
or suffer or permit any person or persons to use, the Premises or any part
thereof for any use or purpose contrary to the Rules and Regulations, or in
violation of the laws of the United States of America, the State of
California, or the ordinances, regulations or requirements of the local
municipal or county governing body or other lawful authorities having
jurisdiction over the Building, (b)Tenant shall be solely responsible to
verify that Tenant's intended use of the Premises for non-general office
use is allowed under applicable law, and (c) Tenant shall be solely liable
for any violation of applicable law as a result of the use of the Premises
for non-general office use. Tenant shall faithfully observe and comply with
the Rules and Regulations; provided, however, that Landlord agrees that the
Rules and Regulations shall not be discriminatorily enforced. Landlord
shall use commercially reasonable efforts to enforce the Rules and
Regulations in the event that a violation of the Rules and Regulations by
any other tenants or occupants of the Building materially interferes with
Tenant's Permitted Use. Tenant shall not use or allow another person or
entity to use any part of the Premises for the storage, use, treatment,
manufacture or sale of hazardous materials or substances as defined
pursuant to any applicable federal, state or local governmental or quasi-
governmental law, code, ordinance, rule, or regulation. Landlord
acknowledges, however, that Tenant will maintain products in the Premises
which are incidental to the operation of its offices, such as photocopy
supplies, secretarial supplies and limited janitorial supplies, which
products contain chemicals which are categorized as hazardous materials.
Landlord agrees that the use of such products in the Premises in compliance
with all applicable laws and in the manner in which such products are
designed to be used shall not be a violation by Tenant of this Article 5.
---------
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ARTICLE 6
---------
SERVICES AND UTILITIES
----------------------
6.1 Standard Tenant Services. Landlord shall provide the following
------------------------
services on all days during the Lease Term, unless otherwise stated below.
6.1.1 Subject to all governmental rules, regulations and
guidelines applicable thereto, Landlord shall provide heating and air
conditioning when necessary for normal comfort for normal office use in the
Premises, from Monday through Friday, during the period from 8:00 a.m. to
6:00 p.m., and on Saturdays during the period from 8:00 a.m. to 1:00 p.m.
(collectively, the "Building Hours"), except for Sundays and New Year's
Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas
Day and any other nationally and locally recognized holidays as designated
by Landlord (collectively, the "Holidays"). Notwithstanding the foregoing
terms of this Section 6.1.1, (i) Landlord shall operate, commencing during
-------------
the Pre-Occupancy Period and, thereafter, during each Lease Year of the
Lease Term, including the Option Term, if any, the Building ventilation
fans in the High-Rise Floors from Monday through Friday, during the period
from 6:00 p.m. to 7:00 p.m. except Holidays, and (ii) Landlord shall
provide, during each Lease Year during the Lease Term, including the Option
Term, if any, an additional hour of heating and air-conditioning in the
High-Rise Floors of the Premises from Monday through Friday, during the
period from 6:00 p.m. to 7:00 p.m. except Holidays. The heating and air-
conditioning system is designed to meet the specifications set forth on
Exhibit K, attached hereto.
---------
6.1.2 Landlord shall provide adequate electrical wiring and
facilities for connection to Tenant's lighting fixtures and incidental use
equipment to accommodate a maximum connected electrical load capacity of up
to seven (7) watts per usable square foot of the Premises, with the
electricity so furnished for Tenant's lighting fixtures and equipment to be
at a nominal one hundred twenty (120) volts with no electrical circuit for
the supply of such equipment which will require a current capacity
exceeding twenty (20) amperes. Landlord shall supply, as part of Operating
Expenses, up to an average during the Building Hours of five (5) watts of
electricity per usable square foot on a used and consumed basis for
Tenant's equipment and for Tenant's lighting fixtures. If Tenant's
electrical consumption in the Premises, as and to the extent expanded to
include space located in the Building, exceeds five (50) watts per usable
square foot (in all instances including only electrical usage which relates
to the usable square footage that is measured) on a used and consumed basis
during the Building Hours (the "Excess Consumption"), then within thirty
(30) days after receipt of written notice, which notice shall include
reasonable evidence of the cost of such Excess Consumption, Tenant shall
pay to Landlord all costs actually incurred by Landlord in connection with
the provision of such Excess Consumption. In determining whether Excess
Consumption exists, the used and consumed electricity will be determined on
an averaged basis over the entire usable square footage of the Premises and
not on the basis of any particular floor or segment or meter (unless the
entire Premises in measured by a single meter). Tenant will design Tenant's
electrical system serving any equipment producing nonlinear electrical
loads to accommodate such nonlinear electrical loads, including, but not
limited to, oversizing neutral conductors, derating transformers and/or
providing power-line filters. Engineering plans shall include a calculation
of Tenant's fully connected electrical design load with and without demand
factors and shall indicate the number of watts of unmetered and submetered
loads. Tenant shall bear the cost of
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replacement of lamps, starters and ballasts for non-Building standard
lighting fixtures within the Premises and Landlord shall, as pan of
Operating Expenses, replace lamps, starters and ballasts for Building
standard lighting fixtures within the Premises. Notwithstanding the
foregoing, Tenant shall have the right, to the extent permitted by
applicable laws, and to the extent it will not increase Landlord's cost of
electricity per usable square foot for other tenants in the Building
(unless Tenant agrees to pay for such increased cost), to separately
contract for and pay for electricity for the entire Premises during any
entire Expense Year, in which case Tenant shall receive a credit against
Operating Expenses equal to the cost of electricity that Landlord did not
incur, as reasonably determined by Landlord, for such Expense Year due to
Tenant's nonuse of such electricity.
6.1.3 Landlord shall provide city water from the regular
Building outlets for drinking, lavatory and toilet purposes. In addition,
Landlord shall provide point of connection to Landlord's condensor water
system for connection of Tenant's supplemental cooling systems, which
systems shall be installed at Tenant's sole cost and expense. Tenant
acknowledges that, as of the date of this Lease, Landlord charges Nine and
No/100 Dollars ($9.00) per ton per month for the use of such condensor
water system, which amount Landlord represents to Tenant is Landlord's
reasonable estimate of the actual costs incurred by Landlord in providing
same.
6.1.4 Landlord shall provide janitorial services, in material
conformance to the specifications attached hereto as Exhibit L, Monday
---------
through Friday except the date of observation of the Holidays, in and about
the Premises. Landlord shall have the right, in Landlord's reasonable
discretion, to modify the janitorial services to the extent necessary to be
consistent with the practices of the Comparable Buildings, but not to
provide services materially less than as set forth on Exhibit L.
---------
Notwithstanding the foregoing, Tenant may elect to be solely responsible
for the performance of janitorial services and other cleaning on the second
(2nd) and fourth (4th) floors of the Premises to the extent that (i) such
services are limited to non-general office use of the Premises, (ii)
Landlord reasonably approves the janitors and janitorial services to be
provided to the second (2nd) and fourth (4th) floors of the Premises and
any other floor located in the low-rise elevator bank and subsequently
leased by Tenant and to the extent Tenant supplies its own janitorial
services for an entire full floor during an entire Expense Year, Tenant
shall receive a credit against Operating Expenses for the costs saved by
Landlord as a result of Tenant providing its own janitorial service.
6.1.5 Landlord shall provide nonexclusive automatic passenger
elevator service during the Building Hours and shall, subject to
emergencies, have at least one (1) elevator available at all other times.
6.1.6 Landlord shall provide nonexclusive freight elevator
service subject to scheduling by Landlord.
6.1.7 Landlord shall maintain, twenty-four (24) hours per day,
seven (7) days per week, throughout the Lease Term, access control
procedures and systems to the Building, with such alterations and
improvements as are necessary or desirable in Landlord's reasonable
judgment. In addition, Landlord shall provide, at all times, twenty-four
(24) hours per day on-site access control personnel consistent with such
service in Comparable Buildings, and Landlord shall at all times have
available on weekends and during non-daylight hours an access control
person (who may be a "rover") to escort
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employees and guests of Tenant to the Parking Garage, subject to the terms
of this Lease, including the Rules and Regulations. Notwithstanding the
foregoing provisions of this Section 6.1.7, Landlord will provide a lobby
-------------
attendant stationed in the lobby of the Building during Building Hours, and
on-site access control personnel twenty-four (24) hours per day (which
personnel requirement shall be satisfied during Building Hours by the
presence of the lobby attendant). Tenant may, at its own expense, install
its own security system ("Tenant's Security System") in the Premises;
provided, however, that Tenant shall coordinate the installation and
operation of Tenant's Security System with Landlord to assure that Tenant's
Security is compatible with Landlord's security system and the "Building
Systems," as that term is defined in Section 7.1 of this Lease and to the
-----------
extent that Tenant's Security System is not compatible with Landlord's
security system and the Building Systems, Tenant shall not be entitled to
install or operate it. Tenant shall be solely responsible for the
monitoring and operation of Tenant's Security System.
6.18 Tenant shall be granted access to the Building telephone
and electrical rooms on each floor of the Premises, and Tenant shall obtain
from Landlord's management office in the Building a key to access such
rooms; provided that (i) Landlord may elect, in its sole discretion, to
have a representative of Landlord, if a representative is reasonably
available, to accompany Tenant or Tenant's agent into such rooms; (ii)
following Tenant's access to the telephone and electrical rooms, Tenant
shall immediately return the key to the management office and insure that
the doors to the telephone and electrical rooms are locked and secured; and
(iii) Landlord shall notify Tenant, except in the case of an emergency, of
any work requiring access to the Building's telephone closets on the floors
of the Premises and shall ensure that such work is completed under
supervision of Landlord's representative.
6.2 Overstandard Tenant Use. Except as specifically noted on the
-----------------------
"Approved Working Drawings," as that term is defined in Article 3 of the
---------
Tenant Work Letter, Tenant shall not, without Landlord's prior written
consent (which consent Landlord shall not withhold if a "Design Problem,"
as that term is defined in Section 7.2 of this Lease, is not created, or
-----------
Tenant, at its sole cost and expense, installs equipment to make sure that
a Design Problem is not created), use (i) heat-generating machines,
machines other than normal fractional horsepower office machines, or other
equipment or (ii) lighting other than building standard lights in the
Premises, which in each of item (i) or item (ii) above, materially
increases the temperature otherwise maintained by the air conditioning
system or materially increases the water to be furnished for the Premises
by Landlord pursuant to the terms of Section 6.1 of this Lease. If Tenant
-----------
uses heating, ventilating or air-conditioning ("HVAC") or water in excess
of that required to be supplied to the entire Premises by Landlord pursuant
to the terms of Sections 6.1 and 6.2, respectively, of this Lease
------------ ---
(collectively, the "Excess Usage"), Tenant shall pay to Landlord, within
thirty (30) days of receipt of written notice, the "Actual Cost," as that
term is defined below in Section 6.4, below, incurred by Landlord in
-----------
connection with the provision of such Excess Usage and the installation,
operation, and maintenance of equipment which is installed in order to
supply such Excess Usage, as such Actual Cost is reasonably demonstrated to
Tenant in Landlord's written notice to Tenant. Upon prior notice to Tenant,
Landlord may install devices to separately meter or Landlord may conduct a
reasonable survey to detect any Excess Usage, and in such event Tenant
shall pay the increased Actual Cost directly to Landlord, within thirty
(30) days of receipt of written notice, including the cost of any
additional metering devices in the event such metering devices indicate, in
accordance with the criteria set forth in Section 6.1 of this Lease, that
-----------
there has been Excess Usage. Subject to Landlord's obligation to provide
the electrical capacity described in Section 6.1.2 above,
-------------
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<PAGE>
Tenant's use of electricity shall never exceed the capacity of the feeders
to the Building or the risers or wiring installation. Tenant at its sole
cost and expense may install additional risers or feeders as long as the
installation or existence of such additional risers or feeders does not
create a Design Problem. If Tenant desires to use I-IVAC during hours other
than those for which Landlord is obligated to supply HVAC pursuant to the
terms of Section 6.1.1 of this Lease ("After Hours HVAC"), Tenant shall
-------------
give Landlord notice for After Hours HVAC prior to 3:00 p.m. on the date
that Tenant requires such services or on any day preceding the date for
weekend or Holiday service, of Tenant's desired use and Landlord shall
supply such After Hours HVAC to Tenant. Within thirty (30) days after being
billed therefor, Tenant shall pay to Landlord the Actual Cost to provide
any After Hours HVAC, as reasonably determined by Landlord and calculated
on a per hour/per elevator bank basis. If more than one (1) tenant of the
Building shall require After Hours I-IVAC, Landlord shall reasonably
allocate the cost thereof between Tenant and such other tenant or among
Tenant and such other tenants. Tenant acknowledges that, as of the date of
this Lease, Landlord charges Ninety Dollars ($90.00) per hour for each
elevator bank of the Building for after-hours heating or air-conditioning
provided by the Building's HVAC system.
6.3 Interruption of Use. Except as otherwise provided in Sections
------------------- --------
7.2 and 19.4 of this Lease, Tenant agrees that Landlord shall not be liable
--- ----
for damages, by abatement of Rent or otherwise, for failure to furnish or
delay in furnishing any service (including telephone and telecommunication
services), or for any diminution in the quality or quantity thereof, when
such failure or delay or diminution is occasioned, in whole or in part, by
necessary repairs, replacements, or improvements, by any strike, lockout or
other labor trouble, by inability to secure electricity, gas, water, or
other fuel at the Building alter reasonable effort to do so, by any
accident or casualty whatsoever, by act or default of Tenant or other
parties, or by any other cause beyond Landlord's reasonable control; and
except as otherwise provided in Sections 7.2 and 19.4 of this Lease, such
------------ ----
failures or delays or diminution shall never be deemed to constitute an
eviction or disturbance of Tenant's use and possession of the Premises or,
except as otherwise provided in Sections 7.2 and 19.4 of this Lease,
------------ ----
relieve Tenant from paying Rent or performing any of its obligations under
this Lease. Furthermore, Landlord shall not be liable under any
circumstances for a loss of, or injury to, property (other than as a result
of Landlord's negligence or wilful misconduct), or for injury to, or
interference with, Tenant's business, including, without limitation, loss
of profits, however occurring, through or in connection with or incidental
to a failure to furnish any of the services or utilities as set forth in
this Article 6. Landlord may comply with mandatory controls or guidelines
promulgated by any governmental entity relating to the use or conservation
of energy, water, gas, light or electricity or the reduction of automobile
or other emissions without creating any liability of Landlord to Tenant
under this Lease, provided that the Premises are not thereby rendered
untenantable.
6.4 Actual Cost. When Tenant is required to pay Landlord for any
-----------
utility or service, Tenant shall pay Landlord's Actual Cost. The "Actual
Cost" shall be the actual costs paid or incurred by Landlord to the extent
such costs are not duplicative of costs already included in Operating
Expenses, unless such actual costs paid or incurred cannot be readily
ascertained, in which event "Actual Cost" shall be the amount reasonably
estimated by Landlord.
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ARTICLE 7
---------
REPAIRS
-------
7.1 Duties of Repair. Landlord shall repair any and all defects in
----------------
the Building other than with respect to tenant improvements constructed by
or for the benefit of tenants of the Building. Landlord shall maintain and
repair (i) the structural portions of the Building, including the
foundation, floor/ceiling slabs, roof, curtain wall, exterior glass and
mullions, columns, beams, shafts (including elevator shafts), stairs,
Parking Garage, stairwells, elevator cabs, plazas, art work, sculptures,
public washrooms, Building mechanical, electrical and telephone closets,
and all common and public areas (collectively, "Building Structure"), and
(ii) the Base Building mechanical, electrical, life safety, plumbing,
sprinkler systems (connected to the core) and HVAC systems (the "Building
Systems"), in good order and repair and in a first class condition;
provided Landlord shall not maintain and repair and Tenant shall maintain
and repair the Building Structure and Building Systems which were
constructed by Tenant, or which were constructed by contractors, agents and
subcontractors contracted with, or employed by Tenant. However, and
notwithstanding the foregoing, the items of the Base Building set forth in
Paragraphs 1, 6 and 7 of Schedule 2 of the Tenant Work Letter which are
constructed by or on behalf of Tenant shall be maintained by Landlord in
good order and repair only to the extent Tenant constructs such items in
accordance with those certain Architectural Drawings and Mechanical,
Electrical and Plumbing drawings respectively specified in Paragraphs 1, 6
and 7 of Schedule 2 of the Tenant Work Letter. In addition, Landlord shall
maintain the mechanical fans on the second floor of the Building, and the
Building Systems on the roof of the Building in order to reasonably
minimize noise and vibration levels to the Premises. Furthermore, Landlord
shall take all commercially reasonable steps (including the incorporation
of commercially reasonable improvements and the expenditure of monetary
amounts as necessary as opposed to substantial construction or
reconstruction of the Building), if necessary, to cause the level of
vibration in the areas of the Premises located on the 23rd and 24th floor
which have a suspended acoustical tile ceiling and standard pad and
carpeting to be materially consistent with the level of vibration found in
such areas of the Premises located on the 22nd floor of the Premises.
Tenant shall, at Tenant's own expense, pursuant to the terms of this Lease,
including without limitation Article 8 hereof, keep the Premises, including
---------
all improvements, fixtures and furnishings therein, in good order and
repair at all times during the Lease Term. In addition, except as provided
as part of Landlord's repair obligations set forth above or elsewhere in
this Lease, Tenant shall, at Tenant's own expense subject to the prior
approval of Landlord to the extent required under Article 8 of this Lease,
---------
and within any reasonable period of time specified by Landlord, pursuant to
the terms of this Lease, including without limitation Article 8 hereof,
---------
promptly and adequately repair all damage to the Premises (other than the
Building Structure and the Building Systems) and replace or repair all
damaged, broken or worn fixtures and appurtenances, except for damage
caused by ordinary wear and tear or caused by Landlord or its agents,
representatives, employees or contractors; provided that if Tenant fails to
make such repairs, Landlord may, but need not, on not-less than ten (10)
business days prior notice to Tenant (except in case of an emergency), make
such repairs and replacements, and Tenant shall pay Landlord the cost
thereof, including a reasonable percentage of the cost thereof (to be
uniformly established for the Building) sufficient to reimburse Landlord
for all overhead, general conditions, fees and other costs or expenses
arising from Landlord's involvement with such repairs and replacements
forthwith upon being billed for same. Landlord may, but shall not be
required to, enter the Premises at all reasonable times to make such
repairs, alterations, improvements and additions to
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<PAGE>
the Premises or to the Building or to any equipment located in the Building
as Landlord shall desire or deem necessary or as Landlord may be required
to do by governmental or quasi-governmental authority or court order or
decree; provided, however, except to the extent necessitated by (A)
emergencies, (B) repairs, alterations, improvements or additions required
by governmental or quasi-governmental authorities or court order or decree
which Landlord cannot reasonably avoid performing without material
interference with the permitted conduct of Tenant's business in the
Premises, or (C) repairs which are the obligation of Tenant hereunder, any
such entry into the Premises by Landlord shall be performed in a manner so
as not to materially interfere with the conduct of Tenant's business in the
Premises. Tenant hereby waives and releases its right to make repairs at
Landlord's expense under Sections 1941 and 1942 of the California Civil
Code or under any similar law, statute, or ordinance now or hereafter in
effect.
7.2 Tenant's Right to Make Repairs. If Tenant provides written
------------------------------
notice to Landlord of an event or circumstance which requires the action of
Landlord with respect to the provision of utilities and/or services and/or
repairs and/or maintenance to the Premises or those portions of the
Building Structure and the Building Systems which are located on a floor on
which Tenant's Premises are located, or relate to electrical, HVAC, water,
or elevator usage and are necessary for Tenant to conduct its operation
from the Premises even if not located on such floors, as set forth in
Sections 6.1 and 7.1 of this Lease, above, and Landlord fails to provide
such action as required by the terms of this Lease within twenty (20)
business days after receipt of such written notice or, if such failure by
Landlord relates to the non-functioning of electrical, HVAC, elevator or
water services to the Low-Rise Floors and such failure causes or threatens
to cause immediate substantial damage to Tenant's property in the Low-Rise
Floors (such circumstances to be known as an "Emergency"), then within two
(2) business days, and to the extent that the required action to be taken
by Tenant does not create a Design Problem, Tenant may proceed to take the
required action upon delivery of an additional five (5) business days (or
two (2) business days in the event of an Emergency) notice to Landlord
specifying that Tenant is taking such required action, and if such action
was required under the terms of this Lease to be taken by Landlord, then
Tenant shall be entitled to prompt reimbursement by Landlord of Tenant's
reasonable costs and expenses in taking such action plus interest at the
Interest Rate during the period from the date Tenant incurs such costs and
expenses until such time as payment is made by Landlord. Notwithstanding
any contrary provision of this Section 7.2, Tenant shall have no right to
-----------
take any such action with respect to those portions of the Base Building or
other portions of the Building and Real Property located on a floor other
than a floor on which Tenant's Premises are located. In the event Tenant
takes the action permitted above, and such work will create a Design
Problem, Tenant shall use only those contractors used by Landlord in the
Building for such work unless such contractors are unwilling or unable to
perform such work at competitive rates, in which event Tenant may utilize
the services of any other qualified contractor which normally and regularly
performs similar work in Comparable Buildings. Further, if Landlord does
not deliver a detailed written objection to Tenant, within thirty (30) days
after receipt of an invoice by Tenant of its costs of taking action which
Tenant claims should have been taken by Landlord, and if such invoice from
Tenant sets forth a reasonably particularized breakdown of its costs and
expenses in connection with taking such action on behalf of Landlord, then
Tenant shall be entitled to deduct from Rent payable by Tenant under this
Lease, the amount set forth in such invoice together with interest at the
Interest Rate. If, however, Landlord is in good faith delivers to Tenant
within thirty (30) days after receipt of Tenant's invoice, a written
objection to the payment of such invoice, setting forth with reasonable
particularity Landlord's reasons
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for its claim that such action did not have to be taken by Landlord
pursuant to the terms of this Lease or that the charges are excessive (in
which case Landlord shall pay the amount it contends would not have been
excessive), then Tenant shall not be entitled to such deduction from Rent,
but as Tenant's sole remedy, Tenant may proceed to institute legal
proceedings against Landlord to collect the amount set forth in the subject
invoice. If Tenant receives a non-appealable final judgment against
Landlord in connection with such legal proceedings, Tenant may deduct the
amount of the judgment, not to exceed the amount of the unpaid portion of
the relevant invoice, from the Base Rent next due and owing under this
Lease. For purposes of this Lease, "Design Problem" shall mean any
alteration, repair, modification, or improvement by Tenant which (a)
adversely affects the Building Structure, (b) adversely affects the
Building Systems, (c) is not in compliance with applicable laws, (d)affects
the exterior appearance of the Building, or (e) affects the normal and
customary business operations of the other tenants in the Building.
ARTICLE 8
---------
ADDITIONS AND ALTERATIONS
-------------------------
8.1 Landlord's Consent to Alterations. Tenant may make
---------------------------------
improvements, alterations, additions or changes to the Premises
(collectively, the "Alterations"), which do not create a Design Problem, by
providing Landlord with notice not less than ten (10) days prior to the
commencement thereof. Tenant may not make any Alterations which may
adversely affect the Building Systems and equipment, exterior appearance of
the Building, or structural aspects of the Building, or any Alterations
involving the blocking of exterior light from the floors of the Premises
(the "Blackened Windows"), the construction of a mezzanine level within the
second (2nd) floor portion of the Premises (the "Mezzanine Level"), or the
construction of an interior staircase in the Premises (the "Subsequent
Staircase"), without first procuring the prior written consent of Landlord
to such Alterations, which consent shall be requested by Tenant not less
than twenty (20) days prior to the commencement thereof if the Alterations
relate to the Blackened Windows, Mezzanine Level, or Subsequent Staircase,
or if such Alterations are to be reviewed by a third party consultant of
Landlord, or not less than ten (10) days prior to the commencement thereof
if the Alterations are to be reviewed by on-site internal personnel of
Landlord, and which consent shall not be unreasonably withheld or delayed
by Landlord. Landlord's failure to respond to Tenant's notice within the
applicable twenty (20) or ten (10) day period shall be deemed Landlord's
approval of the Alteration in question. In the event that the construction
of the Mezzanine Level is approved by Landlord pursuant to the terms of
this Article 8, Landlord shall not increase the Base Rent as a result of
---------
the additional rentable square feet of the Mezzanine Level. In the event
Tenant proposes to make Alterations which require the consent of Landlord
pursuant to this Section 8.1, Tenant's notice regarding the proposed
Alterations shall include the plans and specifications for the Alterations.
The construction of the initial improvements to the Premises shall be
governed by the terms of the Tenant Work Letter and not the terms of this
Article 8.
---------
8.2 Manner of Construction. Landlord may impose, as a condition of
----------------------
its consent to all Alterations or repairs of the Premises or about the
Premises, such reasonable requirements as Landlord in its reasonable
discretion may deem desirable, including, but not limited to, the
requirement that upon Landlord's request made at the time such consent is
granted, Tenant shall, at Tenant's expense, remove upon the expiration or
any early termination of the Lease Term, any Alterations relating to the
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Blackened Windows, the Mezzanine Level and or a Subsequent Staircase, if
any, and such Alterations which do not constitute customary general office
improvements and which are more expensive to remove than such customary
general office improvements, and/or the requirement that Tenant utilize for
such purposes only contractors reasonably approved by Landlord. Tenant
shall construct such Alterations and perform such repairs in conformance
with any and all applicable rules and regulations of any federal, state,
county or municipal code or ordinance and, if required by applicable law,
pursuant to a valid building permit, issued by the City of Los Angeles, in
conformance with Landlord's reasonable construction rules and regulations.
Landlord's approval of the plans, specifications and working drawings for
Tenant's Alterations shall create no responsibility or liability on the
part of Landlord for their completeness, design sufficiency, or compliance
with all laws, rules and regulations of governmental agencies or
authorities. All work with respect to any Alterations must be done in a
good and workmanlike manner and diligently prosecuted to completion to the
end that the Premises shall at all times be a complete unit except during
the period of work. In performing the work of any such Alterations, Tenant
shall have the work performed in such manner as not to obstruct access to
the Building or the common areas for any other tenant of the Building, and
as not to obstruct the business of Landlord or other tenants in the
Building, or interfere with the labor force working in the Building. Upon
request Landlord shall provide Tenant with a copy of any then available
Base Building plans relevant to the proposed Alteration. Subject to
reasonable scheduling, Landlord shall provide Tenant with access to the
Building's freight elevator in connection with any Alterations work, with
such access to be at no charge during Building Hours, and at a charge
during non-Building Hours equal to the actual increase, if any, in
Landlord's actual after-hours staffing costs which are directly
attributable to Tenant's use of the Building's freight elevator. Upon
completion of any Alterations, at Landlord's request, Tenant agrees to
cause a timely Notice of Completion to be recorded in the office of the
Recorder of the County of Los Angeles in accordance with the terms of
Section 3093 of the Civil Code of the State of California or any successor
statute, and Tenant shall deliver to the Building management office a
reproducible copy of the "as built" drawings of the Alterations (which may
be the original construction drawings for such Alterations, with field
modifications).
8.3 Payment for Improvements. Tenant shall reimburse Landlord for
------------------------
Landlord's reasonable, actual, out-of-pocket costs and expenses actually
incurred in connection with Landlord's review of and/or reasonable
involvement with any Alteration.
8.4 Construction Insurance. In the event that Tenant makes any
Alterations, Tenant agrees to carry "Builder's All Risk" insurance in an
amount approved by Landlord, but in no event greater than the cost to cover
the construction of such Alterations, and such other insurance as Landlord
may reasonably require, it being understood and agreed that all of such
Alterations shall be insured by Tenant pursuant to Article 10 of this Lease
----------
immediately upon completion thereof. In addition, Landlord may require any
"Transferee," as that term is defined in Section 14.1, below, but not the
------------
Tenant originally named in this Lease, to obtain a lien and completion bond
or some alternate form of security satisfactory to Landlord in an amount
sufficient to ensure the lien-free completion of such Alterations and
naming Landlord as a co-obligee, if such requirement is necessary in
Landlord's reasonable judgment based upon such Transferee's then-current
financial condition.
8.5 Landlord's Property. All Alterations, improvements, fixtures
-------------------
and/or equipment which may be permanently installed in or about the
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Premises, and all signs installed in, on or about the Premises, from time
to time, shall, except as herein provided, be at the sole cost of Tenant
and shall be and become the property of Landlord, except that Tenant may
remove any Alterations, improvements, trade fixtures and/or equipment,
including but not limited to post-production equipment, which are not
permanently installed, and notwithstanding the foregoing, Tenant shall
remove "Tenant's Signage," as that term is defined in Section 23.4 and any
------------
other sign identifying Tenant, below, provided Tenant repairs any damage to
the Premises and Building caused by such removal in accordance with the
terms of this Article 8 or Article 23, respectively. Furthermore, if, (i)
--------- ----------
pursuant to the terms of Section 8.2 of this Lease, Tenant is required to
-----------
remove any Alteration upon the expiration or early termination of the Lease
Term, or (ii) if pursuant to Tenant's initial construction of its
improvements in the Premises, Tenant constructs improvements which are not
customary general office improvements and which are more expensive to
remove than such customary general office improvements (which improvements
shall only include a staircase between floors of the Premises if the
removal of such staircase is a Subsequent Staircase or is otherwise
required under the terms of this Section 8.5), or (iii) Tenant constructs
the Blackened Windows, the Mezzanine Level or the Subsequent Staircase,
Landlord may, by written notice to Tenant prior to the end of the Lease
Term, or given upon any earlier termination of this Lease, require Tenant
at Tenant's expense to remove such improvements or Alterations, and to
repair any damage to the Premises and Building caused by such removal and
return the Premises back to its condition prior to the installation of such
Alterations or improvements, including but not limited to, the restoration
of the Blackened Windows to their condition that existed prior to the
installation of the Blackened Windows, and the replacement of pan decking
and new concrete at the point of connection of the staircase in question,
to the floors, and beam reinforcement if necessary to maintain the
structural integrity of the Building. Notwithstanding anything to the
contrary set forth in this Article 8, (i) Tenant shall not be obligated to
---------
remove any staircase between the floors of the Premises, which staircase is
constructed with the initial improvements in the Premises (the "Initial
Staircase") if the Initial Staircase is located on the 22nd, 23rd and/or
24th floors of the Premises and Tenant does not renew the initial Lease
Term, and (ii) if Tenant renews the initial Lease Term with respect to
floors 23 and 24 but not floor 22, or with respect to floor 22 but not
floors 23 and 24, then Tenant shall, at Tenant's sole cost and expense,
only be required upon the expiration or earlier termination of the initial
Lease Term, to remove the portion of the Initial Staircase which connects
floors 22 and 23. If Tenant fails to complete such removal and/or to repair
any damage caused by the removal of any Alterations, Landlord may do so
upon three (3) business days' notice to Tenant and may charge the actual,
reasonable and documented cost thereof to Tenant. Notwithstanding anything
to the contrary contained in this Lease, with respect to the 2nd floor,
Tenant will not have to remove or replace any raised flooring or raised
bathroom fixtures (or the reconfigured elevator frames as a result of the
raised floor) or any installed wiring, conductor or cabling in connection
with the raised floor which raised floor or fixtures were constructed with
the initial improvements in the Premises. Tenant's obligations under this
Section 8.5 shall survive the termination of this Lease.
-----------
ARTICLE 9
---------
COVENANT AGAINST LIENS
----------------------
Tenant has no authority or power to cause or permit any lien or encumbrance
of any kind whatsoever, whether created by act of Tenant, operation of law
or otherwise, to attach to or be placed upon the Real Property, Building or
Premises, and any and all liens and encumbrances created by
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Tenant shall attach to Tenant's interest only. Landlord shall have the right at
all times to post and keep posted on the Premises any notice which it deems
necessary for protection from such liens. Tenant covenants and agrees not to
permit any lien of mechanics or materialmen or others to be placed against the
Real Property, the Building or the Premises with respect to work or services
claimed to have been performed for or materials claimed to have been furnished
to Tenant or the Premises at Tenant's request, and, in case of any such lien
attaching or notice of any lien, Tenant covenants and agrees to cause it to be
released and removed of record by bond or otherwise within ten (10) days after
notice by Landlord, and if Tenant shall fail to do so, Landlord, at its sole
option, without limitation as to other remedies available to Landlord under this
Lease, may immediately take all action necessary to release and remove such
lien, without any duty to investigate the validity thereof, and all sums, costs
and expenses, including reasonable attorneys' fees and costs, incurred by
Landlord in connection with such lien shall be deemed Additional Rent under this
Lease and shall be due and payable by Tenant within thirty (30) days of receipt
of an invoice therefor.
ARTICLE 10
----------
INSURANCE
---------
10.1 Indemnification and Waiver. Tenant hereby assumes all risk of
--------------------------
damage to property or injury to persons in or upon the Premises from any cause
whatsoever and agrees that Landlord, its partners, subpartners, trustees,
ancillary trustees and their respective officers, directors, shareholders,
beneficiaries, agents, servants and employees (collectively, the "Landlord
Parties") shall not be liable for, and are hereby released from any
responsibility for, any damage either to person or property or resulting from
the loss of use thereof, which damage is sustained by Tenant or by other persons
claiming through Tenant, except to the extent caused by the negligence or wilful
misconduct of the Landlord Parties. Tenant shall indemnify, defend, protect, and
hold harmless Landlord Parties from any and all loss, cost, damage, expense and
liability (including without limitation court costs and reasonable attorneys'
fees) (collectively, "Claims") incurred in connection with or arising from (i)
any cause in or on the Premises during the Lease Term or any holdover period,
and/or (ii) any negligent acts, omissions or wilful misconduct of Tenant or of
any person claiming by, through or under Tenant, its partners, and their
respective officers, agents, servants or employees of Tenant or any such person
(collectively, the "Tenant Parties"), in, on or about the Real Property, either
prior to, during, or after the expiration of the Lease Term, provided that
Tenant shall not be required to indemnify and hold Landlord harmless from any
Claim to any person, property or entity resulting from the negligent acts,
omissions or wilful misconduct of the Landlord Parties in connection with the
Landlord Parties' activities in, on or about the Real Property, including the
Premises (except for damage to the Tenant Improvements, Alterations and Tenant's
personal property, fixtures, furniture and equipment in the Premises, to the
extent Tenant is required to obtain the requisite insurance coverage pursuant to
this Lease), and Landlord hereby agrees to so indemnify and holds Tenant
harmless from any such Claims; provided further that because Landlord is
required to maintain insurance on the Building and Tenant compensates Landlord
for such insurance as part of Tenant's Share of Operating Expenses and because
of the existence of waivers of subrogation set forth in Section 10.5 of this
------------
Lease, Landlord hereby indemnifies and holds Tenant harmless from any Claims to
any property outside of the Premises to the extent such Claim is covered by such
insurance, even if resulting from the negligent acts or omissions, or wilful
misconduct of the Tenant Parties. Similarly, since Tenant must carry insurance
pursuant to
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this Article 10 to cover its personal property within the Premises and the
Tenant Improvements and Alterations, Tenant hereby indemnifies and holds
Landlord harmless from any Claim to any property within the Premises, to the
extent such Claim is covered by such insurance, even if resulting from the
negligent acts or omissions, or wilful misconduct of the Landlord Parties.
Notwithstanding any contrary provision of this Lease, neither Landlord nor
Tenant shall be liable to the other party for any consequential damages for a
breach or default under this Lease, provided that this sentence shall not be
applicable to any consequential damages which may be incurred by Landlord
relating to, or in connection with (i) action taken by or on behalf of Tenant
pursuant to the provisions of Section 7.2 above, or (ii) any storage, use,
-----------
treatment, manufacture, sale, disposal or discharge of any hazardous materials
or substances (as those terms are defined by applicable law) in, on, under or
about the Premises, Building or Real Property by Tenant, its agents,
representatives, employees, contractors, subtenants or assigns, or any actions
taken by Tenant or such parties in connection therewith, or (iii) any holdover
by Tenant following the expiration of the Lease Term, subject to and in
accordance with the provisions of Article 16 hereof. The provisions of this
Section 10.1 shall survive the expiration or sooner termination of this Lease
- ------------
with respect to any claims or liability occurring prior to such expiration or
termination.
10.2 Landlord's Fire and Casualty Insurance. Landlord shall insure the
--------------------------------------
Building during the Lease Term against loss or damage due to fire and other
casualties covered within the classification of fire and extended coverage,
vandalism coverage and malicious mischief, sprinkler leakage, water damage and
special extended coverage. Such coverage shall be written on an "all risks" of
physical loss or damage basis for the guaranteed replacement cost value new
without deduction for depreciation of the Building, and shall be from such
companies, and on such other terms and conditions, as Landlord may from time to
time reasonably determine. Additionally, at the option of Landlord, such
insurance coverage may include the risks of earthquakes and/or flood damage and
additional hazards, a rental loss endorsement and one or more loss payee
endorsements in favor of the holders of any mortgages or deeds of trust
encumbering the interest of Landlord in the Building or the ground or underlying
lessors of the Building, or any portion thereof. Notwithstanding the foregoing
provisions of this Section 10.2, the coverage and amounts of insurance carried
------------
by Landlord in connection with the Building shall at a minimum be comparable to
the coverage and amounts of insurance which are carried by reasonably prudent
landlords of Comparable Buildings, and Worker's Compensation and Employee's
Liability coverage as required by applicable law. Upon inquiry by Tenant, from
time to time, Landlord shall inform Tenant of all such insurance carried by
Landlord. Tenant shall, at Tenant's expense, comply with all customary insurance
company requirements pertaining to the use of the Premises. If Tenant's conduct
or use of the Premises other than for normal office purposes causes any increase
in the premium for such insurance policies, then Tenant shall reimburse Landlord
for any such increase. Tenant, at Tenant's expense, shall comply with all rules,
orders, regulations or requirements of the American Insurance Association
(formerly the National Board of Fire Underwriters) and with any similar body.
10.3 Tenant's Insurance. Tenant shall maintain the following coverages
------------------
in the following amounts.
10.3.1 Commercial General Liability Insurance covering the insured
against claims of bodily injury, personal injury and property damage (including
loss of use thereof) arising out of
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Tenant's operations, use of the Premises and contractual liabilities, including
a Broad Form Commercial General Liability endorsement covering the insuring
provisions of this Lease and the performance by Tenant of the indemnity
agreements set forth in Section 10.1 of this Lease, written on the basis of
------------
occurrence (if basis of occurrence coverage is available at commercially
reasonable rates), for limits of liability not less than: (i) Bodily Injury and
Property Damage Liability - $5,000,000 each occurrence and $5,000,000 annual
aggregate, and (ii) Personal Injury Liability - $5,000,000 each occurrence and
$5,000,000 annual aggregate, and for a commercially reasonable deductible
amount.
10.3.2 Physical Damage Insurance covering (i) all office
furniture, trade fixtures, office equipment, free-standing cabinet work, movable
partitions, merchandise and all other items of Tenant's property on the Premises
installed by, for, or at the expense of Tenant, (ii) the Tenant Improvements,
and (iii) all other improvements, alterations and additions to the Premises.
Such insurance shall be written on an "all risks" of physical loss or damage
basis, for the guaranteed replacement cost value new without deduction for
depreciation of the covered items, be in amounts that meet any co-insurance
clauses of the policies of insurance and shall include a vandalism and malicious
mischief endorsement, sprinkler leakage coverage and earthquake sprinkler
leakage coverage, and contain a commercially reasonable deductible amount.
10.3.3 Business interruption, loss-of-income and extra-expense
insurance in amounts sufficient to pay for Tenant's expenses and lost income
attributable to perils commonly insured against by prudent tenants or
attributable to prevention of access to the Premises or to the Building as a
result of such perils; Tenant may self-insure such coverage described in this
Section 10.3.3 with deemed full waiver of subrogation.
- ---------------
10.3.4 Workers' Compensation and Employer's Liability or other
similar insurance pursuant to all applicable state and local statutes and
regulations.
10.4 Form of Policies. The minimum limits of policies of liability
----------------
insurance required of Tenant or Landlord under this Lease shall in no event
limit the liability of Tenant or Landlord under this Lease. Tenant's insurance
shall (i) name Landlord, and any other party it so reasonably specifies, as an
additional insured; (ii) specifically cover the liability assumed by Tenant
under this Lease, including, but not limited to, Tenant's obligations under
Section 10.1 of this Lease; (iii) be issued by an insurance company having a
- ------------
rating of not less than A-VII in Best's Insurance Guide or which is otherwise
acceptable to Landlord and licensed to do business in the State of California;
(iv) be primary insurance as to all claims thereunder and provide that any
insurance carried by Landlord is excess and is non-contributing with any
insurance requirement of Tenant; (v) provide that said insurance shall not be
canceled or coverage changed unless thirty (30) days' prior written notice shall
have been given to Landlord and any mortgagee of Landlord; and (vi) contain a
cross-liability endorsement or severability of interest clause acceptable to
Landlord. Tenant shall deliver said policy or policies or certificates thereof
to Landlord on or before the Lease Commencement Date and at least thirty (30)
days before the expiration dates thereof.
10.5 Subrogation. Landlord and Tenant agree to have their respective
-----------
insurance companies issuing property damage insurance waive any rights of
subrogation that such companies may have against Landlord or Tenant, as the case
may be, Landlord and Tenant hereby release and waive any
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right that either may have against the other on account of any loss or damage to
their respective property to the extent such loss or damage is insurable under
policies of insurance for fire and all risk coverage, theft, or other similar
insurance. If either party fails to carry the amounts and types of insurance
required to be carried by it pursuant to this Article 10, in addition to any
----------
remedies the other party may have under this Lease, such failure shall be deemed
to be a covenant and agreement by such party to self-insure with respect to the
type and amount of insurance which such party so failed to carry, with full
waiver of subrogation with respect thereto.
10.6 Additional Insurance Obligations. Tenant shall carry and maintain
--------------------------------
during the entire Lease Term, at Tenant's sole cost and expense, increased
amounts of the insurance required to be carried by Tenant pursuant to this
Article 10, and such other reasonable types of insurance coverage and in such
- ----------
reasonable amounts covering the Premises and Tenant's operations therein, as may
be reasonably requested by Landlord, but in no event shall such increased
amounts of insurance or such other reasonable types of insurance be in excess of
that required by landlords of Comparable Buildings.
ARTICLE II
----------
DAMAGE AND DESTRUCTION
----------------------
11.1 Repair of Damage to Premises by Landlord. Tenant shall promptly
----------------------------------------
notify Landlord of any damage to the Premises resulting from fire or any other
casualty or any condition existing in the Premises as a result of a fire or
other casualty that would give rise to the terms of this Article 11. If the
----------
Premises or any common areas of the Building serving or providing access to the
Premises shall be damaged by fire or other casualty or be subject to a condition
existing as a result of a fire or other casualty, Landlord shall promptly and
diligently, subject to reasonable delays for insurance adjustment or other
matters beyond Landlord's reasonable control, and subject to all other terms of
this Article 11, restore the base, shell, and core of the Premises and such
----------
common areas to substantially the same condition as existed prior to the
casualty, except for modifications required by zoning and building codes and
other laws or by the holder of a mortgage on the Building, or the lessor of a
ground or underlying lease with respect to the Real Property and/or the
Building, or any other modifications to the common areas consistent with the
operation of the Building as a first-class office building and reasonably deemed
desirable by Landlord, provided access to the Premises and any common restrooms
serving the Premises shall not be materially impaired and the common areas of
the Building and the Parking Garage shall not be materially diminished.
Notwithstanding any other provision of this Lease, upon the occurrence of any
damage to the Premises, if Tenant does not notify Landlord that Tenant desires
to repair any damage to the Premises, then as long as this Lease is not
terminated, all insurance proceeds payable to Tenant under Tenant's insurance
required under items (ii) and (iii) of Section 10.3.2 of this Lease respecting
--------------
Tenant Improvements and other alterations or improvements to the Premises (other
than Tenant's personal property and trade fixtures), shall be disbursed for all
costs and expenses incurred by Landlord in connection with the repair of any
such damage, pursuant to a disbursement procedure mutually approved by Landlord
and Tenant. Landlord shall diligently repair any injury or damage to the Tenant
Improvements installed in the Premises a nd shall return such Tenant
Improvements to their original condition; provided that if the cost of such
repair by Landlord exceeds the amount of insurance proceeds received by Landlord
from Tenant's insurance carrier the cost of such repairs shall be paid by Tenant
on a progress payment basis. As long as the Tenant Improvements in
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the Premises are rebuilt, Tenant shall be entitled to retain any portion of the
proceeds of the insurance described in Section 10.3.2 in excess of the cost of
--------------
such restoration. In the event that this Lease is terminated pursuant to the
provisions of this Article 11, Tenant shall assign to Landlord and Landlord
----------
shall be entitled to retain that portion of the insurance proceeds from the
coverage required to be carried under items (ii) and (iii) of Section 10.3.2
--------------
hereof respecting the Tenant Improvements and other alterations or improvements
to the Premises, other than Tenant's personal property and trade fixtures, in an
amount up to the product of (A) the amount of the Tenant Improvement Allowance
for the initial Tenant Improvements and any tenant improvement allowances given
by Landlord for additional space added to the Premises, or the amount of any
tenant improvement allowance given by Landlord during an Option Term, if any,
and (B) a fraction, the numerator of which is the number of full or partial
unexpired months in the Lease Term or when appropriate, an Option Term then
applicable, as of the termination of the Lease and the denominator of which is
120 (or, if applicable, 60 during an Option Term), and Tenant shall be entitled
to retain any remaining portion of the insurance proceeds. In the event this
Lease is not terminated, Tenant shall have the right to reasonably approve the
identity of the general contractor selected by Landlord pursuant to a
competitive bidding process, who shall rebuild the Tenant Improvements and the
material economic terms and conditions of such construction contract. However,
in the event that Tenant notifies Landlord upon the occurrence of any damage to
the Premises that Tenant desires to repair any damage to the Premises, then
Tenant shall, prior to the commencement of the reconstruction of the Tenant
Improvements, submit to Landlord, for Landlord's review and approval, all plans,
specifications and working drawings relating thereto, and Landlord shall
reasonably approve the contractors selected by Tenant to perform such
improvement work. Such submittal of plans and such reconstruction of the Tenant
Improvements shall be performed in substantial compliance with the terms of the
Tenant Work Letter as though such reconstruction was the initial construction of
the Tenant Improvements. Landlord shall not be liable for any inconvenience or
annoyance to Tenant or its visitors, or injury to Tenant's business resulting in
any way from such damage or the repair thereof, provided however, that if such
fire or other casualty shall have damaged the Premises or common areas necessary
to Tenant's occupancy, Landlord shall allow Tenant a proportionate abatement of
Rent, during the time and to the extent Tenant is unable to use the Premises for
the purposes permitted under this Lease, and does in fact not use the Premises.
If the damage-or destruction is due to the negligence or wilful misconduct of
Tenant or any of its agents, employees or contractors, Tenant shall be
responsible for any commercially reasonable, applicable insurance deductible
(which shall be payable to Landlord upon demand).
11.2 Landlord's Option to Repair. Notwithstanding the terms of Section
--------------------------- -------
11.1 of this Lease, Landlord may elect not to rebuild and/or restore the
- ----
Premises and/or Building and instead terminate this Lease by notifying Tenant in
writing of such termination within thirty (30) days after the date of damage,
such notice to include a termination date giving Tenant ninety (90) days to
vacate the Premises, but Landlord may so elect only if the Building shall be
damaged by fire or other casualty or cause or be subject to a condition existing
as a result of such a fire or other casualty or cause, whether or not the
Premises are affected, and one or more of the following conditions is present:
(i) in the reasonable judgment of a contractor selected by Landlord and
reasonably approved by Tenant, repairs cannot reasonably be completed within two
hundred twenty-five (225) days of the date of damage (when such repairs are made
without the payment of overtime or other premiums); (ii) the holder of any
mortgage on the Building or Real Property, or ground or underlying lessor with
respect to the Real Property and/or the Building, (a) shall require that the
insurance proceeds or any portion thereof be used to retire
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the mortgage debt due to an impairment of such holder's collateral, and the
remaining proceeds are insufficient to repair the damage and as a result thereof
the deficiency of insurance proceeds exceeds the "Maximum Amount," as that term
is defined below, and Landlord elects not to commence repair to the Premises or
Building within one (1) year of such damage or destruction, and Landlord
terminates the leases of all other tenants similarly affected by such damage or
destruction, or (b) shall terminate the ground or underlying lease, as the case
may be, as long as such action shall be consistent with the terms of such
mortgage or ground lease, as the case may be, and enforceable under applicable
law; provided that Landlord shall not be required to institute any legal
proceeding contesting such action; (iii) the dollar amount of the damage or
condition arising as a result of such damage which is not fully covered by
Landlord's insurance policies (and that would not be fully covered by Landlord's
insurance policies if Landlord had carried the coverage required under this
Lease) including any deductible amount, is equal to or greater than Two Million
and No/100 Dollars ($2,000,000.00) (the "Maximum Amount"), which Maximum Amount
shall, as of the date of termination of this Lease, be equal to the product of
(a) the Maximum Amount and (b) a fraction, the numerator of which is the number
of full months remaining in the Lease Term, or when appropriate the Option Term
then applicable, as of the date of the termination of this Lease, and the
denominator of which is 120 (or, if applicable, 60 during an Option Term) and
Landlord elects not to commence repair to the Premises or Building within one
(1) year of such damage or destruction and Landlord terminates the leases of all
other tenants similarly affected by such damage or destruction; or (iv) the
damage occurs during the last twelve (12) months of the Lease Term, as such
Lease Term may have been extended by Tenant pursuant to Section 2.2 above;
-----------
provided, however, that if Landlord does not elect to terminate this Lease
pursuant to Landlord's termination right as provided above, and the repairs of
such damage cannot, in the reasonable opinion of a contractor selected by
Landlord and reasonably approved by Tenant, be completed within two hundred
twenty-five (225) days after being commenced (which 225-day period shall not be
subject to extension as a result of any Force Majeure), Tenant may elect, not
later than ninety (90) days after the date of such damage, to terminate this
Lease by written notice to Landlord effective as of the date specified in the
notice. Furthermore, if neither Landlord nor Tenant has terminated this Lease,
and the repairs are not actually completed within such 225-day period, Tenant
shall have the right to terminate this Lease within five (5) business days of
the end of such period and thereafter during the first five (5) business days of
each calendar month following the end of such period until such time as the
repairs are complete, by notice to Landlord (the "Damage Termination Notice"),
effective as of a date set forth in the Damage Termination Notice (the "Damage
Termination Date"), which Damage Termination Date shall not be less than five
(5) business days following the end of such period or each such month, as the
case may be. Notwithstanding the foregoing, if Tenant delivers a Damage
Termination Notice to Landlord, then Landlord shall have the right, which may
only be exercised once with respect to any specific event of damage or
destruction, to suspend the occurrence of the Damage Termination Date for a
period ending thirty (30) days after the Damage Termination Date set forth in
the Damage Termination Notice by delivering to Tenant, within five (5) business
days of Landlord's receipt of the Damage Termination Notice, a certificate of
Landlord's contractor responsible for the repair of the damage certifying that
it is such contractor's good faith judgment that the repairs shall be
substantially completed within thirty (30) days after the Damage Termination
Date. If repairs shall be substantially completed prior to the expiration of
such thirty-day period, then the Damage Termination Notice shall be of no force
or effect, but if the repairs shall not be substantially completed within such
thirty-day period, then this Lease shall terminate upon the expiration of such
thirty-day period. At any time, from time to time, after the date occurring
thirty (30) days after the date of the damage, Tenant may request
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<PAGE>
that Landlord provide Tenant with a certificate from the architect or contractor
described above setting forth such architect's or contractor's reasonable
opinion of the date of completion of the repairs and Landlord shall respond to
such request within five (5) business days.
11.3 Waiver of Statutory Provisions. The provisions of this Lease,
------------------------------
including this Article 11, constitute an express agreement between Landlord and
----------
Tenant with respect to any and all damage to, or destruction of, all or any part
of the Premises, the Building or any other portion of the Real Property, and any
statute or regulation of the State of California, including, without limitation,
Sections 1932(2) and 1933(4) of the California Civil Code, with respect to any
rights or obligations concerning damage or destruction in the absence of an
express agreement between the parties, and any other statute or regulation, now
or hereafter in effect, shall have no application to this Lease or any damage or
destruction to all or any part of the Premises, the Building or any other
portion of the Real Property.
ARTICLE 12
----------
NONWAIVER
---------
No provision of this Lease shall be deemed waived by either party hereto
unless expressly waived in a writing signed thereby. The waiver by either party
hereto of any breach of any term, covenant or condition herein contained shall
not be deemed to be a waiver of any subsequent breach of same or any other term,
covenant or condition herein contained. The subsequent acceptance of Rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any term, covenant or condition of this Lease, other than the
failure of Tenant to pay the particular Rent so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
Rent. No acceptance of a lesser amount than the Rent herein stipulated shall be
deemed a waiver of Landlord's right to receive the full amount due, nor shall
any endorsement or statement on any check or payment or any letter accompanying
such check or payment be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right to recover
the full amount due. No receipt of monies by Landlord from Tenant after the
termination of this Lease shall in any way alter the length of the Lease Term or
of Tenant's right of possession hereunder, or after the giving of any notice
following the termination of this Lease shall reinstate, continue or extend the
Lease Term or affect any notice given Tenant prior to the receipt of such
monies, it being agreed that after the service of notice or the commencement of
a suit or after final judgment for possession of the Premises, Landlord may
receive and collect any Rent due, and the payment of said Rent shall not waive
or affect said notice, suit or judgment. Tenant's payment of any Rent hereunder
shall not constitute a waiver by Tenant of any breach or default by Landlord
under this Lease, whether or not known to Tenant.
ARTICLE 13
----------
CONDEMNATION
------------
13.1 Permanent Taking. If the whole or any material part of the
----------------
Premises, Building or Real Property shall be taken by power of eminent domain or
condemned by any competent authority for any public or quasi-public use or
purpose, or if any adjacent property or street shall be so taken or
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<PAGE>
condemned, or reconfigured or vacated by such authority in such manner so as to
render the continued operation of the Building or Real Property as a first-class
office project infeasible, or if Landlord shall grant a deed or other instrument
in lieu of such taking by eminent domain or condemnation, Landlord shall have
the option to terminate this Lease upon ninety (90) days' notice, provided such
notice is given no later than sixty (60) days after the date of such taking,
condemnation, reconfiguration, vacation, deed or other instrument, as long as
all similarly affected leases are also terminated by Landlord. If, in Tenant's
reasonable judgment, so much of the Premises or Building is taken so as to (i)
materially interfere with the conduct of Tenant's business from the Premises,
(ii) prevent the common areas of the Real Property from being maintained and
operated in a manner consistent with a first-class office building, (iii)
substantially impairs access to the Premises or the Parking Garage, or (iv)
substantially impairs use of the Parking Garage, in each case for a period in
excess of one hundred eighty (180) days, Tenant shall have the option to
terminate this Lease upon ninety (90) days' notice, provided such notice is
given no later than one hundred eighty (180) days after the date of such taking.
Tenant shall be entitled to receive one hundred percent (100%) of the "bonus
value" of the leasehold estate in connection therewith, which bonus value shall
be equal to the sum paid by the condemning authority as the award for
compensation for taking the leasehold created by this Lease. Tenant shall have
the right to file any separate claim available to Tenant for any taking of
Tenant's personal property and fixtures belonging to Tenant and removable by
Tenant upon expiration of the Lease Term pursuant to the terms of this Lease,
and for moving expenses, so long as such claim is payable separately to Tenant
or is otherwise separately identifiable. All Rent shall be apportioned as of the
date of such termination. If any part of the Premises shall be taken, and Tenant
continues to lease any portion of the Premises, then the Rent shall be
proportionately abated retroactive to the date of such taking. Tenant hereby
waives any and all rights it might otherwise have pursuant to Section 1265.130
of The California Code of Civil Procedure.
13.2 Temporary Taking. Notwithstanding anything to the contrary
----------------
contained in this Article 13, in the event of a temporary taking of all or any
----------
portion of the Premises for a period of one hundred and eighty (180) days or
less, then this Lease shall not terminate but the Base Rent and the Additional
Rent shall be abated for the period of such taking in proportion to the ratio
that the amount of rentable square feet of the Premises taken bears to the total
rentable square feet of the Premises; provided that if the remaining portion of
the Premises is not sufficient to allow Tenant to effectively conduct its
business therein, and if Tenant does not conduct its business from such
remaining portion, then Base Rent and Additional Rent shall be abated for the
entire Premises for such time as Tenant continues to be so prevented from using,
and does not use, the Premises. Landlord shall be entitled to receive the entire
award made in connection with any such temporary taking.
ARTICLE 14
----------
ASSIGNMENT AND SUBLETTING
-------------------------
14.1 Transfers. Tenant shall not, without the prior written consent of
---------
Landlord which consent will not be unreasonably withheld as set forth in Section
-------
14.2 below (except as otherwise provided in Sections 14.5 and 14.6 below),
- ---- ----------------------
assign, mortgage, pledge, hypothecate, encumber, or permit any lien to attach
to, or otherwise transfer, this Lease or any interest hereunder, permit any
assignment or other such foregoing transfer of this Lease or any interest
hereunder by operation of law, sublet the Premises
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<PAGE>
or any part thereof, or permit the use of the Premises by any persons other than
Tenant and its employees, visitors and contractors (all of the foregoing are
hereinafter sometimes referred to collectively as "Transfers" and any person to
whom any Transfer is made or sought to be made is hereinafter sometimes referred
to as a "Transferee"). If Tenant shall desire Landlord's consent to any
Transfer, Tenant shall notify Landlord in writing, which notice (the "Transfer
Notice") shall include (i) the proposed approximate effective date of the
Transfer, which shall not be less than thirty (30) days nor more than two
hundred seventy (270) days after the date of delivery of the Transfer Notice,
(ii) a description of the portion of the Premises to be transferred (the
"Subject Space"), (iii) all of the economic terms of the proposed Transfer and
the consideration therefor, the name and address of the proposed Transferee, and
a copy of any existing and/or proposed documentation pertaining to the proposed
Transfer, including any existing operative documents to be executed to evidence
such Transfer or the agreements incidental or related to such Transfer, provided
that Landlord shall have the right to require Tenant to utilize Landlord's
standard form of consent in connection with the documentation of such Transfer,
as long as such standard form does not contain terms and conditions inconsistent
with the terms of this Article 14, or impose obligations on Tenant or the
----------
Transferee in excess of those contained in this Lease, (iv) current financial
statements of the proposed Transferee certified by an officer, partner or owner
thereof, and credit or bank references, and (v) information with regard to the
nature of the business such proposed Transferee intends to operate in the
Premises and how long the proposed Transferee has operated such business.
Landlord shall consent or refuse to consent to the proposed Transfer within
thirty (30) days after Landlord's receipt of the applicable Transfer Notice;
provided that if the proposed Transfer affects less than a full floor of the
Premises, then Landlord shall consent or refuse to consent to the proposed
Transfer within ten (10) business days after Landlord's receipt of the
applicable Transfer Notice. In the event that Landlord fails to notify Tenant in
writing of such consent or refusal to consent within such thirty (30) calendar
days or ten (10) business day period, as applicable, Landlord shall be deemed to
have consented to such Transfer. Any Transfer requiring Landlord's consent
hereunder which is made without Landlord's prior written consent shall, at
Landlord's option, be null, void and of no effect. Whether or not Landlord shall
grant consent, Tenant shall, within thirty (30) days after written request by
Landlord, reimburse Landlord for all reasonable costs and expenses incurred by
Landlord in connection with its review of a proposed Transfer; provided,
however, that with respect to a proposed sublease of less than a full floor of
the Premises, such costs and expenses shall not exceed One Thousand Five Hundred
Dollars ($1,500.00) or if more than a full floor, but not more than two (2) full
floors, Three Thousand Dollars ($3,000.00).
14.2 Landlord's Consent. Landlord shall not unreasonably withhold its
------------------
consent to any proposed Transfer of the Subject Space to the Transferee on the
material terms specified in the Transfer Notice. The parties hereby agree that
it shall be deemed to be reasonable under this Lease and under any applicable
law for Landlord to withhold consent to any proposed Transfer where one or more
of the following apply, without limitation as to other reasonable grounds for
withholding consent:
14.2.1 The Transferee is of a character or reputation or engaged
in a business which is not consistent with the quality of the Building;
14.2.2 The Transferee is either a governmental agency or
instrumentality thereof (the "Governmental Transferee"), which Governmental
Transferee is (i) a foreign country, (ii) of a character or reputation, is
engaged in a business, or is of, or is associated with, a political orientation
or faction,
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<PAGE>
which is inconsistent with the quality of the Building, or which would otherwise
reasonably offend a landlord of the Comparable Buildings, (iii) is capable of
exercising the power of eminent domain or condemnation, or (iv) would
significantly increase the human traffic in the Premises or Building beyond the
traffic which generally results from general office use of space in a first-
class office building; provided that the terms of this Section 14.2.2 shall not
--------------
apply to a Transfer of space to a Governmental Transferee, which Governmental
Transferee currently occupies space in the Building, and is of the same nature,
prestige, and character as a Governmental Transferee to which the Landlord named
in this Lease has made a direct lease in the Building (the "Governmental
Tenant"), provided that the space subject to such Transfer shall be similar in
size to the space leased by such Governmental Tenant from Landlord.
14.2.3 The Transferee's intended use of the Premises is
inconsistent with the Permitted Use;
14.2.4 The Transferee is not a party of adequate financial worth
and/or financial stability, and is not providing adequate financial security, in
light of the responsibilities involved under the proposed assignment or
sublease, as applicable, on the date consent is requested; provided that the
provisions of this Section 14.2.4 shall be applicable only if (i) the proposed
--------------
Transfer is an assignment of Tenant's interest in the Lease, (ii) the proposed
Transfer is a sublease of twenty-four thousand (24,000) rentable square feet or
more, or (iii) the proposed Transfer is a sublease and upon the consummation
thereof the Original Tenant will not remain in physical occupancy of at least
forty thousand (40,000) rentable square feet of the Premises; or
14.2.5 The proposed Transfer would cause Landlord to be in
violation of a provision (the "Restrictive Provision") in any of the leases
listed on Exhibit M, attached hereto.
Conversely, Landlord and Tenant hereby agree that it shall not be
reasonable for Landlord to withhold its consent for any of the following
reasons:
(A) The assignment or sublease occurs when any particular
portion of the Building is not leased or is leased at economic terms which
are not acceptable to Landlord;
(B) Either the proposed assignee or subtenant, or any
person or entity which directly or indirectly controls, is controlled by,
or is under common control with, the proposed assignee or subtenant, (i)
occupies space in the Building at the time of the request for consent, or
(ii) is negotiating or has negotiated with Landlord to lease space in the
Building;
(C) The proposed assignee or subtenant is a landlord or
real estate developer;
(D) The number of subleases exceeds any maximum number; or
(E) The sublessee or assignee is granted further rights to
assign or sublease.
Notwithstanding anything to the contrary in this Lease, if Tenant or any
proposed Transferee claims that Landlord has unreasonably withheld or delayed
its consent under Section 14.2 or otherwise
------------
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<PAGE>
has breached or acted unreasonably under this Article 14, their sole remedies
----------
shall be a suit for contract damages (other than damages for injury to, or
interference with, Tenant's business including, without limitation, loss of
profits, other than profits relating to such proposed Transfer, however
occurring) or declaratory judgment and an injunction for the relief sought, and
Tenant hereby waives all other remedies, including, without limitation, any
right at law or at equity to terminate this Lease, on its own behalf and, to the
extent permitted under all applicable laws, on behalf of the proposed
Transferee. Tenant shall indemnify, defend and hold harmless Landlord from any
and all liability, losses, claims, damages, costs, expenses, causes of action
and proceedings involving any third party or parties (including, without
limitation, Tenant's proposed subtenant, assignee or real estate broker) who
claim they were damaged by Landlord's wrongful withholding or conditioning of
Landlord's consent. If Landlord consents to any Transfer pursuant to the terms
of this Section 14.2, Tenant may within nine (9) months after Landlord's
------------
consent, but not later than the expiration of said nine (9)-month period, enter
into a binding agreement for such Transfer of the Premises or a portion thereof,
upon substantially the same terms and conditions as are set forth in the
Transfer Notice furnished by Tenant to Landlord pursuant to Section 14.1 of this
------------
Lease, provided that if there are any material changes in the terms and
conditions from those specified in the Transfer Notice such that Landlord would
initially have been entitled to refuse its consent to such Transfer under this
Section 14.2, Tenant shall again submit the Transfer to Landlord for its
- ------------
approval and other action under this Article 14.
----------
14.3 Effect of Transfer. If Landlord consents to a Transfer, (i) the
------------------
terms and conditions of this Lease shall in no way be deemed to have been waived
or modified, (ii) such consent shall not be deemed consent to any further
Transfer by either Tenant or a Transferee, (iii) Tenant shall deliver to
Landlord, promptly after execution, an original executed copy of all
documentation pertaining to the Transfer, and (iv) no Transfer relating to this
Lease or agreement entered into with respect thereto, whether with or without
Landlord's consent, shall relieve Tenant or any guarantor of the Lease from
liability under this Lease.
14.4 Non-Transfers. Notwithstanding anything to the contrary contained
-------------
in this Lease, neither (i) an assignment to a transferee of all or substantially
all of the assets of Tenant, (ii) an assignment of the Premises to a transferee
which is the resulting entity of a merger or consolidation of Tenant with
another entity, nor (iii) an assignment or subletting of all or a portion of the
Premises to an affiliate (the "Affiliate") of Tenant (an entity which is
controlled by, controls, or is under common control with, Tenant), shall be
deemed a Transfer under Article 14 of this Lease, provided that Tenant notifies
----------
Landlord of any such assignment or sublease and promptly supplies Landlord with
any documents or information reasonably requested by Landlord regarding such
transfer or transferee as set forth in items (i) through (iii) above, that such
assignment or sublease is not a subterfuge by Tenant to avoid its obligations
under this Lease. "Control," as used in this Section 14.4 and Section 1.5.1.2 of
------------ ---------------
this Lease, shall mean the ownership, directly, or indirectly, of at least
fifty-one percent (51%) of the voting securities of, or possession of the right
to vote, in the ordinary direction of its affairs, of at least fifty-one percent
(51%) of th voting interest in, any person or entity.
14.5 Subleases to Business Affiliates. Notwithstanding any contrary
--------------------------------
provision of this Article 14, Tenant shall have the right without the receipt of
----------
Landlord's consent, but on prior written notice to Landlord, to sublease up to
an aggregate of 15,000 rentable square feet of the Premises to Modern Videofilm,
a ("Modern Videofilm"), and to sublease up to an aggregate of 24,000 rentable
square feet
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<PAGE>
of the Premises to individuals or entities (each, a "Business Affiliate"), which
sublease to a Business Affiliate shall be on and subject to all of the following
conditions: (i) Tenant shall have a direct business relationship (relating to a
primary business of Tenant conducted in the Premises) with each such Business
Affiliate and will conduct substantial business with such Business Affiliate
while such Business Affiliate occupies a portion of the Premises; (ii) all such
Business Affiliates shall be of a character and reputation consistent with the
quality of the Building; (iii) no demising walls or separate entrances shall be
constructed in the Premises to accommodate any such subleases; and (iv)no
signage naming such Business Affiliate shall be installed or placed outside of
the Premises, except to the extent such signage is located on a directory board
in the Building and is reasonably approved by Landlord. No such sublease shall
relieve Tenant from any liability under this Lease. The terms of this Article 14
shall be applicable to such sublease to Business Affiliates and Modem Video film
to the extent such terms are applicable to and not inconsistent with the terms
of this Section 14.5.
14.6 Landlord's Recognition of Transfers Upon Lease Termination. At
----------------------------------------------------------
Tenant's request, Landlord shall execute a recognition agreement (the
"Recognition Agreement") in favor of a Transferee who is a subtenant of Tenant
(the "Subtenant"), which provides that in the event this Lease is terminated,
Landlord shall recognize the sublease between such Subtenant and Tenant (the
"Sublease") and not disturb such Subtenant's possession of the Premises or
applicable portion thereof (the "Sublease Space"), due to such termination;
provided that: (i) at the time of Tenant's request for Landlord's execution of
the Recognition Agreement, such Transfer contains the same economic terms and
conditions set forth in this Lease, subject to equitable modifications based on
the number of rentable square feet contained in the Sublease Space; provided,
however, the economic terms of such Transfer may be more favorable to Landlord
than those set forth in this Lease, and provided that the terms and provisions
of Sections 1.3, 1.4, 1.5 and 2.3 shall in no event be applicable to such
------------------------------
Subtenant and the terms of Section 23.4 shall in no event be applicable to a
------------
Subtenant whose Sublease Space is less than 70,000 rentable square feet (or in
connection with any Option Term, a subtenant whose sublease space is less than
the greater of one (1) full floor or 23,000 rentable square feet); (ii) the
Sublease Space shall consist of all or any portion of the Premises which is
greater than 10,000 rentable square feet (the "Recognized Space"); provided that
such Recognized Space (a) shall not be located on a floor, which floor is both
above and below full floors in which a portion of the Premises is located,
(b)shall, to the extent it is located on a particular floor of the Building,
consist of all of the Premises located on that floor of the Building, and (c)
shall, in the event the Recognized Space is located on floors 22, 23 and/or 24,
only consist of either the entire twenty-second (22nd) floor of the Building,
both the entire twenty-third (23rd) and twenty-fourth (24th) floors of the
Building, or all of the twenty-second (22nd), twenty-third (23rd) and twenty-
fourth (24th) floors of the Building; (iii) Landlord shall not be liable for any
act or omission of Tenant; (iv) Landlord shall not be subject to any offsets or
defenses which the Subtenant might have as to Tenant or to any claims for
damages against Tenant, nor shall Landlord be obligated to fund to, or for the
benefit of, Subtenant, any undisbursed tenant improvement or refurbishment
allowance or other allowances or monetary concessions unless same has been
granted to Tenant and transferred to Subtenant; (v) Landlord shall not be
required or obligated to credit the Subtenant with any rent or additional rent
paid by the Subtenant to Tenant; (vi) Landlord shall not be bound by any terms
or conditions of the Sublease which are inconsistent with the terms and
conditions of this Lease; (vii) such recognition shall be effective upon, and
Landlord shall be responsible for performance of only those covenants and
obligations of Tenant pursuant to the Sublease accruing after, the termination
of this Lease; (viii) as a condition to Landlord's obligation to enter into the
Recognition
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<PAGE>
Agreement, Landlord shall have the right to reasonably approve the
creditworthiness and financial strength of the Subtenant, which reasonable
approval shall be based upon the creditworthiness and financial strength then
generally required by Landlord and landlords of the Comparable Buildings of a
new tenant who is leasing space of a rentable area comparable to the rentable
area of the Sublease Space for a term equal to the remaining Lease Term, who is
granted concessions comparable to the concessions, if any, granted to the
Subtenant, and who is assuming the monetary obligations under the Sublease; and
(ix) the Subtenant shall make full and complete attornment to Landlord, as
lessor, pursuant to a written agreement executed by Landlord and the Subtenant,
so as to establish direct privity of contract between Landlord and the Subtenant
with the same force and effect as though the Sublease was originally made
directly between Landlord and the Subtenant. Upon Landlord's written request
given any time after the termination of this Lease, the Subtenant shall execute
a lease for the space subject to the applicable Sublease upon the same terms and
conditions as set forth in the Recognition Agreement. In determining whether a
Subtenant meets certain minimum square footage tests set forth in item (i),
above, Tenant will not be deemed to have engaged in a subterfuge if Tenant
subleases space to a Subtenant equal to or in excess of the minimum square
footage requirement and the Subtenant sub-subleases a portion of such space back
to Tenant.
ARTICLE 15
----------
SURRENDER OF PREMISES;
----------------------
REMOVAL OF TRADE FIXTURES
-------------------------
15.1 Surrender of Premises. No act or thing done by Landlord or any
---------------------
agent or employee of Landlord during the Lease Term shall be deemed to
constitute an acceptance by Landlord of a surrender of the Premises unless such
intent is specifically acknowledged in a writing signed by Landlord. The
delivery of keys to the Premises to Landlord or any agent or employee of
Landlord shall not constitute a surrender of the Premises or effect a
termination of this Lease, whether or not the keys are thereafter retained by
Landlord, and notwithstanding such delivery Tenant shall be entitled to the
return of such keys at any reasonable time upon request until this Lease shall
have been terminated. The voluntary or other surrender of this Lease by Tenant,
whether accepted by Landlord or not, or a mutual termination hereof, shall not
work a merger, and at the option of Landlord shall operate as an assignment to
Landlord of all subleases or subtenancies affecting the Premises.
15.2 Removal of Tenant Property by Tenant. All articles of personal
------------------------------------
property and all business and trade fixtures (including, but not limited to,
editing bays and equipment), machinery and equipment, furniture and movable
partitions owned by Tenant or installed by Tenant at its expense in the
Premises, which items are not a part of the tenant improvements permanently
installed in the Premises, shall remain the property of Tenant (collectively,
"Tenant's Property"), and may be removed by Tenant at any time during the Lease
Term. In connection therewith, Tenant shall have the right, but not the
obligation, to finance the purchase of and grant security interests in and
otherwise encumber Tenant's Property, and Landlord shall, promptly upon request,
execute a waiver and consent form required by any lender of Tenant granting such
lender the right, upon reasonable notice, to enter the Premises to take
possession of and remove Tenant's Property notwithstanding any alleged breach by
Tenant of the terms of this Lease. Upon the expiration of the Lease Term, or
upon any earlier termination of this Lease, Tenant shall, subject to the
provisions of this Article 15, quit and surrender possession of the
----------
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<PAGE>
Premises to Landlord in as good order and condition as when Tenant took
possession and as thereafter improved by Landlord and/or Tenant, reasonable wear
and tear, casualty damage, and repairs which are specifically made the
responsibility of Landlord hereunder excepted. Upon such expiration or
termination, Tenant shall, without expense to Landlord, remove or cause to be
removed from the Premises all debris and rubbish, Tenant's Property, any other
articles of personal property owned by Tenant or placed by Tenant at its expense
in the Premises, and such similar articles of any other persons claiming under
Tenant, as Landlord may, in its sole discretion, require to be removed, and
Tenant shall repair at its own expense all damage to the Premises and Building
arising in connection with the removal of such items through the Premises and
the Building except as otherwise provided to the contrary in this Lease;
provided, however, notwithstanding anything to the contrary in this Article 15,
----------
the provisions of Article 8 of this Lease shall supersede the provisions of this
---------
Article 15 to the extent such provisions of Article 8 are contrary to the
---------
provisions of Article 15 of this Lease.
----------
ARTICLE 16
----------
HOLDING OVER
-------------
If Tenant holds over after the expiration of the Lease Term hereof, such
tenancy shall be from month-to-month only, and shall not constitute a renewal
hereof or an extension for any further term. In the event that, at the
expiration of the Lease Term, any portion of the Premises shall be subject to a
bona fide, executed by both parties, letter of intent, lease proposal or lease
document between any prospective tenant and Landlord (the "Holdover Lease"), and
Tenant's holding over in any portion of the Premises after the expiration of the
Lease Term (the "Holdover Period") will delay the commencement of the term of
the Holdover Lease, then the Rent during such Holdover Period shall be payable
at a monthly rate equal to (i) during the first sixty (60) days of such Holdover
Period, one hundred fifty percent (150%) of the Rent applicable during the last
rental period of the Lease Term, and (ii) during any Holdover Period in excess
of sixty (60) days, two hundred percent (200%) of the Rent applicable during the
last rental period of the Lease Term. In the event that the Premises shall not
be subject to any Holdover Lease during the Holdover Period, then the Rent
during such Holdover Period shall be payable at a monthly rate equal to (i)
during the first sixty (60) days of such Holdover Period, one hundred twenty
percent (120%) of the Rent applicable during the last rental period of the Lease
Term, and (ii) during any Holdover Period in excess of sixty (60) days, one
hundred forty percent (140%) of the Rent applicable during the last rental
period of the Lease Term. Such month-to-month tenancy shall be subject to every
other term, covenant and agreement contained herein. Nothing contained in this
Article 16 shall be construed as consent by Landlord to any holding over by
- ----------
Tenant, and Landlord expressly reserves the right to require Tenant to surrender
possession of the Premises to Landlord as provided in this Lease upon the
expiration or other termination of this Lease. The provisions of this Article
-------
16 shall not be deemed to limit or constitute a waiver of any other rights or
- --
remedies of Landlord provided herein or at law. Tenant acknowledges that if
Tenant holds over without Landlord's consent, such holding over may compromise
or otherwise affect Landlord's ability to enter into new leases with prospective
tenants regarding the Premises. Therefore, if Tenant fails to surrender the
Premises within sixty (60) days following the termination or expiration of this
Lease, in addition to any other liabilities to Landlord accruing therefrom,
Tenant shall protect, defend, indemnify and hold Landlord harmless from all
loss, costs (including reasonable attorneys' fees) and liability resulting from
such failure, including, without limiting the generality of the foregoing, any
claims made by any
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<PAGE>
succeeding tenant founded upon such failure to surrender, and any losses
suffered by Landlord, including lost profits, resulting from such failure to
surrender.
ARTICLE 17
----------
ESTOPPEL CERTIFICATES
---------------------
Within five (5) days following a request in writing by Landlord, Tenant
shall execute and deliver to Landlord an estoppel certificate if such estoppel
certificate is required as a result of a proposed transfer of an interest in, or
refinancing of, all or a portion of the Building or Real Property, which
estoppel certificate shall be substantially in the form of Exhibit E, attached
---------
hereto. At any time during the Lease Term, Landlord may require Tenant to
provide Landlord with a current financial statement and financial statements of
the two (2) years prior to the current financial statement year, if such
financial information is required as a result of a proposed transfer of an
interest in, or refinancing of, all or a portion of the Building or Real
Property. Such statements shall be prepared in accordance with generally
accepted accounting principles and, if such is the normal practice of Tenant,
shall be audited by an independent certified public accountant. Failure of
Tenant to timely execute and deliver such estoppel certificate or other
instruments upon five (5) additional business days written notice from Landlord
shall constitute an acceptance of the Premises and an acknowledgment by Tenant
that statements included in the estoppel certificate are true and correct,
without exception. Landlord hereby agrees to provide to Tenant an estoppel
certificate signed by Landlord, containing the same types of information, and
within the same periods of time, as set forth above, with such changes as are
reasonably necessary to reflect that the estoppel certificate is being granted
to Tenant by Landlord, rather than being granted by Tenant to Landlord or to a
lender.
ARTICLE 18
----------
SUBORDINATION
--------------
Subject to the delivery of the non-disturbance agreements described in this
Article 18 as a condition precedent to any such subordination, this Lease shall
- ----------
be subject and subordinate to all present and future ground or underlying leases
of the Building and/or the Real Property and to the lien of any mortgage, trust
deed or other encumbrances now or hereafter in force against the Building and/or
the Real Property or any part thereof, if any, and to all renewals, extensions,
modifications, consolidations and replacements thereof, and to all advances made
or hereafter to be made upon the security of such mortgages or trust deeds,
unless the holders of such mortgages, trust deeds or other encumbrances, or the
lessors under such ground lease or underlying leases, require in writing that
this Lease be superior thereto. In consideration of, and as a condition
precedent to, Tenant's agreement to permit its interest pursuant to this Lease
to be subordinated to any particular future ground or underlying lease of the
Building or the Real Property or to the lien of any first mortgage or trust
deed, hereafter enforced against the Building or the Real Property and to any
renewals, extensions, modifications, consolidations and replacements thereof,
Landlord shall deliver to Tenant a commercially reasonable non-disturbance
agreement executed by the landlord under such ground lease or underlying lease
or the holder of such mortgage or trust deed. Landlord's delivery to Tenant of
commercially reasonable non-disturbance agreement(s) in favor of Tenant from any
ground lessors, mortgage holders or lien holders of Landlord
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<PAGE>
who later come into existence at any time prior to the expiration of the Lease
Term shall be in consideration of, and a condition precedent to, Tenant's
agreement to be bound by the terms of this Article 18. Such commercially
----------
reasonable non-disturbance agreements shall include the obligation of any such
successor ground lessor, mortgage holder or lien holder to recognize Tenant's
rights specifically set forth in this Lease to offset certain amounts against
Rent due hereunder, or to otherwise receive certain credits against Rent as set
forth herein. Tenant shall be entitled, at Tenant's sole cost and expense, to
record any such non-disturbance agreement in the Official Records promptly after
full execution and delivery of such agreement. Subject to the non-disturbance
agreements described above, Tenant covenants and agrees in the event any
proceedings are brought for the foreclosure of any such mortgage or deed in lieu
thereof (or if any ground lease is terminated), to attorn to the lienholder or
purchaser or any successors thereto upon any such foreclosure sale or deed in
lieu thereof (or to the ground lessor), if so requested to do so by such
purchaser or lienholder or ground lessor, and to recognize such purchaser or
lienholder or ground lessor as the lessor under this Lease. Tenant shall, within
five (5) days of request by Landlord, execute such further instruments or
assurances as Landlord may reasonably deem necessary to evidence or confirm the
subordination or superiority of this Lease to any such mortgages, trust deeds,
ground leases or underlying leases in accordance with the provisions of this
Article 18.
- ----------
ARTICLE 19
----------
DEFAULTS; REMEDIES
------------------
19.1 Defaults. The occurrence of any of the following shall constitute
--------
an "Event of Default" of this Lease by Tenant (or sometimes in this Lease may be
referred to as a "default" of this Lease by Tenant:
19.1.1 Any failure by Tenant to pay any Rent or any other charge
required to be paid under this Lease, or any part thereof, within five (5)
business days of notice that the same has not been paid when due, which notice
shall be in addition to, and not in lieu of, any notice required under
California Code of Civil Procedure Section 1161 or any similar or successor law;
or
19.1.2 Any failure by Tenant to observe or perform any other
provision, covenant or condition of this Lease to be observed or performed by
Tenant where such failure continues for fifteen (15) days after written notice
thereof from Landlord to Tenant; provided however, that any such notice shall be
in addition to, and not in lieu of, any notice required under California Code of
Civil Procedure Section 1161 or any similar or successor law; and provided
further that if the nature of such failure is such that the same cannot
reasonably be cured within a fifteen (15) day period, Tenant shall not be deemed
to have committed an Event of Default if it diligently commences such cure
within such period and thereafter diligently proceeds to rectify and cure said
failure, as soon as possible.
19.2 Remedies Upon Default. Upon the occurrence of a default by Tenant,
---------------------
Landlord shall have, in addition to any other remedies available to Landlord at
law or in equity, the option to pursue any one or more of the following
remedies, each and all of which shall be cumulative and nonexclusive, without
any notice or demand whatsoever.
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<PAGE>
19.2.1 Terminate this Lease, in which event Tenant shall
immediately surrender the Premises to Landlord, and if Tenant fails to do so,
Landlord may, subject to due process of law and without prejudice to any other
remedy which it may have for possession or arrearages in rent, enter upon and
take possession of the Premises and expel or remove Tenant and any other person
who may be occupying the Premises or any part thereof, without being liable for
prosecution or any claim or damages therefor; and Landlord may recover from
Tenant the following:
(i) The worth at the time of award of any unpaid rent
which has been earned at the time of such termination; plus
(ii) The worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until
the time of award exceeds the amount of such rental loss that Tenant proves
could have been reasonably avoided; plus
(iii) The worth at the time of award of the amount by
which the unpaid rent for the balance of the Lease Term after the time of
award exceeds the amount of such rental loss that Tenant proves could have
been reasonably avoided; plus
(iv) Any other amount necessary to compensate Landlord
for all the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom, specifically including but not limited
to, brokerage commissions and advertising expenses incurred, expenses of
remodeling the Premises or any portion thereof for a new tenant, whether
for the same or a different use, and any special concessions made to obtain
a new tenant; and
(v) At Landlord's election, such other amounts in
addition to or in lieu of the foregoing as may be permitted from time to
time by applicable law.
The term "rent" as used in this Section 19.2 shall be deemed to be and to
------------
mean all sums of every, nature required to be paid by Tenant pursuant to the
terms of this Lease, whether to Landlord or to others. As used in Paragraphs
19.2. l(i) and (ii), above, the "worth at the time of award" shall be computed
by allowing interest at the rate set forth in Article 4 of this Lease, but in no
---------
case greater than the maximum amount of such interest permitted by law. As used
in Paragraph 19.2. l(iii) above, the "worth at the time of award" shall be
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent (1%).
19.2.2 Landlord shall have the remedy described in California
Civil Code Section 1951.4 (lessor may continue lease in effect after lessee's
breach and abandonment and recover Rent as it becomes due, if lessee has the
right to sublet or assign, subject only to reasonable limitations). Accordingly,
if Landlord does not elect to terminate this Lease on account of any default by
Tenant, Landlord may, from time to time, without terminating this Lease, enforce
all of its rights and remedies under this Lease, including the right to recover
all rent as it becomes due.
19.3 Subleases of Tenant. In the event Landlord elects to terminate this
-------------------
Lease on account of any default by Tenant, as set forth in this Article 19,
----------
Landlord shall have the right to terminate any and
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<PAGE>
all subleases which are not recognized by Landlord pursuant to a Recognition
Agreement (the "Non-Recognized Subleases"), licenses, concessions or other
consensual arrangements for possession entered into by Tenant and affecting the
Premises or may, in Landlord's sole discretion, succeed to Tenant's interest in
such Non-Recognized Subleases, licenses, concessions or arrangements. In the
event of Landlord's election to succeed to Tenant's interest in any such Non-
Recognized Subleases, licenses, concessions or arrangements, Tenant shall, as of
the date of notice by Landlord of such election, have no further right to or
interest in the rent or other consideration receivable thereunder (collectively,
the "Sublease Consideration"); provided that Landlord shall apply the Sublease
Consideration received by Landlord to the Rent due hereunder.
19.4 Landlord Default.
----------------
19.4.1 General. Notwithstanding anything to the contrary set
-------
forth in this Lease, Landlord shall be in default in the performance of any
obligation required to be performed by Landlord pursuant to this Lease if (i)
Landlord is obligated to make a payment of money to Tenant, and Landlord fails
to pay such unpaid amounts within eight (8) business days of written notice from
Tenant that the same was not paid when due, or (ii) such failure is other than
the obligation to pay money, and Landlord fails to perform such obligation
within thirty (30) days after the receipt of notice from Tenant specifying in
detail Landlord's failure to perform; provided, however, if the nature of
Landlord's obligation is such that more than thirty (30) days are required for
its performance, then Landlord shall not be in default under this Lease if it
shall commence such performance within such thirty (30) day period and
thereafter diligently pursue the same to completion. Upon any such default by
Landlord under this Lease, Tenant may, except as otherwise specifically provided
in this Lease to the contrary, exercise any of its rights provided at law or in
equity.
19.4.2 Abatement of Rent. In the event that Tenant is prevented
-----------------
from using, and does not use, the Premises or any portion thereof, as a result
of (i) any repair, maintenance or alteration performed by Landlord, or which
Landlord failed to perform after the commencement of the Pre-Occupancy Period
and required by the Lease, which substantially interferes with the conduct of
Tenant's business in the Premises, (ii) any failure to provide services,
utilities or access to the Premises, or (iii) the presence of hazardous
materials in, on or around the Building, as long as the presence of such
hazardous materials was not caused by Tenant or Tenant's employees, agents,
subtenants, representatives, contractors, invitees or licensees and the presence
of such hazardous materials violates applicable law (either such set of
circumstances as set forth in items (i), (ii) or (iii), above, to be known as an
"Abatement Event"), then Tenant shall give Landlord notice of such Abatement
Event, and if such Abatement Event continues for three (3) consecutive business
days after Landlord's receipt of any such notice (the "Eligibility Period"),
then the Base Rent and Tenant's Share of Direct Expenses and Tenant's obligation
to pay for parking (collectively the "Abated Rent") shall be abated or reduced,
as the case may be, retroactive to the date of Tenant's notice of such Abatement
Event and continuing for such time that Tenant continues to be so prevented from
using, and does not use, the Premises or a portion thereof, in the proportion
that the rentable area of the portion of the Premises that Tenant is prevented
from using, and does not use, bears to the total rentable area of the Premises;
provided, however, in the event that Tenant is prevented from using, and does
not use, a portion of the Premises for a period of time in excess of the
Eligibility Period and the remaining portion of the Premises is not sufficient
to allow Tenant to effectively conduct its business therein, and if Tenant does
not conduct its business
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<PAGE>
from such remaining portion, then for such time after expiration of the
Eligibility Period during which Tenant is so prevented from effectively
conducting its business therein, the Abated Rent for the entire Premises shall
be abated for such time as Tenant continues to be so prevented from using, and
does not use, the Premises. If, however, Tenant reoccupies any portion of the
Premises during such period, the Abated Rent allocable to such reoccupied
portion, based on the proportion that the rentable area of such reoccupied
portion of the Premises bears to the total rentable area of the Premises, shall
be payable by Tenant from the date Tenant reoccupies such portion of the
Premises. If Tenant's right to the Abated Rent or Tenant's right to abatement of
Rent under Articles 11 and 13 of this Lease occurs during a free or reduced rent
------------------
period which arises after the Lease Commencement Date, Tenant's free or reduced
rent period shall be extended for the number of days that period in which the
Abated Rent overlaps the free or reduced rent period (the "Overlap Period").
Landlord shall have the right to extend the Lease Expiration Date for a period
of time equal to the Overlap Period if Landlord sends Tenant a notice of such
election within one (1) month following the expiration of the extended free or
reduced rent period. Notwithstanding anything to the contrary set forth in this
Lease, and in particular the provisions of this Section 19.4.2, the terms of
--------------
this Lease shall not constitute a waiver by Tenant of any rights it may have
under this Lease, or at law or in equity to pursue a termination of this Lease
due to the continuing existence of an Abatement Event and shall be in addition
to and supplement Tenant's right to make repairs as set forth in Section 7.2 of
-----------
this Lease; provided, however, if Landlord has not cured an Abatement Event
within two hundred eighty (280) days after receipt of notice from Tenant, Tenant
shall have the right to terminate this Lease during the first five (5) business
days of each calendar month following the end of such 280-day period until such
time as Landlord has cured the Abatement Event, which right may be exercised
only by delivery of notice to Landlord (the "Abatement Event Termination
Notice") during such five (5) business-day period, and shall be effective as of
a date set forth in the Abatement Event Termination Notice (the "Abatement Event
Termination Date"), which Abatement Event Termination Date shall not be less
than ten (10) business days, and not more than six (6) months, following the
delivery of the Abatement Event Termination Notice. If Tenant's right to
abatement of Rent occurs because of an eminent domain taking and/or because of
damage or destruction to the Premises, the Parking Garage, and/or the Building,
under Article 11 or 13 of this Lease, the period in which Tenant is entitled to
----------------
the abatement of Rent shall continue until Tenant has been given sufficient
time, and sufficient access to the Premises, to install its property, furniture,
fixtures and equipment to the extent the same shall have been removed as a
result of such damage or destruction and to move in over a weekend. Except as
specifically provided above in this Section 19.4.2, in the event of a casualty
--------------
or eminent domain taking under the terms of Articles 11 or 13 of this Lease, the
-----------------
terms of Articles 11 and 13 of this Lease shall apply, and in no event shall the
------------------
Eligibility Period apply; provided, however, notwithstanding the foregoing terms
of this Section 19.4, the terms applicable to the Overlap Period shall
------------
nevertheless apply to Articles 11 and 13 of this Lease.
19.5 Efforts to Relet. For the purposes of this Article 19, Tenant's
---------------- ----------
right to possession shall not be deemed to have been terminated by efforts of
Landlord to relet the Premises, by its acts of maintenance or preservation with
respect to the Premises, or by appointment of a receiver to protect Landlord's
interests hereunder. The foregoing enumeration is not exhaustive, but merely
illustrative of acts which may be performed by Landlord without terminating
Tenant's right to possession.
19.6 Landlord Bankruptcy Proceeding. In the event that the obligations
------------------------------
of Landlord under this Lease are not performed during the pendency of a
bankruptcy or insolvency proceeding involving
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<PAGE>
Landlord as the debtor, or following the rejection of this Lease in accordance
with Section 365 of the United State Bankruptcy Code, then notwithstanding any
provision of this Lease to the contrary, Tenant shall have the right to set off
against the Rent next due and owing under this Lease (a) any and all damages
caused by such non-performance of Landlord's obligations under this Lease by
Landlord, debtor-in-possession, or the bankruptcy trustee, and (b) any and all
damages caused by the non-performance of Landlord's obligations under this Lease
following any rejection of this Lease in accordance with Section 365 of the
United States Bankruptcy Code.
ARTICLE 20
----------
ATTORNEYS' FEES
---------------
If either party commences litigation against the other for the specific
performance of this Lease, for damages for the breach hereof or otherwise for
declaratory relief or enforcement of any remedy hereunder, the parties hereto
agree to and hereby do waive any right to a trial by jury and, in the event of
any such commencement of litigation, the prevailing party shall be entitled to
recover from the other party such costs and reasonable attorneys' fees as may
have been incurred.
ARTICLE 21
----------
LETTER OF CREDIT; GUARANTY
--------------------------
21.1 Letter of Credit. In lieu of depositing with Landlord a security
----------------
deposit, Tenant shall deliver to Landlord concurrent with Tenant's execution of
this Lease, and cause to be in effect during the Lease Term (except as provided
below in this Article 21) an unconditional, irrevocable letter of credit (the
----------
"L-C") issued by a "L-C Bank," as that term is defined below, selected by
Tenant, in the amount of Five Million Five Thousand One Hundred Twenty-Five and
No/100 Dollars ($5,005,125.00) (the "L-C Amount"). The L-C shall be issued by a
money-center bank (a bank which accepts deposits, maintains accounts, has a
local Los Angeles office which will negotiate a letter of credit, and whose
deposits are insured by the FDIC (the "L-C Bank")) reasonably acceptable to
Landlord, and which L-C shall be in a form and content as set forth in Exhibit
-------
G, attached hereto. Tenant shall pay all expenses, points and/or fees incurred
- -
by Tenant in obtaining the L-C. The L-C shall be held by Landlord as security
for the faithful performance by Tenant of all the terms, covenants, and
conditions of this Lease to be kept and performed by Tenant during the Lease
Term. Landlord agrees that Tenant may, from time to time, replace any existing
L-C with a new replacement L-C as long as the new L-C is issued by a bank which
meets the criteria of the L-C Bank (or the L-C is issued by the bank that issued
the L-C that is being replaced, which bank still meets the criteria of the L-C
Bank) and that such L-C is in the correct L-C Amount and that such L-C otherwise
is in compliance with the requirements of this Article 21. The L-C shall not be
----------
mortgaged, assigned or encumbered in any manner whatsoever by Tenant without the
prior written consent of Landlord. If Tenant is in default, beyond the giving of
notice and the expiration of the applicable cure period, with respect to any
provision of this Lease, including, but not limited to, the provisions relating
to the payment of Rent, or if Tenant fails to renew or replace the L-C at least
thirty (30) days before its expiration, Landlord may, but shall not be required
to, draw upon that portion of the L-C necessary for the payment of any Rent or
any other sum owed as a result of an Event of Default by Tenant, or for the
payment of any amount that Landlord may
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<PAGE>
reasonably spend or may become obligated to spend by reason of an Event of
Default by Tenant, or to compensate Landlord for any other loss or damage that
Landlord may suffer by reason of an Event of Default by Tenant; provided,
however, that Landlord may draw upon all of the L-C in the event that Tenant
fails to renew or replace the L-C at least thirty (30) days before its
expiration. The use, application or retention of the L-C, or any portion
thereof, by Landlord shall not prevent Landlord from exercising any other right
or remedy provided by this Lease or by law, it being intended that Landlord
shall not first be required to proceed against the L-C, and shall not operate as
a limitation on any recovery to which Landlord may otherwise be entitled;
provided, however, to the extent that the L-C is in effect and is issued by the
L-C Bank in the L-C Amount, then prior to proceeding against the Guarantor,
pursuant to the terms of Section 21.2 below and the Guaranty, Landlord shall
------------
first be required to present the L-C for payment to the L-C Bank in either a
reasonable manner or as required by the terms of the L-C; provided further that
if Landlord fails to receive, within ninety (90) days, the entire portion of the
L-C which Landlord attempted to draw upon pursuant to the terms of this Section
-------
21.1, then Landlord may also proceed against the Guarantor, pursuant to the
- ----
terms of Section 21.2 below and the Guaranty, for the amount Landlord failed to
------------
receive after attempting to proceed against the L-C. Any amount of the L-C which
is drawn upon by Landlord, but is not used or applied by Landlord, shall be held
by Landlord and deemed a security deposit (the "L-C Security Deposit"). If any
portion of the L-C is drawn upon, Tenant shall, within five (5) business days
after written demand therefor, either (i) deposit cash with Landlord (which cash
shall be applied by Landlord to the L-C Security Deposit) in an amount
sufficient to cause the sum of the L-C Security Deposit and the amount of the
remaining L-C to be equivalent to the amount of the L-C then required under this
Lease or (ii) reinstate the L-C to the amount then required under this Lease and
Tenant's failure to do so shall be a default under this Lease. If any portion of
the L-C Security Deposit is used or applied, Tenant shall, within five (5)
business days after written demand therefor, deposit cash with Landlord (which
cash shall be applied by Landlord to the L-C Security Deposit) in an amount
sufficient to restore the L-C Security Deposit to the amount then required under
this Lease, and Tenant's failure to do so shall be a default under this Lease.
Tenant acknowledges that Landlord has the right to transfer or mortgage its
interest in the Building and in this Lease and Landlord agrees that in the event
of any such transfer or mortgage, Landlord shall transfer or assign the L-C
Security Deposit and/or the L-C to the transferee or mortgagee and the L-C
Security Deposit and/or the L-C shall be deemed to be received by such
transferee or mortgagee, and in the event of such transfer, Tenant shall look
solely to such transferee or mortgagee for the return of the L-C Security
Deposit and/or the L-C. If an Event of Default by Tenant is not then in
existence under this Lease, the L-C Amount shall, on the anniversary of the
mutual execution and delivery of this Lease, commencing with the third (3rd)
such anniversary and ending with the seventh (7th) such anniversary, be reduced
on a straight-line basis, in five (5) equal annual installments. Notwithstanding
anything to the contrary set forth in this Section 21.1, the L-C Amount shall
------------
not decrease as set forth above, if, as of the date of any scheduled decrease,
an Event of Default by Tenant is then in existence under this Lease, provided
that upon the cure of such Event of Default, at that time, the L-C Amount shall
be appropriately reduced as if such Event of Default by Tenant had not occurred.
21.2 Guaranty. This Lease is subject and conditioned upon Tenant
--------
delivering to Landlord, concurrently with Tenant's execution and delivery of
this Lease, a guaranty of this Lease in the form attached hereto as Exhibit H,
---------
which guaranty shall be fully executed by and binding upon Haim Saban, as
guarantor (the "Guaranty"). The aggregate liability of Haim Saban under the
Guaranty shall be
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limited to Nine Hundred Eighty-Eight Thousand Seven Hundred Forty-Two and 80/100
Dollars ($988,742.80) (the "Maximum Liability Amount"), subject to reductions as
set forth in Paragraph 23 of the Guaranty. Tenant hereby expressly waives any
------------
and all of the benefits under the second sentence of California Civil Code
Section 2822(a) with respect to the Guaranty, and agrees that Landlord (not
Tenant) may designate the portion of Tenant's lease obligations that is
satisfied by a partial payment by Tenant. Tenant may replace the Guaranty with
a letter of credit that meets the requirements of the L-C under this Lease
except that the L-C Amount of such L-C shall be the Maximum Liability Amount and
the reduction of the L-C Amount under such L-C shall take place in the same
manner as the reduction of the Maximum Liability Amount in accordance with
Paragraph 23 of the Guaranty. Thereafter, such L-C shall be governed by the
applicable terms of Section 21.1, above, and this Lease as though such L-C was
-------------------
the L-C delivered pursuant to the terms of Section 21.1, above.
---------------
ARTICLE 22
----------
REASONABLE CONSENT
------------------
Except for matters for which there is a standard of consent or approval
specifically set forth in this Lease (other than a reasonableness standard)
which express standard shall control, and except for matters which could (i)
adversely affect the Building Systems, (ii) adversely affect the Building
Structure, or (iii) affect the exterior appearance of the Building, in which
case Landlord shall have the right to act in its sole and absolute discretion
(but at all times in good faith) as to the matters described in items (i), and
(ii) and (iii) above, any time the consent or approval of Landlord or Tenant is
required under this Lease, such consent or approval shall not be unreasonably
withheld, conditioned or delayed. Subject to the foregoing, and except for
matters pertaining to the exercise by either party of any remedies in the event
of a default by the other party, in the event this Lease grants Landlord or
Tenant the right to take action, exercise discretion, establish rules and
regulations or make an allocation or other determination, Landlord and Tenant
shall act reasonably and in good faith.
ARTICLE 23
----------
SIGNS
-----
23.1 Full Floor Tenants. As a full floor tenant, irrespective of any
------------------
subtenants, Tenant shall have the right to install identification signage
anywhere in the Premises including in the elevator lobby of the Premises,
provided that such signs must not be visible from the ground level of the
exterior of the Building.
23.2 Multi-Tenant Floor Tenants. If Tenant occupies less than the
--------------------------
entire floor on which the Premises is located, Tenant's identifying signage
shall be provided by Landlord and such signage shall be comparable to that used
by Landlord for other similar floors in the Building and shall comply with
Landlord's Building standard signage program. Any additions, deletions or
modifications to such Building standard signage shall be at Tenant's sole
expense and subject to the prior written approval of Landlord, in its sole
discretion.
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23.3 Prohibited Signage and Other Items. Any signs, notices, logos,
----------------------------------
pictures, names or advertisements which are installed in violation of the terms
of this Lease, may be removed by Landlord following five (5) days notice by
Landlord at the sole expense of Tenant. Except as provided below, Tenant may not
install any signs on the exterior or roof of the Building or the common areas of
the Building or the Real Property. Any signs, window coverings, or blinds, or
other items visible from the exterior of the Premises or Building are subject to
the prior written approval of Landlord, in its sole discretion; provided that
Tenant may install signs, window coverings, blinds or other items behind the
Landlord approved window coverings for the Building which are not visible from
the ground level of the exterior of the Premises or Building.
23.4 Tenant's Building; Signage.
--------------------------
23.4.1 Tenant's Signage Right. Commencing on a date which is
----------------------
early enough, in Tenant's reasonable judgment, to allow "Tenants Signage," as
that term is defined below, to be installed in and fully operational on the
first day of the Pre-Occupancy Period, Tenant shall have an ongoing right to
install (and when appropriate, reinstall) the name of either "Saban Center,"
"Saban Plaza," (and, at Tenant's sole discretion, Tenant's current logo), or
another name identifying the Tenant and approved by Landlord, which approval
shall not be unreasonably withheld ("Tenant's Signage Name"), on the locations
set forth in items (i) through (x), below and in accordance with the
specifications set forth in Exhibit I, attached hereto (individually or
---------
collectively, "Tenant's Signage"); provided that Tenant's Signage Name
appearing on, and the colors of, the "Penthouse Signage," as that term is
defined in item (i) below, shall be the same as on the "West Facing Parking
Garage Signage," as that term is defined in item (viii) below if and when such
West Facing Parking Garage Signage is installed. Notwithstanding the foregoing,
in connection with any advertisements or marketing materials for the Building,
Landlord may, at Landlord's sole discretion, continue to refer to the Building
as "10960 Wilshire".
(i) Two (2) signs allowing for Tenant to increase the size of
the letters up to ten feet in height at Tenant's sole option and discretion and
which signs may be illuminated, which option to illuminate is at Tenant's sole
option, but the method of such illumination, to the extent not specified on
Exhibit I-1, attached hereto, shall be subject to Landlord's reasonable
discretion as set forth in Section 23.4.2, below, identifying Tenant's Signage
--------------
Name and the Tenant's corresponding company logo located on the roof-top
penthouse location at the top of the Building (one sign to be located on the
north and another identical sign to be located on the south facing facades of
the Building) (the "Penthouse Signage") as such north facing sign is set forth
in Exhibit I-1 (Tenant may install a temporary mock-up of the-Penthouse Signage
-----------
on the applicable area of the Building prior to the installation of the
permanent Penthouse Signage for a reasonable period of time).
(ii) Tenant's Signage Name, in stainless steel finish, on the
awnings attached to the Building which face Wilshire Boulevard (replacing the
existing "10960 Wilshire" sign) and identical signage on the southern courtyard
of the Real Property (replacing the existing "10960 Wilshire" sign) as such
Wilshire Boulevard sign is set forth in Exhibit I-2, attached hereto (the
-----------
"Awning Signage").
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(iii) Tenant's Signage Name attached to the Building above the
entrance to the Parking Garage at Midvale Avenue, as set forth in Exhibit I-3,
-----------
attached hereto (the "Midvale Parking Garage Signage").
(iv) Tenant's Signage Name on a free standing sign adjacent to
the entrance to the Parking Garage at Wilshire Boulevard, as set forth in
Exhibit I-4, attached hereto (the "Wilshire Parking Signage").
- -----------
(v) Tenant's Signage Name on the wall adjacent to the main
lobby directory board located in the southern portion of the Building, which
Tenant's Signage Name shall be listed above the names of other tenants in the
Building and shall be fifty percent (50%) bigger than the names of the other
tenants in the Building, shall be the same color as the other applicable tenant
signage, and shall be as set forth on Exhibit I-5, attached hereto ("Southern
-----------
Lobby Signage").
(vi) Tenant's Signage Name, in stainless steel finish, on the
parking ticket kiosk located at the entrance to the parking at Midvale Avenue,
as set forth on Exhibit I-6, attached hereto (the "Midvale Parking Signage").
-----------
(vii) Tenant's Signage Name on any jackets or other uniforms worn
by the lobby attendants and engineers and any other uniform supplied by, or paid
for and or reimbursed by Landlord, respectively, of the Building and on any
other items or materials that Landlord controls the production of, are exhibited
or viewed by the tenants of the Building (other than advertising and marketing
materials), and identify the Building, including but not limited to, parking
tickets.
(viii) Tenant's Signage Name on the southwest corner of the top of
the west-facing exterior of the Parking Garage, as set forth in Exhibit I-7,
-----------
attached hereto (the "West Facing Parking Garage Signage"); provided that Tenant
may increase the size of the lettering on the West Facing Parking Garage Signage
to up to four and one-half (4 1/2) feet and increase the size of Tenant's
company logo to up to five (5) feet, at Tenant's sole option and discretion.
(ix) Tenant's Signage Name on the wall or hung from the ceiling
at the end of the hallway which leads from the Parking Garage to the main ground
floor lobby of the Building, adjacent to the entrance of the "Wall Street Deli"
as set forth in Exhibit I-8, attached hereto (the "Main Lobby Signage").
-----------
(x) Tenant's Signage Name, in stainless steel finish, on the
Building lobby directory boards (replacing the "10960 Wilshire" signs) located
in the southern portion of the Building as set forth in Exhibit I-5, attached
-----------
hereto, and an identical sign to be located in the northern portion of the lobby
of the Building (replacing the "10960 Wilshire" sign) (the "Building Directory
Signage").
23.4.2 Modifications to Specifications. Any details or
-------------------------------
specifications relating to Tenant's Signage which are not set forth on Exhibit
-------
I, including but not limited to, the graphics, materials, color, design,
- -
lettering, lighting, size, illumination, specifications and exact location of
Tenant's Signage (collectively, the "Specifications"), are subject to Landlord's
prior written approval, which approval shall not be unreasonably withheld. Any
changes to the Specifications are subject to Landlord's prior
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written approval, which approval shall not be unreasonably withheld.
Notwithstanding anything to the contrary set forth in this Article 23 and
Exhibit I, (i) Landlord hereby approves the reduction of the size of any
Tenant's Signage, (ii)Landlord hereby approves on the Penthouse Signage and the
West Facing Parking Garage Signage self-contained aluminum channel logos and
letters, interior white neon illumination, semi-gloss black returns, letters in
the color of #6731 gold plex faces, Tenant's logo in the color of #6731 gold
plex faces with black graphic stripes, and the installation of Tenant's logo
flush at the bottom or centered with Tenant's name so that Tenant's name is
equally above and below Tenant's letters, and (iii) except as to the Penthouse
Signage, the West Facing Parking Garage Signage, the Midvale Parking Garage
Signage, and the Midvale Parking Signage (collectively, the "Excluded Signage")
Tenant, at its sole discretion, shall establish a height ratio between the
height of Tenant's logo on Tenant's Signage versus the height of Tenant's name
on Tenant Signage which ratio shall not exceed 1.5 to 1.0, respectively (the
"Ratio"), and the Ratio shall be the same on all Tenant's Signage except the
Excluded Signage which signage logo and name shall be of dimensions set forth on
Exhibits I-1, I-7, I-3, and I-6, respectively. The Ratio shall not apply in
those areas where Tenant elects not to place a logo on Tenant's Signage.
23.4.3 Permits. Tenant's Signage shall be subject to Tenant's
-------
receipt of all required governmental permits and approvals and shall be subject
to all applicable governmental laws and ordinances; provided that Landlord shall
use its commercially reasonable effort to cooperate with Tenant, at Tenant's
sole cost and expense, in order to try to obtain such consents and approvals.
Landlord shall use commercially reasonable efforts to assist Tenant in obtaining
all necessary governmental permits and approvals for Tenant's Signage. Tenant
hereby acknowledges that, notwithstanding Landlord's approval of Tenant's
Signage, Landlord has made no representation or warranty to Tenant with respect
to the probability of obtaining all necessary governmental approvals and permits
for Tenant's Signage. In the event Tenant does not receive the necessary
governmental approvals and permits for Tenant's Signage, Tenant's and Landlord's
rights and obligations under the remaining provisions of this Lease shall be
unaffected.
23.4.4 Transferability and Name Change. Tenant's rights to
Tenant's Signage may not be transferred by the Original Tenant or changed once
such signage is initially installed by the Original Tenant; provided that Tenant
may assign all, but not less than all, of Tenant's rights to Tenant's Signage,
to an Affiliate, an assignee of the Lease or a sublessee of Tenant's interest in
the Lease who shall sublease the greater of (A) one (1) full floor of the
Premises or (B) 23,000 rentable square feet of the Premises, which assignment or
sublease comply with the terms of Article 14 hereof, if Landlord determines in
----------
its reasonable discretion that (i)the transfer of Tenant's rights to Tenant's
Signage in connection with such assignment or sublease or to such Affiliate
would not violate the terms of any existing leases for space in the Building
(which exist as of July 1, 1995); provided that, notwithstanding the foregoing
terms of this item (i), Tenant may transfer Tenant's Signage to any entity whose
primary business is the entertainment business as long as such Transfer does not
violate the terms of the lease for space in the Building by "Philips," as that
term is defined in Section 23.4.7.2, below (in which case, if such violation of
------------------------------------------------------------
the Philips lease would occur, notwithstanding anything to the contrary set
- ---------------------------------------------------------------------------
forth in this Article 23, Tenant, at its sole option, may still Transfer all of
- ------------------------
Tenant's Signage except the Penthouse Signage), (ii) such assignee, sublessee or
Affiliate has a business reputation which is comparable to, or better than, the
business reputation of the Original Tenant, and (iii) the name which will appear
on the Tenant's Signage is the name of such assignee, sublessee or Affiliate,
which assignee,
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sublessee or Affiliate is not an entity which is of a character or reputation,
or is associated with a political faction or orientation, which is inconsistent
with the quality of the Real Property, or which would not be acceptable to a
landlord of a Comparable Building. Notwithstanding the foregoing, in the event
that the Original Tenant changes its logo or legally changes its name (the "New
Tenant Identity"), then Tenant may change Tenant's Signage to reflect such New
Tenant Identity; provided that any New Tenant Identity on the Penthouse Signage
shall be subject to the terms of items (i) and (iii) of this Section 23.4.4.
--------------
23.4.5 Non-Termination and Termination During Option Term.
Tenant's failure to exercise any of its rights to Tenant's Signage shall not
result in the termination of such rights and such rights shall continue to be
exclusive to Tenant; provided that if the Option Space Tenant elects to lease
during the Option Term is less than the greater of (i) two (2) full floors of
the Premises or (ii) 46,000 rentable square feet, then Tenant's Signage rights
under this Section 23 shall terminate upon the commencement of the applicable
Option Term.
23.4.6 Cost and Maintenance. The costs of the actual signs of
Tenant's Signage and the installation, design, construction, and any and all
other costs associated with Tenant's Signage, including, without limitation,
utility charges and hook-up fees, permits, and maintenance and repairs, shall be
the sole responsibility of Tenant; provided that subject to the terms of the
Tenant Work Letter, Tenant may apply a portion of the "Tenant Improvement
Allowance," as that term is defined in Section 2.1 of the Tenant Work Letter, to
-----------
such costs. Should Tenant's Signage require repairs and/or maintenance, as
determined in Landlord's reasonable judgment, Landlord shall have the right to
provide written notice thereof to Tenant and Tenant shall cause such repairs
and/or maintenance to be performed and completed within thirty (30) days after
receipt of such notice from Landlord, at Tenant's sole cost and expense;
provided, however, if such repairs and/or maintenance are reasonably expected to
require longer than thirty (30) days to complete, Tenant shall commence such
repairs and/or maintenance within such thirty (30) day period and shall
diligently prosecute such repairs and maintenance to completion. Should Tenant
fail to complete such repairs and/or maintenance within the periods described in
the immediately preceding sentence, then Landlord shall have the right to notify
Tenant thereof, and if Tenant continues to fall to complete such repairs within
five (5) days following Landlord's notification to Tenant of such failure,
Landlord shall have the right to cause such work to be performed and to charge
Tenant as Additional Rent for the costs of such work plus interest at the
Interest Rate from the date of Landlord's payment of such costs to the date of
Tenant's reimbursement to Landlord. Upon the expiration or earlier termination
of this Lease, Tenant shall, at Tenant's sole cost and expense, cause Tenant's
Signage, other than items (v) and (vi) of Section 23.4.1, above, to be removed
--------------
and shall cause the areas in which such Tenant's Signage was located to be
restored to the condition existing immediately prior to the placement of such
Tenant's Signage; provided that Tenant shall not be obligated to reinstall signs
that were removed in order to allow Tenant's Signage to be installed in place
thereof. If Tenant fails to remove such Tenant's Signage or to restore the areas
in which such Tenant's Signage was located, as provided in the immediately
preceding sentence, within ninety (90) days following the expiration or earlier
termination of this Lease, then Landlord may perform such work, and all costs
and expenses incurred by Landlord in so performing, plus interest at the
Interest Rate from the date of Landlord's payment of such costs to the date of
Tenant's reimbursement to Landlord, shall be reimbursed by Tenant to Landlord
within ten (10) days after Tenant's receipt of an invoice therefor. The terms of
this Section 23.4.6 shall survive the expiration or earlier termination of this
--------------
Lease.
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23.4.7 Restrictions on Granting Building Signage. Except as
-----------------------------------------
set forth in Section 23.4.7.1 below, Landlord shall not grant any signage rights
----------------
to tenants of the Real Property, or to anyone else, anywhere on the Building,
Parking Garage, or Real Property other than (i) signage related to the standard
operation of the Building, including, but not limited to, signage on Building
directory boards, (ii) signage located below Tenant's Signage Name on the
Southern Lobby Signage, which signage shall be subject to the terms of Sections
--------
23.4.1(v) and 23.4.7.1(ix) of this Lease, or (iii) signage described in Section
- --------------------------
23.4.7.1 below.
23.4.7.1 Signage Rights of Other Tenants of the Real Property.
----------------------------------------------------
Landlord may, at its option, grant and Landlord has already granted some or all
of the following signage rights set forth in items (i) through (ix) below (the
"Other Tenants' Signs") and Landlord may, at its option, replace the Other
Tenants' Signs described in items (ii), (iii), (vii) and (ix) with new signs for
other tenants:
(i) The right of "Philips" to the "Philips Spandrel Sign,"
as those terms are defined in Section 23.4.7.2, below;
(ii) The rights of Philips and BBDO Worldwide Inc., and its
successors, assigns and transferees ("BBDO") to the existing signs, and the
rights of future or current tenants of the Building to place signs, on the
monument located at the main entrance of the Building on Wilshire Boulevard
(the "Philips Monument"); provided that Landlord shall not enlarge the
Philips Monument, illuminate the signage on such Philips Monument, increase
the size of the name strips on such Philips Monument, nor consent to any of
the foregoing modifications of such Philips Monument;
(iii) The right of Bank of America, N.T.& S.A., its
successors, assigns and transferees to the existing sign located outside its
premises; provided that such signage may be illuminated and shall not be
larger than the size of such existing sign as of the date hereof;
(iv) The right of Philips to install a sign on the east
facing facade or spandrel of the Building located just above the window line
of the twenty-fourth (24th) floor of the Building;
(v) The right of Rochlin Baran & Balbona, its successors,
assigns and transferees ("Rochlin") to install a sign on both sides of a
monument (not to exceed four feet by four feet) located between the Parking
Garage and the Building;
(vi) The right of Smith Barney, its successors, assigns and
transferees to install a non-illuminated sign on a free standing monument
(not to exceed four feet by four feet) located on Midvale Avenue (the "Smith
Sign");
(vii) All existing rights and rights created by Landlord in
the future of Building ground floor or Parking Garage tenants to signage on
their storefronts, or exterior doors, or eyebrow signage above the first
(1st) floor and below the second (2nd) floor of the Building or Parking
Garage; and
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<PAGE>
(viii) The right of Philips, if Landlord constructs a
monument sign for Tenant at Tenant's request in the exterior plaza behind the
Building (the "Exterior Plaza"), to be granted substantially similar signage
rights in the Exterior Plaza
(ix) The rights of up to six (6) full floor tenants, in
addition to Tenant, and their respective successors, assigns and transferees
to have their names on the Southern Lobby Signage, subject to the terms of
Section 23.4.1(v) above.
-----------------
23.4.7.2 Additional Restrictions on Signage Rights.
-----------------------------------------
(i) Spandrel Signage Rights. Philips Interactive Media of
-----------------------
America, Inc., a Delaware corporation, its successors, assigns and
transferees (collectively, "Philips"), has a sign identifying Philips on the
west facing facade or spandrel, and has the right to have a sign identifying
Philips on the east facing facade or spandrel of the Building located just
above the window line of the twenty-fourth (24th) floor of the Building (the
"Philips Spandrel Sign"). In the event that the Philips Spandrel Sign is
removed, other than in connection with the repair, maintenance or the
replacement thereof with another sign identifying Philips, which replacement
sign shall not be larger than the existing sign, Landlord shall not grant any
signage rights for signage located anywhere on the Spandrel facade of the
Building. In the event that the rights to the Philips Spandrel Sign are
terminated and Philips no longer occupies space in the Building, then within
a reasonable time thereafter, the Philips Spandrel Sign shall be removed.
(ii) Signage to a Competitor of the Original Tenant or
-------------------------------------------------
Other Entities. Landlord agrees that it will not directly grant signage
--------------
rights to tenants of the Building which lease space after the date hereof,
(A) which tenants are of a character which is materially inconsistent with
fundamental concepts of basic human decency such as to the "Nazi Party,"
"Skin Heads," and the like or (B) to tenants which produce or provoke an
image which would be offensive to parents of young children by predominantly
promoting sexual themes (such as Playboy, Penthouse and the like) or violence
directed against women and children. Except in connection with the terms of
leases for tenants in the Building which leases exist as of the date hereof,
Landlord shall not grant any signage rights to a "Competitor," as that term
is defined below, for signage, other than signage on the Building directory
boards, located anywhere in the Real Property. The term "Competitor" as used
herein, shall mean a company whose primary business is in direct competition
with Tenant's primary business, which primary business is an entertainment
company specializing in the creation, production, acquisition and
distribution of television programming, music and feature films and shall
initially refer only to the entities identified in the following list
("Competitor List"):
1. ABC Entertainment
2. All American Entertainment
3. Bohbot Entertainment
4. Cartoon Network
5. Claster
6. Condcord/New Horizons
7. DIC Entertainment
8. Family Channel
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9. Film Roman
10. Fox
11. Hanna Barbera
12. Kushner Locke
13. Marvel
14. MTV/Nickelodeon
15. Nelvana
16. New World Entertainment
17. Paramount Pictures (United Paramount Network)
18. Playboy
19. Ruby Spears Animation
20. Sony Entertainment
21. Spelling Entertainment
22. Turner Network Television
23. USA Network
24. Wait Disney
25. Warner Bros.
Upon the second and each subsequent anniversary of the Lease Commencement
Date, Tenant may modify the Competitor List by delivering notice to
Landlord; provided that any entity added to such list shall, as of the date
proposed for addition by Tenant, be a Competitor of the Original Tenant.
Notwithstanding the foregoing, in no event shall the Competitor List
contain more than twenty-five (25) entities.
23.5 Building Directory. Landlord shall initially provide Tenant with
------------------
name strips to be displayed under Tenant's entry in the main Building directory
board located on the ground floor lobby of the Building at the rate of one (1)
strip per each 1,000 rentable square feet of the Premises. Any modifications to
the initial name strips, or any additional name strips requested by Tenant,
shall be at Tenant's sole cost and expense.
ARTICLE 24
----------
COMPLIANCE WITH LAW
-------------------
Tenant shall not do anything or suffer anything to be done in or about the
Premises which will in any way conflict with any law, statute, ordinance or
other governmental rule, regulation or requirement now in force or which may
hereafter be enacted or promulgated. At its sole cost and expense, Tenant shall
promptly comply with all such governmental measures to the extent that such
governmental measures relate to Tenant's particular use of the Premises or to
the Tenant Improvements located in the Premises, or any Alterations thereof.
Should any standard or regulation now or hereafter be imposed on Landlord or
Tenant by a state, federal or local governmental body charged with the
establishment, regulation and enforcement of occupational, health or safety
standards for employers, employees, landlords or tenants, then Tenant agrees, at
its sole cost and expense, to comply promptly with such standards or
regulations, to the extent such standards or regulations relate to Tenant's
particular use of the Premises or to the Tenant Improvements located in the
Premises or any Alterations thereof, provided
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<PAGE>
that Landlord shall comply with any standards or regulations which relate to the
portion of the Base Building, unless such compliance obligations are triggered
by the Tenant Improvements or Tenant's Alterations in the Premises, in which
event such compliance obligations shall be at Tenant's sole cost and expense,
provided that Tenant shall not be required to make any repair to, modification
of, or addition to the Base Building except and to the extent required because
of Tenant's use of the Premises for other than normal and customary business
office operations. Subject to the foregoing terms of this Article 24, Landlord
----------
shall, at its sole cost and expense, comply with laws in connection
with hazardous materials or handicapped access to the extent that failure to
comply with such laws (i) would, with respect to laws in connection with
hazardous materials, impose an unreasonable health hazard to the occupants of
the Premises, or (ii) would prohibit Tenant from obtaining or maintaining a
certificate of occupancy for the Premises.
ARTICLE 25
----------
LATE CHARGES
------------
If any installment of Rent shall not be received by Landlord or Landlord's
designee within ten (10) days after written notice of Tenant's failure to pay
such amount, or any amount to be paid by Landlord is not paid when due and
Landlord fails to cure such nonpayment within ten (10) days after written notice
from Tenant of such nonpayment, then the defaulting party shall pay to the other
party a late charge equal to three percent (3%) of the overdue amount. Any late
charge payable by Tenant shall be deemed Additional Rent. Either party's right
to require the payment of a late charge shall be in addition to all of such
party's other rights and remedies hereunder or at law and shall not be construed
as liquidated damages or as limiting such party's remedies in any manner. In
addition to the late charge described above, any Rent or other amounts owing by
either party hereunder which are not paid within ten (10) days after the date
they are due shall thereafter bear interest until paid at a rate per annum equal
to the Interest Rate.
LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT
----------------------------------------------------
26.2 Landlord's Cure. All covenants and agreements to be kept or
---------------
performed by Tenant under this Lease shall be performed by Tenant at Tenant's
sole cost and expense and without any reduction of Rent, except to the extent,
if any, otherwise expressly provided herein. If Tenant shall fail to perform any
of its obligations under this Lease, and such failure shall continue in excess
of the time allowed under Sections 19.1.1 or 19.1.2, above, as the case may be,
-------------------------
then upon three (3) additional business days notice from Landlord, Landlord may,
but shall not be obligated to, after reasonable prior notice to Tenant, make any
such payment or perform any such act on Tenant's part without waiving its right
based upon any default of Tenant and without releasing Tenant from any
obligations hereunder.
26.2 Tenant's Reimbursement. Except as may be specifically provided to
the contrary in this Lease, Tenant shall pay to Landlord, upon delivery by
Landlord to Tenant of statements therefor, sums equal to expenditures reasonably
made and obligations incurred by Landlord in connection with the
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remedying by Landlord of Tenant's defaults pursuant to the provisions of Section
-------
26.1. Tenant's obligations under this Section 26.2 shall survive the expiration
- ---- ------------
or sooner termination of the Lease Term.
ARTICLE 27
----------
ENTRY BY LANDLORD
-----------------
Landlord reserves the right at all reasonable times and upon reasonable
notice to the Tenant to enter the Premises to (i) inspect them; (ii) show the
Premises to prospective purchasers, current or prospective mortgagees, ground or
underlying lessors or insurers or, during the last twelve (12) months of the
Lease Term or the Option Term, as applicable, to prospective tenants; (iii) post
notices of nonresponsibility; or (iv) alter, improve or repair the Premises or
the Building if necessary to comply with current building codes or other
applicable laws, or for structural alterations, repairs or improvements to the
Building or the Building systems and equipment, to the extent otherwise
permitted or required under this Lease. Notwithstanding anything to the
contrary contained in this Article 27, Landlord may enter the Premises at any
----------
time to (A) perform services required of Landlord, other than janitorial
services, which janitorial services shall be performed during non-Business
Hours; and (B) subject to the notice requirements set forth in Section 19.1.2 of
--------------
this Lease and subject to the provisions of Section 26.1 of this Lease, perform
------------
any covenants of Tenant which Tenant fails to perform. Any such entries shall
be without the abatement of Rent except as otherwise expressly provided in
Section 19.4.2 of this Lease, and shall include the right to take such steps as
- --------------
required to accomplish the stated purposes; provided, however, except to the
extent necessitated by (a) emergencies, (b) repairs, alterations, improvements
or additions required by governmental or quasi-governmental authorities or court
order or decree, or (c) repairs which are the obligation of Tenant hereunder,
any such entry shall be performed in a manner so to minimize any interference
with the conduct of Tenant's business in the Premises and taking all
commercially reasonable precaution, under the circumstances, to avoid damaging
Tenant's property and complying with Tenant's reasonable security restrictions.
Tenant hereby waives any claims for damages or for any injuries or inconvenience
to or interference with Tenant's business, lost profits, and any other loss
occasioned thereby. For each of the above purposes, Landlord shall at all times
have a key with which to unlock all the doors in the Premises, excluding
Tenant's vaults, safes and special security areas designated in advance by
Tenant. In an emergency, Landlord shall have the right to use any means that
Landlord may deem proper to open the doors in and to the Premises. Any entry
into the Premises in the manner hereinbefore described shall not be deemed to be
a forcible or unlawful entry into, or a detainer of, the Premises, or an actual
or constructive eviction of Tenant from any portion of the Premises.
ARTICLE 28
----------
TENANT PARKING
--------------
28.1 Parking Pass Ratio. Tenant shall have the right, but not the
------------------
obligation, to rent from Landlord parking passes on a monthly basis throughout
the Lease Term up to the amount determined pursuant to the Parking Pass Ratio
set forth in Section 11 of the Summary; provided that if, as of the commencement
of the fourth (4th) Lease Year, Tenant does not use for a period of eighteen
(18) consecutive months thereafter, the maximum amount of parking passes as
determined pursuant to the
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Parking Pass Ratio, then Landlord shall notify Tenant (the "Ratio Decrease
Notice") that Tenant's right to rent any such unused parking pass or space
(each, the "Unused Parking Space") shall be suspended, subject to the terms
below in this Section 28.1, as of the date Landlord gives Tenant the Ratio
------------
Decrease Notice, and, accordingly, during the period that Tenant's right to rent
such Unused Parking Space is suspended, the Parking Pass Ratio set forth in
Section 11 of the Summary shall be amended to reflect such decrease in the
- ----------
number of parking passes or spaces Tenant may rent; and provided further that
if, thereafter, Tenant gives Landlord written notice of Tenant's desire to again
rent such Unused Parking Space, Landlord shall notify Tenant when any Unused
Parking Space or a comparable type of parking pass will become available and
Landlord shall continue to so notify Tenant until such time that Tenant rents
the Unused Parking Space or a comparable type of parking pass. Upon the date
that such Unused Parking Space or a comparable type of parking pass becomes
available, Landlord and Tenant shall amend the Parking Pass Ratio to reflect
such increase in the number of parking passes or spaces that Tenant rents. Upon
Landlord giving to Tenant the Ratio Decrease Notice, Tenant shall return to
Landlord the parking card for the Unused Parking Space which permits access to
the Parking Garage.
28.2 Parking Rate. For the first Lease Year the parking rate Landlord
------------
charges on a monthly basis for the use of (i) a reserved parking space
("Reserved Space") shall be equal to One Hundred Seventy Five and No/100 Dollars
($175.00), (ii)an unreserved parking pass ("Unreserved Pass") shall be equal to
One Hundred Ten and No/100 Dollars ($110.00) and (iii) a Roof-Top Space shall be
equal to Fifty Dollars ($50.00). The parking rates set forth in items (i), (ii),
and (iii) include the respective "Parking Taxes," as that term is defined below
in this Section 28.2, for each Reserved Space, Unreserved Space and Roof-Top
Space rented by Tenant. Commencing with the first day of the second Lease Year
and then on the first day of each Lease Year thereafter during the initial Lease
Term, the parking rates set forth in items (i) through (iii) above, may be
increased for any such Lease Year to an amount equal to the sum of (A) the
lesser of (i) the non-tax portion of the applicable parking rate for the first
Lease Year increased by five percent (5%) on a compounded basis for each Lease
Year occurring after the first Lease Year, including the then-current Lease Year
to which the increase applies, and (ii) the then prevailing parking rate
(exclusive of any taxes) then being charged by landlords of the Comparable
Buildings for the applicable type of parking space, and (B) any taxes imposed by
any governmental authority in connection with the renting of such parking passes
by Tenant or the use of the Parking Garage by Tenant pursuant to the terms of
Section 4.4 of this Lease (collectively, the "Parking Taxes"); provided,
however, the rate for Roof-Top Space shall be forty-five percent (45%) of the
parking rate for an Unreserved Pass. During each Option Term, the rates to be
charged for the parking passes and spaces provided under this Article 28 shall
----------
be determined as part of "Fair Market Rental Value" pursuant to the terms of
Section 2.2.3 of this Lease; provided, however, the rate for Roof-Top Space
- -------------
shall be forty-five percent (45%) of the parking rate for an Unreserved Pass.
28.3 Compliance with Parking Rules and Regulations. Tenant's continued
---------------------------------------------
right to use the parking passes is conditioned upon Tenant not being in Material
Default of all reasonable rules and regulations which are prescribed from time
to time for the orderly operation and use of the Parking Garage and upon
Tenant's cooperation in seeing that Tenant's employees also comply with such
rules and regulations.
28.4 Operation of the Parking Garage. Landlord specifically reserves
-------------------------------
the right to change the size, configuration, design and layout of the Parking
Garage at any time; provided that (i) except in the
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event of an emergency or to comply with applicable law, Landlord shall, in no
event, relocate the nineteen (19) Reserved Spaces designated as Numbers 504
through 517, and 342, 343, 363, 364 and 365 on Exhibit O-Pages 1 and 2 or the
-----------------------
Reserved Space designated as Number 300 on Exhibit O-Page 3, attached hereto,
----------------
(ii) Landlord shall have the right to relocate any Reserved Spaces not included
in item (i) above only to the extent that the relocated Reserved Space is
reasonably acceptable to Tenant, and (iii) in no event shall such change of the
Parking Garage reduce the number of the type of parking spaces Tenant may rent
from Landlord pursuant to the Parking Pass Ratio. Tenant acknowledges and agrees
that Landlord may, without incurring any liability to Tenant and without any
abatement of Rent under this Lease, from time to time, temporarily close-off or
restrict access to the Parking Garage only to the extent that such close-off or
restriction of access is reasonably necessary and no other commercially
reasonable means exist in order to permit or facilitate any such construction,
alteration or improvement; provided, however, during such temporary restriction
of access to the Parking Garage, Landlord shall provide reasonable alternative
parking areas, located within reasonable walking distance from the Building, to
accommodate the number of parking passes rented by Tenant which are temporarily
restricted from access by Tenant. Landlord may totally or partially delegate its
responsibilities hereunder to a parking operator in which case such parking
operator shall have all the rights of control delegated by Landlord; provided
that in no event shall such delegation release Landlord from its obligations
under this Article 28.
----------
28.5 Use of Parking Passes. The parking passes rented by Tenant pursuant
---------------------
to this Article 28 are provided to Tenant solely for use by Tenant's own
----------
personnel and such passes may not be transferred, assigned, subleased or
otherwise alienated by Tenant; provided that Tenant may transfer parking passes
to a permitted Transferee pursuant to the terms of Article 14 of this Lease.
Tenant shall abide by all reasonable rules and regulations which are prescribed
from time to time for the orderly operation and use of the Parking Garage,
including any sticker or other identification system established by Landlord.
Tenant shall reasonably cooperate in seeing that Tenant's employees and visitors
also comply with such rules and regulations.
28.6 Validations. Tenant may validate visitor parking by such method or
-----------
methods as the Landlord may reasonably establish; provided that in the event
that Tenant purchases from Landlord validations for visitor parking then until
Tenant has purchased validations with a face value of Seventy-Four Thousand Nine
Hundred Ninety-Nine and No/100 Dollars ($74,999.00), Tenant shall receive a
credit against each such purchase of validations equal to ten percent (10%) of
the aggregate cost of such validations incurred by Tenant, and once $75,000.00
in face value of validations has been purchased in any calendar year (the
"$75,000 Cut-Off"), then Tenant shall receive a credit against each such
additional purchase of validations equal to fifty percent (50%) of the cost of
validations purchased by Tenant equal to or in excess of the $75,000 Cut-Off.
Tenant shall make reasonable, good faith efforts to use all validations
purchased during a particular calendar year during such calendar year.
ARTICLE 29
----------
MISCELLANEOUS PROVISIONS
------------------------
29.1 Binding Effect. Subject to all other provisions of this Lease,
each of the provisions of this Lease shall extend to and shall, as the case may
require, bind or inure to the benefit not only of
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Landlord and of Tenant, but also of their respective successors or assigns,
provided this clause shall not permit any assignment by Tenant contrary to the
provisions of Article 14 of this Lease.
----------
29.2 No Air Rights. No rights to any view or to light or air over any
-------------
property, whether belonging to Landlord or any other person, are granted to
Tenant by this Lease; provided that Landlord shall not construct any improvement
on the roof of the Parking Garage which materially obstructs the eye-level view
from the twenty-second (22nd) floor or higher of the Building. If at any time
any windows of the Premises are temporarily darkened or the light or view
therefrom is obstructed by reason of any repairs, improvements, maintenance or
cleaning in or about the Real Property, the same shall be without liability to
Landlord and without any reduction or diminution of Tenant's obligations under
this Lease.
29.3 Modification of Lease. Should any current or prospective mortgagee
---------------------
or ground lessor for the Building or Real Property require a modification or
modifications of this Lease, which modification or modifications will not cause
an increased cost or expense to Tenant or in any other way adversely change the
rights or obligations of Tenant hereunder, then and in such event, Tenant agrees
that this Lease may be so modified and agrees to execute whatever documents are
required therefor and deliver the same to Landlord within twenty (20) days
following the request therefor. Should Landlord or any such current or
prospective mortgagee or ground lessor require execution of a short form of
Lease for recording, containing, among other customary provisions, the names of
the parties, a description of the Premises and the Lease Term, Tenant agrees to
execute such short form of Lease and to deliver the same to Landlord within
twenty (20) days following the request therefor, the recordation of which shall
be at the sole cost and expense of Landlord, and not included as an Operating
Expense.
29.4 Transfer of Landlord's Interest. Tenant acknowledges that Landlord
-------------------------------
has the right to transfer all or any portion of its interest in the Real
Property and Building and in this Lease (the "Landlord Transfer"), and Tenant
agrees that in the event of any Landlord Transfer and a transfer of the Letter
of Credit, Landlord shall automatically be released from all liability under
this Lease thereafter accruing and Tenant agrees to look solely to such
transferee for the performance of Landlord's obligations hereunder arising or
accruing after the date of the Landlord Transfer upon agreement by such
transferee to fully assume and be liable for all obligations of this Lease to be
performed by Landlord which first accrue or arise after the date of the
conveyance, and Tenant shall attorn to such transferee. Tenant further
acknowledges that Landlord may assign its interest in this Lease to a mortgage
lender as additional security and agrees that such an assignment shall not
release Landlord from its obligations hereunder and that unless and until such
mortgage lender succeeds to Landlord's interest and obligations hereunder,
Tenant shall continue to look to Landlord for the performance of its obligations
hereunder.
29.5 Prohibition Against Recording. Except as provided in Section 29.3
-----------------------------
of this Lease, neither this Lease, nor any memorandum, affidavit or other
writing with respect thereto, shall be recorded by Tenant or by anyone acting
through, under or on behalf of Tenant. Notwithstanding the foregoing, Landlord
and Tenant shall execute a short form of lease in the form attached hereto as
Exhibit P, concurrently with the mutual execution and delivery of this Lease,
- ---------
which short form of lease Tenant may record at its sole cost and expense.
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29.6 Captions. The captions of Articles and Sections are for
--------
convenience only and shall not be deemed to limit, construe, affect or alter the
meaning of such Articles and Sections.
29.7 Relationship of Parties. Nothing contained in this Lease shall be
-----------------------
deemed or construed by the parties hereto or by any third party to create the
relationship of principal and agent, partnership, joint venturer or any
association between Landlord and Tenant, it being expressly understood and
agreed that neither the method of computation of Rent nor any act of the parties
hereto shall be deemed to create any relationship between Landlord and Tenant
other than the relationship of landlord and tenant.
29.8 Time of Essence. Time is of the essence of this Lease and each of
---------------
its provisions.
29.9 Partial Invalidity. If any term, provision or condition contained
------------------
in this Lease shall, to any extent, be invalid or unenforceable, the remainder
of this Lease, or the application of such term, provision or condition to
persons or circumstances other than those with respect to which it is invalid or
unenforceable, shall not be affected thereby, and each and every other term,
provision and condition of this Lease shall be valid and enforceable to the
fullest extent possible permitted by law.
29.10 Landlord Exculpation. It is expressly understood and agreed that
--------------------
notwithstanding anything in this Lease to the contrary, and notwithstanding any
applicable law to the contrary, the liability of Landlord and the Landlord
Parties hereunder (including any successor landlord) and any recourse by Tenant
against Landlord or the Landlord Parties shall be limited solely and exclusively
to the interest of Landlord in the Building and to the proceeds of any insurance
which cost is included in Operating Expenses, and neither Landlord, nor any of
the Landlord Parties shall have any personal liability therefor, and Tenant
hereby expressly waives and releases such personal liability on behalf of itself
and all persons claiming by, through or under Tenant.
29.11 Entire Agreement. It is understood and acknowledged that there are
----------------
no oral agreements between the parties hereto affecting this Lease and this
Lease supersedes and cancels any and all previous negotiations, arrangements,
brochures, agreements and understandings, if any, between the parties hereto or
displayed by Landlord to Tenant with respect to the subject matter thereof, and
none thereof shall be used to interpret or construe this Lease. The Guaranty
executed by Haim Saban, the Subordination, Non-Disturbance and Attornment
Agreement executed by Tenant and Swiss Bank Corporation, New York Branch, a
branch of a Swiss banking corporation, and this Lease, the exhibits and
schedules attached hereto, and the Side Letter Agreement and the Storage
Agreement, each executed by Landlord and Tenant in connection with, and
referring to, this Lease and dated of even date herewith, contain all of the
terms, covenants, conditions, warranties and agreements of the parties relating
in any manner to the rental, use and occupancy of the Premises, and collectively
shall be considered to be the only agreement between, or in favor of, the
parties hereto and their representatives and agents, and none of the terms,
covenants, conditions or provisions of this Lease can be modified, deleted or
added to except in writing signed by the parties hereto.
29.12 Right to Lease. Landlord reserves the absolute right to effect
--------------
such other tenancies in the Building as Landlord in the exercise of its sole
business judgment shall determine to best promote the interests of the Building.
Tenant does not rely on the fact, nor does Landlord represent, that any
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specific tenant or type or number of tenants shall, during the Lease Term,
occupy any space in the Building.
29.13 Force Majeure. Any prevention, delay or stoppage due to strikes,
-------------
lockouts, labor disputes, acts of God, inability to obtain services, labor, or
materials or reasonable substitutes therefor, governmental actions, civil
commotions, fire or other casualty, and other causes beyond the reasonable
control of the party obligated to perform (collectively, the "Force Majeure"),
except with respect to the obligations imposed with regard to Rent and/or other
charges to be paid by Tenant or Landlord pursuant to this Lease, and except as
to Tenant's obligations under Article 5 of this Lease notwithstanding anything
to the contrary contained in this Lease, shall excuse the performance of such
party for a period equal to any such prevention, delay or stoppage and,
therefore, if this Lease specifies a time period for performance of an
obligation of either party, that time period shall be extended by the period of
any delay in such party's performance caused by a Force Majeure.
29.14 Notices. All notices, demands, statements, approvals or
-------
communications (collectively, "Notices") given or required to be given by either
party to the other hereunder shall be in writing, shall be sent by United States
certified or registered mail, postage prepaid, return receipt requested,
telecopied, or delivered personally (i) to Tenant at the appropriate address set
forth in Section 5 of the Summary, or to such other place as Tenant may from
---------
time to time designate in a Notice to Landlord; or (ii) to Landlord at the
addresses set forth in Section 3 of the Summary, or to such other firm or to
---------
such other place as Landlord may from time to time designate in a Notice to
Tenant. Any Notice will be deemed given three (3) days after the date it is
posted if mailed as provided in this Section 29.14, the first business day after
-------------
the date of the telecommunication, or upon the date personal delivery is made or
attempted to be made if such day is a business day, as the case may be.
29.15 Authority. If Tenant is a corporation or partnership, each
---------
individual executing this Lease on behalf of Tenant hereby represents and
warrants that Tenant is a duly formed and existing entity qualified to do
business in California and that Tenant has full right and authority to execute
and deliver this Lease and that each person signing on behalf of Tenant is
authorized to do so. Furthermore, if Landlord is a corporation or partnership,
each individual executing this Lease on behalf of Landlord hereby represents and
warrants that Landlord is a duly formed and existing entity qualified to do
business in California and that Landlord has full right and authority to execute
and deliver this Lease and that each person signing on behalf of Landlord is
authorized to do so.
29.16 Governing Law. This Lease shall be construed and enforced in
-------------
accordance with the laws of the State of California.
29.17 Brokers.
-------
29.17.1 Landlord shall pay all brokerage commissions owing to
Les Small & Company ("Small") in connection with the transaction contemplated by
this Lease pursuant to the terms of that certain Registration and Co-Brokerage
Agreement Letter dated January 6, 1995 as amended by an amendment dated June 22,
1995, both by and between Small and Landlord (collectively, the "Commission
Agreement"). Landlord and Tenant each represent and warrant to the other that
other than the Brokers set forth in Section 12 of the Summary, no broker, agent,
----------
or finder negotiated or was
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<PAGE>
instrumental in negotiating or consummating this Lease on its behalf and that it
knows of no broker, agent, or finder, other than the Brokers, who are, or might
be, entitled to a commission or compensation in connection with this Lease. In
the event of any such claims for additional brokers' or finders' fees or
commissions in connection with the negotiation, execution or consummation of
this Lease, then Landlord shall indemnify, save harmless and defend Tenant from
and against such claims if they shall be based upon any statement,
representation or agreement by Landlord, and Tenant shall indemnify, save
harmless and defend Landlord if such claims shall be based upon any statement,
representation or agreement made by Tenant.
29.17.2 Landlord and Tenant hereby acknowledge and agree that
Small is an intended third party beneficiary of the provisions of Section
-------
29.17.1 above and of this Section 29.172. To the extent that Landlord fails to
- ------- --------------
pay to Small any amounts due under the Commission Agreement on or before the
date due thereunder, then such amounts shall accrue interest at the Interest
Rate. In addition, if Landlord fails to pay any amounts to Small on or before
the date due under the Commission Agreement, Small may send written notice to
Landlord and Tenant of such failure and if Landlord fails to pay such amounts
within thirty (30) days after said notice, Tenant shall have the right, but not
the obligation, to offset such amounts owed to Small from Landlord against
Tenant's next rental obligations which may become due under this Lease. Any
amounts so offset from Tenant's rental obligations hereunder shall no longer be
owed from Landlord to Small under the Commission Agreement, but will become due
from Tenant to Small.
29.18 Independent Covenants. This Lease shall be construed as though the
---------------------
covenants herein between Landlord and Tenant are independent and not dependent
and Tenant hereby expressly waives the benefit of any statute to the contrary
and agrees that if Landlord fails to perform its obligations set forth herein,
Tenant shall not except as expressly provided in this Lease to the contrary be
entitled (i)to make any repairs or perform any acts hereunder at Landlord's
expense or (ii)to any setoff of the Rent or other amounts owing hereunder
against Landlord; provided, however, that the foregoing shall in no way impair
the right of Tenant to commence a separate action against Landlord for any
violation by Landlord of the provisions hereof, after the giving of notice and
any applicable cure period, so long as notice is first given to Landlord, and an
opportunity is granted to Landlord to correct such violations as provided above.
29.19 Building Name and Signage. Landlord shall not have the right to
-------------------------
change the name of the Building. Subject to the terms of Article 23 of this
----------
Lease, Landlord may install, affix and maintain signs on the exterior and on the
interior of the Building as Landlord may desire. Tenant shall not use the name
of the Building or use pictures or illustrations of the Building in advertising
or other publicity, without the prior written consent of Landlord, which consent
shall not be unreasonably withheld.
29.30 Transportation Management. To the extent required by law, Tenant
-------------------------
shall fully comply with all present or future programs which are obligations of
the Building or Real Property as imposed by applicable governmental laws, which
programs are intended to manage parking, transportation or traffic in and around
the Building, and in connection therewith, Tenant shall take responsible action
for the transportation planning and management of all employees located at the
Premises by working directly with Landlord, any governmental transportation
management organization or any other transportation-related committees or
entities. Such programs imposed by applicable governmental laws
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may include, without limitation: (i) restrictions on the number of peak-hour
vehicle trips generated by Tenant; (ii) increased vehicle occupancy; (iii)
implementation of an in-house ridesharing program and an employee transportation
coordinator; (iv)working with employees and any Building or area-wide
ridesharing program manager; (v) instituting employer-sponsored incentives
(financial or in-kind) to encourage employees to rideshare; and (vi) utilizing
flexible work shifts for employees.
29.21 Telecommunications Equipment. At any time during the Lease Term,
----------------------------
subject to the terms of this Section 29.21, Tenant may install, at Tenant's sole
-------------
cost and expense, up to two (2) satellite or microwave dishes or other
communication equipment (the "Telecommunications Equipment") upon the roof of
the Building. The physical appearance and the size of the Telecommunications
Equipment shall be subject to Landlord's reasonable approval, the location of
any such installation of the Telecommunications Equipment shall be designated by
Landlord subject to Tenant's reasonable approval and Landlord may require Tenant
to install screening around such Telecommunications Equipment, at Tenant's sole
cost and expense, as reasonably designated by Landlord. Tenant shall maintain
such Telecommunications Equipment, at Tenant's sole cost and expense. In the
event Tenant elects to exercise its right to install the Telecommunication
Equipment, then Tenant shall give Landlord prior written notice thereof and
Landlord and Tenant shall execute an amendment to this Lease covering the
payment for installation costs, if any, the Telecommunications Equipment, the
installation and maintenance of such Telecommunications Equipment, Tenant's
indemnification of Landlord with respect thereto, Tenant's obligation to remove
such Telecommunications Equipment upon the expiration or earlier termination of
this Lease, and other related matters; provided that other than the foregoing
matters, in no event shall Tenant be required to pay Landlord for the use of the
roof of the Building in connection with the Telecommunications Equipment.
29.22 Covenant of Quiet Enjoyment. Landlord covenants that Tenant, on
---------------------------
paying the Rent, charges for services and other payments herein reserved and on
keeping, observing and performing all the other terms, covenants, conditions,
provisions and agreements herein contained on the part of Tenant to be kept,
observed and performed, shall, during the Lease Term, peaceably and quietly
have, hold and enjoy the Premises subject to the terms, covenants, conditions,
provisions and agreements hereof without interference by any persons lawfully
claiming by or through Landlord.
29.23 Landlord Renovations. Landlord acknowledges that Landlord has
--------------------
recently made renovations (the "Initial Renovations") to the Building and Real
Property in substantial conformance, unless otherwise required by applicable
law, with the description set forth on Exhibit N, attached hereto. It is
specifically understood and agreed that Landlord has made no representation or
warranty to Tenant and has no obligation to alter, remodel, improve, renovate,
repair or decorate the Premises, Building, or any part thereof and that no
representations respecting the condition of the Premises or the Building have
been made by Landlord to Tenant except as specifically set forth herein or in
the Tenant Work Letter. However, Tenant acknowledges that Landlord may, in
addition to the Initial Renovations, during the Lease Term renovate, improve,
alter, or modify (collectively, the "Future Renovations") the Building,
Premises, and/or Real Property, including without limitation the Parking Garage,
common areas, systems and equipment, roof, and structural portions of the same,
which Future Renovations may include, without limitation, (i) modifying the
common areas and tenant spaces to comply with applicable laws and regulations,
including regulations relating to the physically disabled, seismic conditions,
and building safety and security, and (ii) installing new floor covering,
lighting, and wall coverings in the
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Building common areas, and in connection with the Initial Renovations or any
Future Renovations, Landlord may, among other things, erect scaffolding or other
necessary structures in the Building, limit or eliminate access to portions of
the Real Property, including portions of the common areas, or perform work in
the Building, which work may create noise, dust or leave debris in the Building;
provided, however, Landlord shall use its commercially reasonable efforts to
minimize any material and adverse disruption in connection with Tenant's
Permitted Use of the Premises during the construction of the Renovations. Tenant
hereby agrees that the Initial Renovations or any Future Renovations and
Landlord's actions in connection with the Initial Renovations or any Future
Renovations shall in no way constitute a constructive eviction of Tenant nor
entitle Tenant to any abatement of Rent, except as otherwise provided in Section
19.4 of this Lease. Landlord shall have no responsibility or for any reason be
liable to Tenant for any direct or indirect injury to or interference with
Tenant's business arising from the Initial Renovations or any Future
Renovations, nor shall Tenant be entitled to any compensation or damages from
Landlord for loss of the use of the whole or any part of the Premises or of
Tenant's personal property or improvements resulting from the Initial
Renovations or any Future Renovations or Landlord's actions in connection with
the Initial Renovations or any Future Renovations, or for any inconvenience or
annoyance occasioned by the Initial Renovations or any Future Renovations or
Landlord's actions in connection with the Initial Renovations or any Future
Renovations; provided, however, Landlord shall use its commercially reasonable
efforts to minimize any material and adverse disruption in connection with
Tenant's Permitted Use of the Premises during the construction of the
Renovations.
29.24 Asbestos Disclosures. Landlord has advised Tenant that there is
--------------------
asbestos-containing material ("ACM") in the Building. Landlord has further
advised Tenant that, according to the United States Environmental Protection
Agency: "The presence of asbestos in a building does not necessarily mean that
the health of building occupants is necessarily in danger. As long as asbestos
containing material (ACM) remains in good condition and is not disturbed,
exposure is unlikely." Attached hereto as Exhibit F is a disclosure statement
---------
regarding asbestos in the Building. Tenant acknowledges that such notice
complies with the requirements of Section 25915 of the California Health and
Safety Code. Landlord and Tenant further acknowledge that Landlord shall be
performing the obligations set forth in Section 1.1.6 of the Tenant Work Letter
-------------
in connection with ACM. Landlord agrees to bear any increased costs in the
design or construction of the Alterations directly resulting from any ACM in the
Premises or on the floors directly above and below the Premises. The work (the
"ACM Work") necessary to remediate, encapsulate, or abate any ACM which
interferes with Tenant's construction of the Alterations shall be performed by
Landlord at its sole cost.
29.25 Space for Electrical Transformer, Electrical Subtransformer and
---------------------------------------------------------------
Pony Chiller. In the event that Tenant desires to install, construct or place
- ------------
an electrical transformer in the Building, and/or an electrical subtransformer
and/or a pony chiller on the second (2nd) floor of the Building (collectively,
the "Tenant Provided Utilities"), then Tenant shall give Landlord written notice
thereof and Landlord shall designate space for the applicable Tenant Provided
Utilities in the basement of the Building for the electrical transformer and on
the 2nd floor for the electrical subtransformer and pony chiller (provided that
Landlord shall not be obligated to supply such 2nd floor space if the same is
not available), and Tenant's use of such designated space for the applicable
Tenant Provided Utilities shall be subject to the following conditions: the
drawings, installation, inspection, specifications, construction, maintenance
and removal of the Tenant Provided Utilities shall be subject to Landlord's
reasonable rules
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and regulations with respect thereto, and (ii) any costs in connection with the
Tenant Provided Utilities, except such costs which are included in Operating
Expenses or which do not constitute used and consumed electricity which is
Excess Consumption, shall be paid by Tenant, or if Landlord pays such costs,
shall be reimbursed to Landlord upon demand; provided that Landlord shall not
charge Tenant rent for the use of such space applicable to the Tenant Provided
Utilities. On full floors leased by Tenant, subject to Landlord's reasonable
rules and regulations, Tenant shall also have the exclusive use of the
electrical closet and West telephone closet except for any portion of the
Building Systems contained therein; provided that, notwithstanding the
foregoing, Landlord and Landlord's agents shall have access to, and the riser
cables of other tenants in the Building and ducts and vents otherwise serving
the Building or tenants of the Building shall have the use of, the electrical
closet and the West telephone closet.
29.26 Acoustics. Landlord represents that the Building has been
---------
constructed and will be maintained in a manner which complies with Landlord's
obligations to maintain sound production standards on Schedule 1 of Exhibit D.
-----------------------
29.27 Damage Caused By the Northridge Earthquake. Landlord shall, at its
------------------------------------------
sole cost and expense and not as an Operating Expense, in a manner and to an
extent as determined by Landlord in its reasonable judgment, comply with the
terms of Section 91.8908 of the Los Angeles Municipal Code entitled "Special
Provisions for the Repair of Steel Moment Frame Buildings Located in High
Earthquake Damaged Areas" in connection with any damage to the Building caused
by the January 17, 1994 earthquake (and aftershocks before the date of this
Lease) (collectively, the "Quake") centered in Northridge, California. If Tenant
incurs increased costs in the designing and construction of the Alterations
because of Landlord's making (or failing to make) repairs to the Building
resulting from the Quake as required by this Section 29.27, Landlord shall
-------------
reimburse to Tenant the cost of redoing work which had previously been done.
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IN WITNESS WHEREOF, Landlord and Tenant have caused their duly authorized
representatives to execute this Lease as of the day and date first above
written.
"Landlord":
10960 PROPERTY CORPORATION,
a Delaware corporation,
By:/s/ Gerald R. Mylroie
--------------------------------
Its: Vice President
-----------------------------
By:/s/ Michael P. Lagana, Jr.
--------------------------------
Its: Vice President
-----------------------------
"Tenant":
SABAN ENTERTAINMENT, INC.,
a Delaware corporation,
By:/s/ Mel Woods
--------------------------------
Its: President
-----------------------------
By:/s/ William Josey
--------------------------------
Its: Assistant Secretary
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EXHIBIT 10.39
MAGIC MOVIE STUDIOS OF VALENCIA, LTD.
PRODUCTION FACILITY AGREEMENT
THIS AGREEMENT is made and entered into the 7th day of June, 1994 by and
between MAGIC MOVIE STUDIOS OF VALENCIA, LTD., a California limited partnership
(hereinafter referred to as "MMSV"), and SABAN ENTERTAINMENT, INC. (hereinafter
referred to as "SABAN").
WITNESSETH:
WHEREAS, MMSV is the Owner/Operator of a multipurpose production facility,
located at 28343 Avenue Crocker, Valencia, California 91355, and WHEREAS SABAN
desires to use the following production facility package (hereinafter referred
to as "Package") for the purposes of motion picture production facility for such
purpose all on the terms and condition hereinafter set forth. The package shall
include:
FACILITIES
- ----------
Stage One (1) and Two (2) at the above references address including
approximately 11,700 square feet of office space.
PARKING
- -------
SABAN ENTERTAINMENT may use all the parking spaces available on the lot at
MMSV with the exception of those designated for use by Dresser Rand, Inc. SABAN
may have all the spaces adjacent to Stages 1 and 2.
MMSV has acquired an additional parking lot directly across the street from
the studio which provides approximately 110 additional parking spaces. These
are for the exclusive use of SABAN Entertainment Productions.
EXCLUSIONS
- ----------
At this time, the above package does not include the following:
Stage Manager
Grip and Light
Pre-Light
Power for Air Conditioning/Heat
Catering
Clerical Staff
Dumpster
Cleaning Supplies
Security exclusive to SABAN Entertainment, Inc.
<PAGE>
NOW, THEREFORE, in consideration of the mutual promise and agreements
contained herein, the parties agree as follows:
1. Use of Facility. MMSV grants to Saban the exclusive right to use the
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production facilities for the exclusive purpose of motion picture and television
production and related uses. During its use of MMSV property, Saban shall not
make or permit use of MMSV facilities for any unlawful purpose.
2. Lease Terms. SABAN shall lease the production facilities as
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previously listed under "FACILITIES" above for a period of six (6) months with
one (1) six (6) month optional extension, plus additional one(1) year optional
extension.
2.1 Payments. SABAN shall pay MMSV the amount of Twenty-five
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thousand dollars ($25,000.00) per month for the initial term beginning June 13,
1994. The payment schedule is as follows: $25,000.00 deposit payable upon
signing of this contract. (Receipt of $25,000.00 is hereby acknowledged on May,
1994). First month's rent of $25,000.00 payable on June 13, 1994, or will be
prorated should premises not be ready for occupancy by June 13th; and $25,000.00
per month on or before the 1st day of each month for the initial lease term.
Initial rent will be due and payable upon occupance of production office space
(or per item #18 of the Addendum as pertains to Stages.)
2.2 Extension Option. If the six (6) month option is exercised,
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commencing on December 1, 1994, the rental rate shall remain at $25,000.00 per
month for the full six (6) month term. In the event that Saban exercises the
one (1) year option commencing on June 1, 1995 the rental rate shall increase to
$26,250.000 for the full the full term of one (1) year lease Rent shall be due
and payable on the 1st day of each month prior to the rental period.
3. Maintenance and Repairs. MMSV shall deliver the facilities and
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equipment to SABAN in a good and usable condition, and MMSV shall be responsible
for all necessary and routine repairs, maintenance and upkeep of the MMSV
facilities and equipment in the event that the facilities are damaged by SABAN's
willful misconduct or gross negligent use of the facilities, SABAN shall assume
full financial responsibility except for MMSV's negligent or intentional acts
provided that such damage is caused by SABAN.
MMSV is responsible for all structural repairs, including without
limitation, roof repairs, electrical and plumbing during the term of this lease.
If SABAN informs MMSV of a maintenance problem, MMSV must make every
effort to repair this problem within 48 hours or SABAN will have the right to
make repairs, and deduct the actual costs of said repairs from the next month's
rent if SABAN elects do so. Should SABAN elect not to repair said problem and
should MMSV elect not to repair said problem, then SABAN shall not be held
liable nor responsible for any damages or deterioration which may result from
non-repair.
SABAN shall be entitled to terminate this lease and have the security
deposit refunded, less any damage that SABAN may be directly responsible for due
to gross negligence,
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or for any outstanding invoices due to MMSV from SABAN for items in Addendum
paragraphs 3,5,7,8 and/or 9 should the premises become uninhabitable for the
intended for period exceeding five (5) working days.
4. Insurance. SABAN and MMSV each agree to provide public comprehensive
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liability insurance, including bodily injury, personal injury and property
damages, in an initial amount of not less than one million dollars
($1,000,000.00) for any one occurrence. Said insurance policy must name the
other party as additional insured, and must provide at least ten (10) days
written notice of cancellation or material change. Each party shall provide the
a certificate of insurance evidencing this coverage.
5. Indemnification. MMSV shall indemnify, defend and hold SABAN harmless
---------------
from and against any and all claims, demands, losses, costs, expenses,
obligation, liabilities, damages, recoveries, actions, judgements, suits and
reasonable attorneys fees and disbursements that SABAN shall incur or suffer,
including property damages, injury or death to persons which arise from or in
connection with MMSV's operation provided the foregoing arises out of MMSV's
negligent or intentional acts or omissions, including the negative acts or
omissions of any of MMSV's officers, directors, employees, agents or
representatives, or the breach or failure by MMSV to perform any covenant or
agreement contained herein, except for SABAN's gross negligence or intentional
acts. SABAN shall indemnify, defend and hold MMSV harmless from and against any
and all claims, demands, loss, costs, expenses, obligations, liabilities,
damages, recoveries, action, judgements, suits and reasonable attorneys fees and
disbursements that MMSV shall include or suffer, including property damage,
injury or death to person, which arise from or in connection with SABAN's
operation, use, control or leasing of MMSV, and SABAN's negligent or intentional
acts or omissions (including the acts or omission of any of SABAN's officers
directors, employees, agents or representatives), or the breach or failure by
SABAN to perform any covenant or agreement contained herein except for MMSV's
negligent or intentional acts. SABAN and MMSV shall notify each other in
writing of any claims-or contingent claims which may arise from SABAN's use of
MMSV's production facilities.
6. General. This Agreement shall not be modified or amended except by an
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instrument in writing signed by or on behalf of the parties hereto. This
Agreement shall be binding upon and inure to the benefit of the parties their
successors and assigns.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
MAGIC MOVIES STUDIOS OF VALENCIA, LTD.
a California limited partnership
By: /s/ Gail Howard 6/9/94
------------------------------
GAIL HOWARD, CHIEF OPERATING OFFICER
SABAN ENTERTAINMENT, INC.
By: /s/ Mel Woods
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ADDENDUM TO PRODUCTION FACILITY AGREEMENT
DATED JUNE 7, 1994 BY AND BETWEEN
MAGIC MOVIE STUDIOS OF VALENCIA, LTD.
("MMSV") AND SABAN ENTERTAINMENT, INC. ("SABAN")
1. MMSV shall fully build out the stages and production offices per
attached plans which have been signed by MMSV.
2. MMSV shall completely clean the carpet, replace where worn, soiled
(beyond ability to clean to an acceptable state), or missing. Also, MMSV must
carpet the back stairwell.
3. SABAN agrees to pay $400.00 per month for the rental of the telephone
system, plus 10% surcharge on all telephone toll charges. MMSV shall install
and maintain system at no charge to Saban throughout the term of the lease.
SABAN may install WATTS line if they desire. MMSV agrees to install a telephone
system with the capabilities to provide up to forty-eight (48) lines and sixty
(60) telephones.
4. MMSV will not supply security to SABAN at no charge; however, SABAN
can provide their own security and are not obligated to take security services
from MMSV.
5. Power bill for Stages 1 (one) and 2 (two) will be presented directly
to SABAN for payment, plus a 10% surcharge. Payment must be made to MMSV within
ten (10) business days from submission to SABAN. MMSV agrees to put a maximum
charge of $270.00 per month as a surcharge.
6. MMSV shall be responsible for building insurance and real estate
taxes.
7. MMSV shall be responsible for a janitorial staff and SABAN will be
responsible for cleaning supplies. These supplies will be billed to SABAN at
cost. MMSV provides cleaning service daily Sunday through Friday evenings.
8. Saban shall pay the water bill and gas bill for Stages 1 (one) and 2
(two). These will be billed at cost and shall be paid within ten (10) business
days from of submission for payment.
9. Saban agrees to pay the sum of $120.00 per month for monitoring of
security and the telephone lines to Fire Department and Police Department.
10. Telephone jacks shall be installed in each office at the expense of
MMSV.
11. Cables for computer service will be installed at expense of MMSV.
12. New shower stalls stall be installed in the Mens and Womens restrooms
downstairs on Stage 1 (one).
13. MMSV shall install two (2) paint sinks in Stage I (one).
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14. All 11,7000 square feet of non-sage space shall have air conditioning
sufficient to cool all such space ducted into each room upstairs and, as the
eggcrate style ceiling is used downstairs, air conditioning must be properly
distributed as to sufficiently cool all offices. (35 BTUS/s.f. /1200 BTUS/ton).
15. All materials for new grid wilt be provided and installed by MMSVC in
both Stages 1 (one) and 2 (two). The grid will conform to proper weight
distribution. MMSV will provide an engineering plan of the grid's maximum
weight and weigh distribution.
16. Both Stages 1 (one) and 2 (two), as well as all production areas will
fully with all fire and safety codes.
17. MMSV shall deliver Stages 1 (one) and 2 (two) to SABAN no later than
June 13, 1994 in a habitable condition, inclusive of all structural and roof
repairs. Should MMSV fail to deliver Stages 1 (one) and 2 (two) in such a
condition as aforementioned, the deposit will be refunded in full and the lease
terminated.
18. MMSV will require fourteen (14) days from the date we sign the lease
document to do the renovations per the attached plans. Saban may move into the
offices at any time during the construction. The rent will begin on the office
space commencing the date of completion. Rental of Stages 1 (one) and 2 (two)
will be prorated from the date of move in with a five (5) day grace period and
based on a rental of $12,500.00 per month until all office construction is
completed.
19. MMSV agrees to construct nine (9) dressing rooms and install mirrors
and mirror lights in all make-up areas.
20. MMSV agrees to provide proper lighting in fire lanes, as on Stage 3
(three).
21. MMSV agrees to provide washer and dryer connections in wardroom area.
22. MMSV agrees to replace all locks on all doors throughout the
facilities and will provide new individual and master keys.
AGREED TO AND ACCEPTED :
MAGIC MOVIE STUDIOS OF
VALENCIA, LTD.
by: /s/ Gail Howard
---------------
GAIL HOWARD
CHIEF OPERATING OFFICER
2
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SABAN ENTERTAINMENT, INC.
by: /s/ Mel Woods
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3
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MAGIC MOVIE STUDIOS OF VALENCIA, LTD.
PRODUCTION FACILITY AGREEMENT
THIS AGREEMENT is made and entered into this 5th day of January, 1994, by
and Between MAGIC MOVIE STUDIOS OF VALENCIA, LTD., a California limited
partnership (hereinafter referred to as "MMSV"), and SABAN ENTERTAINMENT, INC.,
(hereinafter referred to as "SABAN").
WITNESSETH:
WHEREAS, MMSV is the Owner/Operator of a multi purpose production facility,
located at 26030 Avenue Hall, Valencia, California 91355, and WHEREAS, SABAN
desires to use the following production facility package (hereinafter referred
to as "Package") for the purpose of motion picture production and MMSV desires
to allow SABAN to use its motion picture production facility for such purpose
all on the terms and conditions hereinafter set forth. The package shall
include:
FACILITIES
- ----------
Stages Three (3), Four (4), and Five (5) at the above referenced address.
ON LOT PARKING
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MMSV hereby grants SARAN the right to TWO Hundred Eighty Eight (288)
parking spaces for the term of this Agreement at no additional charge.
EXCLUSIONS
- ----------
At this time, the above Package does not include the following:
Stage Manager
Grip and light
Pre-light
Power for Air Conditioning/Heat
Catering
Clerical Staff
Dumpster
Cleaning supplies
Security exclusive to Saban Entertainment Inc.
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the parties agree as follows:
1
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1. Use of Facility. MMSV hereby grants to SABAN the exclusive right to
---------------
use the production facility for the exclusive purpose of motion picture and
television production. During its use of MMSV property, SABAN shall not make or
permit use of MMSV facilities for any unlawful purpose.
2. Lease Terms. SABAN shall lease production facilities as previously
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listed under "Facilities" above for a period of twenty four (24) months, with
three (3) one (1) year extension options. The rental rate shall escalate five
percent (5%) for each year commencing January 20, 1995.
2.1 Payments. SABAN shall pay MMSV the amount of Thirty Five
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Thousand Dollars ($35,000) per month for the initial year of the term beginning
January 20, 1994. The Payment schedule is as follows: $35,000 Deposit, payable
upon signing of this contract, First months rent of $35,000, prorated, payable
upon signing of this contract, and $35,000 per month on or before the 1st day of
each month for the first 12 months. Commencing on January 20, 1995, the rental
rate shall increase to $36,750 per month, prorated, for the month of January and
shall continue at the rate of $36,750 per month for the second 12 months.
2.2 Extension Options. If first year option to extend is exercised,
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commencing on January 20, 1996, the rental rate shall increase to $38,587.50 for
the following 12 months. If second year option to extend is exercised,
commencing on January 20, 1997, the rental rate shall increase to $40,516.87 for
the following 12 months. If third year option to extend is exercised,
commencing on January 20, 1998, the rental rate shall increase to $42,542.72 for
the following 12 months. Rent shall be due and payable on the 1st day of each
month prior to the rental period beginning on the 10th day.
3. Maintenance and Repair. NMSV shall deliver the facilities and
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equipment to SABAN in a good and usable condition, and MMSV shall be responsible
for all necessary and routine repairs, maintenance and upkeep of the MMSV
facilities and equipment. In the event that the facilities are damaged by
SABAN'S willful misconduct or negligent use of the facilities, SABAN shall
assume full financial responsibility except for MMSV's negligent or intentional
acts provided that such damage is caused by SABAN.
4. Insurance. SABAN and MMSV each agree to provide public comprehensive
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liability insurance, including bodily injury, personal injury and property
damage in an initial amount of not less than One Million Dollars ($1,000,000.00)
for any one occurrence. Said insurance policy must name the other party as
additional insured, and must provide at least ten (10) days' written notice of
cancellation or material change. Each party shall provide the other with a
certificate of insurance evidencing this coverage.
5. Indemnification. MMSV shall indemnify, defend and hold SABAN harmless
---------------
from and against any and all claims, demands, losses, costs, expenses,
obligations, liabilities, damages, recoveries, actions, judgments, suits and
reasonable attorneys fees and disbursements that SABAN shall incur or suffer,
including property damages, injury or death to persons which arise from or in
connection with MMSV'S operation provided that the foregoing arises out of
MMSV'S negligent or intentional acts or omissions, including the acts or
omissions of any
2
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MMSV's officers, directors, employees, agents or representatives, or the breach
or failure by MMSV to perform any covenant or agreement contained herein, except
for SABAN's negligent or intentional acts. SABAN shall indemnify, defend and
hold MMSV harmless from and against any and all claims, demands, losses, costs,
expenses, obligations, liabilities, damages, recoveries, actions, judgments,
suits, and reasonable attorneys fees and disbursements that MMSV shall incur or
suffer, including property damage, injury or death to persons, which arise from
or in connection with SABAN'S operation, use, control, or leasings of MMSV, and
SABAN's negligent or intentional acts or omissions (including the acts or
omissions of any of SABAN'S officers, directors, employees, agents, or
representatives), or the breach of or failure by SABAN to perform any covenant
or agreement contained herein except for MMSV'S negligent or intentional acts.
SARAN and MMSV shall notify each other of any claims or contingent claims which
my arise from SABAN'S use of MMSV'S production facilities.
6. General. This Agreement shall not be modified or amended except by an
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instrument in writing signed by or on behalf of the parties hereto. This
Agreement shall be binding upon and inure to the benefit of the parties, their
successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
MAGIC MOVIE STUDIOS OF VALENCIA, LTD.
a California limited partnership
By: Park Beverly Drive, Inc.
General Partner
By: /s/ Joseph F. Guglielmo
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JOSEPH F. GUGLIEMO, PRESIDENT
SABAN ENTERTAINMENT INC.
By: /s/ William Josey
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Name: SR. VICE PRESIDENT
AUTHORIZED SIGNATORY
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ADDENDUM TO PRODUCTION FACILITY AGREEMENT
DATED JANUARY 5, 1994, BY AND BETWEEN
MAGIC MOVIE STUDIOS OF VALENCIA, LTD.
AND SABAN ENTERTAINMENT, INC.
1. MMSV agrees that, by January 20, 1994, it will complete, at MMSV's
sole expense, the following construction, renovations, and repairs in Stages 3,
4, and 5:
a. Construction of a wall dividing dressing area from stage area in
Stage 3.
b. Construction of two (2) showers in Stage 3 (one in the women's
restroom facilities, one in the men's restroom facilities).
c. Construction of two (2) showers in Stage 4 (one in the women's
restroom facilities, one in the men's restroom facilities).
d. Relocation of the sprinkler system in the office area in Stage 3,
construction of office ceilings for sound proofing and privacy (using so-
called "egg crate" style ceiling), and installation of air conditioning
ducts and vents into each office.
e. Construction of a dining area and fully-equipped kitchen facility
(including sink, stove, dishwasher, and refrigerator) to accommodate cast
and crew of approximately 100 persons per meal on the first floor of each
of Stages 3 and 4.
f. Construction of three (3) additional dressing rooms in Stage 4.
g. Installation of mirrors and mirror lights in all make-up areas.
h. Installation of washer and dryer connections in Stage 3 and Stage
4.
i. Repair and repainting of the cyclorama in Stage 5.
j. Install carpet on stairs in Stages 3, 4, and 5 in each instance in
which carpet is worn or missing.
k. Lower the grid on Stage 3 and provide an engineering plan of the
grid's maximum weight and weight distribution.
l. Replacement of all locks, including new individual keys and master
keys for all doors throughout the Facilities.
m. Installation of phone jacks in all offices and throughout all
stages.
n. Remove all temporary walls and construction in Stage 5.
o. Repair and paint office walls that are presently temporarily
patched;
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relocate any external wiring on walls to the inside of walls.
p. Install a paint sink on each sound stage for the Art Department's
use.
2. Rent shall be abated on a pro-rata basis for each day after January
20, 1994, that the construction, renovations, and repairs are not completed such
that Saban cannot fully use any portion of the Facilities for production and/or
offices as contemplated in the Production Facility Agreement.
3. Notwithstanding anything to the contrary set forth in the Production
Facility Agreement, the lease payment set forth in paragraph 2.1 thereof, shall
be abated until March 1, 1994, on a prorata basis for Stage 5.
4. MMSV shall provide, during the term of the Production Facility
Agreement:
a. Limited daytime-only security patrol of the exterior of the
Facilities.
b. Security monitoring equipment, for which Saban shall reimburse
MMSV for the actual cost of the monitoring service, which is presently $120
per month.
c. Air conditioning maintenance, including the installation of
additional air conditioning if the current air conditioning volume is
inadequate.
d. Regular, periodic cleaning of the Facilities, except that Saban
will reimburse MMSV on a monthly basis for the actual costs of cleaning
supplies used in the Facilities; MMSV believes, but does not warrant, that
the cost of cleaning supplies for the Facilities will be between $300 and
$350 per month.
e. A Toshiba telephone system with 274 free ports for Saban's use at
the Facilities, for which Saban will pay MMSV cost plus 10% surcharge.
There will be no cost for installation and MMSV will maintain the system
throughout the term of the Production Facility Agreement.
5. Saban will pay the cost of electrical power for the Facilities
directly. Saban will make such payment within ten (10) days after its receipt
of the power provider's statement.
6. Saban will have the right, at its sole expense, to affix signage of
its logo on the building housing Stages 3, 4, and 5, provided, however, that
Saban must conform to Newhall Land and Farm specifications for such signage.
Saban will maintain the signage so affixed at its sole expense.
7. All Santa Clarita-area properties owned and/or managed by MMSV or Park
Beverly Drive, Inc., or any of its or their parent, subsidiaries, or related
companies or entities (collectively, "MMSV Properties") will be available
throughout the term of the Production Facility Agreement for Saban to use as
exterior shooting locations at no additional charge by MMSV to Saban.
2
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8. If MMSV and/or Park Beverly Drive, Inc., or any of its or their parent,
subsidiaries, or related companies or entities not purchase the Lockheed
facility in Santa Clarita, California, within twelve (12) months after the
execution of the Production Facility Agreement, Saban shall have the right to
terminate the Production Facility Agreement by giving MMSV notice thereof at
least 30 days in advance of the effective date of such termination.
9. MMSV represents that no permits are required for shooting on MMSV
stages or MMSV Properties nor is there any requirement that a fire marshal or
police be present during shooting, unless required by future changes to local
laws, ordinances, and/or covenants.
10. The Option to Lease attached hereto is part of the Production Facility
Agreement and is a material part of the consideration given therein.
AGREED TO AND ACCEPTED THIS 7TH DAY OF JANUARY 1994.
MAGIC MOVIE STUDIOS
OF VALENCIA, LTD.
By: PARK BEVERLY DRIVE, INC.
GENERAL PARTNER
By: /s/ Joseph F. Guglielmo
-----------------------
JOSEPH F. GUGLIELMO
PRESIDENT
SABAN ENTERTAINMENT, INC.
By: /s/ William Josey
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Its SR. VICE PRESIDENT
3
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OPTION TO LEASE
Magic Movie Studios of Valencia, Ltd. ("MNSV") agrees to give to Saban
Entertainment, Inc. a ninety (90) day first right of refusal to lease Stages 1
and 2 (presently occupied by CBS), and Stage 6 (presently occupied by Dresser
Rand Inc.), as per the following items:
1. Stages 1 and 2 plus all production offices at the rate of $32,000 per
month through December 31, 1994, and further option to lease for the following
three (3) years at a five percent (5%) escalation per year. The ninety (90) day
first right of refusal on Stages 1 and 2 will be given to Saban Entertainment
Inc. no later than April 30, 1994.
2. Stage 6 option to lease from August 1, 1994 through December 31, 1994
at the rate of $32,000 per month, and a further option to lease for the
following three (3) years at a five percent (5%) escalation per year. This
monthly rental rate is based on 28,000 square feet of stage space, plus
approximately 4,000 square feet of office space.
3. All ancillary charges on Stages 3, 4 and 5 shall be added to the terms
and conditions of Paragraphs 1 and 2 above pursuant to the Production Facility
Agreement between MMSV and Saban Entertainment:Inc.
AGREED TO AND ACCEPTED THIS ______ DAY OF JANUARY, 1994.
MAGIC MOVIE STUDIOS
OF VALENCIA, LTD.
BY: PARK BEVERLY DRIVE, INC.
GENERAL PARTNER
By: /s/ Joseph F. Guglielmo
-----------------------
JOSEPH F. GUGLIEMO, PRESIDENT
SABAN ENTERTAINMENT, INC.
By: /s/ William Josey
-----------------
AUTHORIZED SIGNATORY
By:_______________________________
AUTHORIZED SIGNATORY
Option to Lease
Page 1 of 1
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EXHIBIT 10.40
[SABAN LETTERHEAD]
As of January 1, 1995
DUVEEN TRADING LTD.
c/o The Directors
24 Union Street
St. Helier
Jersey
Channel Islands
Gentlemen:
This letter when fully signed shall constitute an agreement between Duveen
Trading Ltd. ("Distributor"), and Saban International N.V. ("Owner").
1. (a) Owner hereby appoints Distributor, and Distributor hereby accepts such
appointment, as Owner's sole and exclusive distributor in the "Territory",
as hereinafter defined, of "Photoplays", as hereinafter defined, for which
and to the extent Owner owns or controls exploitation rights in the
Territory during the "Term" hereof, as hereinafter defined.
(b) "Photoplays" means all of Owner's television and motion picture
programming in which Owner has, or during the Term acquires, any
exploitation rights in the Territory, including, without limitation, all of
Owner's audiovisual and merchandising rights therein; provided, however,
that nothing in this agreement shall be deemed to transfer to Distributor
any ownership in any Photoplays or in the copyrights or trademarks therein.
From time to time during the Term, Owner shall provide Distributor with a
list of newly-produced and newly-acquired Photoplays and the exploitation
rights available therein for exercise in the Territory.
(c) Owner shall have the right to approve all marketing and promotional
materials, including artwork, formulated by Distributor or any third party
for the Photoplays. Distributor shall provide Owner, not less frequently
than each calendar quarter, with copies of Distributor's exploitation
agreements with third parties for the Photoplays.
(d) Distributors shall not use any sub-agent without the prior written
approval of Owner, which Owner may give or withhold in its sole discretion.
2. The Territory is Israel, including the West Bank and Gaza.
<PAGE>
3. The Term commences on January 1, 1995, and ends on December 31, 1997,
subject to extension pursuant to paragraph 4 hereof. After the expiration
of the Term, Distributor's obligations and agreements under this Agreement
shall continue with respect to all exhibition agreements entered into
hereunder during the Term.
4. Owner shall have the right to extend the Term through December 31, 2000, by
giving Distributor written notice thereof not later than October 31, 1997.
5. (a) In consideration of the grant of distribution rights in Owner's
Photoplays herein during the initial three (3) year Term, Distributor shall
pay Owner the sum of Five Hundred Thousand United States Dollars (US$.
500,000), payable in full when this letter agreement is fully signed.
(b) If Owner exercises its option to extend the Term for an additional
three (3) years, in consideration of the grant of distribution rights in
Owner's Photoplays during such extended Term, Distributor shall pay Owner
the sum of Five Hundred Fifty Thousand United States Dollars (US$.
550,000), payable in full on or before January 1, 1998.
6. Distributor shall bear all costs of every kind and nature in connection
with Distributor's exercise of the distribution rights granted herein.
7. Upon expiration of this Agreement, all print, preprint, sales, and
publicity material supplied by Owner to Distributor shall be returned to
Owner or Owner's designee in the same condition as received by
Distributors, ordinary wear and tear excepted.
8. All transportation and shipping costs incurred in sending Photoplays to
Distributor will be paid by Owner unless pursuant to any exhibition
agreement which provides for materials to be accepted by the lessee thereof
on a collect basis. All transportation and shipping costs incurred in
returning Photoplays to Owner will be paid by Distributor unless pursuant
to any exhibition agreement which provides for materials to be returned at
the lessee's cost.
9. Distributor warrants and represents that Distributor shall not solicit,
offer, or enter into agreement exploiting any rights in any of the
Photoplays outside the Territory or after the Term, and Distributor shall
hold Owner harmless from and against all losses, costs, and damages of
every kind arising from Distributor's breach of this provision or any other
provision of this letter agreement.
10. Owner warrants and represents that it owns or controls, or with respect to
Photoplays produced or acquired during the Term, shall own or control, all
exploitation rights in each Photoplay as to which Owner gives Distributor
notice, and that no such Photoplay will infringe the legally redressable
rights of any third party in the Territory, and Owner shall hold
Distributor harmless from and against all losses, costs, and damages of
every kind arising from Owner's breach of this provision or any other
provision of this letter agreement.
2
<PAGE>
11. Distributor shall take all necessary steps and pay any and all fees
necessary or required to protect the Photoplays and the materials by
copyright in the Territory. If Owner requests, Distributor shall obtain a
copyright for the Photoplays in the Territory in such name as Owner shall
designate but in no other name. If, with or without Owner's permission,
such copyrights are obtained in Distributor's name, Distributor shall hold
such copyright in trust for the benefit of Owner, or such other party as
Owner designates, and, upon expiration of the Term or upon Owner's demand,
if sooner, all rights in and to such copyright shall be conveyed without
delay to Owner or its designee, as the case may be. Distributor shall
promptly notify Owner in writing of any infringement in the Territory of
the copyright or of the trademarks used in connection with the Photoplays
and, subject to Owner's direction, shall take any and all actions in the
name of Owner, Distributor, or any other parties designated by Owner, to
prevent and restrain any such infringement. Owner or a party designated by
Owner shall own the copyright throughout the universe for all elements
added to the Photoplays by Distributor or any lessees, including, without
limitation, foreign language or subtitle elements, and adaptations.
Notwithstanding anything to the contrary set forth herein, neither
Distributor nor any of its lessees of the Photoplays shall remove or
replace any music embodied in the soundtrack of any Photoplay.
12. In the event of any breach by Owner of this Agreement, Distributor shall be
limited to its remedy at law for damages, if any, and Distributor shall not
have the right to terminate or rescind this Agreement or to in any way
enjoin, restrain, or otherwise interfere with the production, distribution,
advertising, or exploitation of the Photoplays, whether by Owner or any of
Owner's assigns or designees.
13. This letter agreement shall be governed by and construed in accordance with
the laws of the Netherlands Antilles applicable to contracts entered into
and entirely performed therein, and courts located in the Netherlands
Antilles shall have sole and exclusive jurisdiction over resolution of any
dispute arising under this letter agreement. The terms set forth in this
letter agreement constitute the entire understanding between the parties
hereto with respect to the subject matter hereof, and no waiver or
modification of the terms shall be valid unless in writing signed by the
party to be charged and only to the extent therein set forth. Distributor
may not assign any rights granted by Owner herein. All other terms shall
be in accordance with Owner's standard terms for agreements of this nature,
subject only to such changes as are agreed to in writing following good
faith negotiation.
The parties hereto acknowledge and agree to the terms and conditions set forth
above.
AGREED TO AND ACCEPTED:
<TABLE>
<S> <C>
DUVEEN TRADING LTD. SABAN INTERNATIONAL N.V.
/s/ Signed - Illegible Signature /s/ R.A. de Meza
- -------------------------------- ------------------
By By R.A. de MEZA
Its Director Its Managing Director
</TABLE>
3
<PAGE>
EXHIBIT 10.41
BARTER SYNDICATION AGREEMENT
MEMORANDUM OF AGREEMENT, made as of January 5, 1996, between SABAN
ENTERTAINMENT, INC. ("Saban"), and FOX BROADCASTING COMPANY, INC. ("Fox").
Saban and Fox hereby agree as follows:
1. Saban hereby engages Fox to provide barter advertising sales for the 1996-97
broadcast season of the Saban Kids Network ("SKN") television programming,
consisting of the following series (collectively "SKN Series"):
a. Monday-through-Friday strip series:
(1) Saban's Masked Rider
(2) Samurai Pizza Cats
b. Once-per-Week series:
(1) Saban's Adventures of Oliver Twist
(2) Dragon Ball Z
(3) Eagle Riders
(4) Sweet Valley High
(5) The Why Why Family
Saban reserves the right, in its sole discretion, to determine the split between
local and national advertising in each SKN Series program broadcast and to
replace any of the SKN Series.
2. Fox will sell the barter advertising time Saban makes available in the SKN
Series programs during the 1996-97 broadcast season. Fox's services will
include ad sales, sales administration, account maintenance, ratings processing,
credit and collection, sales data entry and reporting, and commercials broadcast
standards and practices. Saban reserves the right to designate all or any
portion of the spot inventory for Saban's clients and/or for Saban's own use.
3. In consideration of the services rendered by Fox to Saban hereunder, Saban
will pay Fox a barter advertising sales fee of $800,000, payable in installments
of $200,000 each on September 15, 1996, December 15, 1996, March 15, 1997, and
June 15, 1997.
<PAGE>
4. Saban agrees to engage Global and Dubs to effect the physical distribution
of SKN Series programs for the 1996-97 broadcast season; provided, however,
Saban will have no obligation to continue to use either Global or Dubs, Saban
will pay all physical distribution costs directly.
5. This memorandum of agreement sets forth the entire understanding between
Saban and Fox regarding the subject matter hereof and may not be modified except
in writing signed by the party to be bound. This memorandum of agreement will
be interpreted under California law. Federal and state courts (as applicable)
located in Los Angeles County, California, will have exclusive jurisdiction in
resolution of disputes arising between Saban and Fox with respect to this
memorandum of agreement constitutes the legally binding agreement between Saban
and Fox.
AGREED AND ACCEPTED:
SABAN DOMESTIC SERVICES, INC. FOX BROADCASTING COMPANY
By /s/ Mel Woods By /s/ L. Jacobson
_____________________ __________________
Its Its Executive Vice President
<PAGE>
EXHIBIT 10.42
FCN HOLDING, INC.
10201 West Pico Boulevard
Los Angeles, California 90035
September 26, 1996
Allen & Company Incorporated
711 Fifth Avenue
New York, New York 10022
Attention: Stanley S. Shuman, Executive Vice President
Gentlemen:
The purpose of this letter agreement (the "Agreement") is to confirm
our understanding and agreement with respect to your financial advisory and
investment banking fees for services rendered to the parties in connection with
structuring, negotiation, formation and capitalization of Fox Kids Worldwide,
L.L.C., a Delaware limited liability company ("Fox Kids").
We hereby confirm our mutual agreement, as follows:
1. Defined Terms. All terms which are defined in that certain Strategic
-------------
Stockholders Agreement dated as of December 22, 1995 by and among Saban
Entertainment, Inc., a Delaware close corporation ("SEI"), Haim Saban ("Saban"),
the other "SEI Stockholders" (as therein defined), Fox Broadcasting Company, a
Delaware corporation ("FBC"), FCN Holding, Inc., a Delaware close corporation
(the "Company") and FCNH Sub, Inc., a Delaware close corporation ("FCNH Sub")
(as amended by Amendment No. 1 and Amendment No. 2 thereto, and as the same may
hereafter from time to time be amended, the "Strategic Stockholders Agreement")
and which are not defined in this Agreement shall have the same meanings when
used herein.
2. Issuance of Common Stock in Satisfaction of Fees.
------------------------------------------------
(a) Financial Advisory Services. Allen & Company Incorporated, a New
---------------------------
York corporation ("Allen"), has heretofore been engaged to provide financial
advisory services and other investment banking services in connection with the
structuring, negotiation, formation and capitalization of Fox Kids (individually
and collectively, the "Financial Advisory Services").
<PAGE>
(b) Issuance and Delivery of Shares. As full compensation for the
-------------------------------
Financial Advisory Services, on the terms and subject to the conditions set
forth in this Agreement, concurrent with the execution and delivery of this
Agreement by the parties hereto, and the concurrent execution and delivery of
the "Other Agreements," as provided in Section 4(b) of this Agreement, the
Company has issued and sold to Allen 16 16/99 shares (the "Shares") of the
Common Stock, without par value, of the Company; receipt of the Shares is hereby
acknowledged by Allen. The Company hereby acknowledges that Stanley S. Shuman,
an employee of Allen ("Shuman"), is to contemporaneously receive a beneficial
interest in a portion of the shares from Allen. Allen shall hold such portion
of the shares as nominee for and representative of Shuman, subject to the terms
of this Agreement and the Other Agreements.
3. Representations and Warranties.
------------------------------
(a) By the Company. The Company represents and warrants to Allen that
--------------
the following statements are true and correct as of the date hereof:
(i) Corporate Action; Authorization. The Company has all requisite
-------------------------------
corporate power and authority, and has taken all necessary action, to enter into
and perform all of its obligations under this Agreement and the Other Agreements
to which it is a party, and to issue and deliver the Shares. This Agreement and
the Other Agreements to which the Company is a party have each been duly
authorized, executed and delivered by the Company, and each constitutes the
legal, valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms. The Shares have been duly and validly
issued, and are fully paid and non-assessable.
(ii) Outstanding Common Stock. The Company is authorized by its
------------------------
certificate of incorporation, as amended, to issue 1,000 shares of Common Stock,
without par value (the "Common Stock"), and at the date of and immediately prior
to the execution and delivery of this Agreement, 800 shares of the Common Stock
were issued and outstanding.
(iii) No Violation. The execution and delivery of this Agreement
------------
and each of the Other Agreements to which it is a party by the Company and the
performance by the Company of its obligations hereunder and thereunder does not
and will not (A) violate, conflict with, or constitute or result in a breach of,
any term, condition or provision of, or constitute a default (or an event which,
with notice or the lapse of time, or both, would constitute a default), or
result in the creation of any Lien upon any of its assets under the certificate
of incorporation or by-laws of the Company, or any mortgage, indenture, loan or
credit
2
<PAGE>
agreement or any other agreement or instrument to which the Company is a party,
or pursuant to which it is the direct or indirect obligor, or by which any of
the Company's properties are bound or affected; (B) violate any law, regulation,
judgment, injunction, order or decree binding upon the Company; (C) result in
the loss of any license, franchise, permit, legal privilege or legal right
enjoyed or possessed by the Company; or (D) require the consent of any third
party (including a governmental entity), other than those consents which have
already been obtained.
(iv) No Distributions. Since December 22, 1995, except as provided in
----------------
or contemplated by the Strategic Stockholders Agreement or the other Alliance
Agreements, and except for the distribution on September 26, 1996, by the
Company to Fox Broadcasting Sub, Inc., a Delaware corporation ("Fox Broadcasting
Sub"), of all of the Company's right, title and interest in and to that certain
Stock Ownership Agreement, neither the Company nor SEI has declared or paid any
dividend or made any distributions on or with respect to its capital stock; or
redeemed, purchased or otherwise acquired any of its capital stock.
(b) By Allen. Allen represents and warrants to the Company that the
--------
following statements are true and correct as of the date hereof:
(i) Corporate Action; Authorization. Allen has all requisite
-------------------------------
corporate power and authority, and has taken all necessary action, to enter into
and perform all of its obligations under this Agreement and the Other
Agreements. This Agreement and each of the Other Agreements have been duly
authorized, executed and delivered by Allen and each constitutes the legal,
valid and binding agreement of Allen, enforceable against Allen in accordance
with its terms.
(ii) No Violation. The execution and delivery by Allen of this
------------
Agreement and the Other Agreements, and the performance by Allen of its
obligations hereunder and thereunder does not and will not (A) violate, conflict
with, or constitute or result in a breach of, any term, condition or provision
of, or constitute a default (or an event which, with notice or the lapse of
time, or both, would constitute a default), or result in the creation of any
Lien upon any of its assets under the certificate or articles of incorporation
or by-laws or other charter documents of Allen, or any mortgage, indenture, loan
or credit agreement or any other agreement or instrument to which Allen is a
party, or pursuant to which it is the direct or indirect obligor, or by which
any of Allen's properties are bound or affected; (B) violate any law,
regulation, judgment, injunction, order or decree binding upon Allen; (C) result
in the loss of any license, franchise, permit, legal privilege or legal right
enjoyed or possessed by Allen; or
3
<PAGE>
(D) require the consent of any third party (including a governmental entity).
(iii) Brokers, etc. Allen has not incurred, directly or indirectly,
-------------
any obligation or liability for brokers' or finders' fees, agents' commissions
or other similar charges in connection with this Agreement or the Other
Agreements or any of the transactions contemplated hereby or thereby; and,
without limiting the generality of the foregoing, none of the officers,
directors or employees of Allen, except Shuman, have any right to receive a
beneficial interest in any of the Shares, or otherwise to participate in Allen's
investment in the Company.
(c) By Allen and Shuman. Allen and Shuman each, severally and not
-------------------
jointly, represents and warrants to the Company that the following statements
are true and correct as of the date hereof:
(i) Investment. Allen and Shuman each acknowledges that the Shares
----------
have not been registered under the Securities Act of 1933, as amended (the
"Securities Act") nor qualified under any state securities or "Blue Sky" law, on
the basis that no distribution or public offering of the Shares is to be
effected, and in this connection the Company is relying in part on the
representations of Allen and Shuman. Allen and Shuman each further represents
and warrants to the Company that:
(A) Investment Intent. The Shares are being acquired by Allen
-----------------
and Shuman each solely for its and his own account, for investment
purposes only, and with no present intention of distributing, selling
or otherwise transferring or disposing of the Shares.
(B) Access. Allen and Shuman each has had, during the course
------
of this transaction and prior to its execution of this Agreement and
the Other Agreements, the opportunity to ask questions of, and receive
answers from, the Company and its management, Fox Kids and its
management, and SEI and its management, concerning the Company, Fox
Kids and SEI, their respective businesses, operations and financial
condition, and the terms and conditions of this Agreement and the
Other Agreements. Allen and Shuman each acknowledges that it or its
representatives and he have received all such information as it and he
considers necessary for evaluating the risks and merits of acquiring
the Shares and for verifying the accuracy of any information furnished
to it and him or to which it and he has had access, and that Allen and
Shuman each has entered into this Agreement on the basis of its and
his own judgment and analysis of the Company and the transaction.
4
<PAGE>
(C) Illiquidity. Allen and Shuman each understands that there
-----------
is no public market for the Shares or for any securities which may be
issued for the Shares pursuant to the Other Agreements, and that there
may never be such a public market, and that even if a market develops
Allen and Shuman may never be able to sell or dispose of the Shares or
such other securities and may thus have to bear the risk of its and
his investment for a substantial period of time, or forever.
(D) Accredited Investor. Allen and Shuman each is an
-------------------
"accredited investor" for purposes of Regulation D promulgated by the
Securities and Exchange Commission under the Securities Act.
(iv) Transfer Restrictions. Allen and Shuman each is aware that the
---------------------
Company is a Delaware statutory close corporation, and that significant
restrictions exist under that law, this Agreement and the Other Agreements with
respect to any sale, transfer, assignment, pledge, hypothecation or other
disposition (with or without consideration) of the Shares, and Allen and Shuman
each agrees that it and he will abide by all such restrictions.
4. Concurrent Actions. Concurrent with the execution and delivery of this
------------------
Agreement:
(a) Amendment No. 2 to Strategic Stockholders Agreement. Allen, the
---------------------------------------------------
Company, and each other party to the Strategic Stockholders Agreement have
executed and delivered among themselves counterparts of an Amendment No. 2 to
Strategic Stockholders Agreement (the "Amendment"), in the form of Exhibit "A"
to this Agreement.
(b) Amendment No. 1 to Registration Agreement. Allen, the Company, FBC, Fox
-----------------------------------------
Broadcasting Sub, Saban and the other SEI Stockholders have executed and
delivered among themselves counterparts of an Amendment No. 1 to Registration
Agreement (the "Registration Agreement Amendment"), in the form of Exhibit "B"
to this Agreement. As used in this Agreement, the Strategic Stockholders
Agreement, as amended by the Amendment, and the "Registration Agreement," as
defined in the Amendment, and as amended by the Registration Agreement
Amendment, as such documents may hereafter from time to time be further amended,
are collectively referred to as the "Other Agreements."
(c) Amendment No. 1 to Stock Ownership Agreement. Saban, Fox Broadcasting
--------------------------------------------
Sub and FBC have executed and delivered among themselves counterparts of an
Amendment No. 1 to Stock Ownership Agreement, in the form of Exhibit "C" to this
Agreement (such
5
<PAGE>
agreement, as so amended, and as the same may from time to time hereafter be
further amended, the "Stock Ownership Agreement").
(d) Side Letter. Shuman, Allen, the Company and each other party to the
-----------
Other Agreements have executed and delivered among themselves counterparts of a
Side Letter, in the form of Exhibit "D" to this Agreement, amending the Other
Agreements and reflecting that Allen holds a portion of the Shares as nominee
for and representative of Shuman and that Shuman as beneficial owner of a
portion of the Allen Shares has the same rights and is subject to the same
obligations with respect to the shares beneficially owned by him as Allen is
under the Other Agreements; and that all references to "Allen" in this Agreement
and each of the Other Agreements shall include Shuman with respect to the Shares
beneficially owned by Shuman.
5. Release.
-------
(a) Release by Allen. Allen hereby releases and forever discharges (i) the
----------------
Company, (ii) Fox Kids, (iii) The News Corporation Limited, and each of its
direct and indirect Affiliates and (iv) SEI, and each of its stockholders
(including Saban), and each of their respective officers, directors and
Affiliates (collectively, the "Releasees"), and each of them, from and with
respect to (x) any and all contractual or other obligations or liabilities which
Releasees or any of them may have to Allen, and (y) any and all liabilities,
claims, accounts and causes of action, whether known or unknown, which Allen now
owns or holds, or has at any time heretofore owned or held, against the
Releasees, or any of them, (collectively, the "Released Obligations and
Claims"), in each case to the extent, and only to the extent, that such Released
Obligations and Claims relate to or arise out of the Financial Advisory
Services, or any of the transactions which are or were the subject of, or are or
were contemplated by, the Strategic Stockholders Agreement, or any of the
Alliance Agreements; and without limiting the generality of the foregoing, any
and all agreements (other than the Other Agreements) between Allen and either
SEI or any of the SEI Stockholders (including Saban) are hereby terminated, and
shall be without any further force or effect.
(b) Waiver. As further consideration and inducement for the execution of
------
this Agreement, Allen hereby waives and relinquishes any and all rights and
benefits pertaining to the Released Obligations and Claims under the provisions
of California Civil Code Section 1542, which provides as follows:
"A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by
6
<PAGE>
him must have materially affected his settlement with the debtor."
(c) No Assignment. Allen represents and warrants that it has made no
-------------
assignment of any Released Obligations or Claims. Allen agrees to indemnify and
hold the Company harmless against any such assignments.
6. Further Agreements of Allen.
---------------------------
(a) Call Option.
-----------
(i) In consideration for the issuance and delivery of the Shares to
Allen, Allen grants to the Company the right and option (the "Allen Shares Call
Option"), but not the obligation, to purchase, following the occurrence of
either of the "Triggering Events" described in subsection 6(a)(ii), below, (x)
with respect to the Triggering Event set forth in subsection 6(a)(ii)(x) below,
all, and not less than all, of the Shares owned by Allen or any of its
transferees (including, without limitation, Saban but excluding FBC or Fox
Broadcasting Sub); and (y) with respect to the Triggering Event set forth in
subsection 6(a)(ii)(y), below, all Shares of the Successor Entity which,
pursuant to Section 6(b) of the Strategic Stockholders Agreement, are deemed to
be Allen Shares and which are owned by Allen or any of its transferees (other
than FBC or Fox Broadcasting Sub or Saban and excluding Shares transferred
pursuant to Section 3(a)(i) or 3(a)(ii) of the Strategic Stockholders
Agreement); (the Shares subject to the Allen Shares Call Option are referred to
herein as the "Allen Option Shares") for the per share cash purchase price
determined pursuant to subsection 6(a)(iii), below, by delivering written notice
of its election to Allen not later than 10 business days prior to the date of
closing determined pursuant to subsection 6(a)(iv), below.
(ii) The "Triggering Events" shall be as follows:
(x) the exercise of the "Call Option" pursuant to the Stock
Ownership Agreement; or
(y) unless the Call Option is subsequently exercised, the
exercise of the "Put Option" pursuant to Section 7 of the Strategic
Stockholders Agreement.
(iii) The per share purchase price payable for the Allen Option Shares
upon the exercise of the Allen Shares Call Option shall be equal to:
7
<PAGE>
(A) if the Effective Date is prior to the Initial Public Offering, an
amount equal to 50% of the Fair Market Value as of the Effective Date of
the Company and SEI and their respective subsidiaries and other
consolidated or owned operations, as such Fair Market Value has been
determined with respect to the concurrent sale of the SEI Option Shares
under subsection 7(c)(i)(A) of the Strategic Stockholders Agreement or
subsection 1.2(i) of the Stock Ownership Agreement, whichever shall be
applicable to such concurrent sale (the "Applicable Agreement"), divided by
the sum of (I) the number of shares of Common Stock then outstanding
(excluding the Later Issued FCNH Shares) plus (II) 50% of the number of
----
Later Issued Shares then outstanding; or
(B) if the Effective Date is on or subsequent to the Initial Public
Offering, an amount equal to the Fair Market Value of the Successor Entity,
as such Fair Market Value has been determined with respect to the
concurrent sale of the SEI Option Shares under subsection 7(c)(i)(B) of the
Strategic Stockholders Agreement or subsection 1.2(ii) of the Stock
Ownership Agreement, whichever shall be the Applicable Agreement, divided
by the number of shares of Common Stock of the Successor Entity then issued
and outstanding (and if there is more than one class of common stock of the
Successor Entity, the divisor shall be adjusted to include on an equitable
basis all then outstanding shares of all classes of common stock).
Allen acknowledges and agrees that Saban and Fox Broadcasting Sub, or Saban and
FBC, as applicable, will have the absolute and unconditional right, in
connection with the purchase and sale of the SEI Option Shares, to determine
among themselves the Fair Market Value upon which the per share purchase price
applicable to the Allen Option Shares will be determined; that in making such
determination, none of Saban, Fox Broadcasting Sub or FBC, as applicable, will
have any duty or obligation to consider the impact of such determination upon
Allen; that Allen will not have the right or power to participate in any such
determination; and that Allen forever waives any right which it may have, at law
or in equity, to challenge any such determination.
(iv) The closing of the purchase and sale of the Allen Option Shares
shall take place at the same time and place as has last been set by Saban and
FBC (or Saban and Fox Broadcasting Sub, as applicable) for the closing of the
purchase and sale of the SEI Option Shares under the Applicable Agreement; and
the Company shall advise Allen in writing of such time and location. At the
closing, each of the holders of the Allen Option Shares shall deliver to the
8
<PAGE>
Company documents of transfer in form and substance reasonably acceptable to the
Company and its counsel, necessary to vest in the Company good and marketable
title to the Allen Option Shares so sold by the holder thereof, free and clear
of any and all Liens, other than those imposed under or pursuant to this
Agreement or the Other Agreements, against delivery by the Company of the
purchase price therefore, payable, at the election of the Company, by either (x)
bank cashiers' checks in immediately available funds payable to the order of the
selling holders, or (y) wire transfer of immediately available funds to an
account or accounts designated by the selling holders.
(v) If any securities of the Company are at any time issued to Allen
with respect to the Shares, whether by stock split, stock dividend or otherwise,
or if the Shares are exchanged for securities of the Successor Entity pursuant
to the provisions of the Strategic Stockholders Agreement, or otherwise, all of
such securities shall be considered "Shares" for purposes of this Section 6(a),
and shall be subject to the Allen Shares Call Option herein provided.
(b) Confidentiality.
---------------
(i) As used in this Section 6(b):
"Confidential Information" means all oral, written or recorded
------------------------
information about or related to the Company, Fox Kids, SEI, or any of its
or their subsidiaries or other controlled Affiliates, (or any controlling
persons or other Affiliates, to the extent such information relates to the
Company, Fox Kids, SEI or any of their respective subsidiaries or
controlled Affiliates) (individually and collectively, the "Disclosing
Party") or its or their properties, including any intellectual property,
technology, procedures, strategies, assets, liabilities, business or
prospective or planned business or business activities, which is at any
time furnished to Allen or any of its "Representatives" (as defined below),
directly or indirectly, by the Disclosing Party, its officers, directors,
employees, agents or controlling persons, or any of them, whether furnished
before or after the date of this Agreement, and regardless of the manner in
which it is or was furnished, together with those portions of any
summaries, extracts, analyses, compilations, studies or other documents or
records prepared by Allen or its Representatives which contain, reflect or
are generated from such information, and includes such information
regardless of whether explicitly identified as, or known to Allen or such
Representatives to be, confidential, but does not include
9
<PAGE>
information which (x) is or becomes generally available to the public other
than as a result of a disclosure directly or indirectly by Allen or any of
Allen's Representatives, (y) was or hereafter is independently acquired or
developed by Allen or its Representatives without breach of this Section
6(b), or (z) was or becomes available to Allen or its Representatives on a
non-confidential basis from any Person other than the Disclosing Party, its
officers, directors, employees, agents, controlling persons or advisors,
who to the actual knowledge of Allen was not then either bound by a
confidentiality agreement with the Disclosing Parties, or any of them, or
otherwise prohibited from transmitting the information to Allen.
"Representatives" includes all Persons who receive or otherwise come
---------------
into the possession of Confidential Information as a result of their
employment or engagement by Allen, or any of Allen's controlling Persons.
(ii) (x) Except with the prior written consent of the Disclosing
Party, Allen agrees to keep all Confidential Information confidential and
not to disclose any Confidential Information to any Person other than its
Representatives, and then only to the extent that such Persons have a need
to know the Confidential Information disclosed to them for purposes
relating to this Agreement; and to use the Confidential Information solely
for purposes related to this Agreement.
(y) If Allen or any of its Representatives are requested pursuant
to, or required by, applicable law or regulation or by legal process to
make any disclosure otherwise prohibited under this Section 6(b), Allen
agrees to provide the Disclosing Party with prompt written notice of such
requests or requirements prior to disclosure so that (A) the Disclosing
Party (with Allen's reasonable cooperation) may seek an appropriate
protective order or other remedy, or (B) Allen and the Disclosing Party can
seek in good faith to agree on the appropriate scope and approach to
disclosure. If a protective or other remedy is not obtained, Allen agrees
to furnish only that portion of the Confidential Information which Allen is
legally compelled to disclose, and to use its best efforts to obtain
confidential treatment for the Confidential Information actually disclosed.
(iii) Allen shall inform its Representatives of the confidential nature
of the Confidential Information, and shall direct its Representatives to comply
with this Section 6(b), and Allen will not, directly or indirectly, hereafter
furnish any Confidential Information to any Representative unless and until it
10
<PAGE>
has agreed to so comply. Allen agrees to be responsible for any disclosure or
misuse of any Confidential Information by any of its Representatives, and shall
take any action, through legal process or otherwise, necessary to ensure their
compliance with this Section 6(b).
(c) Stock Ownership Agreement. Allen hereby confirms that Allen shall have
-------------------------
no interest in, nor rights under, the Stock Ownership Agreement.
7. Miscellaneous.
-------------
(a) Interpretation. In this Agreement, headings are for convenience only
--------------
and shall not affect interpretation, and except to the extent that the context
otherwise requires: (i) references to any legislation or to any provision of
any legislation include any modification or re-enactment of, or any legislative
provision substituted for, and all statutory instruments issued under, such
legislation or such provision; (ii) words denoting the singular include the
plural and vice versa; (iii) words denoting individuals include corporations and
other Persons and vice versa; (iv) words denoting any gender include all
genders; (v) references to any document, agreement or other instrument
(including this Agreement) include references to such document, agreement or
other instrument as amended, novated, supplemented or replaced from time to
time; (vi) references to clauses, sub-clauses, sections, sub-sections and
Exhibits are to clauses, sub-clauses, sections, sub-sections and Exhibits of
this Agreement; (vi) "or" is not exclusive; (viii) references to any party to
this Agreement or any other document, agreement or other instrument include its
successors or permitted assigns; and (ix) "writing" and cognate expressions
include all means of reproducing words in a tangible and permanently visible
form.
(b) Third Party Beneficiaries. The parties to this Agreement acknowledge
-------------------------
and agree that this Agreement, and each of the representations, warranties,
covenants, releases and waivers of Allen herein set forth, are intended to be
for the benefit of, and shall be directly enforceable by, Fox Kids, SEI, Saban
and the Other SEI Stockholders and each of the other parties signatory to the
Alliance Agreements, or any of them.
(c) Right and Power of Saban and FBC; Irrevocable Proxy. Allen, which is a
---------------------------------------------------
recognized expert in investment banking and financial advisory services,
acknowledges and agrees (i) that the Shares represent a small minority interest
in the Company, and that FBC, as the owner of substantially all of the Common
Stock of the Company, will be in a position to control the election of
Directors, amendments to the Company's charter documents, and all other
transactions requiring the vote of the Company's
11
<PAGE>
stockholders; (ii) that the Strategic Stockholders Agreement, the Registration
Agreement and the other Alliance Agreements may each be amended or modified in
any respect or particular without the prior consent or approval of Allen; and
(iii) that, as a result of the irrevocable proxy coupled with an interest which
Allen has concurrently granted to Saban and FBC, Allen will not have the right
or power to vote against the Reorganization, and will thus not be entitled to
appraisal rights with respect to the Reorganization; and that Allen, by entering
into this Agreement, hereby waives, to the maximum extent permitted by law, any
right which it may have to object thereto.
(d) Rights Personal to Saban. Each and every right and obligation which
------------------------
refers to "Saban" is personal to Saban; and thus, without the prior written
consent of Saban and the Company, other than as provided in this Agreement, none
of such rights or obligations may be assigned, delegated or transferred to any
other Person; provided that in the event of the incompetency or death of Saban,
--------
all rights granted to Saban hereunder shall be exercisable by his conservator,
executor or administrator, or by a single Person from time to time designated by
SEI Stockholders then holding a majority of the then outstanding shares of SEI
Common Stock held by all SEI Stockholders.
(e) Notices. All notices, demands or other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given (i) if delivered in
person, upon delivery thereof, or (ii) if mailed, certified first class mail,
postage prepaid, with return receipt requested, on the fifth day after the
mailing, or (iii) if sent by telex or facsimile transmission, with a copy mailed
on the same day in the manner provided in (ii) above, when transmitted and
receipt is confirmed by telephone or telex or facsimile response, or (iv) if
otherwise actually delivered, when delivered:
(x) If to the Company:
FCN Holding, Inc.
10201 West Pico Boulevard
Los Angeles, California 90035
Attention: Chase Carey
Fax: (310) 369-1203
With a copy to:
Jay Itzkowitz, Esq.
Fox Inc.
10201 West Pico Boulevard
Los Angeles, California 90035
Fax: (310) 369-2572
12
<PAGE>
(y) If to Saban:
Haim Saban
Saban Entertainment, Inc.
10960 Wilshire Boulevard
Los Angeles, CA 90024
Fax: (310) 235-5108
With a copy to:
Matthew G. Krane, Esq.
2051 Hercules Drive
Los Angeles, CA 90046
Fax: (213) 851-1178
and with a copy to:
Troop Meisinger Steuber & Pasich, LLP
10940 Wilshire Boulevard, Suite 800
Los Angeles, California 90024
Attention: Richard E. Troop, Esq.
Fax: (310) 443-8503
(z) if to Allen:
Allen & Company Incorporated
711 Fifth Avenue
New York, New York 10022
Attention: Stanley S. Shuman
Executive Vice President
Fax: (212) 832-8023
and with a copy to:
Allen & Company Incorporated
711 Fifth Avenue
New York, New York 10022
Attention: William Leimkuhler, Esq.
Fax: (212)832-8023
or at such other address or addresses as may have been furnished by such Person
in like manner to the other parties.
(f) Severability. Should any Section or any part of a Section within this
------------
Agreement be rendered void, invalid or unenforceable by any court of law for any
reason, such invalidity or unenforceability shall not void or render invalid or
unenforceable any other Section or part of a Section in this Agreement.
13
<PAGE>
(g) Governing Law. THE TERMS OF THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO
CONTRACTS MADE WITHIN, AND TO BE PERFORMED WITHIN, SUCH STATE, EXCLUDING CHOICE
OF LAW PRINCIPLES OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS
OF A JURISDICTION OTHER THAN SUCH STATE.
(h) No Adverse Construction. The rule that a contract is to be construed
-----------------------
against the party drafting the contract is hereby waived, and shall have no
applicability in construing this Agreement or the terms of this Agreement.
(i) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall 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.
(j) Costs and Attorneys' Fees. In the event that any action, suit, or
-------------------------
other proceeding is instituted concerning or arising out of this Agreement, the
prevailing party shall recover all of such party's costs, and attorneys' fees
incurred in each and every such action, suit, or other proceeding, including any
and all appeals or petitions therefrom. As used herein, "attorneys' fees" shall
mean the full and actual costs of any legal services actually rendered in
connection with the matters involved, calculated on the basis of the usual fee
charged by the attorneys performing such services, and shall not be limited to
"reasonable attorneys' fees" as defined by any statute or rule of court.
(k) Successors and Assigns. Except as otherwise provided in this
----------------------
Agreement, all rights, covenants and agreements of the parties contained in this
Agreement shall be binding upon and inure to the benefit of their respective
successors and permitted assigns. Except as otherwise specifically set forth
herein, nothing in this Agreement, expressed or implied, is intended to confer
on any Person other than the parties to this Agreement or their respective
successors and assigns any rights, remedies, obligations or liabilities under or
by reason of this Agreement.
(l) Amendments and Waivers. Neither this Agreement nor any term hereof may
----------------------
be changed, waived, discharged or terminated orally or in writing, except that
any term of this Agreement may be amended and the observance of any such term
may be waived (either generally or in a particular instance and either
retroactively or prospectively) with (but only with) the written consent of
Allen, the Company, Saban and FBC; provided, however, that no such amendment or
-------- -------
waiver shall extend to or affect any obligation not expressly waived or impair
any right consequent therein. No delay
14
<PAGE>
or omission to exercise any right, power or remedy accruing to any party hereto
shall impair any such right, power or remedy of such party nor be construed to
be a waiver of any such right, power or remedy nor constitute any course of
dealing or performance hereunder.
(m) Entire Agreement. This Agreement, the attached Exhibits and the other
----------------
Agreements, and the agreements referred to herein and therein, together contain
the entire understanding of the parties, and there are no further or other
agreements or understandings, written or oral, in effect between the parties
relating to the subject matter hereof unless expressly referred to herein. No
party to this Agreement makes any representation or warranty except as expressly
set forth herein.
(n) Specific Performance and Other Remedies. The parties hereto
---------------------------------------
acknowledge and agree that the Shares are unique, and that the parties will have
no adequate remedy at law should any party hereto breach the provisions of
Section 6(a) or 6(b). In the event of the refusal or failure of any party
hereto fully to comply with any of those provisions, the other parties, and each
of them, shall have the right, in addition to any other rights and remedies
which it or they may have hereunder, to specific performance, or other
appropriate injunctive relief with respect thereto. In no event shall any party
to any such proceeding urge or raise as a defense in any such action that an
adequate remedy at law exists.
(o) Agreement to Perform Required Acts. Each party hereto agrees to
----------------------------------
perform any further acts and to execute and deliver any further documents that
may be reasonably necessary to carry out the provisions hereof, that may be
required to secure performance of any party's duties hereunder or that may be
required to assure the legal and binding effect of the provisions hereof.
(p) Consent to Jurisdiction; Forum Selection. Any actions, suits or
----------------------------------------
proceedings instituted in connection with this Agreement or the performance by
the parties of their obligations hereunder shall be instituted and maintained
exclusively in the Superior Court for the State of California, County of Los
Angeles or in the United States District Court for the Central District of
California. By execution and delivery hereof, each party hereto hereby
consents, for itself and in respect of its property, to the jurisdiction of the
aforesaid courts solely for the purpose of adjudicating its rights or
obligations under, or any disputes involving, this Agreement or any document
related hereto. Each party hereto hereby irrevocably waives, to the extent
permitted by applicable law, any objection, including, without limitation, any
objection that the other corporate party or parties lack the capacity to sue or
defend based upon its or their lack of a certificate of qualification to conduct
intrastate business in
15
<PAGE>
California, and any objection to the laying of venue or based on the grounds of
forum non conveniens, which it may now or hereafter have to the bringing of any
- ----- --- ----------
action or proceeding in such jurisdiction in respect of this Agreement or any
document related hereto.
(q) Legends. Allen hereby agrees that each certificate or other writing
-------
evidencing any of the Shares, shall be stamped or otherwise imprinted with
legends, either on the face of such certificate, or on the reverse of such
certificate, with reference thereto appearing on the face of such certificate,
in substantially the following form:
[DESCRIBE THE SHARES] REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
OPTION TO PURCHASE UNDER THAT CERTAIN AGREEMENT DATED AS OF SEPTEMBER 26,
1996, BY AND AMONG THE RECORD HOLDER OF THE SECURITIES SUBJECT TO THIS
CERTIFICATE AND FCN HOLDING, INC. A COPY OF THE LETTER AGREEMENT SHALL BE
FURNISHED WITHOUT CHARGE BY THE ISSUER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE TO THE HOLDER HEREOF UPON SUCH HOLDER'S WRITTEN REQUEST.
[DESCRIBE THE SHARES] REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
MATERIAL RESTRICTIONS ON TRANSFER, RIGHTS OF FIRST REFUSAL, OPTIONS TO
PURCHASE AND IRREVOCABLE PROXIES, AMONG OTHER RESTRICTIONS, UNDER THAT
CERTAIN AMENDMENT NO. 2 TO STRATEGIC STOCKHOLDERS AGREEMENT DATED AS OF
SEPTEMBER 26, 1996, BY AND AMONG THE ISSUER, THE RECORD HOLDER OF THE
SECURITIES SUBJECT TO THIS CERTIFICATE AND CERTAIN OTHER PERSONS. A COPY
OF THE STRATEGIC STOCKHOLDERS AGREEMENT, TOGETHER WITH ALL AMENDMENTS
THERETO AS SHALL THEN BE IN EFFECT, SHALL BE FURNISHED WITHOUT CHARGE BY
THE ISSUER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE TO THE HOLDER
HEREOF UPON SUCH HOLDER'S WRITTEN REQUEST.
THIS CORPORATION IS A CLOSE CORPORATION. THE NUMBER OF HOLDERS OF RECORD
OF ITS SHARES OF ALL CLASSES CANNOT EXCEED 30. ANY ATTEMPTED TRANSFER
WHICH WOULD VIOLATE THIS REQUIREMENT IS VOID. REFER TO THE CERTIFICATE OF
INCORPORATION, BYLAWS AND AGREEMENTS ON FILE WITH THE SECRETARY OF THE
CORPORATION FOR FURTHER RESTRICTIONS.
The Company covenants and agrees that it shall refuse to recognize any
transfer of the Shares effected otherwise than in strict compliance with the
provisions of this Agreement and the Strategic Stockholders Agreement.
(r) Effective Date of Agreements. While this Agreement and each of the
----------------------------
agreements which are exhibits hereto have been executed
16
<PAGE>
as of their dates, each of the agreements shall be deemed to be effective as of
April 3, 1996, and the certificates representing the Allen Shares shall be dated
as of April 3, 1996, the date upon which the parties reached agreement on all
material terms hereof and thereof.
(s) Agreement of Shuman. By execution of this Agreement, Shuman agrees to
-------------------
be bound by each and every provision of this Agreement as if he had been named a
party hereto, with each reference to "Allen" and the "Allen Shares" herein to
include, with respect to the shares beneficially owned by Shuman, Shuman and
such shares, respectively.
17
<PAGE>
* * * *
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter shall constitute an agreement binding upon the Company and Allen.
Very truly yours,
FCN HOLDING, INC.
By: /s/ Larry Jacobson
_________________________
Its: EVP
_________________________
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above written.
ALLEN & COMPANY INCORPORATED
By: /s/ Stanley S. Shuman
_________________________
Its: EVP
_________________________
/s/ Stanley S. Shuman
- ------------------------------
Stanley S. Shuman
18
<PAGE>
E X H I B I T S
- - - - - - - -
A. Amendment No. 2 to Strategic Stockholders Agreement
B. Amendment No. 1 to Registration Agreement
C. Amendment No. 1 to Stock Ownership Agreement
D. Side Letter
19
<PAGE>
SIDE LETTER AGREEMENT
This Side Letter (the "Letter Agreement") is made and entered into as of
September 26, 1996, by and among Saban Entertainment, Inc., a Delaware close
corporation ("SEI"), Haim Saban ("Saban"), each of the entities listed on
Schedule "A" hereto (the "SEI Entities"), Fox Broadcasting Company, a Delaware
corporation ("FBC"), FCN Holding, Inc., a Delaware corporation ("FCNH"), FCNH
Sub, Inc., a Delaware close corporation ("FCNH Sub"), Fox Kids Worldwide, L.L.C.
("Fox Kids"), Allen & Company Incorporated, a New York corporation ("Allen") and
Stanley S. Shuman ("Shuman").
R E C I T A L S
- - - - - - - -
A. Pursuant to a letter agreement, dated as of September 26, 1996, but
effective as of April 3, 1996 (the "Allen Agreement") by and among FCNH, Allen
and Shuman, FCNH has, concurrently with the execution and delivery of this
Amendment, issued and sold to Allen 16 16/99 shares (the "Allen Shares") of the
Common Stock, without par value, of FCNH.
B. The parties desire to execute and deliver this Letter Agreement among
themselves in order to acknowledge and consent to the transfer of beneficial
ownership of a portion of the Allen Shares to Shuman.
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, in consideration of the foregoing facts and the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
1. Allen and Shuman agree that the transfer of a portion of the Allen
Shares by Allen to Shuman is subject to the provisions of Section 2(c) of that
certain Strategic Stockholders Agreement, dated as of December 22, 1995 (as
amended by Amendment No. 1 dated as of February 26, 1996 and Amendment No. 2 to
Strategic Stockholders Agreement dated as of this date) (together, the
"Strategic Stockholders Agreement"), and each of the parties to this Letter
Agreement (other than Shuman and Allen) hereby consents and agrees to the
transfer by Allen to Shuman of some or all of the Allen Shares.
2. The parties to this Letter Agreement acknowledge that a portion of the
Allen Shares is beneficially owned by Shuman and that Allen holds such portion
as nominee for and representative of Shuman, subject to the terms of the Allen
Agreement, the other agreements and this Letter Agreement.
<PAGE>
3. Allen and Shuman each hereby agree to comply with all provisions of the
Strategic Stockholders Agreement, including but not limited to, Section 2(c)
thereof.
4. Shuman hereby agrees to be bound by each of the Strategic Stockholders
Agreement, the Registration Agreement dated as of December 22, 1995 (as amended
by Amendment No. 1 to Registration Agreement dated as of this date) (together,
the "Registration Agreement"), and the Stock Ownership Agreement dated as of
December 22, 1995 (as amended by Amendment No. 1 to Stock Ownership Agreement)
(together, the "Stock Ownership Agreement") as if he had been named as a party
thereto, with each reference to "Allen" and the "Allen Shares" to apply, with
respect to the shares beneficially owned by Shuman, to Shuman and such shares
respectively, and each of such agreements is hereby amended to add that Shuman
is entitled to the same rights and subject to the same terms and conditions
provided to Allen under each of the Strategic Stockholders Agreement,
Registration Agreement and Stock Ownership Agreement.
5. While this Letter Agreement has been executed as of its date, it shall
be deemed to be effective as of April 3, 1996.
IN WITNESS WHEREOF, the parties have executed this Letter Agreement as of
the day and year first above written.
FOX KIDS WORLDWIDE, L.L.C.
By: /s/ Mel Woods
---------------------
/s/ Haim Saban
-------------------------
Its: HAIM SABAN
---------------------
SABAN ENTERTAINMENT, INC.
By: /s/ Mel Woods
-------------------
Its:
-------------------
QUARTZ ENTERPRISES, L.P.
By: /s/ Stan Golden
-------------------
Its:
-------------------
<PAGE>
MERLOT INVESTMENTS
By: /s/ Bill Josey
--------------------
Its:
--------------------
SILVERLIGHT ENTERPRISES, L.P.
By: /s/ Mel Woods
--------------------
Its:
--------------------
CELIA ENTERPRISES, L.P.
By: /s/ Matthew Krane
--------------------
Its:
--------------------
FOX BROADCASTING COMPANY
By: /s/ Larry Jacobson
--------------------
Its: EVP
--------------------
FCN HOLDING, INC.
By: /s/ Larry Jacobson
--------------------
Its: EVP
--------------------
FCNH SUB, INC.
By: /s/ Larry Jacobson
--------------------
Its: EVP
--------------------
ALLEN & COMPANY INCORPORATED
By: /s/ Stanley S. Shuman
--------------------
Its: EVP
--------------------
/s/ Stanley S. Shuman
-------------------------
STANLEY S. SHUMAN
<PAGE>
EXHIBIT 10.43
FIRST AMENDMENT TO THE CONTRIBUTION AND EXCHANGE AGREEMENT
FIRST AMENDMENT (the "Amendment"), dated as of August 1, 1997, by and among
Liberty Media Corporation, Liberty IFE, Inc. and Fox Kids Worldwide, Inc.
RECITALS
WHEREAS, the parties hereto are parties to that certain Contribution and
Exchange Agreement, dated as of June 11, 1997 (the "Agreement"); and
WHEREAS, the parties hereto desire to make certain amendments to the
Agreement as hereinafter described;
NOW, THEREFORE, for good and valuable consideration, receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. All capitalized terms used herein which are defined in the Agreement
and not otherwise defined herein shall have the meanings set forth in the
Agreement.
2. The Agreement is hereby amended by revising Exhibit E (NPAL
Certificate of Amendment) in its entirety to read as set forth in Exhibit E
attached hereto.
3. The Agreement is hereby amended by revising Exhibit F (Fox Kids
Certificate of Designations) in its entirety to read as set forth in Exhibit F
attached hereto.
4. Except as hereby amended, the Agreement shall be and continue in full
force and effect and is in all other respects ratified and confirmed.
<PAGE>
5. This Amendment shall be governed by, and construed in accordance with,
the laws of the State of New York, regardless of the laws that might otherwise
govern under applicable principles of conflicts of law.
6. This Amendment may be executed by the parties hereto in separate
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first set forth above.
LIBERTY MEDIA CORPORATION
By: /s/ David Koff
------------------------
Name: David Koff
Title: Vice President
LIBERTY IFE, INC.
By: /s/ David Koff
-------------------------
Name: David Koff
Title: Vice President
FOX KIDS WORLDWIDE, INC.
By: /s/ Jay Itzkowitz
--------------------------
Name:
Title:
<PAGE>
EXHIBIT 10.44
AGREEMENT RE REGISTRATION RIGHTS
This Agreement Re Registration Rights (this "Agreement") is made and
entered into as of August 1, 1997 by and among Saban Entertainment, Inc.
("SEI"), Haim Saban and each of the entities listed on Schedule A to the
Saban/Fox Registration Agreement referred to below ("SEI Stockholders"), Fox
Broadcasting Company, FCN Holding, Inc. ("FCN Holding"), Fox Kids Worldwide,
Inc. ("Fox Kids"), Liberty Media Corporation ("Liberty Media") and Liberty IFE,
Inc. ("Liberty IFE").
A. Reference is made to that certain Registration Agreement (the
"Saban/Fox Registration Agreement") dated as of December 22, 1995 by and among
SEI, Haim Saban, each of the entities listed on Schedule A thereto, Fox
Broadcasting Company and FCN Holding (together, the "Saban/Fox Parties")
pursuant to which the SEI Stockholders and FCN Holding (hereinafter referred to
as Fox Broadcasting Sub, Inc. ("FBC Sub"), were granted registration rights with
respect to the shares of Fox Kids (which is the "Successor Entity" as that term
is defined in the Saban/Fox Registration Agreement) held by each of them.
B. Pursuant to a Contribution and Exchange Agreement dated as of
June 11, 1997 by and among Liberty Media, Liberty IFE, and Fox Kids, Fox Kids
agreed to grant to Liberty Media, Liberty IFE and subsequent holders of Series A
Preferred Stock of Fox Kids (the "Liberty Parties") certain registration rights
with respect to the Series A Preferred Stock. Fox Kids and the Liberty Parties
have agreed to the form of Registration Rights Agreement, which is attached
hereto as Exhibit A (the "Liberty Registration Agreement").
C. Certain provisions of the Saban/Fox Registration Agreement
conflict or may conflict with provisions of the Liberty Registration Agreement.
The parties hereto confirm, with respect to one another only, the
following:
1. Section 10 of the Saban/Fox Registration Agreement provides that
Fox Kids may not cause any other registration of securities for sale for its own
account or for the account of any other person to become effective within 180
days after the effective date of the registration requested by the Saban/Fox
Parties. The Saban/Fox Parties hereby agree with Fox Kids and the Liberty
Parties that Fox Kids may cause the registration of the Qualifying Preferred
Stock (as defined in the Liberty Registration Agreement) on behalf of the
Liberty Parties to become effective at any time before or after the effective
date of any registration requested by the Saban/Fox Parties.
2. The parties hereto agree that the rights granted to the Liberty
Parties under the Liberty Registration Agreement do not violate Section 11 of
the Saban/Fox Registration Agreement.
<PAGE>
3. Section 13(b) of the Saban/Fox Registration Agreement provides
that Fox Kids will use its best efforts to cause each holder of its equity
securities or any securities convertible into such securities to agree not to
effect any public sale or distribution of such securities during the period
referred to therein. The Saban/Fox Parties hereby agree that Fox Kids shall not
be required or obligated to cause any of the Liberty Parties to agree not to
effect a public sale or distribution of Qualifying Preferred Stock or Preferred
Stock (as such term is defined in the Liberty Registration Agreement) during the
period referred to in said Section 13(b).
4. In addition to the foregoing provisions of this Agreement, the
parties agree that (i) in effecting a registration on behalf of any of the
Saban/Fox Parties pursuant to the Saban/Fox Registration Agreement, neither Fox
Kids nor such Saban/Fox Parties shall be restricted by any of the provisions of
the Liberty Registration Agreement, (ii) in effecting a registration on behalf
of any of the Liberty Parties pursuant to the Liberty Registration Agreement,
neither Fox Kids nor such Liberty Parties shall be restricted by any of the
provisions of the Saban/Fox Registration Agreement, and (iii) the parties hereby
waive any and all provisions of the Saban/Fox Registration Agreement and the
Liberty Registration Agreement to the extent necessary to permit Fox Kids to
effect registrations under the Saban/Fox Registration Agreement, on the one
hand, and the Liberty Registration Agreement, on the other hand, free of any
restrictions or obligations set forth in such other agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement this
1st day of August, 1997.
SABAN ENTERTAINMENT, INC.
By /s/ Haim Saban
--------------------------
Name:
Title:
/s/ Haim Saban
--------------------------
Haim Saban
QUARTZ ENTERPRISES, L.P.
By /s/ Haim Saban
--------------------------
Name:
Title:
MERLOT INVESTMENTS
By /s/ Haim Saban
--------------------------
Name:
Title:
SILVERLIGHT ENTERPRISES, L.P.
By /s/ Haim Saban
--------------------------
Name:
Title:
CELIA ENTERPRISES, L.P.
By /s/ Haim Saban
--------------------------
Name:
Title:
<PAGE>
FOX BROADCASTING COMPANY
By /s/ Jay Itzkowitz
--------------------------
Name:
Title:
FCN HOLDING, INC.
By /s/ Jay Itzkowitz
--------------------------
Name:
Title:
LIBERTY MEDIA CORPORATION
By /s/ David Koff
--------------------------
Name: David Koff
Title: Vice President
LIBERTY IFE, INC.
By /s/ David Koff
--------------------------
Name: David Koff
Title: Vice President
<PAGE>
FOX KIDS WORLDWIDE, INC.
By /s/ Jay Itzkowitz
--------------------------
Name:
Title:
<PAGE>
EXHIBIT 10.46
AGREEMENT RE TRANSFER OF LLC INTERESTS
This Agreement Re Transfer of LLC Interests (this "Agreement") is made and
entered into as of July 31, 1997, by and among Fox Kids Worldwide, Inc. ("Fox
Kids"), Fox Kids Worldwide, L.L.C. (the "LLC") and Fox Broadcasting Company
("Fox Broadcasting").
RECITALS
--------
A. Fox Broadcasting currently holds a note receivable from the LLC
in the amount of $50 million described in Section 5.8 of the Operating
Agreement, as defined in Recital D below (the "Note Receivable").
B. The LLC or its affiliates also currently owe to Fox Broadcasting
or its affiliates the amount of $4.573 million (the "Intercompany
Indebtedness").
C. Fox Broadcasting currently holds a Class A membership interest in
the LLC.
D. Concurrently herewith and as part of the reorganization of Saban
Entertainment, Inc. ("SEI") and FCN Holding, Inc. ("FCNH") into Fox Kids (the
"Reorganization"), the parties to that certain Operating Agreement, dated as of
December 22, 1995, as amended by Amendment No. 1 to Operating Agreement dated as
of September 27, 1996 (the "Operating Agreement") have decided to amend the
Operating Agreement to reflect the Reorganization and to allow for the transfer
by Fox Broadcasting of its Class A membership interest.
E. Fox Broadcasting and Fox Kids have agreed that Fox Broadcasting
should assign to Fox Kids its entire Class A membership interest in the LLC in
exchange for a note from Fox Kids in the amount of $50 million pursuant to that
certain Subordinated Note Agreement dated as of the date hereof between Fox Kids
and Fox Broadcasting attached hereto as Exhibit A (the "Subordinated Note
Agreement").
F. Fox Kids and Fox Broadcasting have agreed that Fox Broadcasting
should transfer to Fox Kids the Note Receivable and should assign to Fox Kids
the Intercompany Indebtedness and Fox Kids will hold the Note Receivable and the
Intercompany Indebtedness. In consideration for the Note Receivable and the
assignment of the Intercompany Indebtedness, Fox Kids will issue to Fox
Broadcasting a $54.573 million note pursuant to the terms of the Subordinated
Note Agreement.
1
<PAGE>
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing facts, the parties
hereto agree as follows:
1. Fox Broadcasting hereby assigns, transfers and conveys to Fox
Kids its entire Class A membership interest in the LLC. In consideration for Fox
Broadcasting's assignment of the Class A membership interest, Fox Kids hereby
agrees to enter into the Subordinated Note Agreement with Fox Broadcasting and
to issue Fox Broadcasting a note in the amount of $50 million. Instead of
holding the Fox Broadcasting Class A membership interest, Fox Kids hereby agrees
to hold the membership interest as a Class B membership interest, equal to all
of the other Class B members in terms of a right to distributions.
2. Fox Broadcasting has not transferred nor does it have any legal
obligation, absolute or contingent, to any person, to transfer or assign any of
its Class A membership interest or to enter into any agreement with respect
thereto.
3. Fox Kids hereby represents and warrants that the acquisition of
the Class A membership interest in the LLC is for its own account for investment
and not with a view to or for sale in connection with any distribution of the
security.
4. Fox Broadcasting hereby assigns to Fox Kids the Note Receivable
and the Intercompany Indebtedness and in consideration therefor, Fox Kids hereby
agrees to issue a note in the amount of $54.573 million to Fox Broadcasting
under the Subordinated Note Agreement. As a result of the assignment from Fox
Broadcasting to Fox Kids, Fox Kids will hold the Note Receivable and the
Intercompany Indebtedness.
5. This Agreement has been executed and delivered in the State of
California and shall be governed by, and construed in accordance with, the
substantive laws of the State of California.
6. This Agreement is binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereunto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first
written above.
FOX BROADCASTING CO
By: /s/ Jay Itzkowitz
---------------------------
Jay Itzkowitz
Senior Vice President
FOX KIDS WORLDWIDE, L.L.C.
By: /s/ Haim Saban
--------------------------
Haim Saban
Chief Executive Officer
FOX KIDS WORLDWIDE, INC.
By: /s/ Haim Saban
--------------------------
Haim Saban
Chief Executive Officer
3
<PAGE>
EXHIBIT 10.48
THIS NOTE AND THE OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATED IN THE
MANNER AND TO THE EXTENT SET FORTH IN THE SUBORDINATED NOTE AGREEMENT (THE
"NOTE AGREEMENT"), DATED AS OF AUGUST 29, 1997. EACH HOLDER OF THIS NOTE,
BY ITS ACCEPTANCE HEREOF, SHALL BE BOUND BY THE PROVISIONS OF THE NOTE
AGREEMENT.
SUBORDINATED PROMISSORY NOTE
----------------------------
No. A-1
$345,513,864.31 August 29, 1997
FOR VALUE RECEIVED, the undersigned, Fox Kids Worldwide, Inc., a Delaware
corporation, having an office at 10960 Wilshire Boulevard, Los Angeles, CA 90024
("Borrower"), hereby promises to pay to the order of News America Holdings
Incorporated, a Delaware corporation (the "Lender"), having an office at 1211
Avenue of the Americas, New York, NY 10036, or registered assigns, in lawful
money of the United States, by wire transfer in immediately available federal
funds, the principal amount of Three Hundred Forty Five Million Five Hundred
Thirteen Thousand Eight Hundred Sixty Four Dollars and Thirty One Cents
($345,513,864.31), loaned by Lender to Borrower pursuant to the Subordinated
Note Agreement dated August 29, 1997, among Borrower, Lender and Citicorp USA,
Inc. (as amended and modified from time to time, the "Note Agreement"), together
with additions to such principal amount and interest thereon as set forth in the
Note Agreement, which interest shall accrue from and after the date hereof on
the outstanding principal amount of this Note, and such principal amount and
interest thereon shall be payable at such times as set forth in the Note
Agreement.
Lender is hereby authorized by Borrower to record on Schedule A to this
Note (or on a supplemental Schedule thereto) the amount of the Loan and the
amount of each payment or prepayment of principal thereof received by Lender, it
being understood, however, that failure to make any such notation shall not
affect the rights of Lender or the obligations of Borrower hereunder in respect
of this Note. At Lender's option, Lender may record such matters in their
internal records rather than recording such matters on such Schedule.
This Note is referred to in, and is issued pursuant to, the Note Agreement
and is entitled to all of the benefits of the Note Agreement and the Loan
Documents. All of the terms, covenants and conditions of the Note Agreement and
all other instruments evidencing the indebtedness hereunder (including, without
limitation, the Loan Documents), are hereby made a part of this Note and are
deemed incorporated herein in full. The Note Agreement, among other things,
provides for the acceleration of the then outstanding indebtedness hereunder
during the existence of an Event of Default, upon the terms and conditions
specified therein. All capitalized terms used herein, unless otherwise
specifically defined in this Note, shall have the meanings ascribed to them in
the Note Agreement. The Loan and all of the Obligations shall be subordinate to
the Senior Obligations, in
<PAGE>
the manner and to the extent set forth in the Note Agreement. Each transferee of
this Note (or any Note or Notes issued in exchange or substitution therefor), by
acceptance of this Note (or any Note or Notes issued in exchange or substitution
therefor), agrees to such subordination.
To the fullest extent permitted by applicable law, Borrower, for itself and
its legal representatives, successors and assigns, expressly waives presentment,
demand, protest, notice of dishonor, notice of nonpayment, notice of maturity,
notice of protest, presentment for the purpose of accelerating maturity and
diligence in collection, and consents that Lender may (with the consent of
Borrower) extend the time for payment or otherwise modify the terms of payment
of any part or the whole of the debt evidenced hereby.
This Note shall be governed by, and construed and enforced in accordance
with, the laws of the State of New York, without regard to conflicts of laws
principles.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of
the date first above written.
FOX KIDS WORLDWIDE, INC.
By: /s/ Jay Itzkowitz
--------------------------
Name:
Title:
<PAGE>
Schedule A
----------
<TABLE>
<CAPTION>
Payments Unpaid Name of
-------------------- Principal Person
Current Balance of Making
Date Amount Principal Interest Note Notation
- ---- ------ --------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
THE OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATED IN THE MANNER AND TO THE
EXTENT SET FORTH IN SECTION 8 HEREOF. EACH HOLDER OF THIS NOTE, BY ITS
ACCEPTANCE HEREOF, SHALL BE BOUND BY THE SUBORDINATION PROVISIONS OF THIS
AGREEMENT.
SUBORDINATED NOTE AGREEMENT
---------------------------
THIS SUBORDINATED NOTE AGREEMENT is made the 29th day of August, 1997, by
and among NEWS AMERICA HOLDINGS INCORPORATED, a Delaware Corporation ("Lender"),
FOX KIDS WORLDWIDE, INC. (together with any successors or assigns, the
"Borrower"), a Delaware corporation, and CITICORP USA, INC., as administrative
agent under the Senior Loan Agreement (as hereinafter defined).
WHEREAS, Lender has agreed to loan to Borrower, and Borrower has agreed
to borrow from Lender, $345,513,864.31, upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto agree as follows:
ARTICLE 1. GENERAL DEFINITIONS
-------------------
1.1 Defined Terms. When used herein, the following terms shall have the
-------------
following meanings:
Affiliate - when used in reference to any specified Person, any Person
---------
that directly or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the specified Person.
Agreement - this Subordinated Note Agreement, as the same may be modified
---------
or amended from time to time.
Business Day - a day on which the Federal Reserve Bank of New York is
------------
open for business in New York, New York.
Closing Date - August 31, 1997.
------------
Code - the Internal Revenue Code of 1986, as amended.
----
Dollars and the symbol $ - lawful money of the United States of America.
------- -
Event of Default - as defined in Section 7.1 of this Agreement.
----------------
GAAP - U.S. generally accepted accounting principles, consistently
----
applied.
<PAGE>
Indebtedness - as applied to any Person, means: (a) all indebtedness for
------------
borrowed money; (b) that portion of obligations with respect to capital leases
that is properly classified as a liability on a balance sheet in conformity with
GAAP; (c) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money; (d) any obligation
owed for all or any part of the deferred purchase price of property or services
if the purchase price is due more than six (6) months from the date the
obligation is incurred or is evidenced by a note or similar written instrument;
and (e) all indebtedness secured by any Lien on any property or asset owned or
held by that Person regardless of whether the indebtedness secured thereby shall
have been assumed by that Person or is nonrecourse to the credit of that Person.
Indemnities - as defined in Section 9.1 of this Agreement.
-----------
Interest - as defined in Section 3.1(A) of this Agreement.
--------
Insolvency Laws - as defined in Section 8.1 of this Agreement.
---------------
Insolvency Proceedings - as defined in Section 8.1 of this Agreement.
----------------------
Interest Payment Date - commencing on September 30, 1997, and each
---------------------
successive December 31, March 31, June 30 and September 30 on which the Loan is
outstanding.
Lien - any mortgage, deed of trust, pledge, lien, security interest,
----
charge or other encumbrance or security arrangement of any nature whatsoever,
including but not limited to any conditional sale or title retention
arrangement, and any assignment, deposit arrangement or lease intended as, or
having the effect of, security.
Loan - as defined in Section 2.1 of this Agreement.
----
Loan Documents - this Agreement, the Note, and any and all agreements,
--------------
instruments and documents executed therewith.
Maturity Date - as defined in Section 2.2 of this Agreement.
-------------
Note - the subordinated promissory note to be made by Borrower on the
----
Closing Date in favor of Lender to evidence the Loan, which shall be in the form
of Exhibit A annexed hereto, and any note or notes issued in replacement or
substitution therefor, as any such note or notes may be further amended,
modified, or supplemented from time to time after the execution and delivery
hereof.
Obligations - (i) the obligations of Borrower to pay, as and when due and
-----------
payable (by scheduled maturity or otherwise), all amounts from time to time
owing by it in respect of any Loan Document, whether for principal, Interest
(including, without limitation, all Interest that accrues after the commencement
of any case, proceeding or other action relating to any Insolvency Proceeding of
Borrower), fees, indemnification payments, contract causes of action, costs,
expenses or otherwise and (ii) the obligations of Borrower to perform or observe
all of its other obligations from time to time existing under any Loan Document.
<PAGE>
Person - an individual, partnership, association, corporation, limited
------
liability company, joint stock or other company, entity, trust or unincorporated
organization, or a government or agency or political subdivision thereof.
Prepayment Date - any date upon which the Loan is being prepaid, in whole
---------------
or in part, pursuant to Section 3.2 of this Agreement.
Principal Amount - as defined in Section 2.1 of this Agreement.
----------------
Senior Agent - Citicorp USA, Inc., as administrative agent under the
------------
Senior Loan Agreement, and any successor or assignee thereof or any authorized
representative of the holders of a majority of the outstanding amount of the
Senior Obligations.
Senior Lenders - any and all lenders that provide financial
--------------
accommodation, advances and/or credit under the Senior Loan Agreement.
Senior Loan Agreement - the Credit Agreement, dated as of August 1, 1997,
---------------------
by and among Borrower, FCN Holding, Inc., Fox Kids Merger Corporation and Saban
Entertainment, Inc., as borrowers; Citicorp USA, Inc., as administrative agent;
Citicorp Securities, Inc., as arranger; and the lenders named therein, as
lenders, as the same may be further amended or supplemented, amended and
restated, refinanced or otherwise modified from time to time after the execution
and delivery hereof.
Senior Loan Documents - the Senior Loan Agreement and any and all
---------------------
agreements, instruments and documents executed in connection with the Senior
Loan Agreement, as the same may be further modified, amended or supplemented
after the execution and delivery thereof.
Senior Obligations - all of the obligations of Borrower, whether now or
------------------
hereafter existing, under or in respect of: (i) the Senior Loan Agreement and
the other Senior Loan Documents, whether direct or indirect, absolute or
contingent, and whether for principal, interest (including, without limitation,
interest accruing after the filing of a petition initiating any Insolvency
Proceeding, whether or not such interest accrues after the filing of such
petition for purposes of any applicable Insolvency Law, or is an allowed claim
in such Insolvency Proceeding), premium, fees, indemnification payments,
contract causes of action, costs, expenses or otherwise; and (ii) all
extensions, modifications, substitutions, amendments, renewals, refinancings,
replacements and refundings of any or all of the Senior Obligations referred to
in clause (i) of this paragraph, and any instrument or agreement evidencing or
otherwise setting forth the terms of any Indebtedness or other Senior
Obligations incurred in any such extension, modification, substitution,
amendment, renewal, refinancing, replacement or refunding.
Subsidiary - with respect to any Person, any other Person of which such
----------
Person owns or controls the voting of, directly or indirectly through one or
more intermediaries, more than fifty percent (50%) of the voting stock or other
ownership interests representing more than fifty percent (50%) of the ordinary
voting power of such entity at the time of determination.
Tax - any tax, levy, impost, duty, withholding, assessment, fee or other
---
charge which is assessed, levied or imposed or calculated for any government,
governmental, semi-governmental administrative, fiscal or judicial body,
department, commission, authority, tribunal, agency or entity
<PAGE>
(including without limitation any penalty, addition to tax or interest payable
in connection or with any failure to pay or any delay in paying any of the
same).
Voided Payment - as defined in Section 8.5 of this Agreement.
--------------
1.2 Certain Matters of Construction. Terms defined herein in the
-------------------------------
singular shall have the correlative meaning when used in the plural and vice
versa. The terms "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular section,
paragraph or subdivision. Any pronoun used shall be deemed to refer to the
masculine, feminine and neuter genders. The Section titles, table of contents
and list of exhibits appear as a matter of convenience only and shall not affect
the interpretation of this Agreement. All references to the knowledge of
Borrower (and phrases of similar import) shall include the knowledge of each of
the Subsidiaries of Borrower.
1.3 Time References. Unless otherwise indicated herein, all references
---------------
to time of day refer to Pacific standard time or Pacific daylight savings time,
as in effect in Los Angeles, California on such day. For purposes of the
computation of a period of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding"; provided, however, that with respect to a computation
of fees or interest payable to Lender, such period shall in any event consist of
at least one (1) full day.
ARTICLE 2. THE LOAN
--------
2.1 The Loan. Lender shall make a loan (the "Loan") to Borrower in the
--------
principal amount of Three Hundred Forty Five Million Five Hundred Thirteen
Thousand Eight Hundred Sixty Four Dollars and Thirty One Cents ($345,513,864.31)
(the "Principal Amount"), which shall be funded in full on the Closing Date.
Lender shall not have any responsibility as to the use of any of the proceeds of
the Loan. The Loan shall be evidenced by the Note in favor of Lender in the form
of Exhibit A annexed hereto.
2.2 Repayment of the Loan. The Principal Amount shall be repaid on
---------------------
September 30, 2007 (the "Maturity Date").
ARTICLE 3. INTEREST, FEES, PREPAYMENTS AND REPAYMENT
-----------------------------------------
3.1 Interest.
--------
(A) Interest ("Interest") shall accrue from and after the Closing
Date, on the Principal Amount, at the rate of eleven and 56/100 percent (11.56%)
per annum, compounded quarterly, on the basis of a three hundred sixty-five
(365)/three hundred sixty-six (366) day year.
(B) At the option of Borrower, and subject to the subordination
provisions set forth in Article 8 hereof, Borrower may on any Interest Payment
Date elect to (i) pay any portion or all of the accrued and unpaid interest on
the principal amount or (ii) elect to defer such payment until the Maturity Date
as provided in Section 3.1(C).
(C) If, on any Interest Payment Date, Borrower elects to defer the
payment of interest until the Maturity Date as provided in Section 3.1(B) or is
not permitted to pay interest as a result of the subordination provisions set
forth in Article 8 hereof, an amount equal to the Interest which accrued on
<PAGE>
the Principal Amount from the immediately preceding Interest Payment Date (or in
the case of the first Interest Payment Date, which accrued from the Closing
Date) through such Interest Payment Date shall be added automatically to the
Principal Amount and become a part thereof (such amount of Interest being
referred to as "Deferred Interest").
3.2 Optional Prepayment.
-------------------
(A) After the Senior Obligations have been paid in full, or at any
earlier time to the extent otherwise expressly permitted under the Senior Loan
Agreement, Borrower may prepay the Loan, in whole or in part, at any time, upon
at least five (5) Business Days' prior written notice to Lender. Any partial
prepayment of the Principal Amount shall be in the amount of Five Hundred
Thousand Dollars ($500,000) or in integral multiples of Five Hundred Thousand
Dollars ($500,000). Any prepayment of the Principal Amount on a Prepayment Date
pursuant to this Section 3.2 shall be accompanied by payment of the amount of:
(i) all Obligations (other than principal and Interest) due and payable
on the Prepayment Date; and
(ii) all Interest accrued (and not yet paid and added to the Principal
Amount as Deferred Interest) on the Principal Amount being prepaid from the
Closing Date through the Prepayment Date.
(B) The prepayment of the Loan pursuant to this Section 3.2 shall
be without premium or penalty.
3.3 Payments. The Obligations shall be payable as set forth in this
--------
Section 3.3.
(A) The Principal Amount shall be due and payable as provided in
Sections 2.2, 3.2 or 7.1 hereof, as applicable.
(B) Interest accrued on the Principal Amount shall be due and
payable in arrears on the earliest of (i) each successive Interest Payment Date,
(ii) the occurrence of an Event of Default in consequence of which Lender elects
to accelerate the maturity and payment of the Obligations, (iii) the Prepayment
Date (but only with respect to the amount of principal being prepaid at such
date) or (iv) the Maturity Date. Notwithstanding the foregoing, Borrower may
elect not to pay Interest on any Interest Payment Date and defer such payment as
provided in Section 3.1(C) above.
(C) Except as may be otherwise provided in Section 3.2 hereof,
costs, fees, expenses and any Obligations payable pursuant to this Agreement
other than Principal Amount and Interest shall be due and payable by Borrower to
Lender or to any other Person designated by Lender in writing (i) on demand, or
(ii) whether or not any demand has been made, upon (a) the occurrence of an
Event of Default in consequence of which Lender elects to accelerate the
maturity and payment of the Obligations or (b) the Maturity Date.
3.4 Payment Procedures. Each payment payable by Borrower to Lender
------------------
under this Agreement, the Note or any of the other Loan Documents shall be made
directly to Lender, not later than 11:00 a.m., on the due date of each such
payment, by wire transfer of immediately available federal funds
<PAGE>
in United States Dollars. If any sum would, but for the provisions of this
Section 3.4, the Note or any of the other Loan Documents, become due and payable
to Lender on any day which is not a Business Day, then such sum shall become due
and payable on the Business Day next succeeding the day on which such sum would
otherwise have become due and payable hereunder or thereunder.
3.5 Taxes.
-----
(A) Gross-up and Other Taxes. All payments made by the Borrower
------------------------
hereunder, and under the Note or any other Loan Document shall be made without
setoff, counterclaim, deduction or other defense. All such payments shall be
made free and clear of and without deduction for any present or future income,
franchise, sales, use, excise, stamp or other Taxes, levies, imposts,
deductions, charges, fees, withholdings, restrictions or conditions of any
nature now or hereafter imposed, levied, collected, withheld or assessed by any
jurisdiction (whether pursuant to United States Federal, state, local or foreign
law) or by any political subdivision or taxing authority thereof or therein, and
all interest, penalties or similar liabilities, excluding taxes on the net
income of, and branch profit taxes of, any Lender imposed by the jurisdiction in
which such Lender is organized or any political subdivision thereof or taxing
authority thereof or any jurisdiction in which such Person's principal office or
relevant lending office is located or any political subdivision thereof or
taxing authority thereof (other than any such Taxes with respect to additional
net income arising from the receipt of payments under this Section 3.5) (such
non-excluded taxes being hereinafter collectively referred to as "Non-Excluded
Taxes"). If the Borrower shall be required by law to deduct or to withhold any
Non-Excluded Taxes from or in respect of any amount payable hereunder, (i) the
amount so payable shall be increased to the extent necessary so that after
making all required deductions and withholdings (including Taxes on amounts
payable to Lender pursuant to this sentence) Lender receives an amount equal to
the sum it would have received had no such deductions or withholdings been made,
(ii) the Borrower shall make such deductions or withholdings, and (iii) the
Borrower shall pay the full amount deducted or withheld to the relevant taxation
authority in accordance with applicable law. Whenever any Non-Excluded Taxes
are payable by the Borrower, as promptly as possible thereafter, the Borrower
shall send Lender an official receipt (or, if an official receipt is not
available, such other documentation as shall be reasonably satisfactory to
Lender) showing payment. In addition, the Borrower shall pay any present or
future stamp, documentary, excise, property or similar Taxes, charges or levies
that arise from any payment made under the Loan Documents by Borrower or from
the execution, delivery, performance, release, discharge, amendment,
enforcement, attempted enforcement or registration of, or otherwise with respect
to, this Agreement, any other Loan Document or any transaction contemplated by
this Agreement or any other Loan Document as any and all of the foregoing relate
to Borrower (hereinafter referred to as "Other Taxes").
(B) Tax Indemnity. Borrower shall indemnify Lender for the full
-------------
amount of Non-Excluded Taxes and Other Taxes, including, without limitation, any
Non-Excluded Taxes or Other Taxes imposed by any jurisdiction on amounts payable
under this Section 3.5 (such Taxes being hereinafter referred to as "Gross-Up
Taxes") with respect to which Borrower has made a deduction from any payment
required to be made to Lender or which are paid by Lender in respect of either
the Loan Documents or payments made by Borrower under the Loan Documents (as the
case may be) and any liability (including penalties, additions to tax, interest
and expenses) arising therefrom or with respect thereto, whether or not such
Non-Excluded Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be made within thirty (30) days from the date Lender makes
written demand therefor.
<PAGE>
(C) Survival of Obligations. Without prejudice to the survival of
-----------------------
any other agreement of Borrower hereunder, the agreements and obligations of
Borrower contained in this Section 3.5 shall survive the payment in full by
Borrower of all principal and Interest hereunder, until six (6) months after the
expiration of the applicable statute of limitation with respect to any Gross-Up
Taxes, Non-Excluded Taxes and Other Taxes.
(D) Filings by Lender. (i) Borrower shall use reasonable efforts in
-----------------
good faith to file (or update the filing of) any certificate or document
provided or requested by Lender or take any reasonable action requested by
Lender if the filing of such certificate or document or the taking of such
action would avoid the need for, reduce the amount of, or assist in the recovery
of any payment of Taxes, or avoid the circumstances giving rise to the need for
such payment, and (ii) in the event Borrower fails to exercise the reasonable
efforts in good faith described in Section 3.5(D)(i) above, the Taxes arising
from such failure shall be considered Non-Excluded Taxes and Borrower shall
indemnify Lender in accordance with Section 3.5(B).
3.6 Application of Payments and Collections. Borrower irrevocably
---------------------------------------
waives the right to direct the application of any and all payments and
collections at any time or times hereafter received by Lender from or on behalf
of Borrower, and Borrower does hereby irrevocably agree that Lender shall have
the continuing exclusive right to apply and reapply any and all such payments
and collections received at any time or times hereafter by Lender or any Person
designated by Lender against the Obligations, in such manner as Lender may deem
advisable consistent with the terms of this Agreement, notwithstanding any entry
by Lender upon any of its books and records. Notwithstanding the foregoing
provisions of this Section 3.6, unless otherwise specified by Lender, any
payment or collection in respect of any of the Obligations (other than quarterly
payments of Interest pursuant to Section 3.1 hereof) shall be applied by Lender
(a) first, to the payment of all Obligations (if any) other than the principal
and Interest due and payable at such time, (b) next, to the payment of all
Interest which shall then be due and payable on the Principal Amount and (c)
next, to the payment of the outstanding Principal Amount.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
------------------------------
To induce Lender to enter into this Agreement and to make advances
hereunder, Borrower represents and warrants to Lender, on the Closing Date,
that:
4.1 Organization, Good Standing, Etc. Borrower (i) is a corporation,
---------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and (ii) has all requisite corporate power and authority to
conduct its business as now conducted and to make the borrowings hereunder and
to consummate the transactions contemplated by the Loan Documents to which it is
a party.
4.2 Authorization, Etc. The execution, delivery and performance by
-------------------
Borrower of each of the Loan Documents to which it is a party (i) have been duly
authorized by all necessary corporate action on the part of Borrower, (ii) do
not and will not contravene the charter and by-laws of Borrower, or any
applicable law or any contractual restriction binding on or otherwise affecting
it or any of its properties, except where such conflict would not have a
material adverse effect on the business, condition (financial or otherwise)
operations or assets of the Borrower and its Subsidiaries taken as a whole (a
"Material Adverse Effect"), (iii) do not and will not result in the violation,
breach of, conflict with, accelerate the due date of any payments under, or
(without the giving of notice or the passage of time or both) entitle any party
to terminate or call a default under any contract to which the Borrower or any
of its Subsidiaries is
<PAGE>
a party, or to which any of their respective assets are subject or otherwise
bound which would not have a Material Adverse Effect, and (iv) do not and will
not result in or require the creation of any Lien, upon or with respect to any
of its properties.
4.3 Governmental Approvals. No authorization or approval or other
----------------------
action by, and no notice to or filing with, any governmental authority or other
regulatory body is required in connection with the due execution, delivery and
performance by each of Borrower or any Subsidiary of each of the Loan Documents
to which it is a party.
4.4 Enforceability of Loan Documents. This Agreement is, and each other
--------------------------------
Loan Document to which each of Borrower or any Subsidiary is a party, when
delivered hereunder, will be, legal, valid and binding obligations of Borrower
and each Subsidiary, as the case may be, enforceable against Borrower and each
Subsidiary in accordance with their respective terms, except to the extent that
the enforceability thereof may be limited by any applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or similar laws
from time to time in effect affecting generally the enforcement of creditors'
rights and remedies and by general principles of equity.
ARTICLE 5. COVENANTS AND CONTINUING AGREEMENTS
-----------------------------------
So long as any amount owing in respect of the Obligations (whether or not
due) shall remain unpaid, Borrower covenants that, unless otherwise consented to
by Lender in writing, it shall:
5.1 Compliance with Laws, Etc. Comply, and cause each of its
--------------------------
Subsidiaries to comply, with all applicable laws, rules, regulations and orders,
except where such failure to comply would not, either in any case or in the
aggregate, reasonably be likely to result in a Material Adverse Effect.
5.2 Preservation of Existence, Etc. Maintain and preserve, and cause
-------------------------------
each of its Subsidiaries to maintain and preserve, its existence, rights and
privileges, and become or remain duly qualified and in good standing in each
jurisdiction in which the character of the properties owned or leased by them or
in which the transaction of their business makes such qualification necessary,
except (i) where the failure to maintain and preserve the existence, rights and
privileges of Borrower or its Subsidiaries would not, either in any single case
or in the aggregate, reasonably be likely to result in a Material Adverse
Effect, or (ii) where such failure to qualify would not, either in any case or
in the aggregate, reasonably be likely to result in a Material Adverse Effect.
5.3 Keeping of Records and Books of Account. Keep, and cause each of
---------------------------------------
its Subsidiaries to keep, adequate records and books of account, with complete
entries made in accordance with GAAP.
5.4 Further Assurances. Shall, and shall cause each Subsidiary to, do,
------------------
execute, acknowledge and deliver, at the sole cost and expense of Borrower or
any such Subsidiary, all such further acts and assurances as Lender may
reasonably require from time to time in order to better assure and confirm unto
Lender the rights now or hereafter intended to be granted to it under this
Agreement, any Loan Document or any other instrument under which Borrower or any
of its Subsidiaries may be or may hereafter become bound for carrying out the
intention or facilitating the performance of the terms of the Agreement.
5.5 Characterization of Note. Lender and Borrower shall at all times
------------------------
characterize the Note as "indebtedness" rather than "stock" for all purposes
whatsoever and will not take any position or action
<PAGE>
to the contrary thereto unless required by law. Neither Lender nor Borrower will
disclose treatment of the Note in a manner inconsistent with the
characterization of the Note as "indebtedness" within the meaning of the Code
Section 385(c) in any return, information statement or other filing with the
Internal Revenue Service.
ARTICLE 6. CONDITIONS PRECEDENT
--------------------
As a condition precedent to Lender making the Loan hereunder, the
following conditions, as the case may be, shall be fulfilled in a manner
reasonably satisfactory to Lender:
6.1 Delivery of Documents. Lender shall have received the following
---------------------
documents on or prior to the Closing Date:
(A) the Note, duly executed and delivered by Borrower, and any other
instruments, documents or certificates executed by Borrower or any of its
Subsidiaries in respect of the transactions contemplated by this Agreement or
which are reasonably requested by Lender;
(B) evidence that Borrower and its Subsidiaries are in full
compliance with all of their respective representations, warranties, covenants
and agreements set forth in the Senior Loan Documents, that neither Borrower nor
its Subsidiaries are in breach of, or default under, any of the Senior Loan
Documents and that the Senior Loan Documents are in full force and effect in
accordance with their respective terms; and
(C) such other documents, instruments and agreements as Lender shall
reasonably request in connection with the foregoing matters.
6.2 Additional Conditions Precedent. The following conditions shall be
-------------------------------
satisfied on the Closing Date, in the sole discretion, reasonably exercised, of
Lender:
(A) no action, proceeding, investigation, regulation or legislation
shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, or which is related to or arises out of this
Agreement, the other Loan Documents, any Senior Loan Documents or the
consummation of the transactions contemplated hereby or thereby or which, in
Lender's sole discretion, would make it inadvisable to consummate the
transactions contemplated by this Agreement or any of the other Loan Documents;
and
(B) all legal matters in connection with the transactions
contemplated by the Loan Documents shall be reasonably satisfactory to Lender
and its counsel in their sole discretion.
ARTICLE 7. EVENTS OF DEFAULT: RIGHTS AND REMEDIES ON DEFAULT
-------------------------------------------------
7.1 Events of Default. The existence of any one or more of the
-----------------
following events shall constitute an Event of Default:
(A) Borrower shall fail to pay any (i) principal when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise)
under the Loan Documents and such
<PAGE>
failure shall continue unremedied for fifteen (15) days or (ii) any Interest,
any fee, indemnity or other amounts due or other Obligations under any Loan
Document when due (unless deferred pursuant to Section 3.1(C) hereof) and such
failure shall continue unremedied for thirty (30) days;
(B) any representation or warranty made by Borrower or any officer of
Borrower under or in connection with any Loan Document shall have been or shall
be incorrect in any material respect when made;
(C) Borrower shall fail to perform or observe any of its Obligations
under any Loan Document, including but not limited to any covenant contained in
Article 5 hereof (other than occurrences referred to or embodied in other
provisions of this Section 7.1), and such failure shall continue unremedied for
a period of thirty (30) days after the earlier of (i) Borrower's receipt of
notice from Lender or (ii) actual knowledge of such breach by Borrower;
(D) Borrower or any Subsidiary (i) shall institute any proceeding or
voluntary case seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for such party or for any substantial part
of its property, (ii) shall be generally not paying its debts as such debts
become due, or shall admit in writing its inability to pay its debts generally,
(iii) shall make a general assignment for the benefit of creditors or (iv) shall
take any action to authorize or effect any of the actions set forth above in
this subsection (D);
(E) any proceeding shall be instituted against Borrower or any
Subsidiary seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief of debtors, or seeking the entry of an order for relief or
the appointment of a receiver, trustee, custodian or other similar official for
Borrower or any Subsidiary or for any substantial part of its property, and
either such proceeding shall remain undismissed or unstayed for a period of
seventy (70) days or any of the actions sought in such proceeding (including,
without limitation, the entry of an order for relief against it or the
appointment of a receiver, trustee, custodian or other similar official for it
or for any substantial part of its property) shall occur; and
(F) any material provision of any Loan Document shall at any time for
any reason be declared to be null and void, or the validity or enforceability
thereof shall be contested by Borrower, or a proceeding shall be commenced by
Borrower or any governmental authority or other regulatory body having
jurisdiction over Borrower, seeking to establish the invalidity or
unenforceability thereof, or Borrower shall deny in writing that Borrower has
any material liability or obligation purported to be created under any Loan
Document;
then, and in any such event, and except as otherwise provided in the
subordination provisions set forth in Article 8 hereof, Lender may by written
notice to Borrower, (i) declare the Loan, all Interest thereon and all other
amounts payable under this Agreement to be forthwith due and payable, whereupon
the Loan, all such Interest and all such amounts shall become and be forthwith
due and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by Borrower; provided, however,
that upon the occurrence and during the continuance of any Event of Default
described in Section 7.1 (C) or (D), the Loan, all such Interest and all such
amounts shall become and be forthwith
<PAGE>
due and payable, without presentment, demand, protest or further notice of any
kind, all of which are expressly waived by Borrower, and (ii) exercise any and
all of its other rights under applicable law, hereunder and under the other Loan
Documents.
7.2 Remedies Cumulative; No Waiver. All covenants, conditions,
------------------------------
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrower contained in this Agreement and the other Loan Documents, or in any
document referred to herein or contained in any agreement supplementary hereto
or thereto or contained in any other agreement between Lender and Borrower,
heretofore, concurrently, or hereafter entered into, shall be deemed cumulative
to, and not in derogation or substitution of, any of the terms, covenants,
conditions, or agreements of Borrower herein contained. The failure or delay of
Lender to exercise or enforce any rights, powers, or remedies hereunder or under
any of the aforesaid agreements or other documents shall not operate as a waiver
of such rights, powers and remedies, but all such rights, powers, and remedies
shall continue in full force and effect until the outstanding Principal Amount,
all Interest and all other Obligations owing or to become owing from Borrower to
Lender shall have been fully satisfied, and all rights, powers, and remedies
herein provided for are cumulative and none are exclusive.
ARTICLE 8. SUBORDINATION
-------------
8.1 In the event of any dissolution, winding up, liquidation,
arrangement, reorganization, adjustment, protection, relief or composition of
Borrower or its debts, whether voluntary or involuntary, in any bankruptcy,
insolvency, arrangement, reorganization, receivership, relief or other similar
action or proceeding under the United States Federal Bankruptcy Code or any
other federal or state bankruptcy or insolvency laws or any similar Requirements
of Law (as such term is defined in the Senior Loan Agreement) of any other
jurisdiction covering the protection of creditors' rights or the relief of
debtors (collectively, the "Insolvency Laws") or upon an assignment for the
benefit of creditors or any other marshalling of the property, assets and
liabilities of Borrower or otherwise (each, an "Insolvency Proceeding"), the
Senior Agent, for the ratable benefit of the Senior Lenders, shall be entitled
to receive payment in full of all of the Senior Obligations before Lender is
entitled to receive any payment or distribution of any kind or character on
account of all or any of the Obligations, and, to that end, any payment or
distribution of any kind or character (whether in cash, property or securities)
that otherwise would be payable or deliverable upon or with respect to the
Obligations in any such Insolvency Proceeding (including, without limitation,
any payment that may be payable by reason of any other Indebtedness of Borrower
being subordinated to payment of the Obligations) shall be paid or delivered
forthwith directly to the Senior Agent, for the account of the Senior Lenders,
in the same form as so received (with any necessary endorsement or assignment)
for application (in the case of cash) to, or to be held as collateral (in the
case of noncash property or securities) for, the payment or prepayment of the
Senior Obligations until all of the Senior Obligations shall have been paid in
full.
8.2 So long as the Senior Obligations shall not have been paid in full,
Lender shall not (a) ask, demand, sue for, take or receive from Borrower (except
as otherwise expressly permitted under the Senior Loan Agreement), directly or
indirectly, in cash or other property or by setoff or in any manner (including,
without limitation, from or by way of collateral), payment of all or any of the
Obligations or (b) commence, or join with any creditor other than the Senior
Agent in commencing, or directly or indirectly cause Borrower to commence, or
assist Borrower in commencing, any Insolvency Proceeding. If Lender, in
contravention hereof, shall commence, prosecute or participate in any Insolvency
Proceeding,
<PAGE>
then the Senior Agent may intervene and interpose as a defense or plea the terms
of the Note in its own name or in the name of Lender.
8.3 Until such time as all of the Senior Obligations have been paid in
full, if any Insolvency Proceeding is commenced by or against the Payor:
(A) the Senior Agent is hereby irrevocably authorized and empowered
(in its own name or in the name of Lender or otherwise), but shall have no
obligation, to demand, sue for, collect and receive every payment or
distribution otherwise payable to Lender in respect of the Note and give
acquittance therefor, and to file claims and proofs of claim and take such other
action (including, without limitation, voting the Obligations or enforcing any
security interest or other lien securing payment of the Obligations) as it may
deem necessary or advisable for the exercise or enforcement of any of the rights
or interests of the Senior Agent or any of the other Senior Lenders under the
Note; and
(B) Lender shall duly and promptly take such action as the Senior
Agent may reasonably request (i) to collect the Obligations for the account of
the Senior Agent, for the ratable benefit of the Senior Lenders, and to file
appropriate claims or proofs of claim in respect of the Obligations, (ii) to
execute and deliver to the Senior Agent such powers of attorney, assignments or
other instruments as the Senior Agent may reasonably request in order to enable
the Senior Agent to enforce any and all claims with respect to, and any security
interests and other liens securing payment of, the Obligations and (iii) to
collect and receive any and all payments or distributions that may be payable or
deliverable upon or with respect to the Obligations.
8.4 All payments or distributions upon or with respect to the
Obligations that are received by Lender contrary to the provisions of this
Article 8 shall be received in trust for the benefit of the Senior Agent, shall
be segregated from other property or funds of Lender and shall be paid or
delivered forthwith directly to the Senior Agent, for the account of the Senior
Lenders, in the same form as so received (with any necessary endorsement or
assignment) to be applied (in the case of cash) to, or held as collateral (in
the case of noncash property or securities) for, the payment or prepayment of
the Senior Obligations until all of the Senior Obligations shall have been paid
in full.
8.5 To the extent that Borrower or any of its Subsidiaries or any other
guarantor of or provider of collateral for the Senior Obligations shall make any
payment on the Senior Obligations that is subsequently invalidated, declared to
be fraudulent or preferential or set aside or is required to be repaid to a
trustee, receiver or any other party under any applicable Insolvency Law or
equitable cause (any such payment being a "Voided Payment"), then to the extent
of such Voided Payment, that portion of the Senior Obligations that had been
previously satisfied by such Voided Payment shall be reinstated and continue in
full force and effect as if such Voided Payment had never been made. To the
extent that Lender shall have received any payments subsequent to the date of
the initial receipt of such Voided Payment by the Senior Agent or any of the
Senior Lenders and such payments have not been invalidated, declared to be
fraudulent or preferential or set aside or required to be repaid to a trustee,
receiver, or any other party under any applicable Insolvency Law or equitable
cause, Lender shall be obligated and hereby agrees that any such payment so made
or received shall be deemed to have been received in trust for the benefit of
the Senior Agent, and Lender hereby agrees to pay to the Senior Agent, upon
demand, the full amount so received by Lender during such period of time to the
extent necessary to fully restore to the Senior Lenders the amount of such
Voided Payment, which amount shall be applied as set forth in Section 8.4.
<PAGE>
8.6 The Senior Agent is hereby authorized to demand specific performance
of the subordination provisions of this Article 8, whether or not Borrower shall
have complied with any of the provisions hereof applicable to it, at any time
when Lender shall have failed to comply with any of the subordination provisions
of this Article 8. Lender hereby irrevocably waives any defense based on the
adequacy of a remedy at law, which might be asserted as a bar to such remedy of
specific performance.
8.7 Lender will not:
(A) (i) cancel or otherwise discharge any of the Obligations (except
upon payment in full of the Senior Obligations), (ii) convert or exchange any of
the Obligations into or for any other Indebtedness, (iii) convert or exchange
any of the Obligations into or for any equity interest in the Borrower or
otherwise unless such equity interest in pledged to the Senior Agent, on behalf
of the Senior Lenders, under the applicable Senior Loan Documents immediately
following such conversion or exchange or (iv) subordinate any of the Obligations
to any Indebtedness of Borrower other than the Senior Obligations;
(B) sell, assign, pledge, encumber or otherwise dispose of any of
the Obligations; or
(C) permit the terms of any of the Obligations to be amended,
waived, supplemented or otherwise modified in such a manner as could have an
adverse effect upon the rights or interests of the Senior Agent or any of the
other Senior Lenders under this Agreement or any of the Loan Documents.
8.8 No payment or distribution to the Senior Agent or any of the other
Senior Lenders pursuant to the provisions of this Agreement or the Note shall
entitle Lender to exercise any rights of subrogation in respect thereof, nor
shall Lender have any right of reimbursement, restitution, exoneration,
contribution or indemnification whatsoever from any property or assets of
Borrower or any of the other guarantors, sureties or providers of collateral
security for the Senior Obligations, or any right to participate in any claim
or remedy of the Senior Agent or any of the Senior Lenders against Borrower,
whether or not such claim, remedy or right arises in equity or under contract,
statute or common law (including, without limitation, the right to take or
receive from Borrower, directly or indirectly, in cash or other property or by
setoff or in any other manner, payment or security on account of such claim,
remedy or right), until all of the Senior Obligations shall have been paid in
full.
8.9 The holders of the Senior Obligations may, at any time and from time
to time, without any consent of or notice to Lender or any other holder of the
Obligations and without impairing or releasing the obligations of Lender
hereunder:
(A) change the manner, place or terms of payment of, or change or
extend the time of payment of, or renew payment or change or extend the time or
payment of, or renew or alter, the Senior Obligations (including any change in
the rate of interest thereon), or amend, supplement or otherwise modify in any
manner any instrument, agreement or other document under which any of the Senior
Obligations is outstanding;
(B) sell, exchange, release, not perfect and otherwise deal with any
of the property or assets of any Person at any time pledged, assigned or
mortgaged to secure the Senior Obligations;
<PAGE>
(C) release any Person liable in any manner under or in respect of
the Senior Obligations;
(D) exercise or refrain from exercising any rights against Borrower
any other Person; and
(E) apply to the Senior Obligations any sums from time to time
received by or on behalf of the Senior Agent or any of the Senior Lenders.
8.10 Each of the Borrower and Lender will further mark their respective
books of account in such a manner as shall be effective to give proper notice of
the effect of the subordination provisions of this Article 8. Each of Borrower
and Lender will, at its sole expense and at any time and from time to time,
promptly execute and deliver all further instruments and documents, and take all
further action, that may be necessary or that the Senior Agent may reasonably
deem desirable and may request, in order to protect any right or interest
granted or purported to be granted under the subordination provisions of this
Article 8 or to enable the Senior Agent or any of the Senior Lenders to exercise
and enforce its rights and remedies hereunder.
8.11 The subordination provisions of this Article 8 are and are intended
solely for the purpose of defining the relative rights of the Senior Lenders, on
the one hand, and Lender, on the other hand. Such provisions are for the
benefit of the Senior Lenders and shall inure to the benefit of, and shall be
enforceable by, the Senior Agent, on behalf of itself and the Senior Lenders,
directly against Lender, and no Senior Lender shall be prejudiced in its right
to enforce subordination of any of the Obligations by any act or failure to act
by Borrower or any Person in custody of its property or assets.
8.12 Nothing contained in this Article 8 is intended to or shall impair,
as between the Borrower and Lender, the obligations of Borrower to Lender.
8.13 For all purposes of this Agreement, the Senior Obligations shall not
be deemed to have been paid in full until the latest of (i) payment in full in
cash of the aggregate principal amount of all outstanding Advances (as such term
is defined in the Senior Loan Agreement), all accrued and unpaid interest
thereon, all fees and expenses owing to the Senior Agent or any of the Senior
Lenders in connection therewith and all other amounts comprising part of the
Senior Obligations, (ii) the expiration or termination of all of the Bank Hedge
Agreements (as such term is defined in the Senior Loan Agreement) and (iii) the
Termination Date (as such term is defined in the Senior Loan Agreement).
ARTICLE 9. MISCELLANEOUS
-------------
9.1 Indemnification. In addition to all of Borrower's other Obligations
---------------
under this Agreement, Borrower agrees to defend, protect, indemnify and hold
harmless Lender and all of its officers, directors, employees, attorneys,
consultants and agents (collectively called the "Indemnities") from and against
any and all losses, damages, liabilities, obligations, penalties, fees,
reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees, costs and expenses) incurred by such Indemnities, whether prior
to or from and after the Closing Date, whether direct, indirect or
consequential, as a result of or arising from or relating to or in connection
with any of the following: (i) the negotiation, preparation, execution or
performance or enforcement of this Agreement or of any document executed in
connection with the transactions contemplated by this Agreement; (ii) the
furnishing of funds to Borrower under this
<PAGE>
Agreement; (iii) any document executed in connection with the transactions
contemplated by this Agreement or (iv) any claim, litigation, investigation or
proceeding relating to any of the foregoing, whether or not any Indemnitee is a
party thereto (collectively, the "Indemnified Matters"); provided, however, that
Borrower shall not have any obligation to any Indemnitee hereunder for any
Indemnified Matter caused by or resulting from the gross negligence or willful
misconduct of such Indemnitee, as determined by a final judgment of a court of
competent jurisdiction. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in this Section 9.1 may be unenforceable because it is
violative of any law or public policy, Borrower shall contribute the maximum
portion which it is permitted to pay and satisfy under applicable law, to the
payment and satisfaction of all Indemnified Matters incurred by the Indemnities.
The foregoing indemnity shall survive the repayment of the Obligations.
9.2 Amendments, Etc. No amendment or waiver of any provision of this
----------------
Agreement or the other Loan Documents, and no consent to any departure therefrom
by Borrower, shall in any event be effective unless the same shall be in writing
and signed by Borrower and Lender, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no amendment, waiver or consent shall, unless in
writing and signed by Lender, (i) reduce the principal of, or interest on, the
Loan or Obligations, (ii) postpone any date fixed for any payment of principal
of, or interest or fees on, the Loan or the amount of any other Obligations,
(iii) change the percentage of the aggregate unpaid principal amount of the
Note, which shall be required for Lender to take any action hereunder or (iv)
amend, modify or waive this Section 9.2; and provided further that no such
amendment or waiver or consent to any departure therefrom of Article 8 or any
other provision that could adversely affect the rights and interests of the
Senior Agent or any of the Senior Lenders (under or in respect of the Loan
Documents or any of the Senior Loan Documents) in any manner shall be effective
without the written consent of the Senior Agent.
9.3 Expenses; Attorneys' Fees. Borrower agrees to pay or cause to be
-------------------------
paid, on demand, and to save Lender harmless against liability for the payment
of, all reasonable out-of-pocket expenses, including but not limited to
reasonable fees and expenses of counsel for Lender, periodic field audits, from
time to time arising from or relating to (other than when arising from the gross
negligence or willful misconduct of Lender, as the case may be): (i) any
amendments, waivers or consents to this Agreement or the other Loan Documents
requested by Borrower whether or not such documents become effective or are
given; (ii) upon the occurrence and during the continuance of any Event of
Default, the preservation and protection of any of Lender's rights under this
Agreement or the other Loan Documents; (iii) the defense of any claim or action
asserted or brought against Lender by any Person that arises from this
Agreement, any other Loan Document, Lender's claims against Borrower, or any and
all matters in connection therewith; (iv) the commencement (other than by
Lender, except upon the occurrence and during the continuance of any Event of
Default) or defense of, or intervention in, any court proceeding arising from or
related to this Agreement or any other Loan Document; (v) upon the occurrence
and during the continuance of any Event of Default, the filing of a petition,
complaint, answer, motion or other pleading by Lender, or the taking of any
action in connection with this Agreement or any other Loan Document; (vi) upon
the occurrence and during the continuance of any Event of Default, any attempt
to collect from Borrower; and (vii) the receipt of any advice with respect to
any of the foregoing.
9.4 Indulgences Not Waivers. The failure, at any time or times
-----------------------
hereafter, to require strict performance by Borrower of any provision of this
Agreement shall not waive, affect or diminish any right of Lender thereafter to
demand strict compliance and performance therewith. Any suspension or waiver of
an Event of Default under this Agreement or any of the other Loan Documents
shall not suspend, waive
<PAGE>
or affect any other Event of Default under this Agreement or any of the other
Loan Documents, whether the same is prior or subsequent thereto and whether of
the same or of a different type. None of the undertakings, agreements,
warranties, covenants and representations of Borrower contained in this
Agreement or any of the other Loan Documents and no Event of Default under this
Agreement or any of the other Loan Documents shall be deemed to have been
suspended or waived by Lender, unless such suspension or waiver is by an
instrument in writing specifying such suspension or waiver and is signed by a
duly authorized representative of Lender and directed to Borrower.
9.5 Severability. Wherever possible, each provision of this Agreement
------------
or any other Loan Document shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement
or any other Loan Document shall be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of such agreement.
9.6 Cumulative Effect; Conflict of Terms. The provisions of the other
------------------------------------
Loan Documents are hereby made cumulative with the provisions of this Agreement.
Except as specifically otherwise provided in this Agreement or in any of the
other Loan Documents by specific reference to the applicable provision of this
Agreement, if any provision contained in this Agreement is in direct conflict
with, or inconsistent with, any provision in any of the other Loan Documents,
the provision contained in this Agreement shall govern and control.
9.7 Execution in Counterparts. This Agreement may be executed in any
-------------------------
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which counterparts taken together shall constitute but one and the
same instrument.
9.8 Notices. Except as otherwise provided herein, all notices, requests
-------
and demands to or upon a party hereto to be effective shall be in writing, shall
be sent by certified or registered mail, return receipt requested), or by
telecopier or delivered by hand or by a recognized overnight courier service
and, unless otherwise expressly provided herein, shall be deemed to have been
validly served, given or delivered when delivered against receipt or, in the
case of telecopy notice, when sent, or, in the case of telex, when the
appropriate answerback received, addressed as follows:
(A) If to Lender:
News America Holdings Incorporated
1211 Avenue of the Americas
New York, NY 10036
Attention: Arthur M. Siskind, Esq.
<PAGE>
With a copy to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, NY 10176
Attention: Jeffrey W. Rubin, Esq.
(B) If to Borrower, at:
Fox Kids Worldwide, Inc.
10960 Wilshire Boulevard
Los Angeles, CA 90024
Attention: Mel Woods
With a copy to:
Troop Meisinger Steuber & Pasich, LLP
10940 Wilshire Boulevard
Los Angeles, CA 90024
Attention: C.N. Franklin Reddick, III, Esq.
(C) If to Senior Agent, at:
Citicorp USA, Inc.
399 Park Avenue
New York, NY 10043
Attention: Andrew Sriubas, Vice President
With a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Attention: William Hirschberg, Esq.
or to such other address as each party may designate for itself by like notice
given in accordance with this Section 9.8.
9.9 Demand. Nothing in this Agreement shall affect or abrogate the
------
demand nature of any portion of the Obligations expressly made payable on demand
by this Agreement or by any instrument evidencing same, and the occurrence of an
Event of Default shall not be a prerequisite for requiring payment of such
Obligations, except as provided for in this Agreement.
9.10 Entire Agreement; Headings. This Agreement, and the other Loan
--------------------------
Documents, together with all other instruments, agreements and certificates
executed by the parties in connection therewith or with reference thereto,
embody the entire understanding and agreement between the parties hereto and
thereto with respect to the subject matter hereof and thereof and supersede all
prior agreements,
<PAGE>
understandings and inducements, whether express or implied, oral or written.
Section headings herein are included for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose.
9.11 Governing Law; Consent To Forum. This Agreement, the Note and the
-------------------------------
other Loan Documents shall be governed by, and construed in accordance with, the
law of the State of New York applicable to contracts made and to be performed in
the State of New York without regard to conflicts of law principles. Any legal
action or proceeding with respect to this Agreement or any other Loan Document
may be brought in the courts of the State of New York or of the United States
for the Southern District of New York, and, by execution and delivery of this
Agreement, Borrower hereby irrevocably accepts in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid courts.
Borrower further irrevocably consents to the service of process out of any of
the aforementioned courts and in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, at its address
for notices contained in Section 9.8, such service to become effective ten (10)
days after such mailing. Nothing herein shall affect the right of Lender to
service of process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against Borrower in any other jurisdiction.
9.12 Right of Set-Off. Upon the occurrence and during the continuance of
----------------
any Event of Default, Lender may, and is hereby authorized to, at any time and
from time to time, without notice to Borrower (any such notice being expressly
waived by Borrower) and to the fullest extent permitted by law, and subject to
the rights of the Senior Agent and the Senior Lenders hereunder, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by Lender to or
for the credit or the account of Borrower against any and all obligations of
Borrower now or hereafter existing under any Loan Document to the extent such
obligations have become due. Lender agrees to notify Borrower promptly after
any such set-off and application made by such Bank; provided that the failure to
give such notice shall not affect the validity of such set-off and application.
The rights of Lender under this Section 9.12 are in addition to the other rights
and remedies (including, without limitation, other rights of set-off) which
Lender may have.
9.13 No Party Deemed Drafter. Borrower and Lender agree that no party
-----------------------
hereto shall be deemed to be the drafter of this Agreement, and Borrower and
Lender, further agree that, in the event this Agreement is ever construed by a
court of law, such court shall not construe this Agreement or any provision of
this Agreement against any party hereto as the drafter of this Agreement.
9.14 Reinstatement; Certain Payments. If claim is ever made upon Lender
-------------------------------
for repayment or recovery of any amount or amounts received by Lender in payment
or on account of any of the Obligations under this Agreement, Lender shall give
prompt notice of such claim to Borrower, and if Lender repays all or part of
said amount by reason of (i) any judgment, decree or order of any court or
administrative body having jurisdiction over Lender or any of its property or
(ii) any good faith settlement or compromise of any such claim effected by
Lender with any such claimant, then and in such event, Borrower agrees that (a)
any such judgment, decree, order, settlement or compromise shall be binding upon
Borrower notwithstanding the cancellation of the Note or other instrument
evidencing the Obligations under this Agreement or the other Loan Documents or
the termination of this Agreement or the other Loan Documents and (b) it shall
be and remain liable to Lender hereunder for the amount so repaid or recovered
to the same extent as if such amount had never originally been received by
Lender.
<PAGE>
9.15 Assignment. Lender may assign to one or more Persons all or a
----------
portion of its rights and obligations under this Agreement; provided, however,
that, without the prior written consent of Borrower, Lender may not assign its
rights and obligations under this Agreement to any Person who is not (a) an
individual who is a citizen or resident of the United States, (b) a corporation,
partnership or other entity created or organized in or under the laws of the
United States, any State or any political subdivision thereof, (c) an estate the
income of which is subject to United States Federal income taxation regardless
of its source or (d) a trust whose administration is subject to the primary
supervision of a United States court and which has one or more United States
fiduciaries who have the authority to control all substantial decisions of such
trust.
9.16 Confidentiality. Lender agrees to exercise all reasonable efforts
---------------
to keep any information delivered or made available by Borrower to it which has
not been publicly disclosed confidential from anyone other than persons employed
or retained by Lender who are or are expected to become engaged in evaluating,
approving, structuring or administering the Loan; provided, however, that
nothing herein shall prevent Lender from disclosing such information (i) to its
officers, directors, employees, agents, attorneys and accountants who have a
need to know such information in accordance with customary practices and who
receive such information having been made aware of the restrictions set forth in
this Section, (ii) upon the order of any court or administrative agency, (iii)
upon the request or demand of any regulatory agency or authority having
jurisdiction over Lender, (v) to the extent reasonably required in connection
with any litigation to which Lender, Borrower, or any Subsidiary or their
respective affiliates may be a party, (vi) to the extent reasonably required in
connection with the exercise of any remedy hereunder, (vii) to Lender's legal
counsel and independent auditors, and (viii) to any actual or proposed
participant or assignee of all or part of its rights hereunder which has agreed
in writing to be bound by the provisions of this Section 9.15.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed on the day and
year specified at the beginning hereof.
Borrower: FOX KIDS WORLDWIDE, INC.
By: /s/ Jay Itzkowitz
_____________________________
Name:________________________
Title:_______________________
Lender: NEWS AMERICA HOLDINGS INCORPORATED
By: /s/ Jon Fisse
_____________________________
Name:________________________
Title:_______________________
Senior Agent: CITICORP USA, INC.
By: /s/ Carolyn Kee
_____________________________
Name:________________________
Title:_______________________
<PAGE>
Exhibit A - Form of Note
- ---------
THIS NOTE AND THE OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATED IN THE
MANNER AND TO THE EXTENT SET FORTH IN THE SUBORDINATED NOTE AGREEMENT
(THE "NOTE AGREEMENT"), DATED AS OF AUGUST 29, 1997. EACH HOLDER OF
THIS NOTE, BY ITS ACCEPTANCE HEREOF, SHALL BE BOUND BY THE PROVISIONS
OF THE NOTE AGREEMENT.
SUBORDINATED PROMISSORY NOTE
----------------------------
No. A-1
$345,513,864.31 August 29, 1997
FOR VALUE RECEIVED, the undersigned, Fox Kids Worldwide, Inc., a Delaware
corporation, having an office at 10960 Wilshire Boulevard, Los Angeles, CA 90024
("Borrower"), hereby promises to pay to the order of News America Holdings
Incorporated, a Delaware corporation (the "Lender"), having an office at 1211
Avenue of the Americas, New York, NY 10036, or registered assigns, in lawful
money of the United States, by wire transfer in immediately available federal
funds, the principal amount of Three Hundred Forty Five Million Five Hundred
Thirteen Thousand Eight Hundred Sixty Four Dollars and Thirty One Cents
($345,513,864.31), loaned by Lender to Borrower pursuant to the Subordinated
Note Agreement dated August 29, 1997, among Borrower, Lender and Citicorp USA,
Inc. (as amended and modified from time to time, the "Note Agreement"), together
with additions to such principal amount and interest thereon as set forth in the
Note Agreement, which interest shall accrue from and after the date hereof on
the outstanding principal amount of this Note, and such principal amount and
interest thereon shall be payable at such times as set forth in the Note
Agreement.
Lender is hereby authorized by Borrower to record on Schedule A to this
Note (or on a supplemental Schedule thereto) the amount of the Loan and the
amount of each payment or prepayment of principal thereof received by Lender, it
being understood, however, that failure to make any such notation shall not
affect the rights of Lender or the obligations of Borrower hereunder in respect
of this Note. At Lender's option, Lender may record such matters in their
internal records rather than recording such matters on such Schedule.
This Note is referred to in, and is issued pursuant to, the Note Agreement
and is entitled to all of the benefits of the Note Agreement and the Loan
Documents. All of the terms, covenants and conditions of the Note Agreement and
all other instruments evidencing the indebtedness hereunder (including, without
limitation, the Loan Documents), are hereby made a part of this Note and are
deemed incorporated herein in full. The Note Agreement, among other things,
provides for the acceleration of the then outstanding
<PAGE>
indebtedness hereunder during the existence of an Event of Default, upon the
terms and conditions specified therein. All capitalized terms used herein,
unless otherwise specifically defined in this Note, shall have the meanings
ascribed to them in the Note Agreement. The Loan and all of the Obligations
shall be subordinate to the Senior Obligations, in the manner and to the extent
set forth in the Note Agreement. Each transferee of this Note (or any Note or
Notes issued in exchange or substitution therefor), by acceptance of this Note
(or any Note or Notes issued in exchange or substitution therefor), agrees to
such subordination.
To the fullest extent permitted by applicable law, Borrower, for itself and
its legal representatives, successors and assigns, expressly waives presentment,
demand, protest, notice of dishonor, notice of nonpayment, notice of maturity,
notice of protest, presentment for the purpose of accelerating maturity and
diligence in collection, and consents that Lender may (with the consent of
Borrower) extend the time for payment or otherwise modify the terms of payment
of any part or the whole of the debt evidenced hereby.
This Note shall be governed by, and construed and enforced in accordance
with, the laws of the State of New York, without regard to conflicts of laws
principles.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of
the date first above written.
FOX KIDS WORLDWIDE, INC.
By:_______________________
Name:
Title:
<PAGE>
Schedule A
----------
<TABLE>
<CAPTION>
Payments Unpaid Name of
-------------------- Principal Person
Current Balance of Making
Date Amount Principal Interest Note Notation
- ---- ------ --------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
FIRST AMENDMENT TO SUBORDINATED NOTE AGREEMENT
----------------------------------------------
This FIRST AMENDMENT TO SUBORDINATED NOTE AGREEMENT (the "First
Amendment"), is made the 28th day of October, 1997, by and among NEWS AMERICA
HOLDINGS, INCORPORATED, a Delaware Corporation ("Lender"), FOX KIDS WORLDWIDE,
INC. (together with any successors or assigns, the "Borrower"), a Delaware
corporation, and CITICORP USA, INC., as the Senior Representative for the Senior
Creditors (each as hereinafter defined).
WHEREAS, the parties hereto are parties to a certain Subordinated Note
Agreement, dated August 29, 1997 (the "Note Agreement" or the "Subordinated Note
Agreement"); and
WHEREAS, as a condition to the issuance of the Senior Notes (as hereinafter
defined), the Borrower and Lender agreed to also subordinate the obligations
hereunder to the Senior Notes Indebtedness (as hereinafter defined).
WHEREAS, the parties hereto desire to amend the Note Agreement to evidence
such changes and to change the Maturity Date thereunder;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto agree as follows:
1. Definitions. a) All capitalized terms used herein which are defined
-----------
in the Note Agreement and not otherwise defined herein shall have their meanings
as defined in the Note Agreement.
b) Section 1.1 is hereby amended by inserting the following sentence
at the beginning of such section. "All capitalized terms used herein which are
defined in the Credit Agreement and not otherwise defined herein shall have
their meanings as defined in the Credit Agreement."
c) The following definitions shall be inserted into Section 1.1 in the
appropriate alphabetical order:
"Administrative Agent - means Citicorp USA, Inc., as the
--------------------
administrative agent and the collateral agent for the Senior Lenders and the
other Secured Parties, together with any successor thereto appointed pursuant to
Article VIII of the Credit Agreement.
Credit Agreement - means the Second Amended and Restated Credit
----------------
Agreement dated as of October 28, 1997 among FCN Holding, Inc., International
Family Entertainment, Inc. and Saban Entertainment, Inc., as the Borrowers
thereunder, Fox Kids Holdings, LLC, as a guarantor thereunder, the Senior
Lenders, Citicorp Securities, Inc., Chase Securities, Inc. and BankBoston,
<PAGE>
N.A., as the Co-Arrangers for the Facilities referred to therein, and the
Administrative Agent, as such agreement may be amended, supplemented or
otherwise modified from time to time.
Indentures - means, collectively, (a) the Indenture dated as of
----------
October 28, 1997 between Fox Kids and The Bank of New York, as Trustee, relating
to the 9 1/4% Senior Notes due 2007, and (b) the Indenture dated as of October
28, 1997 between Fox Kids and The Bank of New York, as Trustee, relating to the
10 1/4% Senior Discount Notes due 2007, in each case as such agreement may be
amended, supplemented or otherwise modified from time to time.
Senior Creditors - means, collectively, the Senior Secured
----------------
Creditors, the Senior Notes Creditors and the other holders, if any, of any of
the Senior Indebtedness.
Senior Indebtedness - means, collectively, the Senior Secured
-------------------
Indebtedness and the Senior Notes Indebtedness.
Senior Notes - means, collectively, the 9/1//4% Senior Notes due
------------
2007 and the 10/1//4% Senior Discount Notes due 2007 issued under the
Indentures, in each case as amended, supplemented or otherwise modified from
time to time.
Senior Notes Creditors - means, collectively, the trustees under
----------------------
each of the Indentures and the holders from time to time of Senior Notes
Indebtedness.
Senior Notes Indebtedness - means (i) all Obligations of Fox Kids,
-------------------------
whether now or hereafter existing, under or in respect of the Indentures and the
Senior Notes, whether direct or indirect, absolute or contingent, and whether
for principal, interest (including, without limitation, interest accruing after
the filing of a petition initiating any Insolvency Proceeding (as hereinafter
defined), whether or not such interest accrues after the filing of such petition
for purposes of any applicable Insolvency Laws (as hereinafter defined), or is
an allowed claim in such Insolvency Proceeding), premium, fees, indemnification
payments, contract causes of action, costs, expenses or otherwise and (ii) any
and all extensions, modifications, substitutions, amendments, renewals,
refinancings, replacements and refundings of any or all of the Obligations
referred to in clause (i) of this definition, and any instrument or agreement
evidencing or otherwise setting forth the terms of any Indebtedness or other
Obligations incurred in any such extension, modification, substitution,
amendment, renewal, refinancing, replacement or refunding.
Senior Representative - means (i) the Administrative Agent or (ii)
---------------------
after the payment in full of all of the Senior Secured Indebtedness and the
termination or expiration of all of the commitments of the Senior Secured
Creditors in respect thereof, either of the trustees for the Senior Notes or the
holders of a majority in aggregate principal amount of the outstanding Senior
Notes of either issue.
Senior Secured Creditors - means, collectively, the Administrative
------------------------
Agent, the Senior Lenders and the other Secured Parties and any other holder of
any of the Senior Secured Indebtedness.
<PAGE>
Senior Secured Indebtedness - means (i) all Obligations of Fox Kids,
---------------------------
whether now or hereafter existing, under or in respect of the Credit Agreement,
the Notes (as defined in the Credit Agreement) and the other Loan Documents (as
defined in the Credit Agreement), whether direct or indirect, absolute or
contingent, and whether for principal, interest (including, without limitation,
interest accruing after the filing of a petition initiating any Insolvency
Proceeding, whether or not such interest accrues after the filing of such
petition for purposes of any applicable Insolvency Laws, or is an allowed claim
in such Insolvency Proceeding), premium, fees, indemnification payments,
contract causes of action, costs, expenses or otherwise and (ii) any and all
extensions, modifications, substitutions, amendments, renewals, refinancings,
replacements and refundings of any or all of the Obligations referred to in
clause (i) of this definition, and any instrument or agreement evidencing or
otherwise setting forth the terms of any Indebtedness or other Obligations
incurred in any such extension, modification, substitution, amendment, renewal,
refinancing, replacement or refunding."
c) The definition of "Senior Lenders" is hereby deleted in its
entirety and replaced with the following:
"Senior Lenders - means the banks, financial institutions and other
--------------
institutional lenders from time to time party to the Credit Agreement."
d) The definitions of Senior Agent, Senior Loan Agreement, and Senior
Obligations are hereby deleted in their entirety. All references to Senior
Obligations in the Loan Agreements shall hereafter be deemed to be references to
Senior Indebtedness.
2. Amendment to Section 2.2. Section 2.2 of the Note Agreement is hereby
------------------------
amended to delete the Maturity Date of "September 30, 2007" and to insert in
lieu thereof "May 1, 2008."
3. Amendment of Article 8. Article 8 is hereby amended in its entirety
----------------------
to read as follows:
ARTICLE 8. SUBORDINATION
-------------
8.1 The aggregate principal amount owing to the Lender from time to time
under this Subordinated Note Agreement, the Note and the other Loan Documents
all accrued and unpaid interest thereon, and any other indebtedness evidenced by
or otherwise owing in respect of this Subordinated Note Agreement, the Note and
the other Loan Documents (collectively, the "SUBORDINATED INDEBTEDNESS") is and
shall be subordinate and junior in right of payment and otherwise, to the extent
and in the manner hereinafter set forth, to the prior payment in full of all of
the Senior Indebtedness (an hereinafter defined), whether now or hereafter
existing. For all purposes of this Subordinated Note Agreement, the Senior
Indebtedness shall not be deemed to have been paid in full until the latest of
(A) the payment in full in cash of all of the Senior Indebtedness and the
expiration or termination of all of the commitments of the Secured Parties and
the other holders of any of the Senior Indebtedness thereunder, (B) the
expiration or termination of all of the Bank Hedge Agreements and (C) the
Termination Date.
8.2 In the event of any dissolution, winding up, liquidation, arrangement,
reorganization, adjustment, protection, relief or composition of Borrower or its
debts, whether voluntary or
<PAGE>
involuntary, in any bankruptcy, insolvency, arrangement, reorganization,
receivership, relief or other similar action or proceeding under the United
States Federal Bankruptcy Code or any other federal or state bankruptcy or
insolvency laws or any similar Requirements of Law of any other jurisdiction
covering the protection of creditors' rights or the relief of debtors
(collectively, the "Insolvency Laws"), or upon an assignment for the benefit of
creditors or any other marshaling of the property, assets and liabilities of
Borrower or otherwise (each, an "Insolvency Proceeding"), the Senior Creditors
shall be entitled to receive payment in full of all of the Senior Indebtedness
before the Lender is entitled to receive any payment or distribution of any kind
or character on account of all or any of the Subordinated Indebtedness, and, to
that end, any payment or distribution of any kind or character (whether in cash,
property or securities) that otherwise would be payable or deliverable upon or
with respect to the Subordinated Indebtedness in any such Insolvency Proceeding
(including, without limitation, any payment that may be payable by reason of any
other Indebtedness of Borrower being subordinated to payment of the Subordinated
Indebtedness) shall be paid or delivered forthwith directly to the Senior
Representative, for the ratable account of the Senior Secured Creditors and the
Senior Notes Creditors, in the same form as so received (with any necessary
endorsement or assignment), for application (in the case of cash) to, or to be
held as collateral (in the case of noncash property or securities) for, the
payment or prepayment of the Senior Indebtedness until all of the Senior
Indebtedness shall have been paid in full.
8.3 No payment or distribution of any property or assets of Borrower of
any kind or character (including, without limitation, any payment that may be
payable by reason of any other Indebtedness of Borrower being subordinated to
payment of the Subordinated Indebtedness) shall be made by or on behalf of
Borrower for or on account of any Subordinated Indebtedness, unless and until
all of the Senior Indebtedness shall have been paid in full or unless such
payment is expressly permitted to be made under Section 8(d)(i)(D) of the Fox
Kids Guarantee and Sections 10.8 and 10.9 of the Indentures. Furthermore, so
long as the Senior Indebtedness shall not have been paid in full, the Lender
shall not (a) ask, demand, sue for, take or receive from Borrower, directly or
indirectly, in cash or other property or by setoff or in any manner (including,
without limitation, from or by way of collateral), payment of all or any of the
Subordinated Indebtedness, except to the extent that such payment is expressly
permitted to be made under Section 8(d)(i)(D) of the Fox Kids Guarantee and
Sections 10.8 and 10.9 of the Indentures, (b) commence, or join with any
creditor other than the Senior Representative in commencing, or directly or
indirectly cause Borrower to commence, or assist Borrower in commencing, any
Insolvency Proceeding, or (c) request or accept any collateral or other security
for the Subordinated Indebtedness. If the Subordinated Lender, in contravention
hereof, shall commence, prosecute or participate in any Insolvency Proceeding,
then the Senior Representative may intervene and interpose as a defense or plea
the terms of this Subordinated Note Agreement in its own name or in the name of
the Subordinated Lender.
8.4 Until such time as all of the Senior Indebtedness has been paid in
full, if any Insolvency Proceeding is commenced by or against Borrower:
(A) the Senior Representative is hereby irrevocably authorized and
empowered (in its own name or in the name of the Lender or otherwise), but
shall have no obligation, to demand, sue for, collect and receive every
payment or distribution otherwise payable to the Lender in respect of this
Subordinated Note Agreement and give acquittance therefor, and to file
claims and proofs of claim and take such other actions (including, without
limitation,
<PAGE>
voting the Subordinated Indebtedness or enforcing any security interest or
other lien securing payment of the Subordinated Indebtedness) as it may
deem necessary or advisable for the exercise or enforcement of any of the
rights or interests of the Senior Representative or any of the other Senior
Creditors under this Subordinated Note Agreement; and
(B) the Lender shall duly and promptly take such action as the Senior
Representative may reasonably request (i) to collect the Subordinated
Indebtedness for the account of the Senior Representative, for the ratable
benefit of the Senior Secured Creditors and the Senior Notes Creditors, and
to file appropriate claims or proofs of claim in respect of the
Subordinated Indebtedness, (ii) to execute and deliver to the Senior
Representative such powers of attorney, assignments or other instruments as
the Senior Representative may reasonably request in order to enable the
Senior Representative to enforce any and all claims with respect to, and
any security interests and other liens securing payment of, the
Subordinated Indebtedness and (iii) to collect and receive any and all
payments or distributions that may be payable or deliverable upon or with
respect to the Subordinated Indebtedness.
8.5 All payments or distributions upon or with respect to the Subordinated
Indebtedness that are received by the Lender contrary to the provisions of this
Subordinated Note Agreement shall be received in trust for the benefit of the
Senior Representative and the other Senior Creditors, shall be segregated from
other property or funds of the Lender and shall be paid or delivered forthwith
directly to the Senior Representative, for the account of the Senior Secured
Creditors and the Senior Notes Creditors, in the same form as so received (with
any necessary endorsement or assignment), to be applied (in the case of cash)
to, or held as collateral (in the case of noncash property or securities) for,
the payment or prepayment of the Senior Indebtedness until all of the Senior
Indebtedness shall have been paid in full.
8.6 To the extent that Borrower, the Lender or any of their respective
Subsidiaries or any other guarantor of or provider of collateral for the Senior
Indebtedness shall make any payment on the Senior Indebtedness that is
subsequently invalidated, declared to be fraudulent or preferential or set aside
or is required to be repaid to a trustee, receiver or any other party under any
applicable Insolvency Law or equitable cause (any such payment being a "Voided
Payment"), then to the extent of such Voided Payment, that portion of the Senior
Indebtedness that had been previously satisfied by such Voided Payment shall be
reinstated and continue in full force and effect as if such Voided Payment had
never been made. To the extent that the Lender shall have received any payments
subsequent to the date of the initial receipt of such Voided Payment by the
Senior Representative or any of the other Senior Creditors and such payments
have not been invalidated, declared to be fraudulent or preferential or set
aside or required to be repaid to a trustee, receiver or any other party under
any applicable Insolvency Law or equitable cause, the Lender shall be obligated
and hereby agrees that any such payment so made or received shall be deemed to
have been received in trust for the benefit of the Senior Representative and the
other Senior Creditors, and the Lender hereby agrees to pay to the Senior
Representative, upon demand, the full amount so received by the Lender during
such period of time to the extent necessary to fully restore to the Senior
Representative and the other Senior Creditors the amount of such Voided Payment,
which amount shall be applied as set forth in Section 8.5.
<PAGE>
8.7 The Senior Representative is hereby authorized to demand specific
performance of the subordination provisions of this Subordinated Note Agreement,
whether or not Borrower shall have complied with any of the provisions hereof
applicable to it, at any time when the Lender shall have failed to comply with
any of the subordination provisions of this Subordinated Note Agreement. The
Lender hereby irrevocably waives any defense based on the adequacy of a remedy
at law which might be asserted as a bar to such remedy of specific performance.
8.8 The Lender will not:
(A) (i) Cancel or otherwise discharge any of the Subordinated
Indebtedness (except upon payment in full of all of the Senior Indebtedness
or, at any time and from time to time prior thereto, to the extent that
such payment is expressly permitted to be made under Section 8(d)(i)(D) of
the Fox Kids Guarantee and under Sections 10.8 and 10.9 of the Indentures),
(ii) convert or exchange any of the Subordinated Indebtedness into or for
any other Indebtedness (except to the extent expressly permitted by the
Indentures), (iii) convert or exchange any of the Subordinated Indebtedness
into or for any Equity Interest in Borrower or otherwise (except to the
extent expressly permitted by the Indentures) or (iv) subordinate any of
the Subordinated Indebtedness to any Indebtedness of Borrower other than
the Senior Indebtedness (except that no consent of the holders of the
Senior Notes or either of the trustees for the Senior Notes shall be
required to subordinate any of the Subordinated Indebtedness to any other
Indebtedness of Borrower (although nothing herein shall limit the
obligation of any holder of Indebtedness of Borrower to turn over or
otherwise subordinate itself to any or all of the Senior Creditors in
accordance with any subordination provisions applicable to such
Indebtedness);
(B) Sell, assign, pledge, encumber or otherwise dispose of any of
the Subordinated Indebtedness; or
(C) Permit the terms of any of the Subordinated Indebtedness to be
amended, waived, supplemented or otherwise modified in such a manner as
could have an adverse effect upon the rights or interests of the Senior
Representative or any of the other Senior Creditors under this Subordinated
Note Agreement, any of the Loan Documents (as defined in the Credit
Agreement), either of the Indentures or any of the other agreements,
instruments or other documents evidencing or otherwise setting forth the
terms of any of the Senior Indebtedness.
8.9 No payment or distribution to the Senior Representative or any of the
other Senior Creditors pursuant to the provisions of this Subordinated Note
Agreement shall entitle the Lender to exercise any rights of subrogation in
respect thereof, nor shall the Lender have any right of reimbursement,
restitution, exoneration, contribution or indemnification whatsoever from any
property or assets of Borrower or any of the other guarantors, sureties or
providers of collateral security for the Senior Indebtedness, or any right to
participate in any claim or remedy of the Senior Representative or any of the
other Senior Creditors against Borrower or any of the Collateral, whether or not
such claim, remedy or right arises in equity or under contract, statute or
common law (including, without limitation, the right to take or receive from
Borrower, directly or indirectly, in cash or other property or by setoff or in
any other manner, payment or security on account of such
<PAGE>
claim, remedy or right), until (i) all of the Senior Indebtedness shall have
been paid in full and all of the commitments of the Secured Parties and the
other holders thereof shall have expired or been terminated, (ii) all of the
Bank Hedge Agreements shall have expired or been terminated and (iii) the
Termination Date shall have occurred.
8.10 The holders of the Senior Indebtedness may, at any time and from time
to time, without any consent of or notice to the Lender or any other holder of
the Subordinated Indebtedness and without impairing or releasing the obligations
of the Lender hereunder:
(A) change the manner, place or terms of payment of, or change or
extend the time of payment of, or renew payment or change or extend the
time or payment of, or renew or alter, the Senior Indebtedness (including
any change in the rate of interest thereon), or amend, supplement or
otherwise modify in any manner any instrument, agreement or other document
under which any of the Senior Indebtedness is outstanding;
(B) sell, exchange, release, not perfect and otherwise deal with any
of the property or assets of any Person at any time pledged, assigned or
mortgaged to secure the Senior Indebtedness;
(C) release any Person liable in any manner under or in respect of
the Senior Indebtedness;
(D) exercise or refrain from exercising any rights against Borrower,
any of the other Loan Parties or any of their respective Subsidiaries or
any other Person;
(E) apply to the Senior Indebtedness any sums from time to time
received by or on behalf of the Senior Representative or any of the other
Senior Creditors; and
(F) sell, assign, transfer or exchange any of the Senior
Indebtedness.
8.11 Each of Borrower and the Lender will, if reasonably requested by the
Senior Representative or either of the trustees for the Senior Notes, further
mark their respective books of account in such a manner as shall be effective to
give proper notice of the effect of the subordination provisions of this
Subordinated Note Agreement. Each of Borrower and the Lender will, at its sole
expense and at any time and from time to time, promptly execute and deliver all
further instruments and documents, and take all further actions, that may be
necessary or that the Senior Representative or either of the trustees for the
Senior Notes may reasonably deem desirable and may request in order to protect
any right or interest granted or purported to be granted under the subordination
provisions of this Subordinated Note Agreement or to enable the Senior
Representative or any of the other Senior Creditors to exercise and enforce its
rights and remedies hereunder.
8.12 The foregoing provisions regarding subordination are and are
intended solely for the purpose of defining the relative rights of the holders
of the Senior Indebtedness, on the one hand, and the holders of the Subordinated
Indebtedness, on the other hand. Such provisions are for the benefit of the
holders of the Senior Indebtedness and shall inure to the benefit of, and shall
be enforceable by, the Senior Representative, on behalf of itself and the other
Senior Creditors, directly against the
<PAGE>
holders of the Subordinated Indebtedness, and no holder of the Senior
Indebtedness shall be prejudiced in its right to enforce the subordination of
any of the Subordinated Indebtedness by any act or failure to act by Borrower or
any Person in custody of its property or assets. The subordination provisions
herein shall constitute a continuing offer to each and every holder of Senior
Indebtedness from time to time and such holders are intended third party
beneficiaries hereof. Nothing contained in the foregoing provisions is intended
to or shall impair, as between Borrower and the holders of the Subordinated
Indebtedness, the obligations of Borrower to such holders.
8.13 (A) Borrower agrees to pay, upon demand therefor, all of the
reasonable and properly documented out-of-pocket costs and expenses (including,
without limitation, reasonable fees and expenses of counsel) incurred by the
Senior Representative or any of the other Senior Creditors in enforcing the
provisions of this Subordinated Note Agreement.
(B) Borrower hereby waives promptness, diligence, presentment
for payment, demand, notice of dishonor and protest and any other notice with
respect to this Subordinated Note Agreement.
(C) None of the rights or interests of the Lender in this
Subordinated Note Agreement may be assigned or otherwise transferred thereby to
any Person other than a member of the TNCL Group or the Saban Group without the
prior written consent of Borrower and the Senior Representative.
(D) No amendment, waiver or modification of this Subordinated
Note Agreement (including, without limitation, the subordination provisions
hereof), and no consent to any departure herefrom, shall be effective unless the
same shall be in writing and signed by the Lender and, if any such amendment,
waiver or modification of this Subordinated Note Agreement (including, without
limitation, the subordination provisions hereof) could adversely affect the
rights or interests of the Senior Representative or any of the other Senior
Creditors under or in respect of this Subordinated Note Agreement, any of the
Loan Documents (as defined in the Credit Agreement), either of these Indentures
or any of the other agreements, instruments or other documents evidencing or
otherwise setting forth the terms of any of the Senior Indebtedness in any
manner, signed by the Senior Representative and/or each of the trustees for the
Senior Notes, and then, in each case, such waiver, modification or consent shall
be effective only in the specific instance and for the specific purpose for
which given; provided that neither of the trustees for the Senior Notes shall be
required to consent to any such amendment, waiver or modification that would not
adversely affect the rights or interests of any of the Senior Notes Creditors.
(E) No failure on the part of the Lender or the Senior
Representative or any of the other Senior Creditors to exercise, and no delay in
exercising, any right, power or privilege hereunder shall operate as a waiver
thereof or a consent thereto; nor shall a single or partial exercise of any such
right, power or privilege preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The remedies provided herein
are cumulative and are not exclusive of any remedies provided by applicable
law."
4. Miscellaneous.
-------------
<PAGE>
4.1 On and after the date hereof, each reference in the Note
Agreement to the terms "this Agreement," "hereunder," "hereof," "hereby,"
"herein" or other similar terms shall be deemed to be a reference to the Note
Agreement as further amended by this First Amendment.
4.2 Except as hereby amended, the Note Agreement shall continue in
full force and effect.
4.3 This First Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts taken together shall constitute but one and the same
instrument.
<PAGE>
IN WITNESS WHEREOF, this First Amendment has been duly executed on the day
and year specified at the beginning hereof.
Borrower: FOX KIDS WORLDWIDE, INC.
By: /s/ Signed by duly authorized officer
--------------------------------------
Name:
--------------------------------
Title:
--------------------------------
Lender: NEWS AMERICA HOLDINGS, INCORPORATED
By: /s/ Signed by duly authorized officer
--------------------------------------
Name:
--------------------------------
Title:
--------------------------------
Senior Representative: CITICORP USA, INC.
By: /s/ Signed by duly authorized officer
--------------------------------------
Name:
--------------------------------
Title:
--------------------------------
<PAGE>
EXHIBIT 10.54
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT, dated as of August 1, 1997 (this
("Agreement"), by and between FOX KIDS WORLDWIDE, INC., a Delaware corporation
(the "Company"), LIBERTY MEDIA CORPORATION, a Delaware corporation ("Liberty"),
and LIBERTY IFE, INC., a Colorado corporation and a wholly owned subsidiary of
Liberty ( "LIFE").
W I T N E S S E T H:
WHEREAS, the Company, Liberty and LIFE are parties to a Contribution
and Exchange Agreement, dated as of June 11, 1997 and amended on the date hereof
(as so amended, the "Contribution Agreement"), pursuant to which LIFE is to
receive on the date hereof, in exchange for certain securities of International
Family Entertainment, Inc. owned by LIFE, 345,000 shares of Series A Preferred
Stock, par value $.001 per share, of the Company (the "Preferred Stock");
WHEREAS, pursuant to Section 2.1(b) of the Contribution Agreement,
LIFE may receive additional shares of Preferred Stock following the date
hereof;
WHEREAS, the shares of Preferred Stock have not been registered under
the Securities Act of 1933, as amended, and are "restricted securities" as that
term is defined in Rule 144 under such Act;
WHEREAS, the Company has agreed to provide Liberty, LIFE and
subsequent holders of the Preferred Stock with the registration rights set forth
herein;
WHEREAS, the security to which the registration rights set forth
herein apply shall be a security that is a "mirror" of the Preferred Stock,
except that the holders of such security shall have no rights or benefits under
the Funding Agreement or the Exchange Agreement (as such terms are defined in
the Contribution Agreement); and
WHEREAS, the execution and delivery of this Agreement satisfies the
condition precedent to the obligations of Liberty and LIFE to consummate the
Contribution set forth in Section 9.8 of the Contribution Agreement.
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth, the parties hereto agree as
follows:
<PAGE>
ARTICLE I
DEFINITIONS
-----------
SECTION 1.1 Definitions. The following terms, as used herein, shall have
-----------
the following meanings:
Affiliate: With respect to any specified Person, any other Person
---------
directly or indirectly controlling, controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
Business Day: Any day other than a Saturday, Sunday or holiday on
------------
which banking institutions located in New York, New York are authorized or
obligated by law, regulation or executive order to close.
Closing Price: As to any shares as of any day, (i) the last sale
-------------
price (or, if no sale price is reported on that day, the average of the bid and
asked prices) on such day of such shares on The Nasdaq Stock Market, or (ii), if
the primary trading market for such shares is not The Nasdaq Stock Market, then
the closing sale price regular way on such day, or, in case no such sale takes
place on such day, the reported closing bid price regular way on such day, in
each case on the principal exchange on which such shares are traded, or (iii)
if the Closing Price of such shares cannot be determined pursuant to one of the
methods specified above, then the average of the bid and asked prices for such
shares on such day as furnished by any New York Stock Exchange member firm
selected from time to time by the Board of Directors of the Company for that
purpose.
Commission: The Securities and Exchange Commission, or any other
----------
federal agency at the time administering the Securities Act and the Exchange
Act.
Common Stock: Any one or more classes or series of common stock of
------------
the Company, including, without limitation, the Class A Common Stock, par value
$.001 per share, and the Class B Common Stock, par value $.001 per share, of the
Company.
Company: As defined in the preamble of this Agreement.
-------
Contribution Agreement: As defined in the first recital above.
----------------------
Exchange Act: The Securities Exchange Act of 1934, as amended, or any
------------
successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, as they each may, from time to time, be in effect.
2
<PAGE>
Holder: A registered holder of shares of Preferred Stock.
------
Initiating Holders: As defined in Section 2.1.
------------------
Initiation Date: As defined in Section 2.1.
---------------
IPO: The initial public offering and sale by the Company of shares of
---
one or more classes or series of Common Stock for its own account in an
underwritten offering pursuant to a registration statement on Form S-1 (or any
successor or similar form) filed under the Securities Act and declared effective
by the Commission.
Liquidation Price: As defined in Section 4 of the Certificate of
-----------------
Designations for the Preferred Stock for purposes of determining the amount
payable to holders of Preferred Stock upon a liquidation, dissolution or winding
up of the Company.
Participating Holders: Those Holders (including Initiating Holders)
---------------------
that participate in a particular registration of Registrable Shares by the
Company pursuant to the provisions of this Agreement.
Person: An individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, limited liability company,
unincorporated organization or government or any agency or political subdivision
thereof.
Prospectus: The prospectus included in the Registration Statement as
----------
of the date it becomes effective under the Securities Act and, in the case of
references to the Prospectus as of a date subsequent to the effective date of
the Registration Statement, as amended or supplemented as of such date,
including all documents incorporated by reference therein, as amended, and each
prospectus supplement relating to the offering and sale of any of the
Registrable Shares.
Public Float Requirement: The Company shall be deemed to have met the
-------------------------
Public Float Requirement if, as of any date of determination, the product of
(i) the number of shares of Common Stock issued in transactions registered
under Section 5 of the Securities Act and outstanding as of such date of
determination and (ii) the Closing Price of such shares, as of such date of
determination, equals not less than $50 million.
Qualifying Preferred Stock: Shares of preferred stock of the Company
--------------------------
issued to a Holder pursuant to Section 2.8 hereof in exchange for an equal
number of shares of Preferred Stock.
Registrable Shares: Shares of Qualifying Preferred Stock and any
------------------
other shares of capital stock of the Company issued in respect of the Preferred
Stock or the Qualifying Preferred Stock as a result of stock splits, stock
dividends, reclassification, recapitalizations, mergers, consolidations or
similar events. Any Registrable Share will cease to be a Registrable Share when
a registration statement covering such Registrable Share has been declared
effective by the Commission and such registration statement has remained
effective for the period specified
3
<PAGE>
in Section 3.1(iii) of this Agreement.
Registration Expenses: All expenses incident to the Company's
---------------------
performance of or compliance with this Agreement, including, without limitation,
(i) all Commission and stock exchange or National Association of Securities
Dealers, Inc. registration and filing fees, (ii) fees and expenses of compliance
with securities or blue sky laws (including, without limitation, reasonable fees
and disbursements of counsel for any underwriters in connection with blue sky
qualifications of Registrable Shares), (iii) printing expenses, messenger and
delivery expenses, (iv) fees and disbursements of counsel for the Company and
all independent certified public accountants (including the expenses of any
annual audit, special audit, if necessary, and "cold comfort" letters required
by or incident to such performance and compliance), (v) the reasonable fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities (other than underwriting discounts and commissions) and (vi) the
reasonable fees and expenses of any special experts or other persons retained by
the Company; provided, however, the term "Registration Expenses" shall not
include, and the Company shall not be responsible for, (x) any underwriting
discounts or commissions or transfer taxes, if any, attributable to the sale of
Registrable Shares or (y) the fees and disbursements of Special Counsel or any
other counsel retained by or for the benefit of any Holder.
Registration Statement: A registration statement of the Company which
-----------------------
covers any Registrable Shares pursuant to the provisions of this Agreement, and
all amendments to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
Requisite Amount of Shares: Shares of Preferred Stock owned by
--------------------------
Initiating Holders, or shares of Qualifying Preferred Stock exchangeable
therefor, with an aggregate Liquidation Price of at least $100 million.
Securities Act: The Securities Act of 1933, as amended, or any
--------------
successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, as they each may, from time to time, be in effect.
Special Counsel: Special securities counsel selected by the
---------------
Initiating Holders to represent the interests of all Participating Holders with
respect to a particular registration.
SECTION 1.2 Interpretation. When a reference is made in this Agreement to
--------------
a Section, such reference shall be to a Section of this Agreement, unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the word "including" is used in this Agreement, it
shall be deemed to be followed by the words "without limitation". The use of any
gender herein shall be deemed to be or include the other genders and the use of
the singular herein shall be deemed to be or include the plural (and vice
----
versa), wherever appropriate. Unless otherwise expressly provided or unless the
- -----
context clearly indicates otherwise, as of any particular time each defined term
used in this Agreement which consists of any particular Persons, securities or
other items or particular types of any thereof is intended to include the
Persons, securities or other
4
<PAGE>
items who or which as of such time are within the scope of such definition,
rather than being confined to the Persons, securities or other items who or
which are within the scope of such definition on the date hereof.
ARTICLE II
REGISTRATION
------------
SECTION 2.1 Demand Registration. Upon the written request (the "Request")
-------------------
of Holder(s) (the "Initiating Holders") that own the Requisite Amount of Shares
that the Company effect the registration under the Securities Act of all or
part of the Registrable Shares to which such Initiating Holders are entitled
pursuant to Section 2.8 below (provided that, if such Request is in respect of
less than the maximum number of Registrable Shares that could be issued to such
Initiating Holders in exchange for their shares of Preferred Stock, the number
of shares requested to be so registered is equal to at least the Requisite
Amount of Shares), and specifying the intended method of disposition of such
Registrable Shares, the Company will promptly give written notice of the Request
to all other Holders (the date of the Company's receipt of the Request being
referred to herein as the "Initiation Date"). The Company shall use its
reasonable commercial efforts to effect, at the earliest practicable date after
the Initiation Date, the registration under the Securities Act of the
Registrable Shares which the Company has been so requested to register (i) by
the Initiating Holders and (ii) by any other Holders who notify the Company in
writing, within 15 days after receiving the Company's notice as hereinabove
provided, of their desire to participate in the registration (whose notice shall
specify the number of Registrable Shares to be so included and the intended
method of disposition), all to the extent necessary to permit the disposition
(in accordance with the intended methods thereof as aforesaid) of the
Registrable Shares so to be registered. Notwithstanding the foregoing, the
Company shall not be required to effect a registration pursuant to this Section
2.1:
(A) until 180 days after the IPO and only if, as of the Initiation
Date, the Public Float Requirement is met;
(B) subject to Section 2.3(iii), during the 90-day period after the
effectiveness of any registration statement of the Company involving a
primary underwritten public offering of shares of Common Stock or
securities of the Company that are convertible into or exercisable for
shares of Common Stock (or such shorter period as (x) may be agreed to by
the managing underwriters for such offering or (y) may be applicable to any
other stockholder of the Company that is required to enter into a stand-
still agreement in respect of such offering); or
(C) during the 90-day period after the effectiveness of any
registration statement of the Company involving a non-underwritten primary
public offering of Common Stock or securities of the Company that are
convertible into or exercisable for shares of Common Stock (other than a
registration statement on Form S-4 or Form S-8 or any successor or
5
<PAGE>
similar form) (or such shorter period as may be agreed to by the Company).
SECTION 2.2 Number of Demands. The Company shall not be required to
-----------------
effect a registration pursuant to Section 2.1 more than twice. Subject to
Section 2.5, a registration requested pursuant to this Section 2.1 will not be
deemed to have been effected unless the registration statement relating thereto
has become effective and has remained effective for the period set forth in
Section 2.3(iii) (as adjusted pursuant to Section 3.2(iii)). The Company may not
include in a registration effected pursuant to Section 2.1 any shares for the
account of the Company or for the account of any stockholder other than a
Holder. The Company shall not be obligated to register Registrable Shares
issuable to a Holder if, in the opinion of the counsel to the Company reasonably
acceptable to such Holder, such Holders's proposed method of disposition of such
Registrable Shares may be lawfully effected without registering such shares
under the Securities Act; provided, however, that the Company shall not have the
right to refuse a registration of Registrable Shares otherwise permitted under
this Agreement if the proposed method of distribution of such shares is an
underwritten public offering.
SECTION 2.3 Company's Right to Postpone Registration. (a) The Company
----------------------------------------
shall be entitled to postpone the filing of a registration statement otherwise
required to be prepared and filed by it pursuant to Section 2.1 for a
reasonable period of time if, at the time it receives a Request:
(i) such registration would require the public disclosure of
material non-public information concerning any transaction or negotiations
involving the Company, or any other information, that, in the opinion of
counsel to the Company, is not yet required to be publicly disclosed and
that the Board, in good faith, determines would materially interfere with
such transaction or negotiations or would otherwise be materially adverse
to the Company; provided such postponement is for a period of time that
does not exceed the earlier of (x) 180 days from the Initiation Date or
(ii) the date such non-public information is publicly disclosed by the
Company.
(ii) such registration would interfere, in the good faith judgment of
the Board, with bona fide financing, acquisition or disposition plans of
the Company or with any other material transaction involving the Company or
any of its majority-owned subsidiaries; provided such postponement is for a
period of time that does not exceed a period of 180 days from the
Initiation Date; or
(iii) the Company proposes to file a registration statement under the
Securities Act for the offering and sale of securities for its own account
in an underwritten offering, and the managing underwriter(s) therefor shall
advise the Company in writing that in their opinion the filing or
effectuation of a registration requested pursuant to Section 2.1 would
adversely affect the success of the offering of the securities proposed to
be registered for the account of the Company; provided such postponement is
for a period of time not to exceed 150 days from the Initiation Date (or
such shorter period as (x) may be agreed to by the managing underwriter(s)
for such offering or (y) may be applicable to any other stockholder of the
Company that is required to enter into a stand-still agreement in respect
of such offering).
6
<PAGE>
(b) If the Company shall postpone the filing of any registration statement
requested pursuant to Section 2.1, the holders of a majority of the Registrable
Shares requested by the Holders (including the Initiating Holders) to be
included in such registration statement shall have the right to withdraw the
Request for such registration by giving written notice to the Company within 15
days after the date of the Company's notice of postponement. In such event, the
withdrawn Request shall not be counted as a demand for registration for purposes
of Section 2.1 or Section 2.2.
SECTION 2.4 Underwritten Offerings. If the registration requested by the
----------------------
Initiating Holders pursuant to Section 2.1 is to be an underwritten offering,
the Initiating Holders shall have the right to select the manager or co-managers
of the offering, provided such manager or co-managers are acceptable to the
Company in its sole discretion. Each Holder who subsequently requests that any
of his Registrable Shares be included in such registration must sell such
Registrable Shares to the underwriters on the same terms and conditions as apply
to the Initiating Holders.
SECTION 2.5 Revocation of Request. The holders of a majority of the
---------------------
Registrable Shares requested by the Participating Holders to be included in a
registration pursuant to Section 2.1 may revoke any Request prior to the
effectiveness of the related registration statement, provided that such Request
shall, subject to Section 2.3(b), still be counted a demand for registration
pursuant to Section 2.1.
SECTION 2.6 Payment of Registration Expenses. The Company will pay all
--------------------------------
Registration Expenses in connection with the registration of Registrable Shares
effected by the Company pursuant to Section 2.1 (including a registration that
is revoked in accordance with Section 2.3(b)), and each Participating Holder
will pay (i) all underwriting discounts and commissions and transfer taxes, if
any, relating to the sale or other disposition of such Holder's Registrable
Shares pursuant to such registration and (y) its pro rata share (or such other
portion as it shall agree upon with the other Participating Holders) of the fees
and disbursements of Special Counsel.
SECTION 2.7 No Piggyback Rights. The Holders shall not have the right to
-------------------
include any Registrable Shares in any registration statement prepared and filed
by the Company for its own account or for the account of any other
stockholder(s) of the Company.
SECTION 2.8 Exchange of Preferred Stock for Qualifying Preferred Stock.
----------------------------------------------------------
The Company shall, immediately prior to the effectiveness of a Registration
Statement requested pursuant to Section 2.1, exchange with the Participating
Holders, on a one-for-one basis, shares of duly authorized and validly issued
Qualifying Preferred Stock for shares of Preferred Stock owned by such holders,
such that such Participating Holders shall own, immediately prior to such
effectiveness, the number of shares of Qualifying Preferred Stock which have
been registered on their behalf pursuant to such Registration Statement. The
Qualifying Preferred Stock shall have terms that are identical to the Preferred
Stock (including but not limited to a carry-over of any accrued but unpaid
dividends on, and the Liquidation Preference (including any cumulated dividends)
of, the shares of Preferred Stock exchanged), except that such Qualifying
Preferred Stock shall not have any rights under, and shall not in any manner
refer to, the Funding Agreement or the Exchange Agreement.
7
<PAGE>
ARTICLE III
REGISTRATION PROCEDURES
-----------------------
SECTION 3.1 Company's Obligations with Respect to Registration. If and
---------------------------------------------------
whenever the Company is required to use its reasonable commercial efforts to
effect the registration under the Securities Act of Registrable Shares owned by
any of the Holders, the Company shall, as expeditiously as possible:
(i) prepare and file with the Commission a Registration Statement
(on a form for which the Company then qualifies and which shall be
available for the sale of Registrable Shares in accordance with the
intended methods of disposition thereof), and use its reasonable commercial
efforts to cause such Registration Statement to become effective as soon as
practicable; provided, however, that before filing a Registration Statement
and the related Prospectus or any pre-effective amendments thereto the
Company shall afford the Participating Holders, Special Counsel and any
managing underwriters and their counsel an opportunity to review copies
thereof. The Company shall not file the Registration Statement or any
amendments thereto if any of the aforementioned Persons shall reasonably
object on a timely basis;
(ii) notify the Participating Holders, Special Counsel and any
managing underwriters and their counsel (A) of the receipt of any comments
from the Commission on the Registration Statement prior to its becoming
effective, and the Company's responses thereto, and (B) when the
Registration Statement becomes effective;
(iii) promptly prepare and file with the Commission such post-
effective amendments to the Registration Statement and supplements to the
related Prospectus (or file a Form 8-K or other appropriate report that
will be incorporated by reference into the Registration Statement) as may
be necessary to keep such Registration Statement effective and to comply
with the provisions of the Securities Act with respect to the disposition
of the Registrable Shares covered by such Registration Statement until the
earlier of such time as all of such Registrable Shares have been disposed
of in accordance with the intended methods of disposition thereof as set
forth in the Registration Statement or the expiration of 180 days after
such Registration Statement first becomes effective; provided, however,
that before filing any post-effective amendment to the Registration
Statement or supplement to the related Prospectus the Company shall afford
the Participating Holders, Special Counsel and any managing underwriters
and their counsel an opportunity to review copies thereof. The Company
shall not file any such post-effective amendment or supplement if any of
the aforementioned Persons shall reasonably object on a timely basis;
(iv) notify the Participating Holders, Special Counsel and any
managing underwriters and their counsel (A) when the filing of a post-
effective amendment to the Registration Statement or a supplement to the
Prospectus is required, when the same is filed, and in the case of a post-
effective amendment, when the same becomes effective, (B) of any
8
<PAGE>
request by the Commission or any state securities authority for any
amendment of or supplement to the Registration Statement or the Prospectus
or for additional information, (C) of the entry of any stop order
suspending the effectiveness of the Registration Statement or of the
initiation of any proceedings for that purpose, (D) of the happening of any
event or the failure of any event to occur or the discovery of any facts or
otherwise that makes any statement made in the Registration Statement or
the Prospectus relating thereto untrue in any material respect or that
causes such Registration Statement or Prospectus to omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading and (E) of the
reasonable determination by the Company that a post-effective amendment to
the Registration Statement would be appropriate;
(v) use commercially reasonable efforts to obtain the withdrawal of
any stop order suspending the effectiveness of the Registration Statement
as soon as reasonably practicable;
(vi) furnish to the Participating Holders, Special Counsel and any
managing underwriters and their counsel a conformed copy of the
Registration Statement and of each pre- and post-effective amendment
thereto (including, in each case, all amendments thereto), and such number
of copies of the final Prospectus and of each supplement thereto as may
reasonably be required to facilitate the distribution of Registrable
Shares in accordance with the method(s) of distribution described in the
Registration Statement;
(vii) cooperate with the Participating Holders and any managing
underwriters to facilitate the timely preparation and delivery of
certificates representing Registrable Shares to be sold under the
Registration Statement not bearing any restrictive legends and in such
denominations and registered in such names as the Participating Holders or
such managing underwriters may reasonably request at least two Business
Days prior to the closing of the sale of such Registrable Shares pursuant
to the Registration Statement;
(viii) make generally available to its securityholders earning
statements satisfying the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 45 days after the end of the 12-month period
(or 90 days after the end of any 12-month period if such period is a fiscal
year), commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement, which
statements shall cover said 12-month period;
(ix) register or qualify the Registrable Shares covered by the
Registration Statement under the securities or blue sky laws of such
jurisdictions as any Participating Holder or any managing underwriters may
designate and do any and all other acts and things which may be necessary
to enable the Participating Holders or any underwriters to consummate the
disposition in such jurisdictions of Registrable Shares in accordance with
the intended method of distribution thereof as described in such
Registration Statement;
9
<PAGE>
provided, however, that the Company shall in no event be required to
qualify to do business as a foreign corporation or as a dealer in any
jurisdiction where it is not so qualified, to conform its capitalization or
the composition of its assets at the time to the securities or blue sky
laws of such jurisdiction, to execute or file any general consent to
service of process under the laws of any jurisdiction, to take any action
that would subject it to service of process in suits other than those
arising out of the offer and sale of Registrable Shares covered by such
Registration Statement, or to subject itself to taxation in any
jurisdiction where it has not theretofore done so;
(x) use reasonable efforts to cause the Registrable Shares covered
by the Registration Statement to be listed on the principal exchange or
exchanges or qualified for trading on the principal over-the-counter market
on which shares of Common Stock are listed or traded at the time of the
sale of such Registrable Shares pursuant to the Registration Statement;
(xi) make available for inspection by Special Counsel and, in the
case of an underwritten offering, any managing underwriters and their
counsel, such financial and other records, pertinent corporate documents
and properties of the Company and its Affiliates (collectively, the
"Records") as shall be reasonably necessary to enable the Participating
Holders and any such managing underwriters to exercise their due diligence
responsibility, and make available the executive officers of the Company
and of such Affiliates to respond to questions relevant to such due
diligence examination. Records which the Company determines, in good faith,
to be confidential shall be subject to the terms of a customary
confidentiality agreement to be entered into among the Company, the
Participating Holders and any managing underwriters;
(xii) if the Participating Holders are to effect an underwritten
offering of Registrable Shares, the Company shall: (w) enter into such
agreements (including underwriting agreements) as are customary in
underwritten offerings; (x) obtain opinions of counsel to the Company and
updates thereof (which may be in the form of a reliance letter), in form
and substance reasonably satisfactory to the managing underwriters, their
counsel and Special Counsel and addressed to the underwriters and the
Participating Holders, covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as may be
reasonably requested by such underwriters, their counsel and Special
Counsel (it being agreed that the matters to be covered by such opinion may
be subject to customary qualifications and exceptions); and (y) obtain
"cold comfort" letters and updates thereof in form and substance reasonably
satisfactory to the managing underwriters, their counsel and Special
Counsel from the independent certified public accountants of the Company
(and, if necessary, any other independent certified public accountants of
any subsidiary of the Company or of any business acquired by the Company
for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each of the
underwriters and the Participating Holders, such letters to be in customary
form and covering matters of the type customarily covered in "cold comfort"
letters in connection with underwritten offerings and such other matters as
10
<PAGE>
reasonably requested by such underwriters in accordance with Statement on
Auditing Standards No. 72; and
(xiii) otherwise comply with applicable rules and regulations of the
Commission and use its commercially reasonable efforts to take such other
actions as may be required to permit unrestricted sales of Registrable
Shares under the Registration Statement in accordance with the intended
methods of distribution described therein.
SECTION 3.2 Holders' Obligations with Respect to Registration. The
-------------------------------------------------
Company's obligations under this Agreement to the Holders shall be conditioned
upon the compliance by the Participating Holders with the following in
connection with any registration of Registrable Shares pursuant to the
provisions of this Agreement:
(i) the Participating Holders shall cooperate with the Company in
connection with the preparation of the Registration Statement and related
Prospectus and, for so long as the Company is obligated to keep the
Registration Statement effective, the Participating Holders shall provide
to the Company, in writing, for use in the Registration Statement and the
Prospectus, all information regarding the Participating Holders and such
other information as may be reasonably required to enable the Company to
prepare the Registration Statement and Prospectus covering the Registrable
Shares and to maintain the currency and effectiveness thereof;
(ii) during such time as the Participating Holders may be engaged in
a distribution of the Registrable Shares, the Participating Holders shall
comply with all applicable laws, rules and regulations, including, but not
limited to, Regulation M promulgated by the Commission under the Exchange
Act and pursuant thereto will, among other things: (A) not engage in any
stabilization activity in connection with the securities of the Company in
contravention of such rules; (B) distribute the Registrable Shares solely
in the manner described in the Registration Statement; and (C) not bid for
or purchase any securities of the Company or attempt to induce any person
to purchase any securities of the Company other than as permitted under the
Exchange Act; and
(iii) on notice from the Company of the happening of any of the events
specified in clauses (A), (B), (C), (D) or (E) of Section 3.1(iv), the
Participating Holders shall cease offering or distributing the Registrable
Shares until such time as the Company notifies the Participating Holders
that offering and distribution of the Registrable Shares may recommence. In
the event the Company shall give any such notice, the 180-day period
referred to in Section 3.1(iii) shall be extended by the number of days
during the period from and including the date of the giving of such notice
to and including the date when (x) the Participating Holders have been
notified by the Company that offering and distribution of the Registrable
Shares may recommence and (y) each Participating Holder (or, in the case of
an underwritten offering, the underwriters) has received the copies of the
supplemented or amended Prospectus contemplated by Section 3.1 (vi).
11
<PAGE>
SECTION 3.3 Pro Rata Participation in Certain Underwritten Offerings. If
--------------------------------------------------------
a registration pursuant to Section 2.1 involves an underwritten offering and the
managing underwriters shall advise the Participating Holders and the Company in
writing that, in their opinion, the number of Registrable Shares proposed to be
included in such registration exceeds the number which can be sold in such
offering without adversely affecting the marketability of such shares, including
the price at which such shares can be sold, the Company shall include in such
registration: First, the Registrable Shares requested to be included in such
-----
registration by the Initiating Holders (provided that if the number of such
Registrable Shares exceeds the number which the Participating Holders and the
Company have been advised can be sold without having the adverse effect referred
to above, the number of such Registrable Shares included in such registration
shall be allocated pro rata among all the Initiating Holders on the basis of the
relative number of Registrable Shares each such Initiating Holder has requested
to be included in such registration, or on such other basis as all such
Initiating Holders shall agree to in writing); and Second, if the number of
------
Registrable Shares requested to be included in such registration by the
Initiating Holders is less than the number which the Participating Holders and
the Company have been advised can be sold in such offering without having the
adverse effect referred to above, then there shall be included in such
registration a number of Registrable Shares requested to be included therein by
the Participating Holders other than the Initiating Holders equal to the number
that does not exceed, in combination with the Registrable Shares of the
Initiating Holders to be included in such registration, the number of
Registrable Shares which the Participating Holders and the Company have been
advised can be sold without having the adverse effect referred to above
(allocated pro rata among all such Participating Holders other than Initiating
Holders on the basis of the relative number of Registrable Shares each such
Participating Holder has requested to be included in such registration, or on
such other basis as all of such Participating Holders shall agree to in
writing).
ARTICLE
HOLDBACK AGREEMENT
------------------
If any registration of Registrable Shares shall be in connection with
an underwritten public offering, the Company agrees not to effect any public
sale or distribution of any security that is substantially similar to the
Preferred Stock or the Qualifying Preferred Stock (it being acknowledged that
the Common Stock is not substantially similar to either such security) or of any
security convertible into or exchangeable or exercisable for any such
substantially similar security (other than any such sale or distribution of such
securities in connection with any merger or consolidation by the Company or any
subsidiary of the Company or in connection with an employee stock option or
other benefit plan) during the 90-day period beginning on the effective date of
the related Registration Statement (unless the underwriters managing such public
offering otherwise agree).
12
<PAGE>
ARTICLE V
INDEMNIFICATION
---------------
SECTION 5.1 Indemnification by the Company. The Company agrees to
------------------------------
indemnify and hold harmless each Participating Holder, and each person, if any,
who controls such Participating Holder within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act, from and against any
and all losses, claims, damages, liabilities and expenses (including reasonable
costs of investigation) arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or the Prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or based upon any omission or alleged
omission to state therein 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, except insofar as such losses, claims,
damages, liabilities or expenses arise out of or are based upon any such untrue
statement or omission or allegation thereof based upon information furnished in
writing to the Company by such Participating Holder expressly for use therein;
provided, however, that the Company shall not indemnify any Participating Holder
or any person who controls any such Participating Holder from any such losses,
claims, damages or liabilities alleged by any person who purchased Registrable
Shares from such Participating Holder if the untrue statement, omission or
allegation thereof upon which such losses, claims, damages or liabilities are
based was made in: (i) any preliminary prospectus, if a copy of the Prospectus
(as then amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) was not sent or given by or on behalf of such
Participating Holder to such person at or prior to the written confirmation of
the sale of Registrable Shares to such person, and if the Prospectus (as so
amended or supplemented) corrected the untrue statement or omission giving rise
to such loss, claim, damage or liability; or (ii) any Prospectus used by such
Participating Holder or any person who controls such Participating Holder, after
such time as the Company advised such Participating Holder that the filing of a
post-effective amendment or supplement thereto was required, except the
Prospectus as so amended or supplemented All fees and expenses which are
reimbursable pursuant to this Section 5.1 shall be reimbursed as they are
incurred.
SECTION 5.2 Indemnification Mechanics. If any action or proceeding
-------------------------
(including any governmental investigation) shall be brought or asserted against
any Participating Holder or any person controlling such Participating Holder in
respect of which indemnity may be sought from the Company, such Participating
Holder or such controlling person shall promptly notify the Company in writing,
and the Company shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to such Participating Holder or controlling
person and the payment of all expenses. Any omission so to notify the Company
shall not, however, relieve the Company from any liability which it may have to
any indemnified party otherwise than under this Article V. A Participating
Holder or any person controlling a Participating Holder shall have the right to
employ separate counsel in any such action or proceeding and to participate in
the defense thereof, but the fees and expenses of such separate counsel shall be
such Participating Holder's expense or the expense of such controlling person
unless (a) the Company has agreed to pay such fees and expenses or (b) the
Company shall have failed to assume the defense of such action or proceeding and
employ
13
<PAGE>
counsel reasonably satisfactory to such Participating Holder or controlling
person in any such action or proceeding or (c) the named parties to any such
action or proceeding (including any impleaded parties) include both such
Participating Holder or such controlling person and the Company and such
Participating Holder or such controlling person shall have been advised by
counsel to such Participating Holder or such controlling person that there may
be a conflict of interest between such Participating Holder or such controlling
person and the Company in the conduct of the defense of such action (in which
case, if the Participating Holder or such controlling person notifies the
Company in writing that it elects to employ separate counsel at the expense of
the Company, the Company shall not have the right to assume the defense of such
action or proceeding on behalf of the Participating Holder or such controlling
person), it being understood, however, that the Company shall not, in connection
with any one such action or proceeding or separate but substantially similar or
related actions or proceedings arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (unless the members of such firm are not admitted to
practice in a jurisdiction where an action is pending, in which case the Company
shall pay the reasonable fees and expenses of one additional firm of attorneys
to act as local counsel in such jurisdiction). The Company shall not be liable
for any settlement of any such action or proceeding effected without its written
consent, but if settled with its written consent, or if there be a final
judgment for the plaintiff in any such action or proceeding, the Company agrees
to indemnify and hold harmless such Participating Holder and any such
controlling person from and against any loss or liability by reason of such
settlement or judgment.
SECTION 5.3 Indemnification by Participating Holders. The Participating
----------------------------------------
Holders, jointly and severally, agree to indemnify and hold harmless the
Company, including its directors and each of its officers, and each person, if
any, who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, to the same extent as the
foregoing indemnity from the Company to such Participating Holders, but only
with respect to information furnished in writing by such Participating Holders
expressly for use in the Registration Statement, the related Prospectus, or any
amendment or supplement thereto, or any preliminary prospectus. In case any
action or proceeding shall be brought against the Company or the Company's
directors or officers or any such controlling person, in respect of which
indemnity may be sought against any Participating Holder, such Participating
Holder shall have the rights and duties given to the Company, and the Company or
the Company's directors or officers or such controlling person shall have the
rights and duties given to such Participating Holder, by Section 5.2.
SECTION 5.4 Contribution. (a) If the indemnification provided for in
------------
this Article V is unavailable to an indemnified party under Section 5.1 or
Section 5.3 in respect of any losses, claims, damages or liabilities referred to
therein (other than by reason of such indemnified party's failure to comply with
the first sentence of Section 5.2), then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims, damages
or liabilities in such proportion as is appropriate to reflect the relative
fault of the Company on the one hand and of the Participating Holders on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and of the
Participating Holders on the other shall be
14
<PAGE>
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the
Participating Holders and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims, damages
and liabilities referred to above shall be deemed to include, subject to the
limitations set forth in Section 5.2, any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim.
(b) Each of the Company and the Participating Holders agrees that it
would not be just and equitable if contribution pursuant to this Section 5.4
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in
Section 5.4(a). Notwithstanding the provisions of this Section 5.4, no
Participating Holder shall be required to contribute any amount in excess of the
amount by which the total price at which the Registrable Shares owned by such
Participating Holder were offered to the public exceeds the amount of any
damages which such Participating Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
SECTION 5.5 Enforceability. The indemnity and contribution agreements
--------------
contained in this Article V shall remain operative and in full force and effect
regardless of (a) any investigation made by or on behalf of any Participating
Holders, by or on behalf of any person controlling such Participating Holders or
by or on behalf of the Company or (b) any termination of this Agreement.
ARTICLE VI
MISCELLANEOUS
-------------
SECTION 6.1 No Inconsistent Agreements. The Company represents and
--------------------------
warrants to, and covenants and agrees with, Liberty, LIFE and each subsequent
Holder that the Company has not entered into and, on and after the date of this
Agreement, will not enter into, any agreement which is inconsistent with the
rights granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with any rights granted by the Company to
the holders of the Company's issued and outstanding securities other than the
Preferred Stock.
SECTION 6.2 Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this Section 6.2, may not be amended, modified or
supplemented, and waivers of compliance with the provisions hereof may not be
given, unless and until the Company shall have obtained the written consent of
Holders of at least 66 2/3% of the Registrable Shares.
15
<PAGE>
SECTION 6.3 Notices. (a) All notices and other communications provided
-------
for or permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telecopier, or any courier guaranteeing overnight delivery (i)
if to a Holder, at its address as set forth in the register of the Company, or
at such other address as may be provided to the Company by a Holder in writing
and (ii) if to the Company, to it at c/o News America Publishing Incorporated,
1211 Avenue of the Americas, New York, New York 10036, Attention: Arthur M.
Siskind, Esq., Telecopy No.: 212-768-2029, or at such other address as may be
provided to the Holders in writing, with a copy to Mel Woods, c/o Fox Kids
Worldwide, Inc., 10960 Wilshire Blvd., Los Angeles, California 90024.
(b) All such notices and communications shall be deemed to have been
duly given: (i) if delivered by hand, at the time received; (ii) if mailed,
three Business Days after being deposited in the mail, postage prepaid; (iii) if
telecopied, when receipt is acknowledged; and (iv) if timely delivered to an air
courier guaranteeing overnight delivery, on the next Business Day.
SECTION 6.4 Successors and Assigns. (a) This Agreement shall inure to
----------------------
the benefit of and be binding upon the successors, assigns and transferees of
each of the parties, including, without limitation and without the need for an
express assignment, the successors, assigns and transferees of Liberty and LIFE
and each subsequent Holder. If any transferee of Liberty or LIFE or any
subsequent Holder shall acquire any shares of Preferred Stock, such shares shall
be held subject to all of the terms of this Agreement, and by taking and holding
such shares, such Person shall be conclusively deemed to have agreed to be bound
by and to perform all of the terms and provisions of this Agreement and such
person shall be entitled to receive the benefits hereof.
(b) The Company may not assign its right or delegate its duties under
this Agreement to any Person without the prior written consent of Holders of at
least 66 2/3% of the Registrable Shares.
SECTION 6.5 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
SECTION 6.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS.
SECTION 6.7 Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
SECTION 6.8 Remedies. The Company acknowledges and agrees that in the
--------
event of any breach of this Agreement by it, the Holders would be irreparably
harmed and could not be made
16
<PAGE>
whole by monetary damages. The Company accordingly agrees to waive the defense
in any action for specific performance that a remedy at law would be adequate
and that the Holders, in addition to any other remedy to which they may be
entitled at law or in equity, shall be entitled to compel specific performance
of this Agreement in any action brought in any court.
17
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
FOX KIDS WORLDWIDE, INC.
By: /s/ Jay Itzkowitz
---------------------------------
Name:
Title:
LIBERTY MEDIA CORPORATION
By: /s/ Robert Bennett
---------------------------------
Name: Robert R. Bennett
Title: President and CEO
LIBERTY IFE, INC.
By: /s/ Robert Bennett
---------------------------------
Name: Robert R. Bennett
Title: President and CEO
18
<PAGE>
PAGE>
EXHIBIT 12
FOX KIDS WORLDWIDE, INC.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
JUNE 30, 1997 SEPTEMBER 30, 1997
EIGHT MONTHS ------------------------------------ ------------------------------------
ENDED PROFORMA PROFORMA
JUNE 30, 1996 ACTUAL PROFORMA AS ADJUSTED ACTUAL PROFORMA AS ADJUSTED
------------- ---------- ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
FIXED CHARGES
INTEREST EXPENSE, NET OF
CAPITALIZED INTEREST.......... 624,000 1,938,000 147,497,000 153,601,000 18,402,000 37,745,000 39,912,000
INTEREST CAPITALIZED DURING
THE PERIOD.................... 471,000 1,923,000 777,000 777,000 552,000 206,000 206,000
AMORTIZATION OF DEBT ISSUE
COSTS......................... 261,000 288,000 1,469,000 3,482,000 412,000 561,000 1,064,000
PORTION OF RENT EXPENSE
CONSIDERED INTEREST........... 994,000 1,411,000 2,034,000 2,034,000 542,000 595,000 595,000
---------- ---------- ----------- ----------- ---------- ----------- -----------
2,350,000 5,560,000 151,777,000 159,894,000 19,908,000 39,107,000 41,777,000
EARNINGS
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES......................... 49,874,000 55,007,000 (31,665,000) (39,782,000) 12,000 (15,689,000) (18,359,000)
FIXED CHARGES, LESS CAPITALIZED
INTEREST...................... 1,879,000 3,637,000 151,000,000 159,117,000 19,356,000 38,901,000 41,571,000
---------- ---------- ----------- ----------- ---------- ----------- -----------
51,753,000 58,644,000 119,335,000 119,335,000 19,368,000 23,212,000 23,212,000
RATIO OF EARNINGS TO FIXED
CHARGES......................... 22.02 10.55 - - - - -
EARNINGS DEFICIENCY.............. 0 0 (32,442,000) (40,559,000) (540,000) (15,895,000) (18,565,000)
</TABLE>
<PAGE>
EXHIBIT 21.1
<TABLE>
<CAPTION>
SUBSIDIARY JURISDICTION
- ---------- ------------
<S> <C>
Angel Grove Productions, Inc. California
Bugboy Productions, Inc. California
CyberProd, Inc. California
Erik Productions California
Fox Kids (Latin America), Inc. California
Fox Kids Europe Holdings, Inc. California
Fox Kids Holdings, L.L.C. Delaware
Fox Kids Networks-Europe, Inc. California
Fox Kids Worldwide, L.L.C. Delaware
Ian Productions, Inc. California
InterProd, Inc. California
Kids Rock, Inc. California
Laurel Way Productions, Inc. California
Melville Productions, Inc. California
MMPR Productions California
Pocket Productions, Inc. California
Saban Domestic Services, Inc. California
Saban Foods, Inc. California
Saban International Services, Inc. California
Saban/Scherick Productions, Inc. California
Saban Entertainment, Inc. Delaware
FCN Holding, Inc. Delaware
FCNH Sub, Inc. Delaware
Fox Childrens Network, Inc. Delaware
Storymakers, Inc. Delaware
Fox Kid's Music, Inc. Delaware
Fox Children's Music, Inc. Delaware
IFE Direct Marketing, Inc. Delaware
Calvin Gilmore Productions, Inc. Delaware
Lynnhaven Acquisition Corp. Virginia
MTM Acquisition Company, Inc. Delaware
Game TV, Inc. Delaware
Family Channel Pictures, Inc. Delaware
Cable Health TV, Inc. Delaware
Fit TV Partnership Delaware
IFE Jack Acquisition Corp. Delaware
Body By Jake Enterprises, L.L.C. Delaware
IFE Latin America, Inc. Delaware
United Family Communications, L.L.C. Delaware
IFE China, Inc. Delaware
Teen Dream Productions, Inc. California
International Family Entertainment, Inc. Delaware
</TABLE>
<PAGE>
<TABLE>
<S> <C>
United States Family Entertainment, Inc. Delaware
MTM Holding Company, Inc. Delaware
MTM Entertainment, Inc. Delaware
Company Six, Ltd. Delaware
Earth Productions, Inc. Delaware
Family Development Corp. Delaware
Family Game Shows, Inc. Delaware
Home Productions, Inc. Delaware
MTM Enterprises, Inc. California
Music to Music, Inc. Delaware
MTM Consumer Products, Inc. Delaware
Melody to Melody, Inc. Delaware
Apollo Productions, Inc. Delaware
Blanket Show Productions, inc. Delaware
Cape Productions, Inc. Delaware
Ditchdigger Productions, Inc. Delaware
Family Challenge Productions, Inc. Delaware
Good News Productions, Inc. Delaware
Kipper Productions, Inc. Delaware
Mimsey Music, Inc. California
MTM Music, Inc. California
Pretender Productions, Inc. Delaware
Queens Productions, Inc. Delaware
Sparks Productions, Inc. Delaware
Treasure Productions, Inc. Delaware
Creativite et Developement - Paris, France
Fox Kids Europe Limited United Kingdom
Fox Kids France SARL Paris, France
Fox Kids International Programming A.V.V. Aruba
Saban Entertainment Germany GmbH Munich, Germany
Saban Entertainment (U.K.), Limited London, England
Saban International N.V. Curacao, Netherlands, Antilles
Saban International Paris SARL Paris, France
Saban Merchandising and Licensing GmbH Munich, Germany
TV-10, B.V. Netherlands
Saban Entertainment Italy SRL Italy
Asian Television AdvertisingLLC Delaware
Monaco Productions (Jurisdiction ?)
The Family Channel, Limited England and Wales
Saban Merchandising, Inc. California
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Hernando Holdings Limited British Virgin Islands
Pretender Productions Ltd. Canada
</TABLE>
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts,"
"Selected Historical Consolidated Financial Data" and to the use of our
reports dated September 29, 1997, except for the 2nd, 3rd, 6th, and 7th
sentence of the 35th paragraph of Note 1, as to which the date is January 21,
1998, with respect to FCN Holding, Inc., Saban Entertainment, Inc. and Fox
Kids Worldwide, L.L.C. (from and after the date of the Reorganization, Fox
Kids Worldwide, Inc.), September 27, 1996, except for the second paragraph of
Note 10 as to which the date is September 29, 1997 with respect to FCN
Holding, Inc. and September 27, 1996 except for the third paragraph of Note 11
as to which the date is September 29, 1997 with respect to Saban
Entertainment, Inc., in Amendment No. 1 to the Registration Statement (Form S-
1 No. 333-12995) and related Prospectus of Fox Kids Worldwide, Inc. for the
registration of 9 1/4% Senior Notes Due 2007 and 10 1/4% Senior Discount Notes
Due 2007.
Our audits also included the financial statement schedules listed in Item
16(b). These schedules are the responsibility of the company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
the financial statement schedules referred to above, when considered in
relation to the basic financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
Ernst & Young LLP
Los Angeles, California
January 23, 1998
<PAGE>
EXHIBIT 23.3
The Board of Directors
International Family Entertainment, Inc.:
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Norfolk, Virginia
January 23, 1998
<PAGE>
EXHIBIT 24.2
POWER OF ATTORNEY
The person whose signature appears below constitutes and appoints Haim Saban and
Mel Woods and each of them, as his true and lawful attorneys-in-fact and agents
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any or all amendments
(including post effective amendments) to this registration statement and new
registration statement filed pursuant to Rule 462(b) of the Securities Act of
1933 and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the foregoing, as fully to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, other either of them, or their substitutes may
lawfully do or cause to be done by virtue hereof.
/s/ Lawrence Jacobson
- ----------------------------
Lawrence Jacobson
Director
Fox Kids Worldwide, Inc.
Dated: January 22, 1998
ACKNOWLEDGMENT
State of California, County of Los Angeles
On, January 22, 1998, before me Veronica S. Arroyo, a Notary Public, personally
appeared Lawrence Jacobson, Director, Fox Kids Worldwide, Inc., personally known
to me or proved to me on the basis of satisfactory evidence to be the person
whose name is subscribed to the within instrument and acknowledged to me that he
executed the same in his authorized capacity, and that by his signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.
Witness may hand and official seal.
----------------------------------
/s/ Veronica S Arroyo VERONICA S. ARROYO
- --------------------- Comm. # 1084981
Signature of Notary NOTARY PUBLIC CALIFORNIA
Los Angeles County
My Comm. Expires Jan. 31, 2003
----------------------------------
<PAGE>
EXHIBIT 25.1
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
----------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------------------
FOX KIDS WORLDWIDE, INC.
(Exact name of obligor as specified in its charter)
Delaware 95-4596247
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
10960 Wilshire Boulevard
Los Angeles, California 90024
(Address of principal executive offices) (Zip code)
______________________
9 1/4% Senior Notes Due 2007
(Title of the indenture securities)
================================================================================
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT
IS SUBJECT.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Name Address
- -----------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE 7a-
29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York (formerly
Irving Trust Company) as now in effect, which contains the authority to
commence business and a grant of powers to exercise corporate trust
powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with
Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed
with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed
with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a
corporation organized and existing under the laws of the State of New York, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 21st day of January, 1998.
THE BANK OF NEW YORK
By: /s/ VAN K. BROWN
-------------------------------
Name: VAN K. BROWN
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE>
EXHIBIT 7
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business September 30,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin...................... $ 5,004,638
Interest-bearing balances.............. 1,271,514
Securities:
Held-to-maturity securities............ 1,105,782
Available-for-sale securities.......... 3,164,271
Federal funds sold and Securities pur-
chased under agreements to resell........ 5,723,829
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................34,916,196
LESS: Allowance for loan and
lease losses ..............581,177
LESS: Allocated transfer risk
reserve........................429
Loans and leases, net of unearned
income, allowance, and reserve 34,334,590
Assets held in trading accounts.......... 2,035,284
Premises and fixed assets (including
capitalized leases).................... 671,664
Other real estate owned.................. 13,306
Investments in unconsolidated
subsidiaries and associated
companies.............................. 210,685
Customers' liability to this bank on
acceptances outstanding................ 1,463,446
Intangible assets........................ 753,190
Other assets............................. 1,784,796
-----------
Total assets............................. $57,536,995
===========
LIABILITIES
Deposits:
In domestic offices.................... $27,270,824
Noninterest-bearing ......12,160,977
Interest-bearing .........15,109,847
In foreign offices, Edge and
Agreement subsidiaries, and IBFs....... 14,687,806
Noninterest-bearing .........657,479
Interest-bearing .........14,030,327
Federal funds purchased and Securities
sold under agreements to repurchase.... 1,946,099
Demand notes issued to the U.S.
Treasury............................... 283,793
Trading liabilities...................... 1,553,539
Other borrowed money:
With remaining maturity of one year
or less.............................. 2,245,014
With remaining maturity of more than
one year through three years......... 0
With remaining maturity of more than
three years.......................... 45,664
Bank's liability on acceptances exe-
cuted and outstanding.................. 1,473,588
Subordinated notes and debentures........ 1,018,940
Other liabilities........................ 2,193,031
-----------
Total liabilities........................ 52,718,298
-----------
EQUITY CAPITAL
Common stock............................. 1,135,284
Surplus.................................. 731,319
Undivided profits and capital
reserves............................... 2,943,008
Net unrealized holding gains
(losses) on available-for-sale
securities............................. 25,428
Cumulative foreign currency transla-
tion adjustments....................... ( 16,342)
-----------
Total equity capital..................... 4,818,697
-----------
Total liabilities and equity
capital .............................. $57,536,995
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the above-
named bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot
Thomas A. Renyi Directors
Alan R. Griffith
- --------------------------------------------------------------------------------
<PAGE>
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
----------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------------------
FOX KIDS WORLDWIDE, INC.
(Exact name of obligor as specified in its charter)
Delaware 95-4596247
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
10960 Wilshire Boulevard
Los Angeles, California 90024
(Address of principal executive offices) (Zip code)
______________________
10 1/4% Senior Discount Notes Due 2007
(Title of the indenture securities)
================================================================================
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT
IS SUBJECT.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Name Address
- -----------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE 7A-29
UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York (formerly
Irving Trust Company) as now in effect, which contains the authority to
commence business and a grant of powers to exercise corporate trust
powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration
Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with
Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee published pursuant
to law or to the requirements of its supervising or examining authority.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a
corporation organized and existing under the laws of the State of New York, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 21st day of January, 1998.
THE BANK OF NEW YORK
By: /s/VAN K. BROWN
---------------------------
Name: VAN K. BROWN
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE>
EXHIBIT 7
---------
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business September 30,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin...................... $ 5,004,638
Interest-bearing balances.............. 1,271,514
Securities:
Held-to-maturity securities............ 1,105,782
Available-for-sale securities.......... 3,164,271
Federal funds sold and Securities pur-
chased under agreements to resell........ 5,723,829
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................34,916,196
LESS: Allowance for loan and
lease losses ..............581,177
LESS: Allocated transfer risk
reserve........................429
Loans and leases, net of unearned
income, allowance, and reserve....... 34,334,590
Assets held in trading accounts.......... 2,035,284
Premises and fixed assets (including
capitalized leases).................... 671,664
Other real estate owned.................. 13,306
Investments in unconsolidated
subsidiaries and associated
companies.............................. 210,685
Customers' liability to this bank on
acceptances outstanding................ 1,463,446
Intangible assets........................ 753,190
Other assets............................. 1,784,796
-----------
Total assets............................. $57,536,995
===========
LIABILITIES
Deposits:
In domestic offices.................... $27,270,824
Noninterest-bearing ......12,160,977
Interest-bearing .........15,109,847
In foreign offices, Edge and
Agreement subsidiaries, and IBFs....... 14,687,806
Noninterest-bearing .........657,479
Interest-bearing .........14,030,327
Federal funds purchased and Securities
sold under agreements to repurchase.... 1,946,099
Demand notes issued to the U.S.
Treasury............................... 283,793
Trading liabilities...................... 1,553,539
Other borrowed money:
With remaining maturity of one year
or less.............................. 2,245,014
With remaining maturity of more than
one year through three years......... 0
With remaining maturity of more than
three years.......................... 45,664
Bank's liability on acceptances exe-
cuted and outstanding.................. 1,473,588
Subordinated notes and debentures........ 1,018,940
Other liabilities........................ 2,193,031
-----------
Total liabilities........................ 52,718,298
-----------
EQUITY CAPITAL
Common stock............................. 1,135,284
Surplus.................................. 731,319
Undivided profits and capital
reserves............................... 2,943,008
Net unrealized holding gains
(losses) on available-for-sale
securities............................. 25,428
Cumulative foreign currency transla-
tion adjustments....................... ( 16,342)
-----------
Total equity capital..................... 4,818,697
-----------
Total liabilities and equity
capital................................ $57,536,995
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the above-
named bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot
Thomas A. Renyi Directors
Alan R. Griffith
- --------------------------------------------------------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FCN HOLDING,
INC., SABAN ENTERTAINMENT, INC. AND FOX KIDS WORLDWIDE, LLC
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1998
<PERIOD-START> JUL-01-1996 JUL-01-1997
<PERIOD-END> JUN-30-1997 SEP-30-1997
<CASH> 36,887,000 108,267,000
<SECURITIES> 0 0
<RECEIVABLES> 93,763,000 167,226,000
<ALLOWANCES> (1,410,000) (1,410,000)
<INVENTORY> 235,575,000 384,550,000
<CURRENT-ASSETS> 0<F1> 0<F1>
<PP&E> 17,550,000 74,859,000
<DEPRECIATION> (8,629,000) 74,859,000
<TOTAL-ASSETS> 412,401,000 2,502,633,000
<CURRENT-LIABILITIES> 0<F1> 0<F1>
<BONDS> 0 0
0 345,000,000
50,000,000 0
<COMMON> 0 0
<OTHER-SE> 82,687,000 77,842,000
<TOTAL-LIABILITY-AND-EQUITY> 412,401,000 2,502,633,000
<SALES> 307,820,000 122,946,000
<TOTAL-REVENUES> 307,820,000 122,946,000
<CGS> (180,381,000) (68,889,000)
<TOTAL-COSTS> (249,041,000) (102,654,000)
<OTHER-EXPENSES> (1,546,000) (1,466,000)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (2,226,000) (18,814,000)
<INCOME-PRETAX> 55,007,000 12,000
<INCOME-TAX> (14,567,000) (1,187,000)
<INCOME-CONTINUING> 40,440,000 (1,175,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 40,440,000 (1,175,000)<F2>
<EPS-PRIMARY> 2.53 (.40)
<EPS-DILUTED> 2.53 (.40)
<FN>
<F1>The Company has elected to present an unclassified balance sheet.
<F2>Represents earnings per share after deduction of dividends on preferred
stock.
</FN>
</TABLE>
