<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 8, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
FOUR MEDIA COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 7819 95-4599440
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
2813 WEST ALAMEDA AVENUE
BURBANK, CA 91505-4455
(818) 840-7000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
ROBERT T. WALSTON
FOUR MEDIA COMPANY
2813 WEST ALAMEDA AVENUE
BURBANK, CA 91505-4455
TEL: (818) 840-7000
FAX: (818) 846-5197
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
YVONNE E. CHESTER, ESQ. SCOTT T. SMITH, ESQ.
TROY & GOULD PROFESSIONAL CORPORATION PILLSBURY MADISON & SUTRO LLP
1801 CENTURY PARK EAST, SUITE 1600 2700 SAND HILL ROAD
LOS ANGELES, CALIFORNIA 90067 MENLO PARK, CALIFORNIA 94025-7111
TEL: (310) 553-4441 TEL: (415) 233-4500
FAX: (310) 201-4746 FAX: (415) 233-4545
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO 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, as amended ("Securities Act"), 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED PRICE(1) REGISTRATION FEE
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<S> <C> <C>
Common Stock, $.01 par value....................... $97,750,000 $29,622
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
----------------
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 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE>
FOUR MEDIA COMPANY
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
FORM S-1 ITEM NUMBER AND CAPTION PROSPECTUS CAPTION
-------------------------------- ------------------
<S> <C> <C>
1. Forepart of the Registration Statement Outside Front Cover Page
and Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Inside Front Cover Page; Back Cover Page;
Pages of Prospectus Additional Information
3. Summary Information, Risk Factors and Risk Factors; Selected Financial Data
Ratio of Earnings to Fixed Charges
4. Use of Proceeds Prospectus Summary; Use of Proceeds
5. Determination of Offering Price Outside Front Cover Page; Underwriting;
Risk Factors
6. Dilution Dilution
7. Selling Security Holders Principal and Selling Stockholders
8. Plan of Distribution Outside Front Cover Pages; Underwriting
9. Description of Securities to Be Outside Front Cover Page; Prospectus
Registered Summary; Description of Capital Stock
10. Interests of Named Experts and Counsel Not Applicable
11. Information with Respect to the Outside Front Cover Page; Prospectus
Registrant Summary; The Company; Risk Factors;
Capitalization; Selected Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management; Certain
Transactions; Principal and Selling
Stockholders; Description of Capital Stock;
Shares Eligible for Future Sale; Additional
Information; Financial Statements
12. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act
Liabilities
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES 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 +
+SECURITIES 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 OCTOBER 8, 1996
PROSPECTUS
SHARES
[LOGO]
FOUR MEDIA COMPANY
COMMON STOCK
---------------
Of the shares of Common Stock, $.01 par value per share ("Common
Stock"), of Four Media Company (the "Company"), offered hereby, shares are
being offered by the Company and shares are being offered by the sole
stockholder of the Company (the "Selling Stockholder"). See "Principal and
Selling Stockholders." The Company will not receive any of the proceeds from
the sale of shares by the Selling Stockholder.
Prior to this offering there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering
price will be between $ and $ per share. See "Underwriting" for factors
which will be considered in determining the initial public offering price.
Application has been made for quotation of the Common Stock on the Nasdaq
National Market under the symbol "FOUR."
---------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE SECURITIES OFFERED HEREBY, SEE "RISK FACTORS" BEGINNING ON
PAGE 6.
---------------
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.
<TABLE>
<CAPTION>
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- -----------------------------------------------------------------------------------------
UNDERWRITING PROCEEDS TO
DISCOUNTS AND PROCEEDS TO THE SELLING
PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDER
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<S> <C> <C> <C> <C>
Per Share........................ $ $ $ $
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Total(3)......................... $ $ $ $
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</TABLE>
(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deduction of expenses payable by the Company estimated at $800,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
additional shares of Common Stock, on the same terms and conditions as
set forth above, solely to cover over-allotments, if any. If such option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions, and Proceeds to the Company will be $ , $ and $ ,
respectively. See "Underwriting."
The shares are being offered by the Underwriters, subject to prior sale,
when, as, and if delivered to and accepted by the Underwriters, and subject to
various prior conditions, including the right to reject orders in whole or in
part. It is expected that delivery of share certificates will be made against
payment therefor at the offices of Furman Selz LLC in New York, New York, on or
about November , 1996.
FURMAN SELZ
---------------
The date of this Prospectus is , 1996
<PAGE>
[PICTURES]
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements (and
related notes thereto) included elsewhere in this Prospectus. The discussion in
this Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in the section entitled "Risk
Factors" and elsewhere in this Prospectus. Unless otherwise indicated, all
information in this Prospectus assumes the completion of the Reorganization
described under "The Company" herein and no exercise of the Underwriters' over-
allotment option.
THE COMPANY
Four Media Company is a leading provider of technical, creative and broadcast
services to owners, producers and distributors of television programming,
feature films and other entertainment content in the United States and Asia.
The name Four Media Company is derived from the Company's core competencies in
film, video, sound and data. The Company's services integrate and apply a
variety of systems and processes to enhance content creation and distribution.
The Company seeks to capitalize on growth in domestic and international demand
for original entertainment content and for existing television and film
libraries without taking production or ownership risk with respect to any
specific television program, feature film or other content.
During the past three fiscal years, the Company has invested $58.1 million in
infrastructure, primarily for new digital systems and equipment. In addition,
the Company has successfully identified, acquired and integrated four
complementary businesses. The Company acquired the assets of three companies in
connection with its formation in 1993, acquired the assets of a fourth company
in 1994, and capitalized and commenced its Singapore broadcast operations in
1995. As a result of its investments and acquisitions, the Company is one of
the largest independent (not affiliated with or related to a content owner)
providers of technical and creative services to the entertainment industry in
terms of total revenues, employees and number of customers, and is one of the
most diversified providers of those services.
The Company has organized its activities into four divisions, each of which
offers services that are integral to the creation, enhancement and/or
distribution of entertainment content. Through its four divisions, the Company
provides services to a diverse base of customers, including major domestic
studios (and their international divisions), independent producers and owners
of television and film libraries, and broadcast networks.
Studio Services. The studio services division, located in Burbank,
California, provides owners of television and film libraries with facilities
and services necessary to manage, format and distribute content worldwide.
Broadcast Services. The broadcast services division, located in Burbank and
the Republic of Singapore, provides domestic and international programmers with
facilities and services necessary to assemble and distribute programming via
satellite to viewers in the United States, Canada and Asia.
Television Services. The television services division, located in Burbank and
Santa Monica, California, provides producers of original television programming
with technical and creative services necessary to conform original film or
video principal photography to a final product suitable for airing on network,
syndicated, cable or foreign television.
Visual Effects Services. The visual effects services division, located in
Burbank and Santa Monica, commenced operations in January 1995 and provides
creators of special visual effects with certain services required to digitally
create or manipulate images in high resolution formats for integration into
feature films.
3
<PAGE>
The Company believes that several trends in the entertainment industry will
have a positive impact on the Company's business, including growth in worldwide
demand for original entertainment content, the development of new markets for
existing content libraries, greater demand for innovation and creative quality
in entertainment markets and wider application of digital technologies to
content manipulation and distribution, including the emergence of new
distribution channels. The Company believes that its current and prospective
customers increasingly will outsource services and "buy" rather than "make"
technical and creative services as the creation and distribution of content
becomes more technology driven and capital intensive. Also, the Company
anticipates that as entertainment companies continue to consolidate, they
increasingly will seek services from full-service providers such as the
Company.
The Company intends to pursue the following growth strategies:
. Pursue Consolidation Opportunities. The Company believes that its
industry is highly fragmented and presents numerous consolidation
opportunities. The Company plans to pursue acquisitions that complement
existing operations, increase market share and diversify product lines.
. Offer Complete Outsourcing Solutions. The Company offers complete
outsourcing solutions by bundling services, which reduce the capital
costs and certain financial and operating risks of customers.
. Utilize Leading Technologies. The Company plans to continue its
investment in component digital equipment and other leading technologies
in order to enhance its reputation for technological leadership in its
industry.
. Provide Superior Customer Service. The Company will continue to develop
its information systems to enhance efficiency and provide timely and
accurate information to its customers.
. Expand Internationally. The Company intends to expand internationally in
response to specific customer demand, particularly where the Company's
technical expertise, financial strength and the ability to execute
quickly are competitive advantages.
. Establish Strategic Alliances. The Company seeks to generate additional
revenue from its technological resources and facilities by establishing
strategic alliances with content creators and others.
. Capitalize on Increasing Application of Digital Technology. The Company
intends to capitalize on new methods of digitizing, storing, retrieving
and manipulating content as well as increased demand for high quality
motion video for use in multimedia applications and new content
distribution channels.
THE OFFERING
<TABLE>
<C> <S>
Common Stock offered by the Company.............. shares
Common Stock offered by the Selling Stockholder.. shares
Common Stock outstanding after the Offering...... shares(1)
Use of proceeds to the Company................... For repayment of certain
indebtedness, capital
expenditures, working
capital and other general
corporate purposes,
including acquisitions. See
"Use of Proceeds."
Proposed Nasdaq National Market symbol........... FOUR
</TABLE>
- -------------------
(1) Excludes shares of Common Stock issuable upon exercise of options
granted at the effective time of the offering and which have an exercise
price equal to the offering price.
4
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
------------------------------------------
JULY 31, 1994 JULY 30, 1995 AUGUST 4, 1996
------------- ------------- --------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................... $42,261 $61,004 $70,028
Income from operations............. 2,488 5,149 5,336
Net income......................... 1,235 3,220 2,424
OTHER DATA:
EBITDA(1).......................... $ 5,772 $11,390 $15,501
</TABLE>
<TABLE>
<CAPTION>
AS OF AUGUST 4, 1996
----------------------
ACTUAL AS ADJUSTED(2)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash, including restricted cash........................ $ 6,021
Working capital........................................ 1,642
Total assets........................................... 81,827
Total debt(3).......................................... 49,131
Total stockholder's equity............................. 22,143
</TABLE>
- -------------------
(1) "EBITDA" is defined herein as earnings before interest, taxes, depreciation
and amortization, excluding gains and losses on asset sales and
nonrecurring charges. EBITDA does not take into account normal capital
expenditures and does not represent cash generated from operating
activities in accordance with generally accepted accounting principles
("GAAP"), is not to be considered as an alternative to net income or any
other GAAP measurements as a measure of operating performance and is not
indicative of cash available to fund all cash needs. The Company's
definition of EBITDA may not be identical to similarly titled measures of
other companies. The Company believes that in addition to cash flows and
net income, EBITDA is a useful financial performance measurement for
assessing the operating performance of the Company because, together with
net income and cash flows, EBITDA widely is used to provide investors with
an additional basis to evaluate the ability of the Company to incur and
service debt and to fund acquisitions or invest in new technologies. To
evaluate EBITDA and the trends it depicts, the components of EBITDA, such
as net revenues, cost of services, and sales, general and administrative
expenses, should be considered. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations." A reconciliation of net
income to EBITDA is as follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
------------------------------------------
JULY 31, 1994 JULY 30, 1995 AUGUST 4, 1996
------------- ------------- --------------
<S> <C> <C> <C>
Net income................. $1,235 $ 3,220 $ 2,424
Add (deduct):
Interest expense, net... 1,253 2,917 3,906
Income tax benefits..... -- (988) (994)
Depreciation and
amortization........... 3,284 6,241 10,165
------ ------- -------
EBITDA..................... $5,772 $11,390 $15,501
====== ======= =======
</TABLE>
(2) Adjusted to give effect to the sale of shares of Common Stock offered
by the Company hereby at an assumed initial public offering price of
$ per share, after deducting underwriting discounts and commissions and
estimated offering expenses, and the application of the estimated net
proceeds therefrom as described in "Use of Proceeds."
(3) Includes a bank revolving line of credit, current and long term portions of
a bank term loan, short and long term notes payable, capital lease
obligations and a subordinated note due to the Company's sole stockholder.
5
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the following matters,
together with the other information contained in this Prospectus, in
evaluating the Company and its business before making an investment decision
with respect to the shares of Common Stock offered hereby.
LOSS OF RELATIONSHIPS WITH KEY CUSTOMERS
Revenue Concentration. A significant portion of the Company's revenues is
derived from a small number of customers. Nine customers, MTV Asia LDC ("MTV
Asia"), Sony Pictures Corporation, TVN Entertainment Corporation ("TVN"),
Warner Bros., Paramount Pictures (a subsidiary of Viacom, Inc.), The Walt
Disney Company, Twentieth Century Fox, Universal Pictures and Hallmark
Entertainment, Inc., accounted for 55.0% of the Company's revenues in fiscal
1996. The Company expects that these customers will continue to account for a
significant portion of the Company's revenues in future periods. Except for
MTV Asia and TVN, none of these customers has a contractual relationship with
the Company or is obligated to purchase any specified level of services from
the Company. Accordingly, there can be no assurance that revenues generated
from these customers, individually or in the aggregate, will reach or exceed
historical levels in any future period. Any substantial decrease in services
provided to one or more of these customers would have a material adverse
effect on the Company's results of operations and financial condition.
Relationship with MTV Asia. MTV Asia, partially owned by Viacom
International Inc., accounted for 15% of the Company's consolidated revenues
in fiscal 1996 and 97% of the revenues of 4MC Asia, the Company's Singapore
subsidiary, during such period. 4MC Asia provides broadcast services to MTV
Asia under a contract which expires in April 2002 and provides for certain
minimum performance standards including, among other things, maintenance by
4MC Asia of specified staffing levels and on-air reliability. MTV Asia has the
right to terminate the contract at any time if, among other things, 4MC Asia
fails to meet the performance standards or certain key employees cease to be
employed by the Company. See "Risk Factors--Dependence on Key Personnel." MTV
Asia also has the right to terminate the contract any time after April 14,
2000 upon payment of specified amounts to 4MC Asia. Termination of the MTV
Asia contract would have a material adverse effect on the Company's results of
operations and financial condition. Further, there can be no assurance that
the MTV Asia contract will be renewed upon expiration. Any such failure to
renew could have a material adverse effect on the Company's business.
Relationship with TVN. TVN accounted for 7% of the Company's revenues during
fiscal 1996. The Company provides broadcast services to TVN under a contract
which expires in January 1998. In early 1996, the Company and TVN agreed to
renew and extend their long-term contractual relationship (which had lapsed,
but continued on a month-to-month basis through mid-1995) to provide for,
among other things, the repayment by TVN of $3.3 million of outstanding
accounts receivable over a three-year period and the potential performance of
additional services by the Company. The Company agreed to these terms in view
of: (i) the revenues historically collected by the Company from the TVN
relationship; (ii) the prospect of new services based upon TVN's expansion;
and (iii) the complementary nature of TVN's requirements with the Company's
anticipated conversion of its broadcast infrastructure from analog to digital
technology. TVN is current with respect to its payment obligations under the
contract. There can be no assurance, however, that TVN will ultimately repay
all outstanding amounts due to the Company, fulfill its obligations under the
contract or reach agreement with the Company with respect to additional
services.
Minimum Performance Standards; Possible Termination of Contracts or
Liquidated Damages. Most of the Company's customer contracts, including those
with MTV Asia and TVN, contain provisions that require the Company to meet
specified performance standards. Failure to meet specified performance
standards could result in the termination of the contract or payment of
liquidated damages, the amount of which depends on the nature and duration of
the nonperformance. The Company paid a total of $12,500 in monetary damages
during the last three fiscal years.
6
<PAGE>
Conversion to In-House Operations. Many of the major studios and other
customers of the Company have substantial capabilities to perform several or
all of the services offered by the Company, and evaluate from time-to-time
whether to perform those services in-house. For example, in 1995, The Disney
Channel, a subsidiary of The Walt Disney Company, changed its operating
strategy in 1995 and moved its network origination and uplink operations in-
house. The Disney Channel accounted for 6.2%, 4.2%, and 1.1% of the Company's
revenues in fiscal 1994, 1995 and 1996, respectively. A decision by other
major customers to move in-house services they currently purchase from the
Company could have a material adverse effect on the Company's results of
operations.
INCURRENCE OF SUBSTANTIAL INCREMENTAL COSTS AND CAPITAL EXPENDITURES PRIOR TO
GENERATION OF REVENUES
The Company incurs substantial incremental costs (primarily labor) and makes
significant capital expenditures prior to generating revenues. For example,
the Company plans to expand its television services operations during fiscal
1997. This expansion is expected to increase labor and depreciation expense
significantly, through the addition of new personnel at increased compensation
levels and through the purchase of new equipment and the construction of
infrastructure. The Company will incur such costs before the equipment and
infrastructure will generate revenues or achieve capacity utilization and
before the new services will gain market acceptance. The incurrence of
incremental costs prior to the generation of revenues will have an immediate
adverse effect on the Company's net income. In addition, the Company may elect
to discontinue services that fail to generate sufficient levels of revenue and
write off the net book value of the assets related to such services. Failure
of the Company to generate anticipated levels of revenue or the write-off of
assets will have an immediate and adverse effect on the Company's results of
operations and financial condition.
RISK OF IMPLEMENTING NEW TECHNOLOGY; TECHNOLOGICAL OBSOLESCENCE
A key growth strategy of the Company is to integrate new systems and
equipment in its facilities and offer new services to customers. The Company
may experience difficulties in deploying new technologies that could delay or
prevent the successful introduction of new services. There can be no assurance
that the deployment of new technology or introduction of new services by the
Company will achieve market acceptance. Failure of the Company to implement
new technology and develop new services successfully or the failure of new
technology and services to achieve market acceptance could have a material
adverse effect on the Company's results of operations.
The systems and equipment utilized by the Company in providing certain
services to customers are subject to rapid technological change and
obsolescence, as well as evolving customer needs and industry standards. In
addition, the Company's competitors may introduce services embodying new
technology which could render the Company's existing services obsolete or
unmarketable. The Company thus may be required to undertake significant
capital expenditures to maintain its technological and competitive position in
the industry. There can be no assurance that the Company will have sufficient
capital or be able to obtain sufficient financing to fund such capital
expenditures, or that subsequent technological change will not make acquired
infrastructure obsolete before the Company recovers its investment.
DEPENDENCE ON KEY PERSONNEL
The Company's future success depends in large part on the continued service
of its executive officers (see "Management"), its key creative artists and
skilled technicians, and other key personnel. A significant percentage of the
Company's revenues can be attributed to services requiring highly compensated
creative technicians. In some instances, certain of the Company's customers
specify by name the personnel that are to work on their projects. Competition
for highly qualified employees is intense and the process of locating key
technical, creative and management personnel with the combination of skills
and attributes required to execute the Company's strategy is often lengthy.
There can be no assurance that the Company will continue to attract, motivate
and retain key personnel. Failure by the Company to retain and attract
qualified key personnel could have a material adverse effect on the Company's
business and results of operations.
7
<PAGE>
4MC Asia's contract with MTV Asia permits MTV Asia to terminate the contract
if both Robert T. Walston, Chairman and Chief Executive Officer, and Gavin W.
Schutz, Vice President and Chief Technology Officer, cease to be employed by
the Company and replacements acceptable to MTV Asia are not found. Termination
of this agreement would have a material adverse effect on the Company's
results of operations and financial condition. In addition, the Company is
negotiating a new loan agreement under which the cessation of Mr. Walston's
employment would constitute an event of default and, at the option of the
lenders, result in the acceleration of outstanding loans. Any such
acceleration could have a material adverse effect on the Company's financial
condition. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
RISKS OF ACQUISITION GROWTH STRATEGY
Ability to Implement Strategy. An important element of the Company's growth
strategy is the acquisition of complementary businesses which may enhance the
Company's operations and profitability. Execution of its growth strategy
requires the Company's existing management to, among other things:
(i) identify acquisition candidates for sale at reasonable prices; (ii) obtain
financing for acquisitions; (iii) consummate identified acquisitions; (iv)
hire, train and assimilate new personnel; and (v) in some instances, invest
substantial funds to enhance the capabilities of the acquired business. There
can be no assurance that the Company will successfully identify, finance,
consummate or assimilate acquisitions. Further, the Company's focus on
acquisition opportunities could lessen the effectiveness of management with
respect to existing operations, which could have a material adverse effect on
the Company's results of operations. In addition, certain of the Company's
larger, better capitalized competitors may seek to acquire some of the same
types of companies that the Company seeks to acquire. Such competition for
acquisitions may increase acquisition prices and related costs and result in
fewer acquisition opportunities, which could have a material adverse effect on
the Company's growth.
Potential Adverse Financial Impacts of Acquisitions. With respect to certain
of the Company's past acquisitions, it generally has taken two years before
the necessary balance sheet restructuring, consolidation with the Company's
existing operations and/or repositioning of marketing strategies, personnel or
equipment has been achieved and the acquisition has been successful from a
financial and operational perspective. The Company expects that certain of its
future acquisitions will take an equal or longer period of time to become
successful, if they ever are successful. Accordingly, the Company expects that
certain future acquisitions will have a material adverse effect on the
business, results of operations and financial condition of the Company for a
minimum period of two years. The Company expects that its future acquisitions
often will involve the recording of a significant amount of goodwill and
deferred charges on its balance sheet. In addition, the Company also might
record deferred charges related to noncompetition agreements. Amortization of
goodwill and deferred charges will reduce net income, which may have an
adverse effect on the Company's results of operations.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company has experienced significant quarterly fluctuations in operating
results and anticipates that these fluctuations will continue. These
fluctuations have been caused by a number of factors, including: (i) with
respect to the Company's studio services division, seasonal and sometimes
fluctuating demand for programming by international broadcasters and other
content buyers, increased labor costs and uneven capacity utilization due to
customer mandated delays, and unanticipated production downtime due to
equipment failure, work stoppages or the absence of key personnel; (ii) with
respect to the Company's broadcast services division, the expiration of month-
to-month service contracts, the unpredictable use of the Company's facilities
for the broadcast of news stories and special events, and the inability of the
Company to remarket its unused transponder capacity consistently; (iii) with
respect to the Company's television services division, the unpredictability of
television production schedules; and (iv) with respect to the Company's visual
effects services division, the absorption by the Company of cost overruns in
fixed price contracts and delays in meeting completion deadlines (for reasons
other than the fault of the Company). The Company therefore believes that
quarter-to-quarter comparisons of its results of operations are not
necessarily meaningful and should not be relied upon as indications of future
performance. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
8
<PAGE>
COMPETITION
The Company experiences intense competition in each of its business
segments. Although the Company believes no one competitor offers a comparable
range of services, some of the Company's current and potential competitors,
particularly those who perform services in-house, have substantially greater
financial, technical, creative, marketing and other resources than the
Company. The Company's competitors may devote substantially greater resources
to the development and marketing of new competitive services. The Company
expects that competition will increase substantially as a result of industry
consolidations and alliances, as well as the emergence of new competitors.
Increased competition could result in price reductions, reduced profit margins
or loss of market share, all of which would have a material adverse effect on
the Company's results of operations. See "Business--Competition."
DEPENDENCE ON ENTERTAINMENT INDUSTRY
The Company's business is dependent on the success of the motion picture and
television industries, which success in turn is highly dependent upon a number
of factors, including the quality of content produced, the availability of
alternative forms of entertainment and leisure activities, general economic
conditions and international demand for content originated in the United
States. The Company's business also is subject to downturns in the event of a
strike by any creative or other personnel integral to the production of motion
pictures or television programming.
RISKS ASSOCIATED WITH SINGAPORE OPERATIONS
Foreign Exchange Rate Fluctuations. The Company provides certain of its
broadcast services in Singapore through its Singapore subsidiary, 4MC Asia.
Substantially all of 4MC Asia's transactions are denominated in Singapore
dollars, including its bank borrowings. Although 4MC Asia is not subject to
foreign exchange transaction gains or losses, its financial statements are
translated into United States dollars as part of the Company's consolidated
financial reporting. Fluctuations in the exchange rate therefore will affect
the Company's consolidated balance sheets and may, upon repatriation of funds
from 4MC Asia to the Company and payment of related income taxes, affect the
Company's net income. Over the past two years the Singapore dollar has been
stable relative to the United States dollar. However, the continued stability
of the exchange rate is subject to numerous factors, all of which are beyond
the Company's control. There can be no assurance that the Company will not
experience material losses as a result of changes in the relative value of the
Singapore dollar as compared to the United States dollar. The Company
currently does not engage in any hedging activities to mitigate its exchange
rate risk. In the event the Company engages in hedging activities in the
future, there can be no assurance that the Company will not experience losses
as a result of such hedging activities.
Foreign Country Operating Risks. In addition to exchange rate risks, the
Company's Singapore operations are subject to a number of risks inherent in
international operations, including unexpected changes in regulatory
requirements, burdens of complying with a variety of foreign laws, tariffs and
other trade barriers, and political and economic instability. Although the
Company believes that Singapore is currently a friendly environment for
foreign corporations, there can be no assurance that the foregoing factors
will not have a material adverse effect on the Company's future results of
operations.
Loss of Tax Exemption. In 1995, the government of the Republic of Singapore
granted 4MC Asia a seven-year tax exemption as a "pioneer status" company. The
tax exemption is conditioned upon 4MC Asia meeting certain investment
requirements. Although the Company believes that it will meet these
requirements, there can be no assurance that it will do so. The termination or
expiration of the tax exemption would have a material adverse effect on the
Company's results of operations. The Company is subject to taxation in the
United States to the extent that 4MC Asia's income is repatriated from
Singapore, less applicable taxes paid in Singapore.
9
<PAGE>
NO PRIOR TRADING MARKET FOR COMMON STOCK; POTENTIAL VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will
develop or be sustained after this offering. The initial public offering price
will be determined by negotiation among the Company, the Selling Stockholder
and the representative of the Underwriters based on several factors and may
not be indicative of the market price of the Common Stock after this offering.
See "Underwriting." The market price of the shares of Common Stock is likely
to be highly volatile and may be affected significantly by factors such as
fluctuations in the Company's quarterly or annual results of operations; a
shortfall in revenues, EBITDA or earnings compared to public securities market
analysts' expectations; changes in analysts' recommendations or projections;
announcements by the Company or by its competitors; delays in or cancellations
of projects; general market conditions or other factors. In addition, the
stock market is subject to significant price and volume fluctuations, some of
which may be unrelated or disproportionate to the operating performance of the
companies affected. Broad market and industry sector fluctuations may
adversely affect the market price of the Common Stock.
CONCENTRATION OF OWNERSHIP
Upon completion of this offering, the present executive officers and
directors of the Company and their affiliates will beneficially own
approximately % of the outstanding shares of Common Stock (approximately %
if the Underwriters' over-allotment option is exercised in full). Accordingly,
these stockholders will have the ability to control or significantly influence
all matters requiring approval by the stockholders of the Company, including
the election of directors and approval of significant corporate transactions.
Such a level of ownership may have the effect of delaying, deferring or
preventing a change in the control of the Company. See "Principal and Selling
Stockholders."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock in the public market
following this offering could adversely affect the market price of the Common
Stock. The number of shares of Common Stock available for sale in the public
market is limited by restrictions under the Securities Act of 1933, as amended
(the "Securities Act"), and lock-up agreements executed by all of the officers
and directors and the sole stockholder of the Company under which such
security holders have agreed not to sell or otherwise dispose of any of their
shares for a period of 180 days after the date of this Prospectus, in the case
of the sole stockholder, and three years after the date of this Prospectus, in
the case of the officers and directors, without the prior written consent of
Furman Selz LLC. Furman Selz LLC may, however, in its sole discretion and at
any time without notice, release all or any portion of the shares subject to
lock-up agreements. In addition to the shares of Common Stock offered
hereby (assuming no exercise of the Underwriters' over-allotment option),
there will be shares of Common Stock outstanding as of the date of this
Prospectus, all of which are "restricted" shares under the Securities Act. As
a result of the lock-up agreements described above and the provisions of Rules
144(k), 144 and 701, the restricted shares will be available for sale in the
public market as follows: (i) shares may be eligible for immediate sale
on the date of this Prospectus; (ii) shares will be eligible for sale
days after the date of this Prospectus upon expiration of lock-up
agreements; and (iii) shares will be eligible for sale at various dates
after upon expiration of lock-up agreements. See "Shares Eligible for
Future Sale."
RISK OF LOSS FROM EARTHQUAKES, FIRE OR OTHER CATASTROPHIC EVENTS
The Company is subject to the risk of loss arising from earthquakes, fires
and other catastrophic events due to the concentration of its business
activities and operations in specific structures. Because of the large amount
of specialized equipment combined with customized listening and viewing
environments, the Company's operations cannot temporarily be relocated to
mitigate the occurrence of a catastrophic event. The Company also may be
unable to broadcast signals for an extended period of time. Consequently, the
Company carries insurance for property loss and business interruption
resulting from such events, subject to deductibles. Although the Company
believes that it possesses adequate insurance coverage for damage to its
property and the disruption of its business from earthquakes, fire and other
casualties, there can be no assurance that such insurance would be sufficient
to cover all of the Company's losses.
10
<PAGE>
RENEWAL OF FCC LICENSES
Transmissions from the Company's domestic broadcast division's earth station
to satellites must be made pursuant to license granted by the Federal
Communications Commission ("FCC"). See "Business--Government Regulations."
While the FCC generally renews satellite earth stations routinely, there can
be no assurance that the Company's licenses will be renewed at their
expiration dates, which could have a material adverse effect on the Company.
IMMEDIATE AND SUBSTANTIAL DILUTION
Investors purchasing shares of Common Stock in this offering will incur
immediate and substantial dilution. To the extent that outstanding options to
purchase the Common Stock are exercised, there will be further dilution. See
"Dilution."
ANTI-TAKEOVER PROVISIONS; POSSIBLE ISSUANCE OF PREFERRED STOCK
Certain provisions of the Company's Certificate of Incorporation and By-Laws
may be deemed to have anti-takeover effects and may delay, defer or prevent a
tender offer, proxy contest or takeover attempt that a stockholder might
consider to be in such stockholder's best interest, including those attempts
that might result in a premium over the market price for the shares held by
such stockholder. See "Description of Capital Stock." In addition, the Board
of Directors, without further stockholder approval, may issue preferred stock
that could have the effect of delaying, deterring or preventing a change in
control of the Company. The issuance of preferred stock could also adversely
affect the voting power of the holders of Common Stock, including the loss of
voting control to others. The Company has no present plans to issue any
preferred stock. See "Description of Capital Stock--Preferred Stock."
11
<PAGE>
THE COMPANY
Four Media Company was incorporated in Delaware in September 1996 as a
holding company to acquire the capital stock of three operating companies:
4MC-Burbank, Inc. ("4MC Burbank"); Four Media Company Asia PTE Ltd. ("4MC
Asia"); and Digital Magic Company ("DMC"). This acquisition is referred to
herein as the "Reorganization" and is expected to be completed in November
1996. 4MC Burbank was formed in July 1993 to acquire substantially all of the
assets of Compact Video Group, Inc., Compact Video Services, Inc., Image
Transform, Inc. and Meridian Studios, Inc. DMC was formed in October 1994 to
acquire substantially all of the assets of Digital Magic & Transfer Company
("DM&T"). 4MC Asia was formed in January 1995 to build and operate the
Company's Singapore broadcast facilities. Unless the context otherwise
requires, all references herein to the "Company" refer to Four Media Company
and its direct and indirect subsidiaries. The Company's principal executive
offices are located at 2813 West Alameda Avenue, Burbank, California 91505,
and its telephone number is (818) 840-7000.
USE OF PROCEEDS
The net proceeds to the Company from the sale of Common Stock offered by the
Company hereby, after deducting underwriting discounts and commissions and
estimated offering expenses, are estimated to be $ ($ if the
Underwriters' over-allotment option is exercised in full). From these net
proceeds, the Company intends to use approximately $ million to repay
outstanding debt consisting of (i) approximately $ million outstanding
under a bank senior term and revolving credit facility which is due in July
1998 and bears interest at an annual rate of 8.5% (in the case of the term
loan) and prime plus 1.5% (in the case of the revolving credit facility), and
was incurred to provide working capital; (ii) approximately $ million of
notes payable and capital leases which are due at various times through 2001
and bear interest at fixed rates ranging between 9.0% and 12.0% per year; and
(iii) approximately $ million plus accrued interest outstanding under a
note payable to Technical Services Partners, L.P. ("TSP"), the Company's sole
stockholder, which is due in August 1998 and bears interest at 10% per annum
(see "Certain Transactions"). The Company intends to use a portion of the
remaining net proceeds of the offering, together with its cash flow from
operations and amounts available under bank credit facilities, to fund planned
capital expenditures. The Company expects to spend an estimated $15.0 million
over the next two years to upgrade its domestic broadcast and television sound
facilities. The Company intends to use any remaining proceeds for working
capital and general corporate purposes.
A significant element of the Company's strategy is to pursue acquisitions
that complement its existing business. The Company regularly engages in
discussions with potential acquisition candidates. Although the Company
currently has no commitments or agreements to effect any acquisition, if the
Company were to make an acquisition, it may use a portion of the remaining net
proceeds to fund all or a portion of the purchase price of the acquired
business.
Pending such uses, the net proceeds will be placed in interest bearing bank
accounts or invested in United States government securities, certificates of
deposit of major banks, high grade commercial paper or investment grade
securities determined to be appropriate by the Company. The Company will not
receive any of the proceeds from the sale of Common Stock by the Selling
Stockholder. See "Principal and Selling Stockholders."
DIVIDEND POLICY
The Company has never declared or paid a cash dividend on its Common Stock
and does not anticipate paying any cash dividends or other distributions on
its Common Stock in the foreseeable future. The Company's bank loans prohibit
the payment of dividends or other distributions to the Company from its
subsidiaries without lender approval, and would thus limit the ability of the
Company to pay dividends. The current policy of the Company's Board of
Directors is to reinvest earnings to finance the expansion of the Company's
business.
12
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) on an
actual basis as of August 4, 1996 and (ii) as adjusted to reflect the sale by
the Company of shares of Common Stock offered hereby at an assumed initial
public offering price of $ per share and the application of the net proceeds
therefrom as described under "Use of Proceeds."
<TABLE>
<CAPTION>
AUGUST 4, 1996
-------------------------
ACTUAL(1) AS ADJUSTED
----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt and capital lease obligations,
including current portion........................... $49,131
Stockholder's equity:
Preferred stock, $.01 par value; 5,000,000 shares
authorized, no shares issued and outstanding....... -- --
Common stock, $.01 par value; 50,000,000 shares
authorized, shares issued and outstanding as
of August 4, 1996; shares issued and outstanding
as adjusted........................................ --
Additional paid-in capital.......................... 15,010
Foreign currency translation adjustment............. 254 254
Retained earnings................................... 6,879 6,879
----------- ----------
Total stockholder's equity......................... 22,143
----------- ----------
Total capitalization.............................. $ 71,274
=========== ==========
</TABLE>
- --------------------
(1) Derived from the Company's audited Consolidated Financial Statements
included elsewhere in this Prospectus. See "Consolidated Financial
Statements."
13
<PAGE>
DILUTION
The net tangible book value of the Company as of August 4, 1996 was $
million or approximately $ per share of Common Stock (after giving effect
to the Reorganization). Net tangible book value per share represents the
amount of the Company's tangible assets less total liabilities, divided by
shares of Common Stock outstanding.
After giving effect to the sale of shares of Common Stock offered by the
Company hereby and after deduction of underwriting discounts and commissions
and estimated offering expenses payable by the Company, the Company's pro
forma net tangible book value as of August 4, 1996 would have been $ , or
$ per share of Common Stock. This represents an immediate increase in net
tangible book value of $ per share to existing stockholders and an immediate
dilution of $ per share to new investors. The following table illustrates
the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share......................... $
Net tangible book value per share as of August 4, 1996................. $
Increase per share attributable to new investors.......................
---
Pro forma net tangible book value per share after the offering..........
---
Dilution per share to new investors..................................... $
===
</TABLE>
The following table sets forth, on a pro forma basis as of August 4, 1996,
the number of shares of Common Stock purchased from the Company, the total
consideration paid (at an assumed initial public offering price of $ per
share) and the average price per share paid by the existing stockholder and by
purchasers of Common Stock in this offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------- --------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing
stockholder(1)(2)...... % % $
New investors(1)........ % %
------- --------- --------- ---------
Total.................. 100.0% $ %
======= ========= ========= =========
</TABLE>
- --------------------
(1) The sale of Common Stock by the Selling Stockholder in this offering will
reduce the number of shares of Common Stock held by it to , or
approximately % (or approximately % if the Underwriters' over-
allotment option is exercised in full), and will increase the number of
shares held by new investors to , or approximately % (
shares, or approximately % if the Underwriters' over-allotment option is
exercised in full), of the total number of shares of Common Stock
outstanding under this offering. See "Principal and Selling Stockholders."
(2) Does not include shares of Common Stock issuable upon exercise of
stock options outstanding as of August 4, 1996, with exercise prices
ranging from $ to $ per share, or approximately
additional shares issuable upon the exercise of stock options expected to
be granted after fiscal 1996, each with an exercise price of $ per
share. See "Management--Stock Plans." To the extent outstanding stock
options are exercised, there will be further dilution to new investors.
14
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data presented below under the captions "Statement of
Operations Data" and "Balance Sheet Data" for, and as of the end of, each of
the fiscal years ended July 31, 1994, July 30, 1995 and August 4, 1996 and the
accountants report thereon, are derived from the financial statements of the
Company, which financial statements have been audited by Coopers & Lybrand,
L.L.P., independent accountants. The financial statements as of July 31, 1994,
July 30, 1995 and August 4, 1996 are included elsewhere in this Prospectus.
The Company has no operating history prior to August 4, 1993.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
------------------------------------------------
JULY 31, 1994 JULY 30, 1995 AUGUST 4, 1996
--------------- --------------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Studio....................... $15,746 $20,677 $23,468
Broadcast.................... 10,876 16,163 20,901
Television................... 15,639 22,712 23,343
Visual effects............... -- 1,452 2,316
------- ------- -------
Total revenues.............. 42,261 61,004 70,028
------- ------- -------
Cost of services:
Personnel.................... 17,096 22,795 25,344
Material..................... 4,240 6,424 7,354
Facilities................... 3,774 3,917 4,692
Other........................ 3,752 5,560 6,021
------- ------- -------
Total cost of services...... 28,862 38,696 43,411
------- ------- -------
Gross profit............... 13,399 22,308 26,617
------- ------- -------
Operating expenses:
Sales, general and
administrative.............. 7,627 10,918 11,116
Depreciation and
amortization................ 3,284 6,241 10,165
------- ------- -------
Total operating expenses.... 10,911 17,159 21,281
------- ------- -------
Income from operations..... 2,488 5,149 5,336
Interest expense, net......... 1,253 2,917 3,906
------- ------- -------
Income before income tax
benefits.................. 1,235 2,232 1,430
Income tax benefits........... -- (988) (994)
------- ------- -------
Net income................. $ 1,235 $ 3,220 $ 2,424
======= ======= =======
OTHER DATA:
EBITDA........................ $ 5,772 $11,390 $15,501
<CAPTION>
AS OF
------------------------------------------------
JULY 31, 1994 JULY 30, 1995 AUGUST 4, 1996
--------------- --------------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash, including restricted
cash......................... $ 4,691 $ 7,368 $ 6,021
Working capital............... 4,674 5,665 1,642
Total assets(1)............... 32,982 71,780 81,827
Total debt(2)................. 21,556 41,942 49,131
Total stockholder's equity.... 6,245 19,617 22,143
</TABLE>
- --------------------
(1) The Company's balance sheet reflects no intangible assets.
(2) Includes current and long-term portions of (i) a bank term loan; (ii)
equipment notes payable; (iii) capital lease obligations; and (iv) a
subordinated note due to the Company's sole stockholder, TSP.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with the Consolidated Financial
Statements and Notes thereto appearing elsewhere in this Prospectus. When used
in the following discussion, the words "believes," "anticipates," "intends,"
"expects" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties
which could cause actual results to differ materially from those projected,
including, but not limited to, those set forth in "Risk Factors." Readers are
cautioned not to place undue reliance on forward-looking statements, which
speak only as of the date hereof. The Company undertakes no obligation to
publicly release the results of any revisions to these forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
OVERVIEW
The Company is a leading provider of technical and creative services to
owners, producers and distributors of television programming, feature films
and other entertainment content. The Company's services integrate and apply a
variety of systems and processes to enhance content creation and distribution.
The Company seeks to capitalize on domestic and international growth in demand
for original entertainment content as well as from the exploitation of
existing television and film libraries without taking production or ownership
risk with respect to any specific television program, feature film or other
content.
The Company's business is divided into broadcast, studio, television and
visual effects services. In each of its four business divisions, the Company
offers most of the systems and technical solutions that constitute the
processes that are integral to the creation, enhancement and distribution of
entertainment content. The studio services division, located in Burbank,
California manages, formats and distributes existing content libraries to end
users in the United States and internationally. The broadcast services
division, located in Burbank and the Republic of Singapore, assembles and
distributes cable television channels and programming via satellite to viewers
in the United States, Canada and Asia. The television services division,
located in Burbank and Santa Monica, California assembles film or video
principal photography into a form suitable for domestic network, syndicated,
cable or foreign television. The visual effects division, located in Santa
Monica, digitally creates and manipulates images in high resolution formats
for use in feature films. The following table sets forth revenues by business
division and as a percentage of consolidated revenues for the periods
indicated:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------------------------------------
JULY 31, 1994 JULY 30, 1995 AUGUST 4, 1996
------------------ ------------------ ------------------
PERCENTAGE PERCENTAGE PERCENTAGE
AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL
------- ---------- ------- ---------- ------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues by division:
Studio.............. $15,746 37.3% $20,677 33.9% $23,468 33.5%
Broadcast........... 10,876 25.7 16,163 26.5 20,901 29.9
Television.......... 15,639 37.0 22,712 37.2 23,343 33.3
Visual effects...... 0 0.0 1,452 2.4 2,316 3.3
------- ----- ------- ----- ------- -----
Total revenues.... $42,261 100.0% $61,004 100.0% $70,028 100.0%
======= ===== ======= ===== ======= =====
</TABLE>
Revenues increased from $42.3 million in fiscal 1994 to $70.0 million in
fiscal 1996 representing a compound annual growth rate ("CAGR") of 28.7%. The
Company attributes this growth rate to several factors including: (i) an
increase in demand for the Company's services resulting from the growth in
worldwide demand for entertainment content; (ii) an expansion of capacity
resulting from its extensive investment in new digital infrastructure; (iii)
successful acquisitions and international expansion; (iv) the diversification
of its service offerings; and (v) the increasing acceptance of its bundled
service outsourcing solutions.
16
<PAGE>
The Company believes that EBITDA is an important measure of its financial
performance. "EBITDA" is defined as earnings before interest, taxes,
depreciation and amortization, excluding gains and losses on asset sales and
nonrecurring charges. The Company's investments in new infrastructure, machine
capacity and technology have produced a relatively high depreciation expense
and will remain a significant non-cash charge to earnings. It is the Company's
policy to depreciate equipment and other capitalized items over a period of
three to seven years. Because of the diversification of the Company's
services, the Company is often able to use equipment beyond its scheduled
useful life. EBITDA is calculated before depreciation and amortization charges
and, in businesses with significant non-cash expenses, widely is used as a
measure of cash flow available to pay interest, repay debt, make acquisitions
or invest in capital equipment and new technologies. As a result, the Company
intends to report EBITDA as a measure of financial performance. EBITDA
increased from $5.8 million in fiscal 1994 to $15.5 million in fiscal 1996
representing a CAGR of 63.9%. The Company attributes this growth rate to
several factors including (i) its CAGR in revenues of 28.7% from fiscal 1994
to fiscal 1996; (ii) an improvement in its gross profit resulting from the
efficiency of its new Singapore operations and new domestic infrastructure;
and (iii) the ability to leverage existing corporate overhead to manage
expanded domestic and international operations.
EBITDA does not represent cash generated from operating activities in
accordance with generally accepted accounting principles ("GAAP") and should
not be considered in isolation or as a substitute for other measures of
performance prepared in accordance with GAAP. EBITDA does not reflect that
portion of the Company's capital expenditures which may be required to
maintain the Company's market share, revenues and leadership position in its
industry. Moreover, not all EBITDA will be available to pay interest or repay
debt.
RESULTS OF OPERATIONS
The following table sets forth the percentage of revenues represented by
certain line items in the Company's statement of operations and EBITDA:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
---------------------------
JULY 31, JULY 30, AUGUST 4,
1994 1995 1996
-------- -------- ---------
<S> <C> <C> <C>
Revenues: .......................................... 100.0% 100.0% 100.0%
Cost of services:
Personnel......................................... 40.5 37.4 36.2
Material.......................................... 10.0 10.5 10.5
Facilities........................................ 8.9 6.4 6.7
Other............................................. 8.9 9.1 8.6
----- ----- -----
Total cost of services.......................... 68.3 63.4 62.0
----- ----- -----
Gross profit.................................. 31.7 36.6 38.0
----- ----- -----
Operating expenses:
Sales, general and administrative................. 18.0 17.9 15.9
Depreciation and amortization..................... 7.8 10.2 14.5
----- ----- -----
Total operating expenses........................ 25.8 28.1 30.4
----- ----- -----
Income from operations........................ 5.9 8.5 7.6
Interest expense, net............................... 3.0 4.8 5.5
----- ----- -----
Income before income tax benefits............. 2.9 3.7 2.1
Income tax benefits................................. -- (1.6) (1.4)
----- ----- -----
Net income.................................... 2.9% 5.3% 3.5%
===== ===== =====
EBITDA.............................................. 13.7% 18.7% 22.1%
</TABLE>
17
<PAGE>
FISCAL YEAR ENDED AUGUST 4, 1996 COMPARED TO FISCAL YEAR ENDED JULY 30, 1995
Revenues. Total revenues for fiscal 1996 increased 15% to $70.0 million
compared to $61.0 million in fiscal 1995. The revenue increase was
attributable primarily to the factors set forth below.
Studio services revenues for fiscal 1996 increased 14% to $23.5 million
compared to $20.7 million in fiscal 1995. Professional duplication led the
growth in the studio services division during fiscal 1996, increasing 35%. The
Company responded to increased demand for its services by adding machine
capacity, upgrading technology, improving service reliability and completing a
new archive during the period. The archive provides capacity to store, manage
and distribute up to 400,000 master videotapes and film elements and the
Company estimates that it has available space for approximately 200,000
additional units. The Company intends to continue to develop infrastructure
and add machine capacity in response to market demand and opportunities to
fill unused archive capacity.
Broadcast services revenues for fiscal 1996 increased 29% to $20.9 million
compared to $16.2 million in fiscal 1995. The increase reflects the inclusion
of a full year of operating results of the Company's Singapore operations and
the expansion of such operations (fiscal 1996 revenues of $11.0 million
compared to fiscal 1995 revenues of $4.0 million). The results of the
Singapore operations consist almost entirely of revenues under a long-term
contract with MTV Asia. The Company does not expect revenues from MTV Asia to
increase significantly over the remaining term of the contract. The increase
in Singapore partially was offset by a decline in domestic broadcast revenues
due to the expiration of a service agreement with the Disney Channel in the
second quarter of fiscal 1996, resulting in a decline in revenues from this
source of $1.8 million over the prior fiscal year. The Company believes that
the deployment of compression technology for broadcast applications and the
expansion of cable channel capacity resulting from the anticipated
introduction of digital set-top boxes will increase demand for its broadcast
services. Accordingly, the Company intends to increase the competitiveness of
its domestic broadcast operations by expanding the capacity and range of its
service offerings.
Television revenues for fiscal 1996 increased 3% to $23.3 million compared
to $22.7 million in fiscal 1995. The increase was a result of the inclusion of
a full year of operating results of the Company's Santa Monica operations
(1996 revenues of $10.6 million compared to 1995 revenues of $8.9 million).
This increase partially was offset by a reduction in revenues due to the loss
of key creative talent in sound mixing and editing and reduced capacity
utilization resulting from the inefficiencies associated with the continued
operation of analog equipment. The Company recently completed construction of
a new digital television services facility in Burbank, which is designed to
replace existing analog infrastructure and equipment and to enhance the
competitiveness of the Company's Burbank-based television operations.
Visual effects revenues for fiscal 1996 increased 53% to $2.3 million
compared to $1.5 million in fiscal 1995. The revenue increase was the result
of an increase in the Company's high resolution digital image processing
capacity and increased sales and marketing activity. During fiscal 1996, the
visual effects division completed projects for a number of prominent customers
including Twentieth Century Fox, Paramount, New Line Cinema and The Walt
Disney Company's Miramax Films unit.
Gross Profit. Gross profit for fiscal 1996 increased 19.3% to $26.6 million
(38.0% of revenues) compared to $22.3 million (36.6% of revenues) in fiscal
1995. The improvement of 1.4% in the Company's gross profit was attributable
primarily to the inclusion of a full year of operating results of the
Company's Singapore operations. This improvement partially was offset by (i) a
reduction in the gross profit in the Company's television operations, and (ii)
costs associated with the start-up and operation of the Company's new archive
facility.
Sales, General and Administrative Expenses. Sales, general and
administrative expenses for fiscal 1996 increased 1.8% to $11.1 million (15.9%
of revenues) compared to $10.9 million (17.9% of revenues) in fiscal 1995. The
improvement of 2.0% in sales, general and administrative expenses as a
percentage of revenues is a result of relatively low sales, general and
administrative expenses associated with the Singapore operations and
18
<PAGE>
the Company's ability to leverage its existing corporate overhead to manage
expanded domestic and international operations. In addition, insurance
proceeds received, which offset expenses incurred of $900,000, further reduced
sales, general and administrative expenses.
Depreciation and Amortization. Depreciation and amortization for fiscal 1996
increased 65% to $10.2 million compared to $6.2 million in fiscal 1995. The
increase is primarily the result of $18.9 million in capital expenditures made
during fiscal 1996.
Income Taxes. Income taxes for fiscal 1996 reflected the recognition, for
financial accounting purposes, of a $1.0 million tax benefit. Recognition of
this tax benefit accounted for 41% of the Company's net income in fiscal 1996.
Recognition of tax benefits in fiscal 1996 resulted from the Company's
profitability in its third year of operations which made recognition of future
tax deductions (arising from, among other things, net operating loss
carryforwards) more certain. Continued profitability in future fiscal years
will result in the Company recognizing income tax expense as it exhausts its
existing tax credits and net operating loss carryforwards.
Earnings Before Interest, Taxes, Depreciation and Amortization. EBITDA for
fiscal 1996 increased 35.9% to $15.5 million compared to $11.4 million in
fiscal 1995. The increase in EBITDA is a result of an increase in revenues, an
improvement in gross profit and a reduction in sales, general and
administrative expenses as a percentage of revenues.
FISCAL YEAR ENDED JULY 30, 1995 COMPARED TO FISCAL YEAR ENDED JULY 31, 1994
Revenues. Total revenues for fiscal 1995 increased 44% to $61.0 million
compared to $42.3 million in fiscal 1994. The revenue increase was
attributable primarily to the factors set forth below.
Studio services revenues for fiscal 1995 increased 32% to $20.7 million
compared to $15.7 million in fiscal 1994. This increase was primarily
attributable to the integration of its various studio service operations into
a single new facility during the second quarter of 1995, which increased
capacity, quality and service reliability. In response to customer demand and
inadequate internal storage capacity, the Company commenced construction of a
new archive facility during fiscal 1995 to support future revenue growth in
studio services.
Broadcast revenues for fiscal 1995 increased 49% to $16.2 million compared
to $10.9 million in fiscal 1994. The revenue increase was primarily the result
of the initiation of operations in Singapore, which generated $4.0 million of
revenues in fiscal 1995. In addition, the domestic broadcast operation added
two long-term contract customers ($800,000) and one short-term customer
($600,000).
Television revenues for fiscal 1995 increased 46% to $22.7 million compared
to $15.6 million in fiscal 1994. The revenue increase was primarily the result
of the acquisition of the assets of DM&T in October 1994, which generated
revenues of $7.5 million in fiscal 1995. The increase in revenues provided by
the Company's Santa Monica operations was partially offset by a $400,000
decline in revenues generated by the Burbank television operations resulting
from the loss of key creative talent in sound mixing and reduced capacity
utilization due to the inefficiencies associated with the continued operation
of analog equipment.
Visual effects revenues were $1.5 million in fiscal 1995, representing
approximately seven months of operations. These revenues primarily were
attributable to visual effects services for eight feature films. In June 1995,
the Company expanded its high resolution processing capacity.
Gross Profit. Gross profit for fiscal 1995 increased 66.4% to $22.3 million
(36.6% of revenues) compared to $13.4 million (31.7% of revenues) in fiscal
1994. The improvement of 4.9% in the Company's gross profit was attributable
primarily to the efficiencies of the new Singapore broadcast facility
experienced during fiscal 1995 (approximately three and one-half months of
operations) and the contribution of higher margin services resulting from the
acquisition of the DM&T assets (approximately nine months of operations).
19
<PAGE>
Sales, General and Administrative Expenses. Sales, general and
administrative expenses for fiscal 1995 increased 43% to $10.9 million (17.9%
of revenues) compared to $7.6 million (18.0% of revenues) in fiscal 1994. The
improvement in sales, general and administrative expenses as a percentage of
total revenues was primarily the result of efficiencies gained in the
elimination of duplicative staff positions and expenses resulting from the
acquisition of the DM&T assets in October 1995.
Depreciation and Amortization. Depreciation and amortization for fiscal 1995
increased 88% to $6.2 million compared to $3.3 million in fiscal 1994. The
increase is primarily the result of $30.3 million in capital expenditures made
during fiscal 1995.
Income Taxes. Income taxes for fiscal 1995 reflected the recognition, for
financial accounting purposes, of a $1.0 million tax benefit. Recognition of
this tax benefit in 1995 accounted for 31% of the Company's net income in
fiscal 1995. Recognition of these tax benefits resulted from the Company's
profitability in its second year of operations which made recognition of
future tax deductions (arising from, among other things, net operating loss
carryforwards) more certain.
Earnings Before Interest, Taxes, Depreciation and Amortization. EBITDA for
fiscal 1995 increased 96.6% to $11.4 million compared to $5.8 million in
fiscal 1994. The increase in EBITDA is a result of an increase in revenues,
improvement in gross profit, and a reduction in sales, general and
administrative expenses as a percentage of revenues.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception in August 1993, the Company has financed its operations
through a combination of debt (including term debt, equipment notes, capital
leases and subordinated debt from its sole stockholder) and cash flow from
operating activities. In fiscal 1994 and 1995, the Company issued subordinated
notes of $10.0 million and $9.0 million to its sole stockholder and obtained
additional third-party financing in the form of term debt, equipment notes and
capital leases of $2.2 million, $21.6 million and $11.5 million in fiscal
1994, 1995 and 1996, respectively. The Company's net cash flow provided by
operating activities was $3.0 million, $4.6 million and $9.4 million in fiscal
1994, 1995 and 1996, respectively.
During the three year period ended August 4, 1996, the Company invested
$58.1 million to convert its infrastructure from analog to component digital,
develop management information systems, consolidate various operations, expand
into the Asian market and create new businesses. The Company's capital
expenditures illustrate a systematic concentration of infrastructure and
equipment investment across each business division, with 69.8% of total
capital expenditures in studio services in fiscal 1994, 57.9% of total capital
expenditures in broadcast services in fiscal 1995 and 62.6% of total capital
expenditures in television services in fiscal 1996. For a description of these
capital expenditures, see "Business--Strategic Accomplishments." The following
table sets forth capital expenditures in each business division as well as
capital expenditures associated with new management information systems by
amount and percentage of total capital expenditures for the periods indicated.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------------------------------------
JULY 31, 1994 JULY 30, 1995(1) AUGUST 4, 1996
----------------- ------------------ ------------------
PERCENTAGE PERCENTAGE PERCENTAGE
AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL
------ ---------- ------- ---------- ------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Capital expenditures(2):
Studio................ $6,166 69.8% $ 5,072 16.7% $ 3,175 16.8%
Broadcast............. 518 5.9 17,519 57.9 2,411 12.7
Television............ 1,499 16.9 3,291 10.9 11,853 62.6
Visual effects........ -- -- 2,525 8.3 413 2.2
Management information
systems.............. 656 7.4 1,878 6.2 1,084 5.7
------ ----- ------- ----- ------- -----
Total capital
expenditures....... $8,839 100.0% $30,285 100.0% $18,936 100.0%
====== ===== ======= ===== ======= =====
</TABLE>
20
<PAGE>
- --------------------
(1) The above table reflects $1,066,000 of organization costs for 4MC Asia.
(2) The capital expenditures reflected in the above table do not include the
net assets written off pertaining to the January 1994 earthquake of
$1,860,000 and $567,000 for the fiscal years ended July 30, 1995 and
August 4, 1996, respectively.
With the completion of its new television services facility in September
1996, the Company believes that substantially all of the major infrastructure
upgrades required to make its facilities state-of-the-art have been completed,
except for an estimated $15.0 million to be expended over the next two years
for domestic broadcast and television sound facilities. The Company believes
that the level of capital expenditures for its existing operations in the next
few years should be significantly reduced from that of the previous three
years. Nevertheless, new technologies could be developed which would render
some or a substantial portion of the Company's infrastructure or equipment
obsolete, or the pressure of competition or customer demands could require the
Company to further rebuild or upgrade its infrastructure and equipment. In
addition, the Company could acquire businesses requiring significant capital
investment or purchase real property. In any such case, the Company may incur
significant additional capital expenditures. The Company has no commitments or
agreements to make any such acquisitions or purchases except for the purchase
of certain real property located in Burbank (see "Business--Properties" for a
description of the purchase of such property).
In August 1996, the Company commenced negotiation of a loan agreement with
CIT Group/Business Credit, Inc. and CIT Group/Equipment Financing, Inc. (the
"CIT Facility") which will provide for secured revolving and term loan
facilities of up to $34.0 million to 4MC Burbank and DMC guaranteed by the
Company. The agreement provides for three separate loan facilities: (i) a
$16.0 million term loan, which bears interest at a rate of LIBOR plus 2.75% or
prime as it changes ("PAC") plus .75% and is payable in 84 equal monthly
principal payments commencing November 1997; (ii) an $11.0 million revolving
line of credit which bears interest at a rate of LIBOR plus 2.5% or PAC plus
.50%; and (iii) a $7.0 million capital expenditure line of credit which bears
interest at a rate of LIBOR plus 2.75% or PAC plus .75% and is payable in 60
equal monthly installments commencing the month after funding. The Company
may, at its option, elect a fixed interest rate for the term loan at the five-
year treasury rate plus 3.35%. Total availability under the revolving line of
credit is subject to certain limitations related to the amount of 4MC
Burbank's and DMC's accounts receivable and inventory.
The obligations of 4MC Burbank and DMC under the CIT Facility will be
secured by substantially all of the assets of 4MC Burbank and DMC. The
obligations are also guaranteed by the Company and secured by a pledge of the
capital stock of 4MC Burbank and DMC. The CIT Facility will contain
restrictive covenants that, among other things, and with certain exceptions,
will limit the ability of 4MC Burbank and DMC to pay dividends or make other
distributions to the Company or to incur additional indebtedness. 4MC Burbank
and DMC also will be required to satisfy certain financial covenants and
tests, including the maintenance of minimum net worth, working capital, fixed
charge coverage ratios and leverage ratios.
In February 1995, 4MC Asia borrowed $16.9 million Singapore dollars ($11.8
million U.S. dollars as of August 4, 1996) under a term loan facility with the
Hong Kong and Shanghai Banking Corporation Limited ("HKSB") to fund the
construction of its Singapore broadcast facility. The term loan bears interest
at an annual rate equal to the HKSB prime rate plus 1.25% and is payable in 60
monthly installments commencing April 1997. The term loan is secured by
substantially all of the assets of 4MC Asia and is guaranteed by 4MC Burbank
(which guarantee will be assumed by the Company upon completion of the
Reorganization). The term loan facility contains restrictive covenants that,
among other things, will prohibit 4MC Asia from incurring additional
indebtedness or paying any dividend or making any other distribution to the
Company, other than under certain conditions the repayment of intercompany
debt in an amount not to exceed $3.0 million Singapore dollars in each of the
first two years of the loan. The term loan will become due and payable, at the
option of HKSB, upon the termination of 4MC Asia's contract with MTV Asia or
the occurrence of certain other events of default.
The Company has entered into various capital lease and equipment notes
related to the purchase of equipment. As of August 4, 1996, the Company's
total obligations under capital leases and outstanding
21
<PAGE>
equipment notes were $18.5 million. These notes are due at various times
through 2001 and bear interest at rates of 8.0% to 11.9%. The Company intends
to repay substantially all of these notes (with proceeds from the offering)
over the next 12 to 18 months as prepayment penalties diminish or lapse.
The Company is negotiating to obtain approximately $8.4 million in secured
debt financing to fund a portion of the purchase price of the Burbank property
which houses the Company's archive facility. The Company currently occupies
approximately 50% of this facility. See "Business--Properties."
The Company believes that the remaining proceeds of this offering (after
repayment of certain outstanding debt, see "Use of Proceeds"), combined with
cash flow from operations and amounts available under the CIT Facility, will
be sufficient to meet its anticipated working capital and capital expenditure
requirements through the end of 1997. The Company may, however, be required to
seek additional debt and/or equity financing to support a more rapid than
planned expansion, respond to competitive pressures or customer demands, or
meet unanticipated requirements. In addition, the Company regularly engages in
discussions regarding the acquisition of complementary businesses. Although
the Company has no commitments or agreements to effect any acquisition, if the
Company were to make an acquisition, it may be required to obtain additional
debt and/or equity capital.
FOREIGN EXCHANGE
Substantially all of 4MC Asia's transactions are denominated in Singapore
dollars, including its bank borrowings. Although 4MC Asia is not subject to
foreign exchange transaction gains or losses, its financial statements are
translated into United States dollars as part of the Company's consolidated
financial reporting. Fluctuations in the exchange rate therefore will affect
the Company's consolidated balance sheets and may, upon repatriation of funds
from 4MC Asia to the Company and payment of related income taxes, affect the
Company's net income. Over the past two years the Singapore dollar has been
stable relative to the United States dollar. However, the continued stability
of the exchange rate is subject to numerous factors, all of which are beyond
the Company's control.
QUARTERLY REVENUE FLUCTUATIONS
The Company's results from operations are dependent upon several market
factors that are beyond its control, including: (i) the size of the domestic
and international markets for the exploitation of content libraries; (ii) the
ability of specialty programmers to find, acquire and market domestic capacity
for new channels and pay-per-view services; (iii) the ability of the major
entertainment companies to launch their domestic cable channels in
international markets (e.g., Asia); (iv) the demand for original programming
for airing on network and/or cable channels; (v) the acceptance of digital
methods of image production and manipulation by producers of feature films and
television programming; and (vi) the viewing audience's demand for higher
levels of production value in film and television programming.
Revenues derived from the Company's television division are seasonal in
nature, generally beginning in September and ending in May. As a result, the
Company historically has experienced its lowest operating results in the
fourth quarter, and first quarter results generally are lower than second and
third quarter results. In addition, the Company's television division can
experience fluctuations in quarterly financial results for reasons beyond the
Company's control including a work stoppage or other event resulting in delays
in production schedules; changes in or extensions of vacation time around
holidays; network cancellations of projects at mid-season; and changes in
staffing, location or budgets of production companies. These factors result in
idle capacity until replacement work can be found. The expansion of the
Company's studio and broadcast services businesses have mitigated, to a
certain extent, the seasonality of the Company's revenues, EBITDA and net
income in prior periods. However, the completion of the Company's new
television facility in Burbank, increased revenues generated by the Company's
Santa Monica facility and future expansion of television operations would
likely create more seasonal variation in the Company's revenues, EBITDA and
net income in current and future fiscal years. See "Risk Factors--Potential
Fluctuations in Operating Results; Seasonality."
22
<PAGE>
The following table presents (in thousands), by fiscal quarter, unaudited
information derived from the Company's Consolidated Statements of Operations
for the two fiscal years ended August 4, 1996.
<TABLE>
<CAPTION>
FISCAL QUARTERS ENDED
-----------------------------------------------------------------------------
FISCAL 1995 FISCAL 1996
-------------------------------------- -------------------------------------
OCT. 31, JAN. 31, APRIL 30, JULY 30, OCT. 31, JAN. 31, APRIL 30, AUG. 4,
1994 1995 1995 1995 1995 1996 1996 1996
-------- -------- --------- -------- -------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Studio................. $ 4,269 $ 5,134 $ 5,727 $ 5,547 $ 5,746 $ 6,008 $ 5,840 $ 5,874
Broadcast.............. 2,838 2,973 4,530 5,822 5,489 5,088 5,065 5,259
Television............. 3,532 6,705 7,315 5,160 5,631 5,684 7,058 4,970
Visual effects......... 0 510 313 629 766 305 515 730
------- ------- ------- ------- ------- ------- ------- -------
Total revenues......... 10,639 15,322 17,885 17,158 17,632 17,085 18,478 16,833
------- ------- ------- ------- ------- ------- ------- -------
Cost of services:
Personnel.............. 4,427 5,768 6,362 6,238 6,527 6,280 6,286 6,251
Material............... 1,204 1,637 1,903 1,680 1,920 1,809 1,816 1,809
Facilities............. 749 936 1,018 1,214 1,124 1,181 1,144 1,243
Other.................. 965 1,491 1,579 1,525 1,504 1,707 1,437 1,373
------- ------- ------- ------- ------- ------- ------- -------
Total cost of
services.............. 7,345 9,832 10,862 10,657 11,075 10,977 10,683 10,676
------- ------- ------- ------- ------- ------- ------- -------
Gross profit.......... 3,294 5,490 7,023 6,501 6,557 6,108 7,795 6,157
------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Sales, general and
administrative........ 1,997 2,654 2,898 3,369 3,030 2,871 2,646 2,569
Depreciation and
amortization.......... 883 1,176 1,931 2,251 2,497 2,508 2,561 2,599
------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses.............. 2,880 3,830 4,829 5,620 5,527 5,379 5,207 5,168
------- ------- ------- ------- ------- ------- ------- -------
Income from
operations........... 414 1,660 2,194 881 1,030 729 2,588 989
Interest expense, net... 391 640 772 1,114 921 1,073 993 919
------- ------- ------- ------- ------- ------- ------- -------
Income before income
tax benefits......... 23 1,020 1,422 (233) 109 (344) 1,595 70
Income tax benefits..... (250) (204) (284) (250) (204) (250) (317) (223)
------- ------- ------- ------- ------- ------- ------- -------
Net income............ $ 273 $ 1,224 $ 1,706 $ 17 $ 313 $ (94) $ 1,912 $ 293
======= ======= ======= ======= ======= ======= ======= =======
OTHER DATA:
EBITDA.................. $ 1,297 $ 2,836 $ 4,125 $ 3,132 $ 3,527 $ 3,237 $ 5,149 $ 3,588
</TABLE>
23
<PAGE>
BUSINESS
OVERVIEW
The Company is a leading provider of technical, creative and broadcast
services to owners, producers and distributors of television programming,
feature films and other entertainment content in the United States and Asia.
The name Four Media Company is derived from the Company's core competencies in
film, video, sound and data. The Company's services integrate and apply a
variety of systems and processes to enhance content creation and distribution.
The Company seeks to capitalize on growth in domestic and international demand
for original entertainment content and for existing television and film
libraries without taking production or ownership risk with respect to any
specific television program, feature film or other content.
During the past three fiscal years, the Company has invested $58.1 million
in infrastructure, primarily for new digital systems and equipment. In
addition, the Company has successfully identified, acquired and integrated
four complementary businesses. The Company acquired the assets of three
companies in connection with its formation in 1993, acquired the assets of a
fourth company in 1994, and capitalized and commenced its Singapore broadcast
operations in 1995. As a result of its investments and acquisitions, the
Company is one of the largest independent (not affiliated with or related to a
content owner) providers of technical and creative services to the
entertainment industry in terms of total revenues, employees and number of
customers, and is one of the most diversified providers of those services.
The Company has organized its activities into four divisions, each of which
offers services that are integral to the creation, enhancement and/or
distribution of entertainment content.
Studio Services. The studio services division provides owners of television
and film libraries with all of the facilities and services necessary to
manage, format and distribute content worldwide. These services include
restoring and preserving damaged content, archiving original elements and
working masters, creating working masters from original elements, duplicating
masters for professional applications and formatting masters to meet specific
end-user standards and requirements. The studio services division seeks to
offer customers lower operating costs, improved response time and reliability,
access to new technology, and adherence to quality standards that are
recognized by the international technical community. The division's customer
base includes the major domestic studios (and their international divisions)
as well as independent owners of television and film libraries. Studio
services operations are conducted in Burbank.
Broadcast Services. The broadcast services division provides domestic and
international programmers with the facilities and services necessary to
assemble and distribute programming via satellite to viewers in the United
States, Canada and Asia. These services include assembly of programming
provided by the customer into a 24-hour "network" format; creating
interstitial and promotional graphics and other material that support the
brand identity of the programming; providing production support and facilities
for the timely creation of original programming, such as announce and news
segments; and providing automated systems to broadcast the programming via
playback and uplink facilities. In addition, the broadcast services division
provides facilities and services for the delivery of syndicated television
programming in the United States and Canada and also transmits special events,
sports or news stories for insertion in a network, cable system or direct-to-
home broadcast. The division's customer base includes major entertainment
companies offering worldwide network programming, independent content owners
offering niche market programming, and pay-per-view channels marketing movies
and special events to the cable industry and direct-to-home viewers. Broadcast
services operations are conducted in Burbank and the Republic of Singapore.
Television Services. The television services division provides producers of
original television programming with the technical and certain of the creative
services that are necessary to conform original film or video principal
photography to a final product suitable for airing on network, syndicated,
cable or foreign television. These services include developing negative in the
Company's film laboratory; converting developed negative to videotape and/or
digital formats; creating music and sound effects; mixing sound elements for
laydown to the final program master; creating visual effects; integrating
visual effects in the final program master;
24
<PAGE>
correcting color; removing artifacts and scratches from the program master;
formatting for commercial integration; and delivering (via tape or satellite)
the program master for broadcast. The division's customer base includes most
of the major domestic studios and broadcast networks that are engaged in the
production of original programming as well as a large number of independent
production companies. Television services operations are conducted in Burbank
and Santa Monica.
Visual Effects Services. The visual effects services division commenced
operations in January 1995 and provides creators of special visual effects
with certain services required to digitally create or manipulate images in
high resolution formats for integration in feature films. These services
include developing negative and correcting color in the Company's film
laboratory; digitally scanning film; and digitally compositing multiple layers
of effects and recording the result on film. The division's customer base
includes most of the major domestic studios as well as independent visual
effects supervisors. Visual effects operations are conducted in Burbank and
Santa Monica.
MARKETS
The entertainment industry creates motion pictures, television programming,
and interactive multimedia content for distribution through theatrical
exhibition, home video, pay and basic cable television, direct-to-home,
private cable, broadcast television, on-line services and video games. Content
is released into a "first-run" distribution channel, and later into one or
more additional channels or media. In addition to newly-produced content, film
and television libraries may be released repeatedly into distribution.
Entertainment content produced in the United States is exported, and is in
increasingly high demand internationally. The Company believes that several
trends in the entertainment industry will have a positive impact on the
Company's business, including growth in worldwide demand for original
entertainment content, the development of new markets for existing content
libraries, greater demand for innovation and creative quality in entertainment
markets and wider application of digital technologies to content manipulation
and distribution, including the emergence of new distribution channels.
The Motion Picture Industry. The motion picture industry encompasses the
production, distribution and domestic exhibition of feature-length motion
pictures, including their distribution in home video, television and other
ancillary markets. While the domestic motion picture industry is dominated by
the major studios, including Paramount Pictures, Sony Pictures Entertainment
(Columbia/Tri-Star), Twentieth Century Fox, Universal Pictures, The Walt
Disney Company and Warner Bros., independent production companies also play an
important role in the production of motion pictures for domestic and
international feature film markets. The major studios release as many as 200
new feature films a year and domestic independent producers and distributors
account for an estimated 180 films a year.
In 1995, the worldwide revenue of United States motion picture distributors
totaled $18.3 billion, an increase of 6.2% over 1994. Recent growth in
international revenue has far exceeded growth in North American revenues, with
international revenue now accounting for nearly half of total revenue.
According to an August 1996 communications industry forecast, it is expected
that by the year 2000, international revenue from motion pictures produced in
the United States will surpass North American revenue. The Company's studio
services division provides services that support the preparation and delivery
of feature films for distribution in domestic and international home video,
television and other ancillary markets.
The Television Production Industry. The North American (United States and
Canada) television production and distribution industry serves the largest
broadcast market in the world, with a population of approximately 290 million
and more than 95 million homes. In North America, programming is delivered to
the end user via conventional broadcast networks, cable channels, individual
television stations and satellite delivery systems. The number of broadcast
television networks in the United States continues to increase, with United
Paramount Network and the Warner Bros. Network recently joining the
established networks, ABC, NBC, CBS and Fox. The established networks
penetrate nearly 100% of domestic television households and provide the
25
<PAGE>
most effective access to a broad-based mass audience for television
advertisers. Spending for television advertising, which drives the production
of new programming and the sale of existing content libraries, reached a
record level of $37.5 billion in 1995, compared to $29.0 billion in 1990.
The demand for entertainment content has increased significantly as a result
of the introduction of new broadcast networks, direct broadcast satellite
systems, pay television, increased cable penetration and the growth of home
video. The new television networks have created the need for more hours of
original programming and competition for viewers has increased the demand for
innovation and creative quality resulting in higher levels of spending. In
1995, United States television broadcasters (including cable) spent
approximately $8.9 billion for programming, compared to $7.2 billion in 1990.
The Company's television services division supports the creation of television
programming for domestic distribution and the Company's broadcast services
division supports the delivery of programming through various channels of
distribution including cable and satellite delivery systems.
In the last decade, the privatization of broadcasting systems outside the
United States, the proliferation of broadcast licenses, and the introduction
of sophisticated delivery technologies, such as cable and satellite
transmission systems, have led to significant growth of broadcasting and cable
television markets outside North America. European television is the most
visible example of the growth in programming outlets. Over the last 15 years,
European governments have encouraged a major expansion of the public and
private broadcasting sectors. For example, Germany and France each have added
six broadcast networks and the United Kingdom has added four. The introduction
of new television broadcast systems is just beginning in Asia and Eastern
Europe. Most foreign broadcasters require a mix of both indigenous programming
to satisfy the local content requirements of their broadcast licenses and
popular international programming, largely produced in the United States. The
substantial growth of broadcast markets outside North America has also
increased the demand for entertainment content produced in the United States.
The Company's television services division supports the creation of
programming for international distribution, the Company's studio services
division supports the preparation of content to be viewed in international
markets, and the Company's broadcast division supports the distribution of
cable channels in Asia and is seeking to establish a presence in other
developing international markets.
The Multimedia Industry. The interactive multimedia industry encompasses
video games, and on-line and interactive services. While certain segments of
the industry such as video games are well established, the multimedia industry
is an emerging business with significant growth potential. According to an
industry forecast, revenues derived from the sale of video game systems and
game software were $4.5 billion in 1995. Improvements in technology, the
availability of communication bandwidth, the proliferation of distribution
channels for entertainment products and services, and the involvement of large
entertainment companies, together, signify a critical mass to support such
growth. On-line services offer the consumer access to the Internet and the
World Wide Web via internet access providers such as Netcom(R) and UUNet(R),
and to services such as America On-line(R) and Prodigy(R) which offer both
internet access and proprietary features. Numerous companies provide Web site
design and creation, such as Digital Planet(R), Dimension X(R) and
Starware(R), that integrate various forms of media including live action
video, animation, graphics and audio. Other interactive on-line services such
as video-on-demand are being deployed by cable television operators and
certain of the regional telephone companies. Although the Company currently
derives no significant revenues from these market segments, the Company
believes that its creative and technical processes will be marketable to the
multimedia industry specifically in the areas of video compression,
digitization, 2D and 3D graphics, and authoring for the more complex platforms
and applications such as digital versatile disk ("DVD") and server-based on-
demand services.
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STRATEGIC ACCOMPLISHMENTS
The Company has implemented its business plan and capitalized on industry
trends and opportunities to accomplish the following:
Studio Services. In fiscal 1994, the Company identified a growth opportunity
in servicing technical and operational needs related to the domestic and
international distribution of entertainment content. The Company pursued this
opportunity by improving and upgrading its infrastructure, constructing an
archive and developing and implementing a management information system to
provide customers with instant access to information regarding the status of
their assets, work-in-process and shipments. Since 1993, the Company has
invested approximately $14.4 million in its studio services facilities. The
facilities occupy approximately 82,000 square feet of new space (in two
buildings) and feature a state-of-the-art digital infrastructure. Studio
services revenues have increased to $23.5 million in fiscal 1996 compared to
$15.7 million in fiscal 1994. The Company intends to capitalize on the
emergence of growth opportunities related to the domestic and international
distribution of content and the digitization and compression of content for
new distribution and multimedia applications by continuing to add capacity to
its studio services facilities.
Broadcast Services. In fiscal 1995, the Company determined that it could
capitalize on its core competencies and customer relationships and expand its
broadcast operations internationally. The Company evaluated expansion in
Europe, South America, Asia and Africa. After extensive research, the Company
selected Asia and established a new broadcast facility in Singapore. The
Company selected Asia because of (i) the availability of powerful transponder
capacity serving the entire Asian and Asean populations; (ii) the growing
popularity and acceptance of television as an entertainment vehicle in various
Asian and Asean cultures; (iii) the ability of the region to draw advertising
dollars based upon the emergence of a large middle class with disposable
income; and (iv) the large number of international and local programmers
seeking access to the region using cost-efficient satellite delivery systems.
The Company invested approximately $19.6 million to design and construct its
Singapore broadcast facility. The all digital and fully integrated broadcast
facility occupies approximately 20,000 square feet of newly developed space.
MTV Asia is the Company's first major customer in Singapore. The Company's
long-term contract with MTV Asia provides a base upon which to build other
business. The value of the Singapore operation is derived from (i) MTV Asia's
long-term commitment to the Company; (ii) the growth potential of the region
in general and Singapore as a broadcast hub specifically; (iii) the
availability of the facility's excess capacity to generate revenues outside
the MTV Asia relationship; and (iv) the ability of the Company to apply its
outsourcing model to domestic or international customers in any location.
Broadcast services revenues increased to $20.9 million in fiscal 1996 compared
to $10.9 million in fiscal 1994. The Company intends to rebuild its domestic
broadcast facility to accommodate the transmission of digitally compressed
signals and server-based playback systems by the end of fiscal 1998.
Television Services. In 1994, the Company acquired the assets of DM&T, a
facility specializing in providing visual effects for television. The Company
invested a total of $15.3 million in the facility, including approximately
$7.7 million to acquire the DM&T assets and an additional $4.3 million for the
purchase of component digital equipment and other improvements. The Company
believes that its facility is among the most technologically advanced
television services facilities in the Los Angeles area. In 1996, the Company
completed construction of a new television facility in Burbank providing new
server-based technology targeted at the episodic television market. The
Company studied the migration to a file server environment for all digital
non-linear assembly of television programming and implemented a new design
incorporating server-based technology. In addition, the Company incorporated
four Rank Cintel URSA Gold(R) telecines in the new infrastructure to provide
high quality pictures as well as seamless transition from telecine to off-line
and on-line applications. The Company invested approximately $16.4 million to
design and construct the Burbank facility.
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The Company intends to exploit the depth of the Company's television service
offerings by pursuing revenue opportunities related to the production and
distribution of original television programming--one of the largest segments
of the Los Angeles entertainment market. The Company offers the television
industry a full range of services in desirable geographic locations, a fully
integrated infrastructure designed to reduce turnaround time and increase
creative flexibility, and segmented service offerings. Television services
revenues increased to $23.3 million in fiscal 1996 compared to $15.6 million
in fiscal 1994.
Visual Effects Services. In fiscal 1995, the Company determined that it
could apply its core competencies in the digital manipulation of images for
television to high resolution visual effects for feature films. The Company
retained a highly respected creative staff and acquired certain high
resolution equipment including a Quantel(R) Domino(R) computer and a Silicon
Graphics(R) computer that runs Discreet Logic(R) Inferno(R) software. In
addition, the Company acquired six Silicon Graphics(R) workstations running a
variety of software for high resolution animation applications, and film
scanning and recording equipment required to digitize high resolution images.
As of August 4, 1996, the Company's total capital investment in the visual
effects operation was approximately $2.9 million. The Company has attracted
visual effects projects for medium budget feature films and portions of
projects for large budget major motion pictures. The Company anticipates
making additional investments in high resolution capacity in response to
demand. Visual effects services revenues increased to $2.3 million in fiscal
1996 compared to $1.5 million in fiscal 1995.
GROWTH STRATEGY
The Company seeks to benefit from the increasing worldwide demand for
original entertainment content and the development of new markets for existing
television and film libraries. The Company intends to increase its market
share and to establish a brand identity in the markets it serves by executing
the following growth strategies:
. Pursue Consolidation Opportunities. The Company plans to pursue
acquisitions that complement existing operations, increase market share
and diversify product lines. The Company participates in a highly
fragmented industry in which many small, entrepreneurial companies
compete for market share. Many do not have the size, diversity,
liquidity or capital resources required to modernize infrastructure or
derive efficiencies from economies of scale. The Company has
successfully identified, acquired and integrated four complementary
business. The Company acquired the assets of three companies in
connection with its formation in 1993, acquired the assets of DM&T in
1994, and capitalized and commenced its broadcast operations in
Singapore in 1995.
. Offer Complete Outsourcing Solutions. The Company intends to expand the
range of outsourcing solutions it provides to customers by bundling
services into a variety of combinations. This innovative outsourcing
approach provides customers several benefits including (i) lower capital
investment and operating costs than in-house alternatives; (ii) more
control over processes by using a single vendor; (iii) access to current
technology without the necessity of continuously upgrading equipment;
(iv) no diversion of technical, administrative and managerial resources
to non-core activities; (v) access to a diverse group of broadly
experienced technical and creative professionals; (vi) the ability to
enforce contractual standards of performance, thereby improving
accountability and reliability; and (vii) the ability to reduce
financial risk by identifying and fixing all of the costs associated
with a particular process.
. Utilize Leading Technologies. The Company plans to continue its
investment in component digital equipment and other leading technologies
in order to enhance its reputation for technological leadership in its
industry. During the three years ended August 4, 1996, the Company
invested $58.1 million to expand the scope and scale of its operations,
broaden its service offerings, expand internationally and convert the
majority of its infrastructure and equipment to be compatible with new
digital content formats. The Company believes that continued investment
in infrastructure and the deployment of digital technology will position
the Company to benefit from the domestic and international growth in
entertainment content production and distribution.
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. Provide Superior Customer Service. The Company will continue to develop
its information systems to enhance efficiency and provide timely and
accurate information to its customers. The Company has invested
approximately $3.6 million to design, develop and implement a management
information system that provides timely and accurate information to
customers about the status of archived material, work orders, shipments
and deliveries.
. Expand Internationally. The Company intends to expand internationally in
response to specific customer demand, particularly where the Company's
technical expertise, financial strength and the ability to execute
quickly are competitive advantages. The Company has demonstrated its
ability to respond quickly to international expansion opportunities. For
example, it commenced negotiations with MTV Networks in August 1994
regarding a contract for services in Asia, and after locating,
designing, building and staffing a $19.6 million state-of-the-art
digital broadcast facility in Singapore, commenced the broadcast of two
MTV Asia channels, MTV Aseana and MTV Pan China, in April 1995. The
Company intends to capitalize on its experience in Singapore by pursuing
similar opportunities in other locations.
. Establish Strategic Alliances. The Company seeks to generate additional
revenue from its technological resources and facilities by establishing
strategic alliances with content creators and others. In fiscal 1996,
the Company entered into an agreement with Silverhammer, Inc., a design
and production firm specializing in the creation of network and
corporate visual promotions, identities, in-show graphics and internet
home pages. The agreement specifies that the Company will be
Silverhammer's exclusive service provider and permits the Company to
acquire an equity position in Silverhammer.
. Capitalize on the Increasing Application of Digital Technology. The
Company intends to capitalize on new methods of digitizing, storing,
retrieving and manipulating content as well as increased demand for high
quality motion video for use in multimedia applications and new content
distribution channels. For example, the Company anticipates
opportunities in authoring and mastering content for DVD and video on
demand applications. The Company believes that compression technologies,
such as MPEG II, will gain acceptance in the broadcast and cable
industries and facilitate the expansion of channel capacity and
programming opportunities. The Company purchased compression equipment
in fiscal 1996 in anticipation of the development of a market for
compression applications. In addition, the Company currently is
developing the capability to transmit digitally compressed signals to
domestic satellites.
PRODUCTS AND SERVICES
The Company has defined its operating divisions in terms of the
entertainment industry market segments each serves. Each entertainment
industry market segment is driven by diverse but related economic factors, and
as a result, the Company is not solely dependent upon any single market
segment within the entertainment industry. The Company intends to maintain and
expand the diversity of its revenue sources and views such diversity as a
significant competitive operating and financial advantage.
For each of its operating divisions, the Company has defined a set of
services which support the entire technical and creative process of its
customers: studio services--"Content Preparation Process;" broadcast
services--"Network Delivery Process;" television services--"Original
Programming Delivery Process;" and visual effects--"Effects Creation Process."
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STUDIO SERVICES
The studio services division offers a broad range of facilities and
technical services to owners of television and film libraries. The division
provides all of the services necessary to manage, format and distribute
content on an international scale. These services include archiving original
elements and working masters, restoring and preserving damaged content,
creating working masters from original elements, duplicating masters for
professional applications, and formatting masters to meet specific end-user
standards and requirements. The Company offers the customer lower operating
costs, improved response time and reliability, access to new technology, and
adherence to standards of quality that are recognized by the international
technical community.
The Company's Content Preparation Process consists of the services outlined
in the chart below. While the Company markets these services as a cost-
effective package, service offerings are available individually and priced
separately.
The Content Preparation Process
Audio
Restoration Transfer Layback
Archive -- -- -- Conversion
Preservation Transform
Duplication
Archive. The storage and handling of videotape and film elements require
specialized security and environmental control procedures. Throughout the
entertainment industry, content representing millions of dollars of future
revenue is stored in physically small units that are subject to the risk of
loss resulting from physical deterioration, natural disaster, unauthorized
duplication or theft. The Company's archive is designed to store approximately
400,000 master videotapes and film elements in an environment protected from
temperature and humidity variation, seismic disturbance, fire, theft and other
external events. In addition to the physical security of the archive, content
owners require frequent and regular access to their libraries. Speed and
accuracy of access is a critical value added factor. The Company believes that
its archive, built at a cost of $3.1 million in fiscal 1994, is the largest
among independent service providers and among the most advanced with respect
to security, environmental control and access features.
Restoration. Substantially all film elements originating prior to 1983 have
faded, degraded or have been damaged in some way. Generally, damaged negatives
cannot be utilized in the Content Delivery Process because the resulting
broadcast submaster will not meet the minimum quality standards required in
domestic and foreign markets. The Company's technicians restore damaged film
negative to original and sometimes enhanced quality through the use of
proprietary optical and electronic equipment and techniques. The Company
believes it is well recognized for its ability to complete technically
challenging restoration assignments.
Preservation. Modern film stock, introduced in 1983, has a shelf life
exceeding 100 years. Because images recorded on old film stock degrade over
time resulting in the loss of color and in extreme cases the integrity of the
film itself, older film frequently is converted to a new archival film stock
medium. Film is the preferred archival medium because it has the highest image
resolution of any image storage medium. Using a proprietary process, the
Company takes the original (or restored) negative and creates an archival
answer print and interpositive (i.e., a new negative). The Company believes
that, due to technical and operational advances in its proprietary
preservation process, it is a market leader in the preservation of existing
film content.
Transfer. Substantially all film content ultimately is distributed to the
home video, broadcast, cable or pay-per-view television markets, requiring
that film images be transferred to video images. Each frame must be color
corrected and adapted to the size and aspect ratio of a television screen in
order to ensure the highest level of
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conformity to the original film version. Because certain film formats require
transfers with special characteristics, it is not unusual for a motion picture
to be mastered in many different versions. For example, anamorphic
(Cinemascope) formats require mastering in at least two aspect ratios
(pan/scan and letter box) and certain international broadcasters have other
requirements. The Company transfers film to videotape using Ursa Gold(R)
telecine equipment and DaVinci(R) digital color correction systems recently
installed at a cost of $6.4 million. This equipment produces the highest
quality transfers available in the industry. Technological developments, such
as the anticipated domestic introduction of television sets with 16 x 9 aspect
ratios and the implementation of advanced definition television systems for
terrestrial and satellite broadcasting, if they occur, should contribute to
the growth of the Company's film-to-tape transfer business in the future.
Transform. Production companies may choose to originate their work on
videotape even though the ultimate market is a theatrical release on film. The
Company developed a proprietary process called Transform(R) to convert
videotape to film. Transform(R) uses an electron beam recorder and a patented
color imaging system to transform video pictures from all current broadcast
standards to 16mm or 35mm film. The process involves transferring red, blue
and green video images sequentially to a 16mm fine grain intermediate film
stock using an electron beam modulated with the video image. These fine grain
separations are then sequentially step-printed onto color negative film stock.
The Transform(R) process is applicable to advertising commercials and
interstitial programming material (less than 90 seconds in running length) as
well as theatrical length presentations including feature films, concerts and
special events. The Company currently transforms numerous short segments,
special events, and six to ten feature films per year.
Audio Layback. Audio layback is the process of creating duplicate videotape
masters with sound tracks that are different from the original recorded master
sound track. Content owners selling their assets in foreign markets require
the replacement of dialog with voices speaking local languages. In some cases,
all of the audio elements, including dialog, sound effects, music and laughs,
must be recreated, remixed and synchronized with the original videotape. Audio
sources are premixed foreign language tracks or tracks that contain music and
effects only. The latter is used to make a final videotape product that will
be sent to a foreign country to permit addition of a foreign dialogue track to
the existing music and effects track. The Company attracts audio layback
business by offering (i) optimum sound quality; (ii) synchronization of audio
to picture within a half frame accuracy; (iii) consistent quality and
accuracy; (iv) quick turnaround; and (v) competitive pricing.
Conversion. Conversion is the process of changing the frame rates of a video
signal from one video standard (such as the United States standard) to another
(such as the European standard). Through the utilization of Digital Electronic
Film Transfer and Phase Correlation technologies, the Company provides the
highest quality conversion services available. The Company's primary
competitive advantages are its state-of-the-art equipment and its detailed
knowledge of the international markets with respect to quality-control
requirements and technical specifications.
Duplication. The final step in the Content Preparation Process is the
creation of submasters for distribution to professional end users. Master
tapes are used to make submasters in NTSC, PAL and other formats. Videotape
content is copied for use in intermediate processes, such as editing, on-air
backup and screening, and for final delivery to cable and pay-per-view
programmers, broadcast networks, television stations, airlines, home video
duplicators and foreign distributors. The Company duplicates videotape in all
international standards in 22 tape formats. The Company believes that its
professional duplication facility is technically advanced and has unique
characteristics that significantly increase equipment capacity utilization
while reducing error rates and labor costs.
BROADCAST SERVICES
The broadcast services division offers a broad range of facilities and
technical and creative services to domestic and international programmers. The
Company provides all of the facilities and services necessary to assemble and
distribute programming via satellite to viewers in the United States, Canada
and Asia. These services include assembling programming provided by the
customer into a 24-hour "network" format, creating
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interstitial and promotional graphics and other material that support the
brand identity of the programming, providing production support and facilities
for the timely creation of original programming such as announce and news
segments, and providing automated systems to deliver the programming to air
via playback and uplink facilities. In addition, the Company provides
broadcast facilities and services for the delivery of syndicated television
programming in the United States and Canada and transmits special events,
sports or news stories for insertion in a network, cable system or direct-to-
home broadcast. The Company's customer base consists of the major studios and
entertainment companies offering world-wide network programming, independent
content owners offering niche market programming and pay-per-view channels
marketing movies and special events to the cable industry and direct-to-home
viewers. Broadcast service operations are conducted in Burbank and the
Republic of Singapore.
The Company's Network Delivery Process consists of the services outlined in
the chart below. While the Company markets these services as a cost-effective
package, service offerings are available individually and priced separately.
The Network Delivery Process
Production Network Uplink
Promotion -- Assembly -- Origination -- Satellite
Audio Transponder
Production and Promotion. A broadcaster's identity and continuity during the
broadcast day are established and enhanced when an on-camera personality
(presenter) is used to introduce the channel or the channel's programming.
Timely broadcast programming, such as news, requires immediate and precise
coordination of on-camera talent, the script, the pre-recorded videotape and
graphic materials and the broadcast schedule. The Company operates a state-of-
the-art production studio in Singapore with three cameras, production and
audio control rooms, videotape playback and record, multi-language prompter,
computerized lighting, and dressing and makeup rooms. The studio is fully
configured for host, news and chroma key segments. A one-camera field crew is
also available for electronic field production recording, and the Company
offers live-to-satellite interview and other on-camera services. On-screen
marketing and broadcast continuity also depend on on-air promotional material
to support the channel's brand identity and the channel's programming. The
Company, working in conjunction with the customer's producers, offers a
complete on-air promotional service, including graphics, editing, voice-over
record, sound effects editing, sound mixing and music composition.
Audio. Programming designed for distribution in markets other than those for
which it was originally produced is prepared for export through language
translation and either subtitling or voice dubbing. The Company provides
dubbed language versioning with an audio layback and conform service that
supports various audio and videotape formats to create an international
language-specific master videotape. The Company's Burbank facility also
creates music and effects tracks from programming shot before an audience to
prepare television sitcoms for dialog record and international distribution.
The Company's Singapore facility supports subtitling with translation
coordination and a complete on-screen and closed-caption subtitling facility.
Subtitling currently is available in Chinese and English; other languages can
be added in response to customer need.
Assembly. Prior to broadcast, program and interstitial material is checked
for quality control and may be pre-compiled into final broadcast form prior to
on-air playback. Interstitial pre-compilation is performed in Company editing
facilities, often using proprietary systems and software which permit the
efficient assembly of high production value visual effects. Syndicated
programming is also prepared for distribution with commercials and similar
elements inserted prior to distribution. Control procedures are used to ensure
on-air reliability. The Company provides programming to almost all United
States broadcast television stations through daily satellite feeds and tape
shipments. A variety of movie and show formatting and time compression
services are available
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to prepare programming for distribution. Commercial, promotional, billboard,
warning, logo and other integration, as well as closed captioning for the
hearing impaired and source identification encoding, is performed. The Company
also provides program log and traffic support to programmers; affiliate
relations and station coordination; library storage of broadcast master tapes;
and a syndication program library and recycled videotape inventory.
Network Origination. The Company provides videotape playback and origination
to cable, pay-per-view and direct-to-home networks and services. The Company
accepts daily program schedules, programs, promos and advertising, and
delivers 24 hours of seamless daily programming to cable affiliates and home
satellite subscribers. The Company uses automated robotics systems for
broadcast playback, which include proprietary systems and software. The
Company also operates industry-standard encryption and/or compression systems
as needed for customer satellite distribution. The Company uses a customized
approach to satisfy each customer's timeliness, flexibility and reliability
requirements. Playback systems are both videotape and video server-based, and
subtitling and "local avail" (head and commercial insertion) are supported.
Quality control, tape storage and trafficking services are also offered by the
Company. Currently, the Company supports over twenty 24-hour channels from its
Burbank facility, and two 24-hour channels originate from the Singapore
facility.
Uplink and Satellite Transponders. The Company's Burbank facility operates a
C-band video-oriented satellite earth station facility with eight
transmit/receive antennas and over 30 transmit chains. Catalina Transmission
Corp. ("Catalina"), a wholly owned subsidiary of 4MC Burbank, is licensed by
the FCC and operates as a common carrier. Facilities are staffed 24 hours a
day and also are used for downlink and turnaround services. The Company
communicates with two transponders on the Galaxy IV(R) satellite in support of
the Company's syndication and Canadian distribution business segments.
Catalina accesses various "satellite neighborhoods" daily, including basic and
premium cable, broadcast syndication and direct-to-home markets. The Company
resells transponder capacity for ad hoc and other occasional use and bundles
its transponder capacity with other broadcast services to provide a complete
broadcast package at a fixed price.
TELEVISION SERVICES
The television services division provides a broad range of facilities and
technical and creative services directed to producers of original television
programming. The Company provides all of the technical and certain of the
creative services that are necessary to conform original film or video
principal photography to a final product suitable for network, syndicated,
cable or foreign television. These services include developing negative in the
Company's film laboratory, converting developed negative to video tape and/or
digital formats, creating music and sound effects, mixing all sound elements
for laydown to the final program master, creating visual effects in the final
program master, color correction, dirt and scratch removal, formatting for
commercial integrating and physical delivery via tape or digital delivery via
satellite of the program master for air. The Company's customer base includes
most of the major studios and broadcast networks that produce original
programming as well as a large number of independent production companies.
Television operations are conducted in Burbank and Santa Monica.
The Company's Programming Delivery Process consists of the services outlined
in the chart below. While the Company markets these services as a cost-
effective package, service offerings are available individually and priced
separately.
The Original Programming Delivery Process
Audio
Negative Off-Line Visual Assembly
Developing -- Editing -- Effects -- Formatting
Transfer Duplication
Digitization
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Negative Developing. Because of the creative freedom, high resolution image
quality and flexibility attained by working with film, the majority of prime
time network and first run syndicated television programming originates on
film. "Dailies" (camera original negative shot during each day) for one hour
dramas, situation comedies and movies-of-the-week are delivered to the
Company's film laboratory to be developed overnight. The Company's film
laboratory specializes in negative developing for television applications and
has increased its television related activities in each year since the
Company's inception.
Transfer and Digitization. The transfer department accepts developed
negative from a laboratory and transfers the film to videotape. The transfer
process enables the customer to view the previous day's work on videotape and
begin the creative process of editing the footage. The transfer process is one
of the most technically and creatively challenging of any of the Company's
services. The Company must integrate various forms of audio and encode the
video picture with feet and frame numbers from the original film. The Company
utilizes state-of-the-art URSA Gold(R) telecine equipment adapted for
television specifications. The Company believes that its equipment produces
the highest quality results attainable in the industry today in part because
it uses only URSA Gold(R) technology for television transfer services.
Off-Line Editing. The Company delivers low resolution digitized images to
the customer for processing by various non-linear editing work stations, such
as the Avid(R), Media Composer(R), Lightworks(R) and Heavyworks(R). Using
these or similar systems, the customer determines the programming content and
creates an edit decision list, which will eventually be used to assemble the
source material into a final product suitable for broadcast. The Company
provides and fully supports non-linear off-line editing with personnel and
equipment for use by the customer within the Company's facilities or at other
locations designated by the customer. In addition, the Company is currently
constructing communications infrastructure to provide digitized images
directly from the film-to-tape transfer room to work stations via dedicated
phone lines.
Audio. After the customer has made substantially all of the creative
decisions necessary to determine the programming content, the Company offers
various services to enhance and conform the audio to the video image. The
Company creates sound effects, assists in replacing dialog and re-records all
the audio elements for integration with the final video product. The Company
designs sound effects to give life to the visual images with a proprietary
library of over 30,000 digital sound effects. Dialog replacement is sometimes
required to improve quality, replace lost dialog or eliminate extraneous noise
from the original recording. Re-recording combines sound effects, dialog,
music and laughter together to complete the final product. In addition, the
re-recording process allows the enhancement of the listening experience by
adding specialized sound treatments, such as stereo, Dolby(R) SR(R) and
Surroundsound(R). The Company's primary audio markets are situation comedies
and one-hour dramas. Finally, the Company has two theater sized re-recording
stages targeted at the feature film and made-for-TV movie markets. The Company
employs an award winning staff in both areas and is well respected for its
technical and creative contribution.
Visual Effects. Visual effects are used to enhance the visual experience of
the viewing audience by supplementing images obtained in principal photography
with computer generated images. Most often, visual effects create images that
cannot be created by any other means on a cost effective basis. DMC, the
Company's visual effects operation located in Santa Monica, specializes in
creating visual effects for television. DMC's compositing suites are
configured for nine layers of color correction and eight layers of compositing
with powerful wipe generators. These devices are used to generate bends,
warps, morphs, 3D shapes and transformations in real time. DMC also offers an
array of graphics and animation workstations using a variety of software to
accomplish unique effects, including 3D animation. The Company believes that
DMC is a leader in providing visual effects for the television industry as
evidenced by its involvement in numerous award winning series, including Star
Trek(R)--The Next Generation(R), Star Trek(R)--Deep Space Nine(R) and Star
Trek(R)--Voyager(R).
Assembly, Formatting and Duplication. Once all of the creative decisions
have been made by the customer, including the integration of sound and visual
effects, the Company employs the edit decision list to assemble the source
material into its final form. To accomplish this, the Company utilizes a
combination of
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component digital linear assembly systems and super computer based non-linear
assembly systems. The Company believes that its assembly systems, which will
become fully operational in the last three months of 1996, are among the most
technologically advanced in the industry. In addition, the Company utilizes
sophisticated computer graphics equipment to generate titles and characters
and to format the program to meet specific network requirements (e.g., time
compression and commercial blocks). Finally, the Company creates multiple
"masters" for delivery to the network for broadcast, archival and other
purposes designated by the customer.
VISUAL EFFECTS SERVICES
The visual effects division offers a broad range of facilities and technical
and creative services to creators of special visual effects for feature films
and television. The Company provides services required to digitally create or
manipulate images in high resolution formats for integration into feature
films as well as certain television applications. These services include
negative developing and color correction utilizing the Company's film
laboratory facilities, film scanning and recording and digital compositing.
The Company bundles its visual effects services in order to lower the cost of
certain visual effects, improve response time and the consistency of results,
and to provide customers access to new technology. The Company's customer base
includes most of the major studios as well as independent visual effects
supervisors contracted by producers of feature films. Visual effects
operations are conducted in Burbank and Santa Monica.
The Company's Effect Creation Process consists of the services outlined in
the chart below. While the Company markets these services as a package,
service offerings are available individually and priced separately.
The Effect Creation Process
Correction
Pre- -- Design -- Scanning -- Developing
Production Creation Recording
Printing
Consulting
Pre-Production and Principal Photography Consulting. Using a script provided
by the production company, the Company provides a written outline for
implementing the effects, time frame and preliminary effects budget. The
Company makes recommendations on how best to realize each visual effect,
taking into consideration the complexity of the desired effect, the production
schedule and budget. Even projects that would not normally be considered a
special effect feature will make use of digital techniques to create sets,
backgrounds, lighting, crowds and other effects. The Company creates story
boards in order to reach an understanding as to which elements will be shot
and by whom prior to principal photography. Upon request, the Company will
provide a visual effects supervisor to assist in the principal photography
that will later be incorporated in a digital effect. Often, the Company
assembles a film crew to shoot elements that are necessary to properly
integrate a visual effect into a particular scene.
Effect Design and Creation. In order to reduce costs and meet shorter
release schedules, the studios have recently begun reducing the amount of time
available for the Effect Creation Process from twelve months to four months.
This acceleration is often at odds with the responsibility of the visual
effects supervisor to evaluate many effect alternatives before making a final
selection. In order to minimize costs, the Company first designs effects in
low (i.e., video) resolution. Once the design is approved, the Company creates
visual effects in high (i.e., film) resolution using powerful super computers,
such as the Domino(R) Double Four(R) and the Silicon Graphics(R) Onyx Reality
Engine II(R). The Domino(R) is used for high speed digital image creation,
animation, compositing, retouching, rotoscoping, motion and color correction.
The Reality Engine(R) runs a variety of software packages, including
Inferno(R) by Discrete Logic(R), which is capable of creating elaborate
digital multi-plane matte paintings and live action effect composites. The
Company also employs other Silicon Graphics(R) work stations to run
specialized software, including Alias(R), Soft Image(R) and Elastic Reality(R)
for 3D animation applications.
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Film Scanning and Recording. An integral part of the Effect Creation Process
is the digitizing of principal photography so that images can be created or
manipulated in a digital work station. The Company digitizes film on an
Oxberry(R) 6400 film scanner and transfers the digital information to a
central file server where it can be accessed by any of the Company's work
stations. Once the effect is completed and approved by the visual effects
supervisor, the Company downloads the digital information to a Celco(R)
Extreme Effects(R) digital film recorder, which records the digital
information on film. The completed conversion can then be assembled with the
film negative.
Color Correction, Negative Developing and Prints. Throughout the Effect
Creation Process the visual effects supervisor relies upon the film laboratory
to process and print the visual effects segments so that they can be viewed in
film resolution. In preparing the final cut it is often difficult to integrate
the effect seamlessly with the principal photography on a timely or cost
efficient basis. The Company's film laboratory offers a proprietary color
correction process designed to give the visual effects supervisor more control
over the integration of the digitally created images with the principal
photography. The Company believes that it has the only visual effects
operation that offers this film laboratory quality control feature.
CUSTOMERS
The Company's customer base includes the major studios, independent owners
of television and film libraries, programmers, producers of original
television programming and creators of visual effects. As of August 4, 1996,
the Company had over 2,000 active accounts included in its customer base. The
Company is committed to building and retaining a loyal customer base by
providing a broad range of service offerings, state-of-the-art equipment and
technology, and superior customer service at competitive prices.
The Company's ten largest customers accounted for 57.4% of total revenues in
fiscal 1996, compared to 52.2% in fiscal 1995. In addition, 29.5% of the
Company's revenues were generated by the six major domestic studios (Disney,
MCA/Universal, Sony/Columbia, Viacom/Paramount, Warner Bros. and Twentieth
Century Fox) in fiscal 1996, compared to in fiscal 1995. The increase in
revenue concentration among the Company's top ten revenue producing customers
is the result of the substantial increase in revenues from MTV Asia and the
expansion of the Company's relationship with Sony/Columbia. The Company
believes that the increase in the percentage of its revenues generated by the
major studios reflects the expansion of services provided by each of the
Company's operating divisions together with greater customer acceptance of the
Company's ability to provide complete outsourcing solutions.
In the Company's television and visual effects divisions, customer
relationships also can be measured by the number and types of projects
completed by the Company during the production season. During the 1995-1996
television season, the Company provided one or more services to 67 episodic
television programs. In the 1996-1997 season, the Company expects to provide
one or more services to 79 episodic television programs. The Company believes
that the increase in its television customer base is the result of an
increased volume of television production, the construction of a new
television facility in Burbank and significantly improved coordination between
the Burbank and Santa Monica television facilities. In fiscal 1995 and 1996,
the Company provided one or more visual effects services to eight and 13
feature film projects, respectively.
TECHNOLOGY
The Company purchases hardware and software developed and manufactured by
others and integrates various systems and technologies in a proprietary manner
to accomplish the objectives of customers. The integration of hardware and
software often requires the development of new proprietary systems and
infrastructure by the Company. From time to time, the Company forms strategic
alliances with hardware and software manufacturers to jointly develop a
specific application. Examples of informal strategic alliances involving joint
development projects include: (i) BTS(R) and NVision(R) component digital
routing systems; (ii) Snell & Wilcox, Alchemist(R), phase correlation
standards conversion equipment; (iii) Rank Cintel URSA Gold(R) technology
deployment for television and feature mastering applications; (iv) Sony Corp.
LMS(R) automated robotic broadcast systems; and (v) Quantel, Inc.(R) Edit
Box(R) and Clip Box(R) file server and non-linear editing technology for
episodic television assembly.
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The Company substantially has completed the deployment of new component
digital infrastructure in its television and studio services divisions. The
Company believes that this infrastructure is state-of-the-art and sets the
industry standard for performance, efficiency and reliability. The Company
intends to upgrade its broadcast services operation in Burbank to accommodate
new digital technologies and convert the remaining analog portions of the
Company's television business to component digital as it becomes technically
and operationally feasible. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
COMPETITION
Los Angeles is the center of domestic television and feature film production
and the exploitation of content libraries. It is also the largest and most
competitive market in the world in terms of total revenue potential in the
Company's studio, television and visual effects business segments. The
entertainment services industry in Los Angeles is highly fragmented, and no
single industry participant, including the Company, has a dominant market
share in any service offering. The Company believes that it is unique,
however, among industry competitors in terms of the breadth of its operating
divisions and the depth of service offerings within each business segment.
The Company experiences intense competition in each of its business
segments. Although the Company believes no one competitor offers a comparable
range of services, some of the Company's current and potential competitors,
particularly those who perform services in-house, have substantially greater
financial, technical, creative, marketing and other resources than the
Company. The Company's competitors may devote substantially greater resources
to the development and marketing of new competitive services. The Company
expects that competition will increase substantially as a result of industry
consolidations and alliances, as well as the emergence of new competitors. The
Company also actively competes with industry participants operating niche or
specialty businesses. In addition, certain of the Company's current and
prospective customers conduct in-house operations that the Company considers
competitive. For example, Warner Bros., a major customer, conducts extensive
in-house operations in several of the Company's business segments. The Company
believes that all of its services offerings are competitive with in-house
operations and other independent service providers.
The Company entered the international broadcast market with the completion
of its Singapore facility in 1995, and it will seek to provide services to
domestic and foreign programmers in regional television markets in Asia and
abroad. The Company competes with local service providers that may have
competitive advantages resulting from their experience in the region,
including in Singapore and elsewhere in Asia, who have well established
customer relationships and business operations.
EMPLOYEES
The Company employs creative, technical, engineering, administrative and
managerial staff in each operating division. In addition, the Company has
centralized certain financial and administrative functions, including
accounting, credit, billing, payroll and human resources. As of August 4,
1996, the Company had a total of 549 full time employees, 393 of which were
located in Burbank, 74 full time employees in Santa Monica and 82 full time
employees in Singapore.
The Company has entered into employment agreements with certain members of
its creative staff to secure their services. The Company believes that it
provides compensation and benefits that are competitive with the market for
persons with the skills required by the Company. The Company has experienced
no work stoppages since its formation in 1993, and considers its relations
with employees to be good.
PROPERTIES
The Company's principal executive offices, together with its facilities for
domestic broadcast, television and studio services, are located in four
buildings in the Burbank Media District. The Company leases these facilities,
which in the aggregate occupy approximately 86,000 square feet, under
agreements with terms expiring between January 1999 and October 1999, and
options to renew extending through October 2014. In addition, the
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<PAGE>
Company leases 44,807 square feet in a 90,000 square foot facility in Burbank
to house its archive. The Company has entered into a Purchase and Sale
Agreement to purchase this property for $11.3 million. The Company's visual
effects division and a portion of its television division are located in Santa
Monica in a 29,000 square foot facility, which is leased under an agreement
that expires in October 1999 and may be renewed at the Company's option
through October 2004. The Company's film laboratory is located in an 18,000
square foot facility in Burbank, and is owned by the Company. The film
laboratory services both the television and the studio services divisions. The
Company leases 20,000 square feet in Singapore to house its Singapore
broadcast facility. The lease expires in December 1996, and may be renewed at
the Company's option through December 2001. The Company believes that all of
its facilities substantially comply with applicable environmental and other
laws and regulations. The Company believes that its facilities are adequate
for its current needs and that additional space will be available as needed
for future expansion.
GOVERNMENT REGULATION
Transmissions from the Company's domestic broadcast division's earth station
to satellites must be made pursuant to license granted by the FCC. Catalina
holds three satellite earth station licenses and other authorizations required
for the operation of the Company's business. The license for Catalina's
transportable earth station normally is granted for a period of a year and has
been routinely renewed. The two licenses for its fixed earth stations normally
are granted for a period of ten years with one expiring in 2001 and the other
expiring in 2004. The FCC generally renews licenses for satellite earth
stations routinely, but there can be no assurance that the Company's licenses
will be renewed at their expiration dates or that such renewals will be for
full terms. In addition, FCC licensing decisions or changes in United States
government policies limiting or increasing the cost of access to satellites
could adversely affect the Company. No FCC authorization is required for
reception of transmission from domestic satellites from points within the
United States. The Company relies on third party licenses or authorizations
when it transmits domestic satellite traffic through earth stations operated
by such third parties. The FCC establishes technical standards for satellite
transmission equipment which change from time to time, and also requires
coordination of earth stations with land-based microwave systems at certain
frequencies to assure noninterference. Transmission equipment must also be
installed and operated in a manner that avoids exposing humans to harmful
levels of radio-frequency radiation. The placement of earth stations or other
antennae is typically subject to regulation under local zoning ordinances.
LITIGATION
The Company is involved in two legal proceedings with the International
Alliance of Theatrical Stage Employees ("IATSE"), the union which formerly
represented approximately 100 employees of Compact. In the first case,
entitled ATS Acquisition Corp., Inc. v. National Labor Relations Board
("NLRB") Case No. 31-CA-20089, IATSE argued that the Company should have
bargained with it as a labor law "successor" following the sale of Compact's
assets to the Company in August 1993. The Company refused to bargain with
IATSE, contending that only a broad, company-wide bargaining unit was
appropriate. In a decision issued in July, 1996, the NLRB ordered the Company
to bargain with IATSE with regard to certain of the Compact bargaining unit
employees. The Company has continued to express its disagreement with this
bargaining unit. Since the NLRB's orders are not self-executing, the Company
anticipates that the NLRB will seek enforcement of its order in the United
States Court of Appeals. The Company will continue to assert that only
company-wide bargaining is appropriate following a secret ballot election
conducted among its employees. The Company will fulfill its legal obligations
if bargaining is eventually ordered by the courts. However, the National Labor
Relations Act does not require a party to compromise its position in
collective bargaining. Moreover, the NLRB has confirmed the Company's position
that it lawfully implemented its own wages, benefits and working conditions
when it acquired the assets owned by Compact in 1993 and denied the union's
request for back pay. The NLRB's bargaining order, therefore, provides for no
backpay liability to the Company.
The second action, entitled IATSE, et. al. v. ATS Acquisition Corp., Inc.,
et. al., United States District Court Case No. CB 93-5574-JGD(x), was filed by
IATSE against the Company in United States District Court for the Central
District of California on September 14, 1993. This lawsuit essentially alleges
that the Company is an
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alter ego or "disguised continuance" of Compact and is therefore bound by
Compact's collective bargaining agreement with IATSE. The Company believes
this lawsuit is baseless. In any event, in 1996, the court stayed further
proceedings in the matter pending completion of the NLRB proceedings referred
to above. Accordingly, the Company has not been forced to defend this lawsuit
and believes that the resolution of Case No. 31-CA-20089 will determine the
final outcome of legal disputes with IATSE, and that the Company will
ultimately prevail in that matter.
In addition, the Company is subject from time to time to litigation arising
in the ordinary course of its business, and the Company believes that no such
litigation is pending (including the IATSE matters referred to above) that
would have a material adverse effect on the Company's results of operations or
financial condition.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and their ages as of
August 4, 1996 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert T. Walston....... 38 Chairman of the Board and Chief Executive Officer
John H. Donlon.......... 51 President and Director
John H. Sabin........... 56 Vice President, Chief Financial Officer and Director
Gavin W. Schutz......... 40 Vice President, Chief Technology Officer and Director
Robert Bailey........... 38 Vice President, Director of Marketing and Director
James T. Conlon......... 48 Vice President and Director of International Operations
Shimon Topor(1)......... 52 Director
Edward Kirtman(1)....... 44 Director
</TABLE>
- --------------------
(1) Member of Compensation Committee
Robert T. Walston is the founder of the Company and has served as Chairman
and Chief Executive Officer since August 1993. From 1991 until he founded the
Company, Mr. Walston served as a Vice President and Director of Steinhardt
Group, Inc. where he directed the firm's sourcing and financial analysis of
acquisitions of middle market companies. From 1988 to 1991, Mr. Walston was a
Vice President of Dean Witter Reynolds, Inc. where he worked on merger and
acquisition assignments and debt and equity offerings. Mr. Walston received a
BBA from Baylor University and an MBA from the University of Texas at Austin.
John H. Donlon has served as President and a Director of the Company since
August 1993. Prior to joining the Company, Mr. Donlon was President and Chief
Executive Officer of Compact Video Group, Inc., a provider of feature
mastering and standards conversion services to the entertainment industry,
from 1984 to 1993. From 1981 to 1984, Mr. Donlon was employed by Technicolor,
Inc. as President of Technicolor's videocassette subsidiary and from 1977 to
1981 as Vice President and Director of Technicolor's Laboratory Operations.
Mr. Donlon received degrees from the Georgia Institute of Technology and the
University of Florida.
John H. Sabin has served as Vice President, Chief Financial Officer and a
Director of the Company since August 1993. Prior to joining the Company he was
a Senior Vice President and Chief Financial Officer of Compact Video Group,
Inc., a provider of post-production services to the television industry. From
1988 to 1993 he was an Executive Vice President of Kenmare Capital Corp., a
private holding company involved in merchant banking activities. From 1978 to
1988, he was a Vice President and Chief Financial Officer of Robert Bruce
Industries, a publicly held multi-division apparel manufacturer and
wholesaler. Mr. Sabin received a BS degree in Industrial Administration from
Iowa State University.
Gavin W. Schutz has served as Vice President and Chief Technology Officer of
the Company since August 1993, and was elected a Director of the Company in
September 1996. Prior to joining the Company he was Director of Engineering of
Image Transform, Inc., a provider of feature mastering and standards
conversion services to the entertainment industry, from 1980 to 1993. Mr.
Schutz is responsible for the design of digital video standards converters,
time and smear correctors and video noise reduction using four field non-
recursive digital filtering algorithms. Mr. Schutz received a BS degree in
Electronic Engineering from the South Australia Institute of Technology.
Robert Bailey has served as Vice President and Director of Marketing of the
Company since August 1996, and was elected a Director of the Company in
September 1996. From 1993 to 1996 he served as Vice President and Director of
Marketing for the Company's studio and television services divisions. Prior to
joining the Company he was a Vice President of Image Transform, Inc., a
provider of feature mastering and standards
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conversion services to the entertainment industry, from 1985 to 1993. From
1977 to 1985, he was creator/producer of "Hollywood Detective" for the A&E
Channel, Producer/Director of "Eye on L.A." for ABC and Producer of
"Remmington Steele" for MTM Productions. Mr. Bailey received a BA from the
University of Southern California.
James T. Conlon has served as Vice President of the Company since August
1993, and Director of International Operations since 1994. From 1984 to 1993,
he was Director of Engineering, Director of Distribution Services and Manager
of Satellite Services at Compact Video Group, Inc. From 1975 to 1984, he held
various positions at Trans American Video and assisted the creative
development of Paramount's "Entertainment Tonight" and Merv Griffin
Productions' "Jeopardy". Mr. Conlon received a BS degree in Computer Science
from Pratt Institute and a MBA from the University of Southern California.
Shimon Topor has served as a Director of the Company since August 1993. He
has been a general partner in all of the private investment partnerships
controlled by Michael H. Steinhardt since 1985. Prior to joining the
Steinhardt organization, he managed the international operations of Bank
Hapoalim, served as Chairman and Chief Executive Officer of Israel Continental
Bank, and Senior Vice President of the Ampal Corporation. Mr. Topor received a
law degree from Hebrew University Law School.
Edward Kirtman has served as a Director of the Company since August 1993. He
has been a general partner in all of the private investment partnerships
controlled by Michael H. Steinhardt since 1995. From 1986 to 1994 he served as
the Chief Financial Officer of the Steinhardt organization's real estate
investment corporations and partnerships. Prior to joining the Steinhardt
organization, Mr. Kirtman was an Assistant Vice President of Heller Financial,
Inc. Mr. Kirtman received a BBA from Baruch College.
The Company's executive officers are appointed by, and serve at the
discretion of, the Board of Directors. The Board of Directors is divided into
three classes. Class I, with terms expiring in 1999, is comprised of
Messrs. Walston, Topor and Kirtman. Class II, with the terms expiring in 1998,
is comprised of Messrs. Donlon, Sabin and Schutz. Class III, with terms
expiring in 1997, is comprised of Mr. Bailey. There are no family
relationships among any of the executive officers and directors of the
Company.
DIRECTOR COMPENSATION
The Company's non-employee directors are paid a fee of $1,000 for each
meeting attended of the Board of Directors or of a committee of the Board, and
all directors are reimbursed for expenses incurred in attending such meetings.
The Company has recently established a stock option plan that provides for
automatic stock option grants to non-employee directors commencing upon the
consummation of this offering. See "Management--Stock Plans" and "Certain
Transactions."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee was formed in September 1996 to review
and approve the compensation and benefits for the Company's executive
officers, administer the Company's stock option and other benefit plans and
make recommendations to the Board of Directors regarding such matters. The
Committee is currently composed of Messrs. Topor and Kirtman. Prior to
formation of the Compensation Committee, the entire Board of Directors
administered executive compensation programs. No interlocking relationships
exist between any member of the Company's Compensation Committee and any
member of any other company's board of directors or compensation committee.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Certificate of Incorporation limits the liability of the
Company's directors for monetary damages to the maximum extent permitted under
the laws of the State of Delaware. Such limitation of liability has no effect
on the availability of equitable remedies, such as injunctive relief or
rescission.
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The Company's Bylaws provide that the Company will indemnify its directors
and officers and may indemnify its employees and agents (other than officers
and directors) against certain liabilities to the maximum extent permitted
under the laws of the State of Delaware. The Company has entered into
indemnity agreements with each of its current directors and executive officers
that provide for indemnification of, and advancement of expenses to, such
persons to the maximum extent permitted under the laws of the State of
Delaware, including by reason of action or inaction occurring in the past and
circumstances in which indemnification and advancement of expenses are
discretionary under Delaware law.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to the Chief Executive
Officer and the other four most highly compensated executive officers whose
salary equals or exceeds $100,000 (collectively, the "Named Officers"), for
services rendered to the Company in all capacities during the fiscal year
ended August 4, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
COMPENSATION
---------------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION(1) COMPENSATION
--------------------------- -------- ------- --------------- ------------
<S> <C> <C> <C> <C>
Robert T. Walston,
Chairman and Chief Executive
Officer......................... $240,000 $ -- $3,508 $--
John H. Donlon,
President....................... 253,493 -- 4,449 --
John H. Sabin,
Vice President and Chief
Financial Officer............... 174,965 -- 3,617 --
Gavin W. Schutz,
Vice President and Chief
Technology Officer.............. 175,000 40,000 2,673 --
Robert Bailey,
Vice President and Director of
Marketing....................... 125,000 40,000 -- --
</TABLE>
- --------------------
(1) Represents the Company's 401(k) contributions for these individuals for
the 12 months ended December 31, 1995.
No Named Officer received a stock option grant during fiscal 1996. The
following table sets forth certain information concerning the number and value
of unexercised stock options held as of August 4, 1996 for each of the Named
Officers who hold stock options.
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<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT AT FISCAL YEAR END
SHARES FISCAL YEAR END ($)(1)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John H. Donlon..........
John H. Sabin...........
Gavin W. Schutz.........
Robert Bailey...........
</TABLE>
- --------------------
(1) Based on the difference between the deemed fair market value of the
securities underlying the options at August 4, 1996 (which for purposes of
this table, is assumed to be $ per share) and the exercise price.
STOCK PLANS
1993 Stock Options. The Company granted stock options to four executive
officers of the Company on September 7, 1993. These options are exercisable
for shares of Common stock at $ per share, the fair market value on the
date of grant. These stock options vest over a six-year period at the rate of
16.7% per year. As of August 4, 1996 none of these options have been
exercised.
1997 Stock Plan. The Company's 1997 Stock Plan (the "1997 Plan") will be
submitted for approval by the Board of Directors and sole stockholder in
October 1996. The 1997 Plan provides for the granting to employees (including
officers and employee directors) of incentive stock options and for the
granting to employees (including officers and employee directors) of
nonstatutory stock options and stock purchase rights ("SPRs"). A total of
shares of Common Stock has been reserved for issuance under the 1997
Plan, which number will be increased on August 1 of each year, beginning in
1997, by a number of shares equal to five percent of the Company's outstanding
Common Stock as of such dates. The maximum number of shares of Common Stock
available for issuance pursuant to incentive stock option grants under the
1997 Plan is .
The 1997 Plan will be administered by the Board of Directors or a committee
designated by the Board (the "Administrator"). Options and SPRs granted under
the 1997 Plan are not generally transferable by the optionee except by will or
by the laws of descent and distribution, and are exercisable during the
lifetime of the optionee only by such optionee. Generally, options granted
under the 1997 Plan must be exercised within thirty days of the end of an
optionee's status as an employee of the Company, or within twelve months after
such optionee's termination by death or disability, but in no event later than
the expiration of the option term. The exercise price of all incentive and
nonstatutory stock options granted under the 1997 Plan will be determined by
the Administrator. With respect to any owner of 10% or more of the Company's
outstanding capital stock (a "10% Stockholder"), the exercise price of any
incentive stock option granted must equal at least 110% of the fair market
value on the grant date. The exercise price of incentive stock options for all
other employees must be no less than 100% of the fair market value per share
on the grant date. The maximum term of an option granted under the 1997 Plan
may not exceed ten years from the date of grant (five years in the case of an
incentive stock option granted to a 10% Stockholder). In the case of SPRs,
unless the Administrator determines otherwise, the Company will have a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
disability). Such repurchase option lapses at a rate determined by the
Administrator. The purchase price for shares repurchased by the Company will
be the original price paid by the purchaser and may be paid by cancellation of
any indebtedness of the purchaser to the Company.
1997 Director Option Plan. Non-employee directors will be entitled to
participate in the 1997 Director Option Plan (the "Director Plan"). The
Director Plan will be submitted for approval by the Board of Directors and
sole stockholder in October 1996, but will not become effective until the
effective date of this offering. A total of shares of Common Stock has
been reserved for issuance under the Director Plan.
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<PAGE>
The Director Plan provides for an automatic grant of an option to purchase
shares of Common Stock (the "First Option") to each non-employee director
who first becomes a non-employee director (other than an employee director who
ceases to be an employee but remains a director) after the effective date of
the Director Plan. The option is to be granted on the date such person becomes
a non-employee director. Beginning on the third anniversary of the date he or
she became an outside director, each non-employee director will automatically
be granted an option to purchase shares (a "Subsequent Option") each year
on the date of such anniversary, provided he or she is then a non-employee
director. Each non-employee director will be eligible to receive a Subsequent
Option, regardless of whether such non-employee director was eligible to
receive a First Option. First Options and each Subsequent Option will have a
term of five years. One-quarter of the shares subject to a First Option will
vest one year after its date of grant and an additional one quarter will vest
at the end of each year thereafter, provided that the optionee continues to
serve as a director on such dates. All of the shares subject to a Subsequent
Option will vest one year after the date of the option grant, provided that
the optionee continues to serve as a director on such date. The exercise
prices of the First Option and each Subsequent Option will be 100% of the fair
market value per share of the Company's Common Stock on the date of the grant
of the option.
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CERTAIN TRANSACTIONS
ACQUISITION OF COMPACT ASSETS BY SOLE STOCKHOLDER
4MC Burbank was incorporated in July 1993 as a wholly owned subsidiary of
TSP, a partnership formed for the purpose of acquiring certain net assets of
Compact Video Group, Inc., Compact Video Services, Inc., Image Transform, Inc.
and Meridian Studios, Inc. (collectively "Compact"). In August 1993, TSP was
capitalized by cash from private investment funds managed by Michael H.
Steinhardt and his affiliates and assets from Compact, providing for a total
capitalization at the time of formation of approximately $5.0 million. The
initial equity interest in TSP of the private investment funds managed by
Mr. Steinhardt was 80%. TSP contributed all of its cash and noncash assets to
4MC Burbank in exchange for all of the capital stock of 4MC Burbank. In
connection with this contribution, 4MC Burbank entered into a loan agreement
with Compact's primary lender with respect to approximately $10.6 million of
previously outstanding debt of Compact.
As a result of subsequent capital investments in TSP during fiscal 1994 and
1995, the equity interests of the private investment funds managed by
Mr. Steinhardt increased to 95.46%, 98.05% and 98.05% as of July 31, 1994,
July 30, 1995 and August 4, 1996, respectively.
In connection with the acquisition of Compact in 1993, the Company's Chief
Executive Officer was granted a profit interest in TSP for identifying,
analyzing and consummating the acquisition. The profit interest is equal to
10% of the excess, if any, by which the distributions (in cash or in kind)
from TSP exceed the partners' total investment in TSP plus a return of 9% per
annum. No amounts have been earned or paid under this profit interest. Upon
completion of this offering, at an assumed initial public offering price of
$ , Mr. Walston as a result of his profit interest in TSP will beneficially
own % of the Company's Common Stock.
LOANS FROM SOLE STOCKHOLDER
In August 1993, TSP agreed to provide 4MC Burbank with up to $10.0 million
pursuant to a subordinated note, which bears interest at 10% per annum and is
due in August 1998. In November 1994, TSP agreed to provide 4MC Burbank with
up to an additional $9.0 million on the same terms as the August 1993 note.
During fiscal 1994 and 1995, TSP advanced to 4MC Burbank $8.4 million and
$10.6 million, respectively, under these arrangements. In July 1995, TSP
contributed the $10.0 million principal amount of the August 1993 note to the
capital of 4MC Burbank. The remaining $9.0 million principal amount of, and
accrued interest on, the November 1994 note will be repaid using a portion of
the proceeds of this offering.
SERVICES PROVIDED TO STEINHARDT BAER PICTURES COMPANY
The Steinhardt Baer Pictures Company ("SBPC") is owned by Thomas Baer and S.
Pictures Company, Inc. (a corporation wholly owned by Michael H. Steinhardt).
SBPC holds limited partnership interests in a series of limited partnerships,
each of which owns the rights to a single motion picture (the "Movie LPs").
Mr. Baer was a director of 4MC Burbank from September 1993 until August 1996.
At various times during the period from 1993 to 1995, the Movie LPs engaged
4MC Burbank and/or its subsidiaries to provide services. The aggregate value
of services rendered by 4MC Burbank and its subsidiaries to the Movie LPs
totaled $188,000 in fiscal 1994, $2,000 in fiscal 1995 and $1,000 in fiscal
1996.
CONSULTING AGREEMENT WITH FORMER DIRECTOR
Donald Ross was a director of 4MC Burbank from March 1995 through August
1996. Since the Company's acquisition of the DM&T assets, Mr. Ross, through a
wholly owned company, has provided certain financial and administrative
services to 4MC Burbank and DMC on an independent contractor basis. During
fiscal 1995 and 1996, 4MC Burbank paid Mr. Ross an aggregate of $147,000 and
$205,000, respectively. No amounts were paid to Mr. Ross in fiscal 1994. Mr.
Ross is no longer a director of, or independent contractor for, the Company.
45
<PAGE>
INDEMNITY AGREEMENTS
The Company has entered into separate but identical indemnity agreements
(the "Indemnity Agreements") with each director and executive officer of the
Company (the "Indemnitees"). The Indemnity Agreements provide that the Company
will indemnify each Indemnitee against payment of and liability for any and
all expenses actually and reasonably incurred by the Indemnitee in defending
or investigating a claim, by reason of the fact that the Indemnitee is or was
a director and/or officer 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, or other enterprise, provided it is determined that
the Indemnitee acted in good faith and reasonably believed his actions to be
in the best interests of the Company.
REORGANIZATION
In connection with the Reorganization, TSP will contribute all of the shares
of capital stock of 4MC Burbank to the Company .
The Company believes that the above transactions were, and any future
transactions between the Company and any affiliate thereof will be, on terms
no less favorable than those that generally are available from unaffiliated
third parties.
46
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of October , 1996, and
as adjusted to reflect the sale of Common Stock offered hereby, by: (i) each
person who is known by the Company to own beneficially more than 5% of the
Common Stock; (ii) the Selling Stockholder; (iii) each of the Company's
directors; (iv) each of the Named Officers; and (v) all directors and
executive officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
SHARES BENEFICIALLY OWNED OWNED AFTER
PRIOR TO OFFERING(1) SHARES OFFERING(1)
---------------------------- TO BE ----------------------
NAME OF BENEFICIAL SOLD IN
OWNERS NUMBER PERCENT OFFERING NUMBER PERCENT
- ------------------ ------------ ------------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
Technical Services
Partners, L.P.(2)......
Robert T. Walston(3)....
John H. Donlon(4).......
John H. Sabin(5)........
Gavin W. Schutz(6)......
Robert Bailey(7)........
Shimon Topor(2)(8)......
Edward Kirtman(2)(8)....
All directors and
executive officers as a
group
(7 persons)(9).........
</TABLE>
- --------------------
(1) Assumes no exercise of the Underwriters' over-allotment option. Applicable
percentage of ownership is based on shares of Common Stock outstanding
as of October , 1996. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission. In computing the
number of shares beneficially owned by a person and the percentage
ownership of that person, shares of Common Stock subject to options held
by that person that are currently exercisable or exercisable within
60 days of October , 1996 at a price less than or equal to the market
price are deemed outstanding. Such shares, however, are not deemed
outstanding for the purposes of computing the percentage ownership of any
other person. Except as indicated in the footnotes to this table and
pursuant to applicable community property laws, each stockholder named in
the table has sole voting and investment power with respect to the shares
set forth opposite such stockholder's name.
(2) Each of such stockholder's address is c/o Steinhardt Management Company,
Inc., 605 Third Avenue, 33rd Floor, New York, NY 10158.
(3) Mr. Walston's address is c/o Four Media Company, 2813 West Alameda Avenue,
Burbank, California 91505. As a result of his profit interest in TSP, Mr.
Walston will beneficially own shares of the Company's Common Stock. See
"Certain Transactions." As of , 1996, options to purchase shares
of the Company's Common Stock were currently exercisable. If all of such
options had been exercised, Mr. Walston would have beneficially owned %
of the Common Stock of the Company before the offering and % after the
offering.
(4) Includes shares issuable upon exercise of vested options.
(5) Includes shares issuable upon exercise of vested options.
(6) Includes shares issuable upon exercise of vested options.
(7) Includes shares issuable upon exercise of vested options.
(8) These shares are owned by TSP. Messrs. Topor and Kirtman are executive
officers of the general partner of TSP, and general partners of certain of
the limited partners of TSP. Neither Mr. Topor nor Mr. Kirtman own any
shares of Common Stock directly, but may be considered the beneficial
owner of the securities listed above. However, Messrs. Topor and Kirtman
disclaim beneficial ownership of such shares.
(9) Includes shares issuable upon exercise of vested options.
47
<PAGE>
DESCRIPTION OF CAPITAL STOCK
At the closing of this offering, the authorized capital stock of the Company
will consist of 50,000,000 shares of Common Stock, $.01 par value and
5,000,000 shares of undesignated Preferred Stock, $.01 par value.
COMMON STOCK
As of October , 1996, there were shares of Common Stock held of record
by the Company's sole stockholder. Holders of Common Stock are entitled to one
vote per share on all matters to be voted upon by the stockholders, including
the election of directors. As of October , 1996, options to purchase an
aggregate of shares of Common Stock were also outstanding. See
"Management." Subject to preferences that may be applicable to any outstanding
Preferred Stock, the holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared from time to time by the Board of
Directors out of funds legally available therefor. See "Dividend Policy." In
the event of a liquidation, dissolution or winding up of the Company, the
holders of Common Stock are entitled to share ratably in all assets remaining
after payment of liabilities, subject to prior liquidation rights of any
outstanding Preferred Stock. The Common Stock has no preemptive or conversion
rights or other subscription rights. There are no redemption or sinking fund
provisions applicable to the Common Stock. All outstanding shares of Common
Stock are fully paid and non-assessable, and the shares of Common Stock to be
outstanding upon completion of this offering will be fully paid and non-
assessable.
PREFERRED STOCK
The Board of Directors has the authority to issue up to 5,000,000 shares of
Preferred Stock in one or more series and to fix the rights, preferences,
privileges and restrictions without any further vote or action by the
stockholders. The issuance of Preferred Stock may have the effect of delaying,
deferring or preventing a change in control of the Company without further
action by the stockholders and may adversely affect the voting and other
rights of the holders of Common Stock. The issuance of Preferred Stock with
voting and conversion rights may adversely affect the voting power of the
holders of Common Stock, including the loss of voting control. The Company has
no present plan to issue any shares of Preferred Stock.
CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION AND BYLAWS
Certain provisions of the Company's Certificate of Incorporation (the
"Certificate") and Bylaws summarized in the following paragraph may be deemed
to have anti-takeover effects and may delay, defer or prevent a tender offer,
proxy contest or takeover attempt that a stockholder might consider to be in
such stockholder's best interest, including those attempts that might result
in a premium over the market price for the shares held by such stockholder.
The Company's Certificate and Bylaws provide that: (i) the Board of
Directors shall be divided into three classes of directors, with the term of
each class being for a period of three years and expiring in a different year;
(ii) the number of directors shall be fixed by the Board of Directors, but
shall consist of no less than three nor more than 11 directors; (iii) a
majority of the Board of Directors then in office, although less than a
quorum, has the authority to fill any vacancies on the Board of Directors;
(iv) a stockholder give advance notice of a proposal or director nomination
that such stockholder desires to present at the annual meeting; (v) the Bylaws
of the Company may be amended only by the Board of Directors or by two-thirds
of the Company's voting stock; (vi) any action by the stockholders be taken
only at an annual or special meeting of stockholders and not by written
consent; and (vii) a special meeting of stockholders may be called only by the
Chairman of the Board of Directors or a majority of the directors then in
office, though less than a quorum.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is U.S.
Stock Transfer Corporation.
48
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering. there has been no public market for the Company's
Common Stock. Sales of substantial amounts of Common Stock in the public
market could adversely affect the market price of the Common Stock.
Upon completion of this offering, the Company will have an aggregate of
shares of Common Stock outstanding, assuming no exercise of the Underwriters'
over-allotment option and no exercise of outstanding options. Of these shares,
the shares sold in this offering will be freely tradable without
restriction or further registration under the Securities Act, unless held by
"affiliates" of the Company, as that term is defined in Rule 144 under the
Securities Act. The remaining shares of Common Stock are held by the
Company's sole stockholder, TSP, and are "restricted" securities within the
meaning of Rule 144 under the Securities Act. Beginning 90 days after the date
of this Prospectus, and absent consideration of the contractual restrictions
described below, all of these shares would be eligible for sale by TSP in
reliance upon Rule 144 promulgated under the Securities Act. In addition,
absent the restrictions described below, if TSP were to effect a distribution
of the shares of Common Stock it holds to its constituent partners, up to
of these shares may become available for immediate sale in the public market
without restriction pursuant to Rule 144(k).
The Company's officers and directors and TSP have agreed not to offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, or enter into any similar agreement that
transfers, in whole or in part, the economic risk of ownership of the Common
Stock, for a period of 180 days from the date of this Prospectus, in the case
of TSP, and three years from the date of this Prospectus, in the case of the
Company's officers and directors, without the prior written consent of Furman
Selz LLC. Furman Selz LLC may, in its sole discretion and at any time without
notice, release all or any portion of the securities subject to lock-up
agreements. In addition, TSP has agreed that it will not effect a distribution
of the shares of Common Stock it holds to its constituent partners without
obtaining an agreement of the distributee to be bound by the terms of TSP's
lock-up agreement. As a result of these contractual restrictions,
notwithstanding possible earlier eligibility for sale under the provisions of
Rules 144 and 144(k), no shares will be eligible for immediate sale on the
effective date of this offering and, unless earlier released from the lock-up
agreements, shares of Common Stock will be eligible for sale
after the effective date of this offering, subject to the volume limitations
of Rule 144 in the case of shares held by TSP or any of its distributees who
are "affiliates" of the Company.
Additionally, pursuant to Rules 144 and 701, beginning after the
effective date of this offering, upon the expiration of contractual lock-up
restrictions, an aggregate of approximately shares will be vested and
eligible for sale upon the exercise of outstanding stock options.
In general, under Rule 144 as currently in effect, an affiliate of the
Company, or person (or persons whose shares are aggregated) who has
beneficially owned restricted shares for at least two years but less than
three years, will be entitled to sell in any three-month period a number of
shares that does not exceed the greater of (i) 1% of the then outstanding
shares of Common Stock (approximately shares immediately after the
offering) or (ii) the average weekly trading volume during the four calendar
weeks immediately preceding the date on which notice of the sale is filed with
the Securities and Exchange Commission. Sales pursuant to Rule 144 are subject
to certain requirements relating to manner of sale, notice and availability of
current public information about the Company. A person (or person whose shares
are aggregated) who is not deemed to have been an affiliate of the Company at
any time during the 90 days immediately preceding the sale and who has
beneficially owned his or her shares for at least three years is entitled to
sell such shares pursuant to Rule 144(k) without regard to the limitations
described above. In general, under Rule 701 under the Securities Act as
currently in effect, any employee, consultant or advisor of the Company who
purchases shares from the Company in connection with a compensatory stock or
option plan or other written agreement related to compensation is eligible to
resell such shares 90 days after the effective date of the offering in
reliance on Rule 144, but without compliance with certain restrictions
contained in Rule 144.
49
<PAGE>
At , 1996, the Company had reserved an aggregate of shares of
Common Stock for issuance pursuant to the 1997 Plan, and options to purchase
approximately shares were outstanding under the 1997 Plan. In addition,
shares of Common Stock are reserved for issuance under the Director Plan.
No options are outstanding under the Director Plan. As soon as practicable
following the offering, the Company intends to file registration statements
under the Securities Act to register shares of Common Stock reserved for
issuance under the 1997 Plan and the Director Plan. Such registration
statements will automatically become effective immediately upon filing.
Substantially all of such shares will be eligible for immediate public sale.
50
<PAGE>
UNDERWRITING
Each of the Underwriters named below (the "Underwriters"), for which Furman
Selz LLC is acting as the representative (the "Representative"), has severally
agreed, subject to the terms and conditions of the Underwriting Agreement, to
purchase from the Company and the Selling Stockholder, and the Company and the
Selling Stockholder have agreed to sell to each of the Underwriters, the
number of shares of Common Stock set forth opposite its name below.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
Furman Selz LLC...........................................
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
to purchase the shares of Common Stock listed above are subject to the
approval of certain legal matters by counsel and various other conditions. The
Underwriting Agreement also provides that the Underwriters are committed to
purchase all of such shares of Common Stock offered hereby, if any are
purchased (without consideration of any shares that may be purchased through
the Underwriters' over-allotment option).
The Representative has advised the Company and the Selling Stockholder that
the Underwriters propose to offer the shares of Common Stock to the public
initially at the public offering price set forth on the cover of this
Prospectus and to certain dealers at such price less a concession of not in
excess of $ per share. The Underwriters may allow, and such selected
dealers may reallow, a concession not in excess of $ per share to certain
other dealers. After the initial public offering of the shares of Common
Stock, the public offering price and other selling terms may be changed by the
Representative.
Prior to the offering made hereby, there has been no public market for the
Common Stock. Accordingly, the initial public offering price for the Common
Stock will be determined by negotiation among the Company, the Selling
Stockholder and the Representative. Among the factors to be considered in such
negotiations are the Company's results of operations and current financial
condition, estimates of the business potential and prospects of the Company,
the experience of the Company's management, the economics of the industry in
general, the general condition of the equities market and other relevant
factors. There can be no assurance that any active trading market will develop
for the Common Stock or as to the price at which the Common Stock may trade in
the public market from time to time subsequent to the offering made hereby.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to
additional shares of Common Stock at the public offering price set forth
on the cover page of this Prospectus, less underwriting discounts and
commissions. To the extent that the Underwriters exercise this option, each
Underwriter will have a firm commitment, subject to certain conditions, to
purchase such number of additional shares of Common Stock as is proportionate
to such Underwriter's initial commitment to purchase shares from the Company.
The Underwriters may exercise such option solely to cover over-allotments, if
any, incurred in the sale of the shares of Common Stock offered hereby.
The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the Underwriters may be required
to make in respect thereof.
The Company and the holders of shares of Common Stock in the aggregate,
including TSP and each officer and director of the Company, have agreed,
subject to certain exceptions, not to offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock,
or enter into any similar agreement that transfers, in whole or in part, the
economic risk of ownership of the Common Stock, for varying periods from the
date of the Underwriting Agreement, without the prior written consent of
Furman Selz LLC.
The Representative has informed the Company and the Selling Stockholder that
the Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
The Company has applied for listing of the Common Stock on the Nasdaq
National Market under the symbol "FOUR."
51
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Troy & Gould Professional Corporation, Los Angeles,
California. Certain legal matters will be passed upon for the Underwriters by
Pillsbury Madison & Sutro LLP, Menlo Park, California.
EXPERTS
The consolidated balance sheets of 4MC-Burbank, Inc. as of July 30, 1995 and
August 4, 1996 and the consolidated statements of operations, stockholder's
equity, and cash flows for each of the three fiscal years in the period ended
August 4, 1996, and the balance sheet of Four Media Company at October 1,
1996, included in this prospectus have been included in reliance on the
reports of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C., a Registration Statement on Form S-1 under
the Securities Act with respect to the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedule thereto. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement and the exhibits and schedules
filed as part thereof. Statements contained in this Prospectus regarding the
contents of any contract or other document are not necessarily complete, and,
in each instance reference is made to the copy of such contract or document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. A copy of the Registration
Statement, and the exhibits and schedule thereto, may be inspected without
charge at the public reference facilities maintained by the Commission in Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
regional offices located at the Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, 13th
Floor, New York, New York 10048, and copies of all or any part of the
Registration Statement may be obtained from such offices upon the payment of
the fees prescribed by the Commission. In addition, the Registration Statement
may be accessed electronically at the Commission's site on the World Wide Web
located at http://www.sec.gov.
The Company intends to distribute to its stockholders annual reports
containing financial statements audited by its independent accountants and
quarterly reports containing unaudited financial information for the first
three quarters of each fiscal year.
52
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
4MC-Burbank, Inc.
Report of Independent Accountants........................................ F-2
Consolidated Balance Sheets at July 30, 1995 and August 4, 1996.......... F-3
Consolidated Statements of Operations for the fiscal years ended July 31,
1994, July 30, 1995 and August 4, 1996.................................. F-4
Consolidated Statements of Stockholder's Equity for the fiscal years
ended July 31, 1994, July 30, 1995 and August 4, 1996................... F-5
Consolidated Statements of Cash Flows for the fiscal years ended July 31,
1994, July 30, 1995 and August 4, 1996.................................. F-6
Notes to Consolidated Financial Statements............................... F-7
Four Media Company
Report of Independent Accountants........................................ F-17
Balance Sheet at October 1, 1996......................................... F-18
Notes to Financial Statements............................................ F-19
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
4MC-Burbank, Inc.
Burbank, California
We have audited the accompanying consolidated balance sheets of 4MC-Burbank,
Inc. (the "Company") as of July 30, 1995 and August 4, 1996, and the related
consolidated statements of operations, stockholder's equity, and cash flows
for each of the three fiscal years in the periods ended July 31, 1994, July
30, 1995 and August 4, 1996. 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 4MC-Burbank, Inc. as of July 30, 1995 and August 4, 1996, and the
consolidated results of their operations and their cash flows for each of the
three fiscal years in the periods ended July 31, 1994, July 30, 1995 and
August 4, 1996, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Los Angeles, California
September 25, 1996
F-2
<PAGE>
4MC-BURBANK, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JULY 30, AUGUST 4,
1995 1996
-------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash....................................................... $ 6,651 $ 5,312
Restricted cash............................................ 717 709
Trade accounts receivable, net of allowance for doubtful
accounts of $563 and $823 as of July 30, 1995 and August
4, 1996, respectively..................................... 9,745 8,622
Inventory.................................................. 695 867
Prepaid expenses and other current assets.................. 1,548 2,838
------- -------
Total current assets..................................... 19,356 18,348
Property, plant and equipment, net.......................... 49,410 57,665
Deferred taxes.............................................. 1,000 2,000
Long-term receivable........................................ -- 2,008
Other assets................................................ 2,014 1,806
------- -------
Total assets............................................. $71,780 $81,827
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt and capital lease
obligations............................................... $ 3,470 $ 6,153
Accounts payable........................................... 5,010 5,803
Accrued and other liabilities.............................. 5,211 4,750
------- -------
Total current liabilities................................ 13,691 16,706
Long-term debt and capital lease obligations................ 29,472 33,978
Subordinated debt, due to stockholder....................... 9,000 9,000
------- -------
Total liabilities........................................ 52,163 59,684
Commitments and contingencies (Note 7)
Stockholder's equity:
Common stock, $.01 par value; 1,000 shares authorized,
issued and outstanding.................................... -- --
Additional paid-in capital................................. 15,010 15,010
Foreign currency translation adjustment.................... 152 254
Retained earnings.......................................... 4,455 6,879
------- -------
Total stockholder's equity............................... 19,617 22,143
------- -------
Total liabilities and stockholder's equity............... $71,780 $81,827
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
4MC-BURBANK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
----------------------------
JULY 31, JULY 30, AUGUST 4,
1994 1995 1996
-------- -------- ---------
<S> <C> <C> <C>
Revenues:
Studio............................................ $15,746 $20,677 $23,468
Broadcast......................................... 10,876 16,163 20,901
Television........................................ 15,639 22,712 23,343
Visual effects.................................... -- 1,452 2,316
------- ------- -------
Total revenues................................... 42,261 61,004 70,028
------- ------- -------
Cost of services:
Personnel......................................... 17,096 22,795 25,344
Material.......................................... 4,240 6,424 7,354
Facilities........................................ 3,774 3,917 4,692
Other............................................. 3,752 5,560 6,021
------- ------- -------
Total cost of services........................... 28,862 38,696 43,411
------- ------- -------
Gross profit.................................... 13,399 22,308 26,617
------- ------- -------
Operating expenses:
Sales, general and administrative................. 7,627 10,918 11,116
Depreciation and amortization..................... 3,284 6,241 10,165
------- ------- -------
Total operating expenses......................... 10,911 17,159 21,281
------- ------- -------
Income from operations.......................... 2,488 5,149 5,336
Interest expense, net.............................. 1,253 2,917 3,906
------- ------- -------
Income before income tax benefits............... 1,235 2,232 1,430
Income tax benefits................................ -- (988) (994)
------- ------- -------
Net income...................................... $ 1,235 $ 3,220 $ 2,424
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
4MC-BURBANK, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
FOREIGN
COMMON STOCK ADDITIONAL CURRENCY TOTAL
------------- PAID-IN TRANSLATION RETAINED STOCKHOLDER'S
SHARES AMOUNT CAPITAL ADJUSTMENT EARNINGS EQUITY
------ ------ ---------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common
stock.................. 1,000 $-- $ 5,010 $-- $ -- $ 5,010
Net income.............. 1,235 1,235
----- ---- ------- ---- ------ -------
Balance, July 31, 1994.. 1,000 5,010 1,235 6,245
Stockholder subordinated
debt conversion........ 10,000 10,000
Net income.............. 3,220 3,220
Foreign currency
translation
adjustments............ 152 152
----- ---- ------- ---- ------ -------
Balance, July 30, 1995.. 1,000 15,010 152 4,455 19,617
Net income.............. 2,424 2,424
Foreign currency
translation
adjustments............ 102 102
----- ---- ------- ---- ------ -------
Balance, August 4,
1996................... 1,000 $-- $15,010 $254 $6,879 $22,143
===== ==== ======= ==== ====== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
4MC-BURBANK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-----------------------------
JULY 31, JULY 30, AUGUST 4,
1994 1995 1996
-------- -------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................................ $ 1,235 $ 3,220 $ 2,424
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................... 3,284 6,241 10,165
Provision for doubtful accounts.................. 183 215 580
Deferred taxes................................... -- (1,000) (1,000)
Changes in operating assets and liabilities:
Decrease (increase) in restricted cash.......... -- (717) 8
Increase in trade and long term receivables..... (668) (4,644) (1,469)
Increase in inventory........................... (39) (277) (172)
Increase in prepaid expenses and other current
assets......................................... (694) (606) (1,289)
Increase in accounts payable.................... 1,862 3,148 792
Decrease in accrued and other liabilities....... (2,116) (992) (652)
------- ------- --------
Net cash provided by operating activities...... 3,047 4,588 9,387
Cash flows from investing activities:
Purchases of property, plant and equipment........ (7,877) (25,077) (10,318)
Organization costs for 4MC Asia................... -- (1,066) --
Acquisition of business........................... -- (4,759) --
------- ------- --------
Net cash used in investing activities.......... (7,877) (30,902) (10,318)
Cash flows from financing activities:
Proceeds from subordinated promissory note........ 8,400 10,600 --
Proceeds from term loans.......................... -- 12,070 --
Proceeds from term loan financing of acquisition.. -- 3,542 --
Proceeds from equipment notes..................... 1,261 3,723 3,685
Proceeds from issuance of common stock in exchange
for note payable................................. 4,000 -- --
Repayment of note payable......................... (4,000) -- --
Repayment of equipment notes and capital lease
obligations...................................... (689) (1,833) (4,095)
------- ------- --------
Net cash provided by (used in) financing
activities.................................... 8,972 28,102 (410)
Effect of exchange rate changes on cash............ -- 172 2
------- ------- --------
Net increase (decrease) in cash and cash
equivalents....................................... 4,142 1,960 (1,339)
Cash and cash equivalents at beginning of year..... 549 4,691 6,651
------- ------- --------
Cash and cash equivalents at end of year........... $ 4,691 $ 6,651 $ 5,312
======= ======= ========
Supplemental disclosure of cash flow information:
Cash paid during the fiscal year for:
Interest......................................... $ 926 $ 3,664 $ 3,406
Income taxes..................................... -- -- --
Non cash investing and financing activities:
Capital lease obligations incurred............... $ 963 $ 2,284 $ 7,851
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
4MC-BURBANK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS, ORGANIZATION AND BASIS OF PRESENTATION
4MC-Burbank, Inc. (the "Company") is a provider of technical and creative
services to owners, producers and distributors of television programming,
feature films and other entertainment content. Through the integration of
available technologies, the Company applies a variety of systems and processes
to enhance entertainment content and dissemination.
The Company's business is divided into studio, broadcast, television and
visual effects services. The studio services division located in Burbank,
California, manages, formats and distributes existing content libraries. The
broadcast services division, located in Burbank, and the Republic of
Singapore, assembles and distributes television networks and programming via
satellite to viewers in the United States, Canada and Asia. The television
services division, located in Burbank and Santa Monica, California, assembles
film or video principal photography into a form suitable for network,
syndicated, cable or foreign television. The visual effects division, located
in Santa Monica, digitally creates and manipulates images in high-resolution
formats for use in feature films.
The Company was incorporated in July 1993 as a wholly owned subsidiary of
Technical Services Partners, L.P. ("TSP"), a limited partnership formed for
the purpose of acquiring certain defined net assets of Compact Video Group,
Inc., Compact Video Services, Inc., Image Transform, Inc. and Meridian
Studios, Inc. (collectively "Compact").
On August 4, 1993, TSP acquired substantially all of the assets of Compact
and transferred those assets to the Company. This acquisition was accounted
for under the purchase method and included $5,010,000 of capitalization,
$6,506,000 in assumed liabilities and acquisition costs and $10,550,000 in a
new term loan with Compact's previous primary lender.
On October 26, 1994, 4MC Acquisition Corp., a wholly owned subsidiary of the
Company, acquired substantially all of the assets of Digital Magic & Transfer
Company ("DM&T") for $50,000 in cash, $3,542,000 in equipment notes and
$4,048,000 in assumed liabilities and acquisition costs. The acquisition was
accounted for under the purchase method. Subsequent to this acquisition, 4MC
Acquisition Corp. changed its name to Digital Magic Company ("DMC").
On February 13, 1995, Four Media Company Asia PTE Ltd. ("4MC Asia"), a
wholly owned subsidiary of the Company registered in the Republic of
Singapore, entered into an agreement with a customer to provide production,
post production and network origination services. The agreement has a seven
year term and provides for early termination by the customer after five years
by paying a fee, as defined in the agreement, not to exceed $3,500,000.
Results of operations include the 51 1/2 weeks ended July 31, 1994, the 52
weeks ended July 30, 1995 and the 53 weeks ended August 4, 1996.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The consolidated financial statements include
the accounts of 4MC-Burbank, Inc. and its wholly owned subsidiaries, DMC and
4MC Asia. All intercompany accounts and transactions have been eliminated.
Foreign Currency Translation. All balance sheet accounts of 4MC Asia are
translated at the current exchange rate as of the end of the year. Statement
of operation items are translated at average currency exchange rates. The
resulting translation adjustment is recorded as a separate component of
stockholder's equity. The
F-7
<PAGE>
4MC-BURBANK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
functional currency in which 4MC Asia transacts business is the Singapore
dollar. Transaction gains and losses included in operations were not
significant in fiscal 1995 or 1996.
Cash and Cash Equivalents. The Statement of Cash Flows classifies changes in
cash (short-term, highly liquid investments readily convertible into cash with
an original maturity of three months or less at the date of purchase)
according to operating, investing or financing activities. At times, cash
balances may be in excess of Federal Deposit Insurance Corporation insurance
limits.
Inventory. Inventories are stated at the lower of cost (first-in, first-out)
or market, and are comprised of raw materials and supplies.
Property, Plant and Equipment. Property, plant and equipment acquired from
Compact and DM&T were recorded at their acquisition cost which resulted in a
reduction of their historical carrying value in accordance with Accounting
Principles Board (APB) Opinion No. 16. Additions to property, plant and
equipment subsequent to the date of acquisition are recorded at cost.
Depreciation and Amortization. Depreciation of property, plant and equipment
is computed by use of the straight-line method based on the estimated useful
lives of 3 to 7 years of the respective assets, except for leasehold
improvements, which are amortized using the straight-line method over the life
of the improvement or the length of the lease, whichever is shorter.
Amortization of assets recorded under capital leases is based on the term of
the lease. Interest costs incurred during construction totaling $490,000 and
$142,000 were capitalized for the years ended July 30, 1995 and August 4,
1996, respectively, and are being amortized over the related assets estimated
useful lives. When properties are retired or otherwise disposed of, the cost
and related accumulated depreciation are removed from the accounts, and the
resulting gain or loss is credited or charged to operations. The policy of the
Company is to charge amounts expended for maintenance and repairs to current
year expense and to capitalize expenditures for major replacements and
betterments.
Other Assets. Other assets include costs incurred by 4MC Asia prior to the
commencement of operations and a lease interest associated with the
acquisition of the assets of DM&T. These assets are amortized on the straight-
line method over five to seven years. Other assets also include software
development costs. The Company capitalizes internal software development costs
when technological feasibility has been established. Capitalization ends when
the software is put into service. Amortization of software development costs
is computed by use of the straight-line method over three years.
Use of Estimates. The preparation of financial statements is in accordance
with generally accepted accounting principles and requires management to make
estimates and assumptions for the reporting period and as of the financial
statement date. These estimates and assumptions affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities,
and the reported amounts of revenues and expenses. Actual results could differ
from those estimates.
Recently Issued Accounting Standards. In March 1995, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No. 121"). SFAS No.
121 established accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used, and for long-lived assets and certain identifiable intangibles
to be disposed of. The Company is required to adopt the provisions of SFAS No.
121 for fiscal 1997, and the Company believes that upon its adoption there
should be no impact to results of operations.
F-8
<PAGE>
4MC-BURBANK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
In November 1995, the FASB also issued SFAS No. 123, "Accounting for Stock-
Based Compensation" ("SFAS No. 123"). SFAS No. 123 establishes new accounting
standards for the measurement and recognition of stock-based awards prescribed
by APB Opinion No. 25, "Accounting for Stock Issued to Employees" however,
under this opinion, the Company will be required to disclose the pro forma
effect of stock-based awards on net income and earnings per share as if SFAS
No. 123 had been adopted. SFAS No. 123 is effective for fiscal 1997. The
Company intends to use the provisions of APB Opinion No. 25 in accounting for
stock-based awards. As such, this standard will have no impact on the
Company's results of operations upon adoption.
Fair Values of Financial Instruments. SFAS No. 107 "Disclosure About Fair
Value of Financial Instruments" ("SFAS No. 107"), requires disclosure of fair
value information about most financial instruments both on and off the balance
sheet, if it is practicable to estimate. SFAS No. 107 excludes certain
financial instruments such as certain insurance contracts and all non-
financial instruments from its disclosure requirements. A financial instrument
is defined as a contractual obligation that ultimately ends with the delivery
of cash or an ownership interest in an entity. Disclosure regarding the fair
value of financial instruments are derived using external market sources,
estimates using present value or other valuation techniques. Cash, accounts
receivable, accounts payable, accrued and other liabilities and short-term
revolving credit agreements and variable rate long-term debt instruments
approximate their fair value.
Advertising. Advertising costs are expensed as incurred and included in
sales, general and administrative expenses. Advertising expenses amounted to
$288,000, $476,000 and $287,000 in the years ended July 31, 1994, July 30,
1995 and August 4, 1996, respectively.
3. BUSINESS AND CREDIT CONCENTRATIONS
The Company grants credit to its customers, substantially all of whom are
participants in the entertainment industry. The Company reviews a customer's
credit history before extending credit. The Company establishes an allowance
for doubtful accounts based upon factors surrounding the credit risk of
specific customers, historical trends, and other information. For the fiscal
year ended August 4, 1996 one customer accounted for 10% of the Company's
domestic sales and 12% of net accounts receivable. For the fiscal year ended
July 30, 1995, no single customer accounted for a significant amount of the
Company's domestic sales. For the fiscal year ended July 31, 1994, the
Company's two largest customers accounted for 16% and 10% of sales and 7% and
15% of net accounts receivable. During the fiscal year ended August 4, 1996,
the Company entered into a long term agreement for services with a customer
and as a part of the agreement the Company deferred payment in the amount of
$3,300,000. This amount is payable over three years in monthly installments of
principal and interest at 8%. There can be no assurance that this customer
ultimately will repay all outstanding amounts due to the Company.
Approximately 30% and 57% of the Company's net income for the years ended
July 30, 1995 and August 4, 1996, respectively, related to 4MC Asia. For the
year ended August 4, 1996, 97% of 4MC Asia revenues and 15.3% of the Company's
consolidated total revenues were generated by one customer. This customer
accounted for 5% of the Company's consolidated net accounts receivable.
F-9
<PAGE>
4MC-BURBANK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. PROPERTY, PLANT AND EQUIPMENT
The following is a summary of property, plant and equipment (in thousands):
<TABLE>
<CAPTION>
JULY 30, AUGUST 4,
1995 1996
-------- ---------
<S> <C> <C>
Land....................................................... $ 925 $ 925
Buildings and building improvements........................ 4,511 4,689
Machinery and equipment.................................... 46,801 62,399
------- -------
52,237 68,013
Less, accumulated depreciation and amortization............ 9,092 18,717
------- -------
43,145 49,296
Construction in progress................................... 6,265 8,369
------- -------
Property, plant and equipment, net....................... $49,410 $57,665
======= =======
Included above is property and equipment under capital
leases of:
Machinery and equipment.................................. 3,350 11,856
Less, accumulated amortization........................... 542 1,756
------- -------
Property and equipment under capital leases, net......... $ 2,808 $10,100
======= =======
</TABLE>
During the years ended July 31, 1994, July 30, 1995 and August 4, 1996, the
Company expensed maintenance, repairs and spare parts in amounts of
$1,389,000, $1,889,000 and $1,795,000, respectively.
During the year ended August 4, 1996, the Company settled its claim arising
from the January 17, 1994 earthquake for $4,093,000. Of this amount $2,333,000
was received as partial settlement during the year ended July 30, 1995 and the
remainder amounting to $1,760,000 was received in the 1996 fiscal year.
Insurance proceeds in excess of the net book value of destroyed assets and
repair costs of damaged assets were approximately $1,098,000. Of this amount
$198,000 and $900,000 was credited to sales, general and administrative
expense as a recovery under the business interruption coverage of expenses
incurred in 1995 and 1996, respectively.
5. INCOME TAXES
Deferred income taxes are determined in accordance with SFAS No. 109,
"Accounting for Income Taxes." Under this method, deferred income taxes are
recognized for the tax consequences in future years of differences between the
tax bases of assets and liabilities and their financial reporting amounts at
each year-end based on enacted tax laws and statutory rates applicable to the
periods in which the differences are expected to affect taxable income.
Valuation allowances are established to reduce deferred tax assets to the
amount expected to be realized.
F-10
<PAGE>
4MC-BURBANK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. INCOME TAXES, CONTINUED
The income tax provision (benefit) consisted of the following (in
thousands):
<TABLE>
<CAPTION>
JULY 31, JULY 30, AUGUST 4,
1994 1995 1996
-------- -------- ---------
<S> <C> <C> <C>
Current:
Federal........................................ $ 380 $ -- $ 26
State.......................................... 115 12 11
Deferred
Federal........................................ (380) (768) (791)
State.......................................... (115) (232) (240)
----- ----- -----
Total........................................ $ -- $(988) $(994)
===== ===== =====
</TABLE>
The significant components of the deferred tax asset consisted of the
following (in thousands):
<TABLE>
<CAPTION>
JULY 31, JULY 30, AUGUST 4,
1994 1995 1996
-------- -------- ---------
<S> <C> <C> <C>
Deferred tax asset:
Allowance for doubtful accounts.............. $ 209 $ 226 $ 339
Plant, property & equipment.................. 2,370 2,450 1,871
Intangible assets............................ 148 160 335
Accrued vacation............................. 158 161 168
Acquisition expenses......................... 311 78 43
Net operating loss carryforward.............. 1,068 1,116 1,894
Deferred lease............................... -- 180 (12)
Other........................................ 68 37 (191)
Valuation allowance.......................... (4,332) (3,408) (2,447)
------- ------- -------
Net deferred tax asset..................... $ -- $ 1,000 $ 2,000
======= ======= =======
</TABLE>
At July 31, 1994, July 30, 1995 and August 4, 1996, the Company had a net
deferred tax asset before valuation allowance of $4,332,000, $4,408,000 and
$4,447,000, respectively. The Company recorded a valuation allowance against
the entire deferred tax asset in 1994, as the Company was in its first year of
operations.
The Company has assessed its past earnings history and trends, budgeted
revenues and expiration dates of net operating loss carryforwards and has
determined that it is more likely than not that $2,000,000 of deferred tax
assets will be realized. The remaining valuation allowance of $2,447,000 is
maintained on deferred assets which the Company has not determined to be more
likely than not realizable at August 4, 1996. The Company will continue to
review this valuation allowance on a quarterly basis and make adjustments, as
appropriate.
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Federal tax at statutory rate............................... 34% 34% 34%
State income taxes, net of federal tax benefits............. -- 1 --
Permanent differences....................................... -- 1 1
Foreign income not subject to taxes......................... -- (10) (33)
Tax net operating loss carryforward......................... (31) (25) --
Reduction of valuation allowance............................ -- (45) (70)
Other....................................................... (3) -- (2)
--- --- ---
--% (44)% (70)%
=== === ===
</TABLE>
F-11
<PAGE>
4MC-BURBANK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
As of August 4, 1996, the Company has net operating loss carryforwards of
approximately $9,800,000 and $2,300,000 for Federal and California tax
purposes, respectively. The net operating loss carryforwards begin to expire
in 2009 and 1999 for Federal and California income tax purposes, respectively.
In 1995, the government of the Republic of Singapore granted 4MC Asia a
seven-year tax exemption as a "pioneer status" company. The tax exemption is
conditioned upon 4MC Asia meeting certain investment requirements. The Company
believes that it will meet these requirements, and will be able to realize the
full future benefit of the tax exemption. The resulting tax savings reflected
in net income amounted to $178,000 in fiscal 1995 and $378,000 in fiscal 1996.
6. LONG TERM DEBT
The following is a summary of long-term debt (in thousands):
<TABLE>
<CAPTION>
JULY 30, AUGUST 4,
1995 1996
-------- ---------
<S> <C> <C>
BABC term loan............................................... $ 7,350 $ 6,615
BABC revolving credit facility............................... 3,200 3,200
HKSB term loan............................................... 12,070 11,817
Equipment notes.............................................. 7,122 8,645
Capital lease obligations.................................... 3,200 9,854
Subordinated promissory note................................. 9,000 9,000
------- -------
41,942 49,131
Less, current maturities..................................... 3,470 6,153
------- -------
$38,472 $42,978
======= =======
</TABLE>
Aggregate loan and capital lease obligation maturities for the next five
fiscal years are as follows (in thousands):
<TABLE>
<CAPTION>
PRINCIPAL FUTURE LEASE
PAYMENTS PAYMENTS TOTAL
--------- ------------ -------
<S> <C> <C> <C>
Fiscal years ending in
1997............................................ $ 4,041 $2,112 $ 6,153
1998............................................ 14,082 2,288 16,370
1999............................................ 13,236 2,465 15,701
2000............................................ 3,480 1,778 5,258
2001............................................ 2,771 1,211 3,982
Thereafter...................................... 1,667 -- 1,667
------- ------ -------
Total......................................... $39,277 $9,854 $49,131
======= ====== =======
</TABLE>
On August 4, 1994, the Company entered into a loan agreement with Bank of
America Business Credit ("BABC") in conjunction with the purchase of the
assets of Compact. The bank provided a senior term and revolving loan which
are collateralized by substantially all the assets of the Company and its
subsidiaries. The term loan is due July 31, 1998, with monthly installments of
$61,250 commencing August 1995, at an interest rate of 8.5%. The revolving
credit is due July 31, 1998 at an interest rate of 8.5% through July 31, 1995
and prime (8.25% as of August 4, 1996) plus 1.5% thereafter. The loan
agreement contains various covenants restricting the cash payments to
stockholder for management fees, dividends or repayment of the subordinated
note payable. The Company is also required to make mandatory capital
expenditures, maintain specified financial ratios and levels of net worth.
F-12
<PAGE>
4MC-BURBANK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On February 22, 1995, 4MC Asia entered into a loan agreement with The Hong
Kong and Shanghai Banking Corporation Limited ("HKSB"), providing a term loan
facility of SD$16,898,000 Singapore dollars (approximately $12,070,000 US
dollars at June 30, 1995). The loan is collateralized by substantially all of
4MC Asia's assets and is guaranteed by the Company. The loan is payable in 60
monthly installments commencing April 17, 1997 at a rate of 1.25% above the
HKSB prime rate (6.25% and 6.5% as of July 30, 1995 and August 4, 1996,
respectively). The loan agreement contains various restrictive covenants,
including the maintenance of $1,000,000 Singapore dollars (approximately
$717,000 U.S. dollars at July 30, 1995 and $709,000 as of August 4, 1996) in
cash deposits and certain debt-to-equity ratios.
The Company has entered into various capital lease and equipment notes
related to the purchase of equipment. These notes are due through 2001 and are
at interest rates of 8.0% to 11.9%.
6. LONG TERM DEBT, CONTINUED
On August 4, 1993, the Company entered into an agreement with TSP to provide
to the Company up to $10,000,000 in borrowings in the form of a subordinated
promissory note, at an interest rate of 10%, with no principal payment
required until August 1998. On September 6, 1993, TSP exchanged a $4,000,000
note payable by the Company for 800 shares of Common Stock. On November 17,
1994, the Company entered into an agreement for additional borrowings of up to
$9,000,000 under the same terms as the August 1993 subordinated promissory
note. Repayment of borrowings under the August 1993 and November 1994
subordinated notes is restricted under covenants contained in the BABC loan
agreement, various equipment notes and various capital lease obligations.
During the years ended July 31, 1994 and July 30, 1995, TSP advanced to the
Company $8,400,000 and $10,600,000, respectively, under the subordinated
promissory notes. On July 28, 1995, TSP contributed $10,000,000 in
subordinated promissory notes to the equity of the Company.
7. COMMITMENTS AND CONTINGENCIES
The Company and certain subsidiaries have employment agreements with certain
members of their creative staff to secure their services for up to two years
at amounts approximating their current levels of compensation. At August 4,
1996, the Company's remaining aggregate commitment under such contracts is
approximately $1,111,000.
The Company leases its production and office facilities under noncancelable
operating leases with initial terms up to five years through 2000. These
leases contain renewal options, require additional payments for property
taxes, utilities, insurance and maintenance costs and are subject to periodic
escalation charges. Facilities rent expense amounted to $3,242,000, $4,327,000
and $4,392,000 for the fiscal years ended July 31, 1994, July 30, 1995 and
August 4, 1996, respectively. At August 4, 1996 the annual commitment under
these facilities leases is summarized as follows (in thousands):
<TABLE>
<S> <C>
Fiscal years ending in:
1997.................................................................. $ 4,129
1998.................................................................. 3,951
1999.................................................................. 3,787
2000.................................................................. 356
-------
Total............................................................... $12,223
=======
</TABLE>
F-13
<PAGE>
4MC-BURBANK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company leases certain office equipment under operating leases which
expire through 1999. Rent expense related to equipment amounted to $324,800,
$134,800 and $190,200 for the fiscal years ended July 31, 1994, July 30, 1995
and August 4, 1996, respectively. At August 4, 1996 the annual commitment
under various leases is summarized as follows (in thousands):
<TABLE>
<S> <C>
Fiscal years ending in:
1997................................................................... $ 434
1998................................................................... 434
1999................................................................... 418
------
Total................................................................ $1,286
======
</TABLE>
The Company is involved in litigation matters arising in the normal course
of business. Management believes that the disposition of these lawsuits will
not materially affect the financial position or results of operations of the
Company.
8. EMPLOYEE BENEFIT PLANS
The Company's savings and investment plan covers substantially all of the
employees of the Company. The participants may contribute up to 15% of their
annual compensation (subject to the annual IRS limitation) to the plan and the
Company will match the participant's contribution up to a maximum of 2% of the
participant's compensation. The Company expensed $225,000, $208,000 and
$211,000 related to the plan for the years ended July 31, 1994, July 30, 1995
and August 4, 1996, respectively.
9. RELATED PARTIES
As of July 30, 1995 and August 4, 1996, TSP was the holder of subordinated
promissory notes from the Company totaling $9,000,000. In addition, the
Company owed $450,000 of accrued interest to TSP as of August 4, 1996 and no
amounts were due as of July 30, 1995. During the years ended July 30, 1995 and
August 4, 1996, the Company paid $1,762,000 and $450,000, respectively, to TSP
in interest.
The Company provided services to a company controlled by a then member of
the Board of Directors in the amount of $188,008, $2,000 and $1,000 for the
years ended July 31, 1994, July 30, 1995 and August 4, 1996, respectively.
The Company paid consulting fees and expenses to a member of the Board of
Directors of the Company of $147,000 and $205,423 for the years ended July 30,
1995 and August 4, 1996, respectively. As of August 4, 1996, the director is
no longer affiliated with the Company.
The Company has entered into an agreement with an emerging company wherein
the Company would advance it up to $600,000. As of August 4, 1996, the Company
has advanced cash for operating purposes of approximately $238,000. The
Company has the option to purchase a significant portion of the stock of the
emerging company as of January 1, 1997. Management has not determined at this
time whether this option will be exercised.
In connection with the acquisition of Compact in 1993, the Company's Chief
Executive Officer was granted a profit interest in TSP for identifying,
analyzing and consummating the acquisition. The profit interest is equal to
10% of the excess, if any, by which the distributions (in cash or in kind)
from TSP exceed the partners' total investment in TSP plus a return of 9% per
annum. No amounts have been earned or paid under this profit interest.
F-14
<PAGE>
4MC-BURBANK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. STOCK OPTIONS
The Company issued stock options to four key executives of the Company on
September 7, 1993. These options were for 95 shares of common stock at an
exercise price of $2,212 per share, the fair market value at the date of grant
as determined by the Company and approved by the Board of Directors. These
stock options vest over a six year period at 16.7% per year. As of August 4,
1996, no options have been exercised or canceled and no additional options
have been granted.
11. BUSINESS SEGMENTS
Information about the Company's operations in different geographic areas for
the years ended July 31, 1994, July 30, 1995 and August 4, 1996 are as follows
(in thousands):
<TABLE>
<CAPTION>
UNITED CONSOLIDATED
STATES ASIA CORPORATE TOTAL
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales to unaffiliated customers:
1994 $42,261 $ -- $ -- $42,261
1995 56,999 4,005 -- 61,004
1996 58,970 11,058 -- 70,028
- ----------------------------------------------------------------------------
Income from operations:
1994 $ 7,601 $ -- $(5,113) $ 2,488
1995 9,249 1,107 (5,207) 5,149
1996 7,095 2,922 (4,681) 5,336
- ----------------------------------------------------------------------------
Identifiable assets:
1994 $31,120 $ -- $1,862 $32,982
1995 46,364 21,620 3,796 71,780
1996 54,741 22,307 4,779 81,827
- ----------------------------------------------------------------------------
Capital expenditures:
1994 $ 8,146 $ -- $ 694 $ 8,840
1995 9,131 17,362 1,934 28,427
1996 13,318 2,208 983 16,509
- ----------------------------------------------------------------------------
Depreciation expense and amortization
1994 $ 3,123 $ -- $ 161 $ 3,284
1995 4,721 954 566 6,241
1996 6,548 2,722 895 10,165
- ----------------------------------------------------------------------------
</TABLE>
12. SUBSEQUENT EVENTS (UNAUDITED)
In August 1996, the Company entered into negotiations of a $34,000,000 loan
arrangement with CIT Group Business Credit, Inc. and CIT Group Equipment
Financing, Inc. ("CIT"). This agreement includes (i) a $16,000,000 term loan,
payable in 84 monthly principal payments of $190,476 commencing October, 1997
at an interest rate of LIBOR plus 2.75% or prime as it changes ("PAC") plus
.75%; (ii) an $11,000,000 revolving line of credit at an interest rate of
LIBOR plus 2.5% or PAC plus .50%; and (iii) a $7,000,000 capital expenditure
line of credit payable in 60 monthly installments commencing three months
after funding at an interest rate of LIBOR plus 2.75% or PAC plus .75%. As
part of this financing, the Company plans to repay the BABC loans and
$1,845,000 of equipment notes. The Company may, at its option, elect a fixed
rate for the term loan at the five-year treasury rate plus 3.35%. The loan
facility is collateralized by substantially all of the domestic assets of the
Company.
F-15
<PAGE>
4MC-BURBANK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Each of the credit facilities described above has an initial term of 42
months with automatic twelve month renewals thereafter unless terminated by
the Company or lender. The Company may extend the maturity for 24 months if
the balances of the term and capital expenditure facilities are less than 80%
of appraised value of the collateral.
On September 25, 1996, the Company changed its name from Four Media Company
to "4MC-Burbank, Inc." On the same date, a holding company under the name
"Four Media Company" was incorporated in the State of Delaware ("4MC
Delaware"). It is expected that in October 1996, 4MC Delaware will acquire all
of the outstanding capital stock of 4MC-Burbank, Inc., 4MC Asia and DMC (the
"Reorganization"). The purpose of the reorganization is to facilitate future
financing transactions and acquisitions.
F-16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Four Media Company
Burbank, California
We have audited the accompanying balance sheet of Four Media Company as of
October 1, 1996. This financial statement is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respect, the financial position of Four Media Company as of
October 1, 1996, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Los Angeles, California
October 1, 1996
F-17
<PAGE>
FOUR MEDIA COMPANY
BALANCE SHEET
OCTOBER 1, 1996
<TABLE>
<S> <C>
ASSETS
Cash................................................................... $1,000
------
Total assets......................................................... $1,000
======
STOCKHOLDER'S EQUITY
Preferred stock, $.01 par value, 5,000,000 shares authorized, none
issued and outstanding................................................ $ --
Common stock, $.01 par value, 50,000,000 shares authorized, 100,000
shares issued and outstanding......................................... $1,000
------
Total stockholder's equity........................................... $1,000
======
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-18
<PAGE>
FOUR MEDIA COMPANY
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Four Media Company (the "Company") was incorporated in the State of Delaware
on September 25, 1996. The authorized capital stock of the Company consists of
50,000,000 shares of common stock, par value of $.01 per share and 5,000,000
shares of preferred stock, par value of $.01 per share. As of October 1, 1996,
the Company issued and had outstanding 100,000 shares of Common Stock and no
preferred shares were issued or outstanding. Each holder of common stock shall
be entitled to one vote for each share held.
2. FORMATION OF THE COMPANY
The Company was formed as a holding company to acquire all of the
outstanding capital stock of 4MC-Burbank, Inc., Four Media Company Asia PTE
Ltd. ("4MC Asia") and Digital Magic Company ("DMC") (the "Reorganization").
The Reorganization is expected to be completed in November 1996. The purpose
of the Reorganization is to facilitate future financing transactions and
acquisitions.
F-19
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY OTHER
THAN THE SECURITIES TO WHICH IT RELATES OR ANY OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH
SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS 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 CONTAINED HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THIS DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
The Company.............................................................. 12
Use of Proceeds.......................................................... 12
Dividend Policy.......................................................... 12
Capitalization........................................................... 13
Dilution................................................................. 14
Selected Financial Data.................................................. 15
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 16
Business................................................................. 24
Management............................................................... 40
Certain Transactions..................................................... 45
Principal and Selling Stockholders....................................... 47
Description of Capital Stock............................................. 48
Shares Eligible for Future Sale.......................................... 49
Underwriting............................................................. 51
Legal Matters............................................................ 52
Experts.................................................................. 52
Additional Information................................................... 52
Index to Consolidated Financial Statements............................... F-1
</TABLE>
---------------------
UNTIL , 1996 (25 DAYS FROM THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SHARES
[LOGO]
FOUR MEDIA COMPANY
COMMON STOCK
---------------------
PROSPECTUS
---------------------
FURMAN SELZ
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth an itemized statement of all expenses to be
incurred in connection with the issuance and distribution of the securities
that are the subject of this Registration Statement. All amounts shown, other
than the Securities and Exchange Commission registration fee and the NASD
filing fee, are estimates only.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............. $ 29,622
NASD filing fee................................................. 10,275
Nasdaq National Market listing fee.............................. 40,000
Printing expenses............................................... 125,000
Transfer agent fees............................................. 5,000
Legal fees and expenses......................................... 300,000
Accounting fees and expenses.................................... 150,000
"Blue sky" fees and expenses.................................... 10,000
Miscellaneous expenses.......................................... 130,103
--------
Total......................................................... $800,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Certificate of Incorporation and the Bylaws of the Company provide for
the indemnification of directors and officers to the fullest extent permitted
by the General Corporation Law of the State of Delaware (the "GCL").
Section 145 of the GCL authorizes indemnification when a person is made a
party to any proceeding by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation or was serving as a
director, officer, employee or agent of another enterprise, at the request of
the corporation, and if such person acted in good faith and in a manner
reasonably believed by him or her to be in, or not opposed to, the best
interests of the corporation. With respect to any criminal proceeding, such
person must have had no reasonable cause to believe that his or her conduct
was unlawful. If it is determined that the conduct of such person meets these
standards, he or she may be indemnified for expenses incurred and amounts paid
in such proceeding if actually and reasonably incurred by him or her in
connection therewith.
If such a proceeding is brought by or on behalf of the corporation (i.e., a
derivative suit), such person may be indemnified against expenses actually and
reasonably incurred if he or she acted in good faith and in a manner
reasonably believed by him or her to be in, or not opposed to, the best
interests of the corporation. There can be no indemnification with respect to
any matter as to which such person is adjudged to be liable to the
corporation; however, a court may, even in such case, allow such
indemnification to such person for such expenses as the court deems proper.
Where such person is successful in any such proceeding, he or she is entitled
to be indemnified against expenses actually and reasonably incurred by him or
her. In all other cases, indemnification is made by the corporation upon
determination by it that indemnification of such person is proper because such
person has met the applicable standard of conduct.
The Underwriting Agreement, the form of which is included as Exhibit 1.1 to
this Registration Statement, provides that the Company shall indemnify the
Underwriters under certain circumstances and the Underwriters shall indemnify
the officers and directors of the Company under certain circumstances.
The Company has entered into separate but identical indemnity agreements
(the "Indemnity Agreements") with each director and executive officer of the
Company (the "Indemnitees"). The Indemnity Agreements provide that the Company
will indemnify each Indemnitee against payment of and liability for any and
all expenses actually and reasonably incurred by the Indemnitee in defending
or investigating a claim, by reason of the fact that the Indemnitee is or was
a director and/or officer 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, or other enterprise, provided it is determined that
the Indemnitee acted in good faith and reasonably believed his actions to be
in the best interests of the Company.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On October 1, 1996, the Company sold 100,000 shares of Common Stock to
Technical Services Partners, L.P., a Delaware limited partnership ("TSP"), in
consideration for $1,000. These shares were issued pursuant to exemptions
available under Section 4(2) of the Securities Act of 1933, as amended.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
(a) The following exhibits, which are furnished with this Registration
Statement or incorporated herein by reference, are filed as part of this
Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
1.1 Form of Underwriting Agreement.*
3.1 Certificate of Incorporation of the Company.
3.2 Bylaws of the Company.
4.1 Specimen Common Stock Certificate.*
5.1 Opinion of Troy & Gould Professional Corporation.*
10.1 Four Media Company 1997 Stock Plan and Stock Option Agreement.*
10.2 Four Media Company 1997 Director Option Plan and Director Stock Plan
Stock Option Agreement.*
10.3 Form of Indemnity Agreement between the Company and each of its
officers and directors.
10.4 Agreement dated as of February 13, 1995 between MTV Asia LDC and Four
Media Company Asia PTE. Ltd.+
10.5 Guaranty by Viacom International Inc. of MTV Asia's obligations to
Four Media Company Asia PTE Ltd. dated February 13, 1995.
10.6 Guaranty by Four Media Company of obligations of Four Media Company
Asia PTE Ltd. to MTV Asia dated February 13, 1995.
10.7 January 18, 1996 Amendment Letter re Agreement dated as of February
13, 1995 between MTV Asia LDC and Four Media Company Asia PTE. Ltd.+
10.8 Uplink-Playback Service Deal Memorandum between TVN Entertainment
Corporation and Compact Video Services, Inc. dated November 20, 1989,
as amended.+
10.9 Letter Agreement between Four Media Company and TVN Entertainment
Corporation dated March 18, 1996.+
10.10 Agreement for Term Loan Facilities between The Hong Kong and Shanghai
Banking Corporation Limited and Four Media Company Asia PTE. Ltd.
dated February 22, 1995.
10.11 Deed of Subordination between Four Media Company, Four Media Company
Asia PTE LTD and The Hong Kong and Shanghai Banking Corporation
Limited dated February 22, 1995.
10.12 Deed of Debenture between Four Media Company Asia PTE LTD. and The
Hong Kong and Shanghai Banking Corporation Limited dated February 22,
1995.
10.13 Deed of Assignment between Four Media Company Asia PTE LTD and The
Hong Kong and Shanghai Banking Corporation Limited dated February 22,
1995.
10.14 Guarantee by Four Media Company of Four Media Company Asia PTE Ltd.
liabilities to The Hong Kong and Shanghai Banking Corporation Limited
dated February 16, 1995.
10.15 Satellite Services Agreement re Transponder 7 between Global Access
Telecommunications Services, Inc. and Four Media Company dated April
12, 1996.
10.16 Satellite Services Agreement re Transponder 5 between Global Access
Telecommunications Services, Inc. and Four Media Company dated April
12, 1996.
10.17 Global Access Telecommunications Services, Inc. Standard Terms and
Conditions.
10.18 August 28, 1996 Letter Amendment to the Satellite Services Agreement
re Transponder 5 dated April 12, 1996 and to the Satellite Services
Agreement re Transponder 7 dated April 12, 1996.
10.19 Financing agreement between The CIT Group/Business Credit, Inc., The
CIT Group/Equipment Financing, Inc., 4MC-Burbank, Inc. and Digital
Magic Company dated 1996.*
10.20 Lease between Singapore Telecommunications Limited and Four Media
Company Asia PTE Ltd. commencing December 15, 1994.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
10.21 Office Building Lease between Ford Motor Credit Company and Four Media
Company dated August 1, 1994.
10.22 Employment Agreement between the Company and Robert T. Walston dated
October 1, 1996.*
10.23 Employment Agreement between the Company and John H. Donlon dated as
of October 1, 1996.*
10.24 Employment Agreement between the Company and John H. Sabin dated as of
October 1, 1996.*
10.25 Employment Agreement between the Company and Gavin W. Schutz dated as
of October 1, 1996.*
10.26 Employment Agreement between the Company and Robert Bailey dated as of
October 1, 1996.*
10.27 Purchase and Sale Agreement and Escrow Instructions between C.P.
Private Partners, L.P.I. and Four Media Company dated July 29, 1996.
21.0 List of Subsidiaries.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Troy & Gould Professional Corporation (contained in Exhibit
5.1).
24.1 Power of Attorney (contained in Part II).
27.0 Financial Data Schedule.
</TABLE>
- --------------------
* To be filed by amendment.
+ Portions of exhibits deleted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidentiality.
(b) Schedules are omitted since the required information is not present in
amounts sufficient to require submission of schedules or because the
information required is included in Registrant's Consolidated Financial
Statements and Notes thereto.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
Underwriter at the closing specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required by
the Underwriter to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons 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 Securities 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 of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person 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 Securities Act and will be governed by the final
adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
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, 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-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Burbank, State of
California, on October 8, 1996.
Four Media Company
/s/ Robert T. Walston
By: _________________________________
ROBERT T. WALSTON
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert T. Walston and John H. Donlon, and each
of them, 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 and all amendments (including post-
effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-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
premises, as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Robert T. Walston Chairman of the October 8, 1996
- ------------------------------------- Board and Chief
ROBERT T. WALSTON Executive Officer
(Principal
Executive Officer)
/s/ John H. Donlon President and October 8, 1996
- ------------------------------------- Director
JOHN H. DONLON
/s/ John H. Sabin Vice President, October 8, 1996
- ------------------------------------- Chief Financial
JOHN H. SABIN Officer (Principal
Financial and
Accounting Officer)
and Director
/s/ Gavin W. Schutz Vice President, October 8, 1996
- ------------------------------------- Chief Technology
GAVIN W. SCHUTZ Officer and
Director
/s/ Robert Bailey Vice President, October 8, 1996
- ------------------------------------- Director of
ROBERT BAILEY Marketing and
Director
/s/ Shimon Topor Director October 8, 1996
- -------------------------------------
SHIMON TOPOR
/s/ Edward Kirtman Director October 8, 1996
- -------------------------------------
EDWARD KIRTMAN
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT INDEX
------- -------------
<C> <S>
1.1 Form of Underwriting Agreement.*
3.1 Certificate of Incorporation of the Company.
3.2 Bylaws of the Company.
4.1 Specimen Common Stock Certificate.*
5.1 Opinion of Troy & Gould Professional Corporation.*
10.1 Four Media Company 1997 Stock Plan and Stock Option Agreement.*
10.2 Four Media Company 1997 Director Option Plan and Director Stock Plan
Stock Option Agreement.*
10.3 Form of Indemnity Agreement between the Company and each of its
officers and directors.
10.4 Agreement dated as of February 13, 1995 between MTV Asia LDC and Four
Media Company Asia PTE. Ltd.+
10.5 Guaranty by Viacom International Inc. of MTV Asia's obligations to
Four Media Company Asia PTE Ltd. dated February 13, 1995.
10.6 Guaranty by Four Media Company of obligations of Four Media Company
Asia PTE Ltd. to MTV Asia dated February 13, 1995.
10.7 January 18, 1996 Amendment Letter re Agreement dated as of February
13, 1995 between MTV Asia LDC and Four Media Company Asia PTE. Ltd.+
10.8 Uplink-Playback Service Deal Memorandum between TVN Entertainment
Corporation and Compact Video Services, Inc. dated November 20, 1989,
as amended.+
10.9 Letter Agreement between Four Media Company and TVN Entertainment
Corporation dated March 18, 1996.+
10.10 Agreement for Term Loan Facilities between The Hong Kong and Shanghai
Banking Corporation Limited and Four Media Company Asia PTE. Ltd.
dated February 22, 1995.
10.11 Deed of Subordination between Four Media Company, Four Media Company
Asia PTE LTD and The Hong Kong and Shanghai Banking Corporation
Limited dated February 22, 1995.
10.12 Deed of Debenture between Four Media Company Asia PTE LTD. and The
Hong Kong and Shanghai Banking Corporation Limited dated February 22,
1995.
10.13 Deed of Assignment between Four Media Company Asia PTE LTD and The
Hong Kong and Shanghai Banking Corporation Limited dated February 22,
1995.
10.14 Guarantee by Four Media Company of Four Media Company Asia PTE Ltd.
liabilities to The Hong Kong and Shanghai Banking Corporation Limited
dated February 16, 1995.
10.15 Satellite Services Agreement re Transponder 7 between Global Access
Telecommunications Services, Inc. and Four Media Company dated April
12, 1996.
10.16 Satellite Services Agreement re Transponder 5 between Global Access
Telecommunications Services, Inc. and Four Media Company dated April
12, 1996.
10.17 Global Access Telecommunications Services, Inc. Standard Terms and
Conditions.
10.18 August 28, 1996 Letter Amendment to the Satellite Services Agreement
re Transponder 5 dated April 12, 1996 and to the Satellite Services
Agreement re Transponder 7 dated April 12, 1996.
10.19 Financing agreement between The CIT Group/Business Credit, Inc., The
CIT Group/Equipment Financing, Inc., 4MC-Burbank, Inc. and Digital
Magic Company dated 1996.*
10.20 Lease between Singapore Telecommunications Limited and Four Media
Company Asia PTE Ltd. commencing December 15, 1994.
10.21 Office Building Lease between Ford Motor Credit Company and Four Media
Company dated August 1, 1994.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT INDEX
------- -------------
<C> <S>
10.22 Employment Agreement between the Company and Robert T. Walston dated
October 1, 1996.*
10.23 Employment Agreement between the Company and John H. Donlon dated as
of October 1, 1996.*
10.24 Employment Agreement between the Company and John H. Sabin dated as of
October 1, 1996.*
10.25 Employment Agreement between the Company and Gavin W. Schutz dated as
of October 1, 1996.*
10.26 Employment Agreement between the Company and Robert Bailey dated as of
October 1, 1996.*
10.27 Purchase and Sale Agreement and Escrow Instructions between C.P.
Private Partners, L.P.I. and Four Media Company dated July 29, 1996.
21.0 List of Subsidiaries.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Troy & Gould Professional Corporation (contained in Exhibit
5.1).
24.1 Power of Attorney (contained in Part II).
27.0 Financial Data Schedule.
</TABLE>
- --------------------
* To be filed by amendment.
+ Portions of exhibits deleted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidentiality.
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
FOUR MEDIA COMPANY
1. NAME.
The name of this corporation is FOUR MEDIA COMPANY (the "Corporation").
2. REGISTERED OFFICE AND AGENT.
The registered office of the Corporation shall be located at 1013 Centre
Road, Wilmington, Delaware 19805 in the County of New Castle. The registered
agent of the Corporation at such address shall be Corporation Service Company.
3. PURPOSE AND POWERS.
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the Delaware General Corporation
Law. The Corporation shall have all power necessary or helpful to engage in
such acts and activities.
4. CAPITAL STOCK.
4.1. AUTHORIZED SHARES.
The total number of shares of all classes of stock that the Corporation
shall have the authority to issue is 55,000,000 shares, of which 5,000,000
shares shall be Preferred Stock, having a par value of $0.01 per share
("Preferred Stock"), and 50,000,000 shares shall be classified as Common Stock,
par value $0.01 per share ("Common Stock"). The Board of Directors is expressly
authorized to provide for the classification and reclassification of any
unissued shares of Preferred Stock or Common Stock and the issuance thereof in
one or more classes or series without the approval of the stockholders of the
Corporation.
4.2. COMMON STOCK.
(a) RELATIVE RIGHTS.
The Common Stock shall be subject to all of the rights, privileges,
preferences and priorities of the Preferred Stock as set forth in the
certificate of designations filed to establish the respective series of
Preferred Stock. Each share of Common Stock shall have the same relative rights
as and be identical in all respects to all the other shares of Common Stock.
1
<PAGE>
(b) VOTING RIGHTS.
Each holder of shares of Common Stock shall be entitled to attend all
special and annual meetings of the stockholders of the Corporation and, share
for share and without regard to class, together with the holders of all other
classes of stock entitled to attend such meetings and to vote (except any class
or series of stock having special voting rights), to cast one vote for each
outstanding share of Common Stock so held upon any matter or thing (including,
without limitation, the election of one or more directors) properly considered
and acted upon by the stockholders, except as otherwise provided in this
Certificate of Incorporation or by applicable law.
(c) DIVIDENDS.
Whenever there shall have been paid, or declared and set aside for payment,
to the holders of shares of any class of stock having preference over the Common
Stock as to the payment of dividends, the full amount of dividends and of
sinking fund or retirement payments, if any, to which such holders are
respectively entitled in preference to the Common Stock, then the holders of
record of the Common Stock and any class or series of stock entitled to
participate therewith as to dividends, shall be entitled to receive dividends,
when, as, and if declared by the Board of Directors, out of any assets legally
available for the payment of dividends thereon.
(d) DISSOLUTION, LIQUIDATION, WINDING UP.
In the event of any dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, the holders of record of the
Common Stock then outstanding, and all holders of any class or series of stock
entitled to participate therewith in whole or in part, as to distribution of
assets, shall become entitled to participate in the distribution of any assets
of the Corporation remaining after the Corporation shall have paid, or set aside
for payment, to the holders of any class of stock having preference over the
Common Stock in the event of dissolution, liquidation or winding up, the full
preferential amounts (if any) to which they are entitled, and shall have paid or
provided for payment of all debts and liabilities of the Corporation.
4.3. PREFERRED STOCK.
(a) ISSUANCE, DESIGNATIONS, POWERS, ETC.
The Board of Directors expressly is authorized, subject to limitations
prescribed by the Delaware General Corporation Law and the provisions of this
Certificate of Incorporation, to provide, by resolution and by filing a
certificate of designations pursuant to the Delaware General Corporation Law,
for the issuance from time to
2
<PAGE>
time of the shares of Preferred Stock in one or more series, to establish from
time to time the number of shares to be included in each such series, and to fix
the designation, powers, preferences and other rights of the shares of each such
series and to fix the qualifications, limitations and restrictions thereon,
including, but without limiting the generality of the foregoing, the following:
(i) the number of shares constituting that series and the distinctive
designation of that series;
(ii) the dividend rate on the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that series;
(iii) whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
(iv) whether that series shall have conversion privileges, and, if so, the
terms and conditions of such conversion, including provision for adjustment of
the conversion rate in such events as the Board of Directors shall determine;
(v) whether or not the shares of that series shall be redeemable and, if
so, the terms and conditions of such redemption, including the dates upon or
after which they shall be redeemable, and the amount per share payable in case
of redemption, which amount may vary under different conditions and at different
redemption dates;
(vi) whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
(vii) the rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, and the
relative rights of priority, if any, of payment of shares of that series; and
(viii) any other relative powers, preferences, and rights of that series,
and qualifications, limitations or restrictions on that series.
(b) DISSOLUTION, LIQUIDATION, WINDING UP.
In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of Preferred Stock of
each series shall be entitled to receive only such amount or amounts as shall
have been fixed by the
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certificate of designations or by the resolution or resolutions of the Board of
Directors providing for the issuance of such series.
4.4. ADJUSTMENTS OF AUTHORIZED STOCK.
Except as provided to the contrary in the provisions establishing a class
or series of stock, the amount of the authorized stock of the Corporation of any
class or classes may be increased or decreased (but not below the number then
outstanding) by the affirmative vote of a majority of the directors then in
office, whether or not a quorum.
4.5. RESTRICTIONS ON FOREIGN OWNERSHIP OF SHARES.
(a) No shares of stock of any class or series outstanding at any time shall
be owned of record or beneficially by a person (as defined in Section 4.5(c)
hereof) whose ownership thereof would constitute a violation of Section 310(a)
or 310(b) of the Communications Act of 1934, as amended, or any similar or
successor federal statutes.
(b) The Corporation may, in its sole discretion, redeem any outstanding
shares of stock of any class or series which are owned in violation of Section
4.5(a) hereof. Shares redeemed by the Corporation under this Section 4.5(b) may
be redeemed for cash, property or rights, at the lesser of (i) the fair market
value at the time of the redemption or (ii) the holder's purchase price,
provided the holder purchased such shares within a year prior to the redemption.
The Board of Directors shall have sole discretion to determine whether shares
are owned in violation of Section 4.5(a) hereof, the fair market value of any
shares to be redeemed, and the value of any non-cash consideration to be
provided for such shares in any such redemption.
(c) For purposes of this Section 4.5, "person" shall mean an individual, a
partnership, a corporation, a trust, a joint venture, an unincorporated
organization, a government or any department or agency thereof or any other
legal entity.
5. INCORPORATOR; INITIAL DIRECTORS
5.1. INCORPORATOR.
The name and mailing address of the incorporator (the "Incorporator") is
Greenberg Glusker Fields Claman & Machtinger LLP, 1900 Avenue of the Stars,
Suite 2100, Los Angeles, CA 90067-4590. The powers of the Incorporator shall
terminate upon the filing of this Certificate of Incorporation.
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5.2. INITIAL DIRECTORS.
The following persons, having the following mailing addresses, shall serve
as the directors of the Corporation until their successors are elected and
qualified:
NAME MAILING ADDRESS
CLASS I
(NAMES ADDRESSES)
CLASS II
(NAMES ADDRESSES)
CLASS III
(NAMES ADDRESSES)
6. BOARD OF DIRECTORS.
6.1. CLASSIFICATION.
Except as otherwise provided in this Certificate of Incorporation or a
certificate of designations relating to the rights of the holders of any class
or series of Preferred Stock, voting separately by class or series, to elect
additional directors under specified circumstances, the number of directors of
the Corporation shall be as fixed from time to time by or pursuant to the Bylaws
of the Corporation. The directors, other than those who may be elected by the
holders of any class or series of Preferred Stock voting separately by class or
series, shall be classified, with respect to the time for which they severally
hold office, into three classes, Class I, Class II and Class III, which shall be
as nearly equal in number as possible, and shall be adjusted from time to time
in the manner specified in the Bylaws of the Corporation to maintain such
proportionality. Each initial director in Class I shall hold office for a term
expiring at the 1999 annual meeting of stockholders, each initial director in
Class II shall hold office initially for a term expiring at the 1998 annual
meeting of stockholders, and each initial director in Class III shall hold
office for a term expiring at the 1997 annual meeting of stockholders.
Notwithstanding the foregoing provisions of this Section 6.1, each director
shall serve until such director's successor is duly elected and qualified or
until such director's earlier death, resignation or removal. At each annual
meeting of stockholders, the successors to the class of directors whose term
expires at that meeting shall be elected to hold office for a term expiring at
the annual meeting of stockholders held in the third year following the year of
their election and until their successors have been duly elected and qualified
or until any such director's earlier death, resignation or removal.
6.2. CHANGE OF AUTHORIZED NUMBER.
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In the event of any increase or decrease in the authorized number of
directors, the newly created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the Board of Directors among the
three classes of directors so as to maintain such classes as nearly equal as
possible. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
6.3. DIRECTORS ELECTED BY HOLDERS OF PREFERRED STOCK.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of this Certificate of Incorporation or a certificate of designations
applicable thereto, and such directors so elected shall not be divided into
classes pursuant to this Section 6 unless expressly provided by the certificate
of designations.
6.4. LIMITATION OF LIABILITY.
No director of the Corporation shall be liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty as a
director, provided that this provision shall not eliminate or limit the
liability of a director (a) for any breach of the director's duty of loyalty to
the Corporation or its stockholders; (b) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law; (c) for
the types of liability set forth in Section 174 of the Delaware General
Corporation Law; or (d) for any transaction from which the director received any
improper personal benefit. Any repeal or modification of this Section 6.4 by
the stockholders of the Corporation shall be prospective only, and shall not
adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification with respect to acts or
omissions occurring prior to such repeal or modification.
7. INDEMNIFICATION.
To the extent permitted by law, the Corporation shall fully 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) by reason of the fact that such
person is or was a director or officer of the Corporation, or is or was serving
at the request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and
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reasonably incurred by such person in connection with such action, suit or
proceeding.
To the extent permitted by law, the Corporation may fully 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) by reason of the fact that such
person is or was an employee or agent of the Corporation, or is or was serving
at the request of the Corporation as an employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding.
The Corporation may advance expenses (including attorneys' fees) incurred
by a director or officer in advance of the final disposition of such action,
suit or proceeding upon the receipt of an undertaking by or on behalf of the
director or officer to repay such amount if it shall ultimately be determined
that such director or officer is not entitled to indemnification. The
Corporation may advance expenses (including attorneys' fees) incurred by an
employee or agent in advance of the final disposition of such action, suit or
proceeding upon such terms and conditions, if any, as the Board of Directors
deems appropriate.
8. ACTIONS BY STOCKHOLDERS.
Any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special meeting of
stockholders, and may not be effected by any consent in writing by such
stockholders.
9. SPECIAL MEETINGS.
Special meetings of the stockholders may be called at any time but only by
(a) the chairman of the board of the Corporation or (b) a majority of the
directors in office, although less than a quorum.
10. COMPROMISE OR ARRANGEMENT CLAUSE.
Whenever a compromise or arrangement is proposed between the Corporation
and its creditors or any class of them and/or between the Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the application of
any
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receiver or receivers appointed for the Corporation under Section 291 of the
Delaware General Corporation Law or on the application of trustees in
dissolution or of any receiver or receivers appointed for the Corporation under
Section 279 of the Delaware General Corporation Law order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing three
fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders of the Corporation, as the case may be, and also on the
Corporation.
11. AMENDMENT OF CERTIFICATE OF INCORPORATION.
Notwithstanding any other provisions of this Certificate of Incorporation
or the Bylaws of the Corporation (and notwithstanding the fact that a lesser
percentage may be specified by law, this Certificate of Incorporation or the
Bylaws of the Corporation), the affirmative vote of 66-2/3% of the total number
of votes of the then outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors, voting together as a
single class, shall be required to amend or repeal, or to adopt any provision
inconsistent With the purpose or intent of Sections 6, 8 and 9 hereof, and this
Section 11. Notice of any such proposed amendment, repeal or adoption shall be
contained in the notice of the meeting at which it is to be considered. Subject
to the provisions set forth herein, the Corporation reserves the right to amend,
alter, repeal or rescind any provision contained in this Certificate of
Incorporation in the manner now or hereafter prescribed by law.
12. AMENDMENT OF BYLAWS.
In furtherance and not in limitation of the powers conferred by the
Delaware General Corporation Law, the Board of Directors is expressly authorized
and empowered to adopt, amend and repeal the Bylaws of the Corporation, subject
to the right of the stockholders entitled to vote with respect thereto to amend
or repeal Bylaws adopted by the Board of Directors as provided for in this
Certificate of Incorporation or in the Bylaws of the Corporation.
IN WITNESS WHEREOF, the undersigned, being the Incorporator hereinabove
named, for the purpose of forming a corporation pursuant to the Delaware General
Corporation Law, hereby certifies that the facts hereinabove stated are truly
set forth, and
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accordingly executes this Certificate of Incorporation this 25th day of
September, 1996.
GREENBERG GLUSKER FIELDS CLAMAN
& MACHTINGER LLP
Incorporator
By:/s/ Jill Cossman
__________________________
Jill A. Cossman
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EXHIBIT 3.2
BYLAWS
OF
FOUR MEDIA COMPANY
1. OFFICES.
1.1. REGISTERED OFFICE.
The initial registered office of the Corporation shall be in Dover,
Delaware, and the initial registered agent in charge thereof shall be United
States Corporation Company.
1.2. OTHER OFFICES.
The Corporation may also have offices at such other places, both within and
without the State of Delaware, as the Board of Directors may from time to time
determine or as may be necessary or useful in connection with the business of
the Corporation.
2. MEETINGS OF STOCKHOLDERS.
2.1. PLACE OF MEETINGS.
All meetings of the stockholders shall be held at such place as may be
fixed from time to time by the Board of Directors or the Chairman of the
Board and Chief Executive Officer.
2.2. ANNUAL MEETINGS.
The Corporation shall hold annual meetings of stockholders on the first
Tuesday in May at 11 a.m. or at such other date and time as shall be designated
from time to time by the Board of Directors or the Chairman of the Board and
Chief Executive Officer, at which stockholders shall elect directors and
transact such other business as may properly be brought before the meeting.
2.3. SPECIAL MEETINGS.
Special meetings of the stockholders, for any purpose or purposes, unless
otherwise prescribed by statute or the Corporation's Certificate of
Incorporation (the "Certificate of Incorporation"), may be called by (a) the
Chairman of the Board and Chief Executive Officer or (b) a majority of the
directors in office, whether or not a quorum.
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2.4. NOTICE OF MEETINGS.
Notice of any meeting of stockholders, stating the place, date and hour of
the meeting and the purpose or purposes for which the meeting is called, shall
be given to each stockholder entitled to vote at such meeting not less than 10
days nor more than 60 days before the date of the meeting (except to the extent
that such notice is waived or is not required as provided in the General
Corporation Law of the State of Delaware (the "Delaware General Corporation
Law")). Such notice shall be given in accordance with, and shall be deemed
effective as set forth in, Section 222 (or any successor section) of the
Delaware General Corporation Law.
2.5. WAIVERS OF NOTICE.
Whenever the giving of any notice is required by statute, the Certificate
of Incorporation or these Bylaws, a waiver thereof, in writing and delivered to
the Corporation, signed by the person or persons entitled to said notice,
whether before or after the event as to which such notice is required, shall be
deemed equivalent to notice. Attendance of a stockholder at a meeting shall
constitute a waiver of notice (a) of such meeting, except when the stockholder
at the beginning of the meeting objects to holding the meeting or transacting
business at the meeting, and (b) of consideration of a particular matter at the
meeting that is not within the purpose or purposes described in the meeting
notice, unless the stockholder objects to considering the matter at the
beginning of the meeting.
2.6. BUSINESS AT ANNUAL MEETING.
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be (a) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, (b) otherwise properly brought before the meeting by or
at the direction of the Board of Directors or (c) otherwise properly brought
before the meeting by a stockholder.
For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary. To be timely, a stockholder's notice must be received at the
principal executive offices of the Corporation no later than the date designated
for receipt of stockholders' proposals in a prior public disclosure made by the
Corporation. If there has been no such prior public disclosure, then to be
timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation not less than 60 days nor
more than 90 days prior to the annual meeting; provided, however, that in the
-------- -------
event that less than 70 days' notice of the date of the annual meeting is given
to stockholders or prior public disclosure of the date of the meeting
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is made, notice by the stockholder to be timely must be so received not later
than the close of business on the 10th day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (b) the name and
address, as they appear on the Corporation's books, of the stockholder proposing
such business, (c) the class and number of shares of the Corporation which are
beneficially owned by the stockholder, (d) any material interest of the
stockholder in such business and (e) the same information required by clauses
(b), (c) and (d) above with respect to any other stockholder that, to the
knowledge of the stockholder proposing such business, supports such proposal.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at an annual meeting except in accordance with the procedures set
forth in this Section 2.6. The Chairman of the Board and Chief Executive Officer
shall, if the facts warrant, determine and declare to the annual meeting that a
matter of business was not properly brought before the meeting in accordance
with the provisions of this Section 2.6, and if the Chairman of the Board and
Chief Executive Officer should so determine, the Chairman of the Board and Chief
Executive Officer shall so declare to the meeting and any such business not
properly brought before the meeting shall not be transacted.
2.7. LIST OF STOCKHOLDERS.
After the record date for a meeting of stockholders has been fixed, at
least 10 days before such meeting, the officer who has charge of the stock
ledger of the Corporation shall make a list of all 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
10 days prior to the meeting, either at a place in the city where the meeting is
to be held, which place is to be specified in the notice of the meeting, or at
the place where the meeting is to be held. Such list also shall, for the
duration of the meeting, be produced and kept open to the examination of any
stockholder who is present at the time and place of the meeting. The stock
ledger of the Corporation shall be the only evidence as to the stockholders
entitled to examine the list required by Section 2.8 hereof or to vote in person
or by proxy at any meeting of stockholders.
2.8. QUORUM AT MEETINGS.
Stockholders may take action on a matter at a meeting only if a quorum
exists with respect to that matter. Except as otherwise
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provided by statute or by the Certificate of Incorporation, the holders of a
majority of the stock issued and outstanding and entitled to vote at the
meeting, and who are present in person or represented by proxy, shall constitute
a quorum at all meetings of the stockholders for the transaction of business.
Once a share is represented for any purpose at a meeting (other than solely to
object (a) to holding the meeting or transacting business at the meeting or (b)
to consideration of a particular matter at the meeting that is not within the
purpose or purposes described in the meeting notice), it is deemed present for
quorum purposes for the remainder of the meeting and for any adjournment of that
meeting unless a new record date is or must be set for the adjourned meeting.
The holders of a majority of the voting shares represented at a meeting, whether
or not a quorum is present, may adjourn such meeting from time to time. At such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. 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 entitled to vote at
the meeting.
2.9. VOTING AND PROXIES.
Unless otherwise provided in the Delaware General Corporation Law or in the
Certificate of Incorporation, and subject to the other provisions of these
Bylaws, each stockholder shall be entitled to one vote on each matter, in person
or by proxy, for each share of the Corporation's capital stock that has voting
power and that is held by such stockholder. No proxy shall be voted or acted
upon after three years from its date, unless the proxy provides for a longer
period. A duly executed appointment of proxy shall be irrevocable if the
appointment form states that it is irrevocable and if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power.
2.10. REQUIRED VOTE.
If a quorum exists, action on a matter (other than the election of
directors) is approved if the votes cast favoring the action exceed the votes
cast opposing the action, unless the Certificate of Incorporation or the
Delaware General Corporation Law requires a greater number of affirmative votes
(in which case such different requirement shall apply). Directors shall be
elected by a plurality of the votes cast by the shares entitled to vote in the
election (provided a quorum exists), and the election of directors need not be
by written ballot. The Board of Directors, in its discretion, may require that
any votes cast at such meeting shall be cast by written ballot.
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2.11. ACTION WITHOUT A MEETING.
Any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special meeting of
stockholders, and may not be effected by any consent in writing by such
stockholders.
2.12. INSPECTORS OF ELECTION.
The director or the person presiding at the meeting shall appoint one or
more inspectors of election and any substitute inspectors to act at the meeting
or any adjournment thereof Each inspector, before entering upon the discharge of
his or her duties, shall take and sign an oath faithfully to execute the duties
of inspector at such meeting with strict impartiality and according to the best
of his or her ability. The inspectors shall determine the number of shares of
stock outstanding and the voting power of each, the shares of stock represented
at the meeting, the existence of a quorum, the validity and effect of proxies
and ballots, and shall receive votes, ballots or consents, hear and determine an
challenges and questions arising in connection with the right to vote, count and
tabulate all votes, ballots or consents, determine the result, determine and
retain for a reasonable period a record of the disposition of any challenges
made to any determination by the inspectors, certify their determination of the
number of shares represented at the meeting, and their count of all votes and
ballots, and do such acts as are proper to conduct the election or vote with
fairness to all stockholders. The inspectors may appoint and retain other
persons or entities to assist the inspectors in the performance of the duties of
the inspectors. On request of the person presiding at the meeting, the
inspectors shall make a report in writing of any challenge, question or matter
determined by them and execute a certificate of any fact found by them.
3. DIRECTORS.
3.1. POWERS.
The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors, which may exercise an such powers of
the Corporation and do all such lawful acts and things, subject to any
limitation set forth in the Certificate of Incorporation, these Bylaws or
agreements among stockholders which are otherwise lawful.
3.2. NUMBER AND ELECTION.
The number of directors which shall constitute the whole board shall not be
fewer than three nor more than 11. Within the limits above specified, the
number of directors shall be determined by resolution of the Board of Directors.
Directors shall be elected only by stockholders at annual meetings of
stockholders, other than
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the initial board of directors and except as provided in Section 3.3 hereof in
the case of vacancies and newly created directorships. Each director elected
shall hold office for the term for which such director is elected and until such
director's successor is elected and qualified or until such director's earlier
resignation or removal.
3.3. VACANCIES.
Vacancies and newly created directorships resulting from any increase in
the authorized number of directors shall be filled, for the unexpired term, by
the concurring vote of a majority of the directors then in office, whether or
not a quorum, and any director so chosen shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director's successor shall have
been elected and qualified or until such director's earlier death, resignation
or removal.
3.4. CLASSES; TERMS OF OFFICE.
Unless otherwise provided in the Certificate of Incorporation, the Board of
Directors shall divide the directors into three classes; and, when the number of
directors is changed, shall determine the class or classes to which the
increased or decreased number of directors shall be apportioned; provided,
--------
however, that no decrease in the number of directors shall affect the term of
- -------
any director then in office. At each annual meeting of stockholders, directors
elected to succeed those whose terms are expiring shall be elected for a term of
office expiring at the annual meeting of stockholders held in the third year
following their election and until their respective successors are elected and
qualified, or until such director's earlier death, resignation or removal.
3.5. NOMINATION OF DIRECTORS.
Nominations of persons for election to the Board of Directors may be made
by the Board of Directors, or by any stockholder of the Corporation entitled to
vote for the election of directors at the annual meeting who complies with the
notice procedures set forth in this Section 3.5. Nominations by stockholders
shall be made pursuant to timely notice in writing to the Secretary. To be
timely, a stockholder's notice shall be received at the principal executive
offices of the Corporation no later than the date designated for receipt of
stockholders' proposals in a prior public disclosure made by the Corporation.
If there has been no such prior public disclosure, then to be timely, a
stockholder's nomination must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 60 days nor more
than 90 days prior to the annual meeting; provided, however, that in the event
-------- -------
that less than 70 days' notice of the date of the meeting is given to
stockholders or prior public
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disclosure of the date of the meeting is made, notice by the stockholder to be
timely must be so received not later than the close of business on the 10th day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure was made. Such stockholder's notice shall set
forth (a) as to each person whom the stockholder proposes to nominate for
election or re-election as a director, (i) the name, age, business address and
residence address of such person, (ii) the principal occupation or employment of
such person, (iii) the class and number of shares of the Corporation which are
beneficially owned by such person, and (iv) any other information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
without limitation such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (b) as to
the stockholder giving notice (i) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such nomination, and (ii) the
class and number of shares of the Corporation which are beneficially owned by
the stockholder. No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 3.5. The Chairman of the Board and Chief Executive Officer shall, if the
facts warrant, determine and declare to the annual meeting that a nomination was
not made in accordance with the provisions of this Section 3.5, and if the
Chairman of the Board and Chief Executive Officer should so determine, the
Chairman of the Board and Chief Executive Officer shall so declare to the
meeting and the defective nomination shall be disregarded.
3.6. MEETINGS.
(a) REGULAR MEETINGS.
Regular meetings of the Board of Directors may be held without notice at
such time and at such place as shall from time to time be determined by the
Board of Directors.
(b) SPECIAL MEETINGS.
Special meetings of the Board of Directors may be called by the Chairman of
the Board and Chief Executive Officer on one day's notice to each director,
either personally or by telephone, express delivery service (so that the
scheduled delivery date of the notice is at least one day in advance of the
meeting), telegram or facsimile transmission, and on five days' notice by mail
(effective upon deposit of such notice in the mail). The notice need not
describe the purpose of a special meeting.
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(c) TELEPHONE MEETINGS.
Members of the Board of Directors may participate in a meeting of the Board
of Directors by means of conference telephone or similar communications
equipment by means of which all participating directors can simultaneously hear
each other during the meeting. A director participating in a meeting by this
means is deemed to be present in person at the meeting.
(d) ACTION WITHOUT MEETING.
Any action required or permitted to be taken at any meeting of the Board of
Directors may be taken without a meeting if all members of the Board of
Directors consent thereto in writing, and the writing or writings are delivered
to the Corporation for inclusion in the Minute Book of the Corporation.
(e) WAIVER OF NOTICE OF MEETING; PRESUMPTION OF ASSENT.
A director may waive any notice required by statute, the Certificate of
Incorporation or these Bylaws before or after the date and time stated in the
notice. Except as set forth below, the waiver must be in writing, signed by the
director entitled to the notice, and delivered to the Corporation for inclusion
in the Minute Book of the Corporation. Notwithstanding the foregoing, a
director's attendance at or participation in a meeting waives any required
notice to the director of the meeting unless the director at the beginning of
the meeting objects to holding the meeting or transacting business at the
meeting and does not thereafter vote for or assent to action taken at the
meeting. A director who is present at a meeting is presumed to have assented to
any action taken unless such director enters a dissent or abstention in the
minutes of the meeting or files a written dissent to such action no later than
five days after such director receives a copy of the minutes of the meeting,
provided that the right to dissent shall not apply to a director who votes in
favor of such action.
(f) QUORUM AND VOTE AT MEETINGS.
At all meetings of the Board of Directors, a quorum of the Board of
Directors consists of a majority of the total number of directors prescribed
pursuant to Section 3.2 hereof (or, if no number is prescribed, the number in
office immediately before the meeting begins). The vote of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors, except as may be otherwise specifically provided by
statute or by the Certificate of Incorporation or by these Bylaws. In the
absence of a quorum for any meeting of the Board of Directors, a majority of the
directors present thereat may adjourn such meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
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(g) COMPENSATION OF DIRECTORS.
The Board of Directors shall have the authority to fix the compensation of
directors. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
4. COMMITTEES.
4.1. CREATION OF COMMITTEES.
The Board of Directors may by resolution create one or more committees and
appoint members of the Board of Directors to serve on them. The Board of
Directors shall create (a) an Audit Committee for the purpose of examining and
considering matters relating to the financial affairs of the Corporation, and
(b) a Compensation Committee for the purpose of establishing and implementing an
executive compensation policy. Each committee may have one or more members, who
serve at the pleasure of the Board of Directors, provided that the Audit
Committee shall consist of at least a majority of non-employee directors. The
creation of a committee and appointment of members to it shall be approved by a
majority of all the directors in office when the action is taken, whether or not
a quorum. The same rules that govern meetings, action without meetings, notice
and waiver of notice, and quorum and voting requirements of the Board of
Directors apply to committees and their members as well.
4.2. COMMITTEE AUTHORITY.
To the extent specified by the Board of Directors or in the Certificate of
Incorporation, each committee may exercise the authority of the Board of
Directors, except that a committee may not: (i) approve or recommend to
stockholders action that is required by law to be approved by stockholder; (ii)
fill vacancies on the Board of Directors or on any of its committees; (iii)
amend the Certificate of Incorporation; (iv) adopt, amend or repeal these
Bylaws; (v) approve a plan of merger not requiring stockholder approval; (vi)
authorize or approve a distribution, except according to a general formula or
method prescribed by the Board of Directors; or (vii) authorize or approve the
issuance or sale or contract for sale of shares, or determine the designation
and relative rights, preferences and limitations of a class or series of shares,
except that the Board of Directors may authorize a committee, or a senior
executive officer of the Corporation, to do so within limits specifically
prescribed by the Board of Directors.
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5. OFFICERS.
5.1. POSITIONS.
The officers of the Corporation shall be a Chairman of the Board and Chief
Executive Officer, a President, a Secretary and a Chief Financial Officer, and
such other officers as the Board of Directors (or an officer authorized by the
Board of Directors) from time to time may appoint, including one or more Vice
Chairmen, Executive Vice Presidents, Vice Presidents, Assistant Secretaries and
Assistant Treasurers. Each such officer shall exercise such powers and perform
such duties as shall be set forth below and such other powers and duties as from
time to time may be specified by the Board of Directors or by any officer(s)
authorized by the Board of Directors to prescribe the duties of such other
officers. Any number of offices may be held by the same person, except that in
no event shall the President and the Secretary be the same person.
5.2. POWERS.
(a) Each officer shall have, in addition to the duties and powers set
forth herein, such duties and powers as are commonly incident to such officer's
office and such additional duties and powers as the Board of Directors may from
time to time authorize.
(b) Powers of attorney, proxies, waivers of notice of meetings,
consents and other instruments relating to securities or partnership interests
owned by the Corporation may be executed in the name of and on behalf of the
Corporation by the Chairman of the Board and Chief Executive Officer or the
President and any such officer may, in the name of and on behalf of the
Corporation, take all such action as any such officer may deem advisable to vote
in person or by proxy at any meeting of security holders of any corporation in
which the Corporation may own securities, or at any meeting of any partnership
in which the Corporation owns an interest at any such meeting, shall possess and
may exercise any and all rights and powers incident to the ownership of such
securities or partnership interest and which, as the owner thereof, the
Corporation might have possessed and exercised, if present.
5.3. CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER.
The Chairman of the Board and Chief Executive Officer shall (when present)
preside at all meetings of the Board of Directors and stockholders, and shall
ensure that all orders and resolutions of the Board of Directors and
stockholders are carried into effect. The Chairman of the Board and Chief
Executive Officer shall have overall responsibility and authority for management
of the operations of the corporation, subject to the authority of the Board of
Directors. The Chairman of the Board may execute bonds, mortgages and other
contracts, under the seal of the Corporation, if required, except where required
or permitted by law to be
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otherwise signed and executed and except where the signing and execution thereof
shall be expressly delegated by the Board of Directors to some other officer or
agent of the Corporation.
5.4. PRESIDENT.
The President shall have responsibility and authority for management of the
operations of the Corporation, subject to the authority of the Board of
Directors and the Chairman of the Board and Chief Executive Officer. The
President may execute bonds, mortgages and other contracts, under the seal of
the Corporation, if required, except where required or permitted by law to be
otherwise signed and executed and except where the signing and execution thereof
shall be expressly delegated by the Board of Directors to some other officer or
agent of the Corporation. In the absence of the Chairman of the Board and
Chief Executive Officer or in the event of the Chairman of the Board and Chief
Executive Officer's inability or refusal to act, the President shall perform the
duties of the Chairman of the Board and Chief Executive Officer, and when so
acting shall have all the powers of, and be subject to all the restrictions
upon, the Chairman of the Board and Chief Executive Officer.
5.5. VICE PRESIDENT.
Any Vice President shall have such duties and powers as shall be set forth
in these Bylaws or as shall be designated from time to time by the Board of
Directors or by the Chairman of the Board and Chief Executive Officer or the
President. In the absence of the President or in the event of the President's
inability or refusal to act, the Vice President (or in the event there be more
than one Vice President, the Vice Presidents in the order designated, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the President , and when so acting shall have all the powers of,
and be subject to all the restrictions upon, the President. Any Vice President
may execute bonds, mortgages and other documents under the seal of the
Corporation, except where required or permitted by law to be otherwise executed
and except where the execution thereof shall be expressly delegated by the Board
of Directors to some other officer or agent of the Corporation.
5.6. SECRETARY.
The Secretary shall have responsibility for preparation of minutes of
meetings of the Board of Directors and of the stockholders and for
authenticating records of the Corporation. The Secretary shall give, or cause
to be given, notice of all meetings of the stockholders and special meetings of
the Board of Directors. The Secretary or an Assistant Secretary also may attest
all instruments signed by any other officer of the Corporation.
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5.7. CHIEF FINANCIAL OFFICER.
The Chief Financial Officer shall have responsibility for the custody of
the corporate funds and securities and shall see to it that full and accurate
accounts of receipts and disbursements are kept in books belonging to the
Corporation. The Chief Financial Officer shall render to the Chairman of the
Board and Chief Executive Officer, the President, the Vice President, and the
Board of Directors, upon request, an account of all financial transactions and
of the financial condition of the Corporation.
5.8. TERM OF OFFICE.
The officers of the Corporation shall hold office until their successors
are chosen and qualified or until their death, earlier resignation or removal.
Any officer may resign at any time upon written notice to the Corporation. Any
officer elected or appointed by the Board of Directors may be removed at any
time, with or without cause, by the affirmative vote of a majority of the Board
of Directors.
5.9. COMPENSATION.
The compensation of officers of the Corporation shall be fixed by the
Compensation Committee of the Board of Directors.
5.10. FIDELITY BONDS.
The Corporation may secure the fidelity of any or all of its officers or
agents by bond or otherwise.
6. CAPITAL STOCK.
6.1. CERTIFICATES OF STOCK; UNCERTIFICATED SHARES.
The shares of the Corporation shall be represented by certificates,
provided that the Board of Directors may provide by resolution that some or all
of any or all classes or series of the Corporation's stock shall be
uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
Corporation. Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock represented by certificates, and upon request
every holder of uncertificated shares, shall be entitled to have a certificate
(representing the number of shares registered in certificate form) signed in the
name of the Corporation by the Chairman of the Board and Chief Executive
Officer, the President or any Vice President, and by the Chief Financial
Officer, Secretary or any Assistant Treasurer or Assistant Secretary. Any or
all the signatures on the certificate may be facsimile. In case any officer,
transfer agent or registrar whose signature or facsimile signature appears on a
certificate
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shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
6.2. LOST CERTIFICATES.
The Board of Directors, Chairman of the Board and Chief Executive Officer,
the President, or Secretary may direct a new certificate of stock to be issued
in place of any certificate theretofore issued by the Corporation and alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming that the certificate of stock has been lost, stolen
or destroyed. When authorizing such issuance of a new certificate, the Board of
Directors or any such officer may, as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or such owner's legal representative, to advertise the same in
such manner as the Board of Directors or such officer shall require and/or to
give the Corporation a bond, in such sum as the Board of Directors or such
officer may direct, as indemnity against any claim that may be made against the
Corporation on account of the certificate alleged to have been lost, stolen or
destroyed or on account of the issuance of such new certificate or
uncertificated shares.
6.3. RECORD DATE.
(a) ACTIONS BY STOCKHOLDERS.
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders, the Board of Directors may
fix a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors and shall
not be less than 10 nor more than 60 days before the meeting or action requiring
a determination of stockholders.
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,
unless the Board of Directors fixes a new record date.
If no record date is fixed by the Board of Directors, the record date shall
be at the close of business on the day next preceding the day on which notice is
given, or if notice is not required or is waived, at the close of business on
the day next preceding the day on which the meeting is held.
(b) PAYMENTS.
In order that the Corporation may determine the stockholders entitled to
receive payment of any dividend or other distribution
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or allotment of any rights or the stockholders 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 of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than 60 days
prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
(c) STOCKHOLDERS OF RECORD.
The Corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends, to
receive notifications, to vote as such owner, and to exercise all the rights and
powers of an owner. The Corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise may be provided by the Delaware General Corporation Law.
7. INSURANCE.
The Corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the Corporation (or is
or was serving at the request of the Corporation as a director, officer,
partner, trustee, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise) against liability
asserted against or incurred by such person in such capacity or arising from
such person's status as such (whether or not the Corporation would have the
power to indemnify such person against the same liability).
8. INDEMNIFICATION.
8.1. INDEMNIFICATION IN ACTIONS, SUITS OR PROCEEDINGS
OTHER THAN THOSE BY OR IN RIGHT OF THE CORPORATION.
(a) The Corporation shall 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) by reason of the fact that such person is or was a director or
officer of the Corporation, or is or was serving at the request of the
Corporation as a director or officer of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
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suit or proceeding, if such person acted in good faith and in a manner which
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 that such 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 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
reasonable cause to believe that such conduct was unlawful.
(b) The Corporation may 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) by
reason of the fact that such person is or was an employee or agent of the
Corporation, or is or was serving at the request of the Corporation as an
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, if such person acted in good faith and in a manner which 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 that such conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contenders or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which 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
reasonable cause to believe that such conduct was unlawful.
8.2. INDEMNIFICATION IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN THE RIGHT
OF THE CORPORATION.
(a) The Corporation shall 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 by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection with the defense or settlement of such action or suit if
such person acted
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in good faith and in a manner which such person reasonably believed to be in or
not opposed to the best interests of the Corporation. No such indemnification
shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the Corporation unless and only to the
extent that 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 the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.
(b) The Corporation may 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 by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that such person is or was an employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as an employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit if such person acted in
good faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Corporation. No such indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the Corporation unless and only to the extent
that 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 the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.
8.3. AUTHORIZATION OF INDEMNIFICATION.
Any indemnification under this Section 8 shall be made by the Corporation
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 such person or persons have met the applicable standard of
conduct set forth in Sections 8.1 and 8.2 hereof. Such determination shall be
made (a) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (b) if
such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (c) by a majority of the stockholders entitled to vote generally in
the election of directors.
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8.4. ADVANCEMENT OF EXPENSES.
The Corporation may advance expenses (including attorneys' fees) incurred
by a director or officer in advance of the final disposition of such action,
suit or proceeding upon the receipt of an undertaking by or on behalf of the
director or officer to repay such amount if it shall ultimately be determined
that such director or officer is not entitled to indemnification.
The Corporation may advance expenses (including attorneys' fees) incurred
by an employee or agent in advance of the final disposition of such action, suit
or proceeding upon such terms and conditions, if any, as the Board of Directors
deems appropriate.
9. GENERAL PROVISIONS.
9.1. INSPECTION OF BOOKS AND RECORDS.
Any stockholder, 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 Corporation'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 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 Corporation at its registered office or at its principal place of business.
9.2. DIVIDENDS.
The Board of Directors may declare dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation and
the laws of the State of Delaware.
9.3. RESERVES.
The Board of Directors may set apart, out of the funds of the Corporation
available for dividends, a reserve or reserves for any proper purpose and may
abolish any such reserve.
9.4. EXECUTION OF INSTRUMENTS.
All checks, drafts or other orders for the payment of money, and promissory
notes of the Corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time to time
designate.
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9.5. FISCAL YEAR.
The fiscal year of the Corporation shall begin on January 1 and end on
December 31.
9.6. SEAL.
The corporate seal shall be in such form as the Board of Directors shall
approve. The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
10. AMENDMENTS TO BYLAWS.
The Board of Directors may from time to time adopt, amend and repeal these
Bylaws. Such action by the Board of Directors shall require the affirmative
vote of at least a majority of the directors then in office. If stockholders
are entitled to vote with respect thereto to amend or repeal Bylaws adopted by
the Board of Directors as may be provided in the Certificate of Incorporation or
by law, then the affirmative vote of 66-2/3% of the total number of votes of the
then outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required for the amendment or repeal of Bylaws by the stockholders of the
Corporation.
The foregoing Bylaws were adopted by the Board of Directors on
September 25, 1996.
/s/ John Sabin
______________________________
Secretary
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EXHIBIT 10.3
INDEMNITY AGREEMENT
-------------------
This Indemnity Agreement (the "Agreement) is made as of ___________, 1996
by and between Four Media Company, a Delaware corporation (the "Corporation"),
and _____________ (the "Indemnitee"), Director of the Corporation.
R E C I T A L S
---------------
A. The Corporation and the Indemnitee recognize that the interpretation of
statutes, regulations, court opinions and the Corporation's Certificate of
Incorporation and bylaws in certain circumstances may not provide the
Corporation's officers and directors with adequate guidance with respect to the
legal risks and potential liabilities to which they may become personally
exposed as a result of performing their duties in good faith for the
Corporation.
B. The Corporation and the Indemnitee are aware of the substantial
increase in the number of lawsuits filed against corporate officers and
directors.
C. The Corporation and the Indemnitee recognize that the cost of defending
against such lawsuits, whether or not meritorious, may impose substantial
economic hardship upon the Corporation's officers and directors.
D. The Corporation and the Indemnitee recognize that the legal risks,
potential liabilities and expenses of defense associated with litigation against
officers and directors arising or alleged to arise from the conduct of the
affairs of the Corporation are frequently excessive in view of the amount of
compensation received by the Corporation's officers and directors, and thus may
act as a significant deterrent to the ability of the Corporation to obtain
experienced and capable officers and directors.
E. Section 145 of the General Corporation Law of the State of Delaware,
which sets forth certain provisions relating to the indemnification of officers
and directors (among others) of a Delaware corporation by such corporation, is
specifically not exclusive of other rights to which those indemnified thereunder
may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise.
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F. In order to induce capable persons such as the Indemnitee to serve or
continue to serve as officers or directors of the Corporation and to enable them
to perform their duties to the Corporation secure in the knowledge that certain
expenses and liabilities that may be incurred by them will be borne by the
Corporation, the Board of Directors of the Corporation has determined, after due
consideration and investigation of the terms and provisions of this Agreement
and the various other options available to the Corporation and the Indemnitee in
lieu of this Agreement, that the following Agreement is in the best interests of
the Corporation and its stockholders.
G. The Corporation desires to have the Indemnitee serve or continue to
serve as an officer and/or director of the Corporation, and the Indemnitee
desires to serve or continue to serve as an officer and/or director of the
Corporation provided, and on the express condition, that he is furnished with
the indemnity set forth below.
A G R E E M E N T
-----------------
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth below, the Corporation and the Indemnitee agree as follows:
1. Continued Service. Subject to the terms of any written employment
-----------------
agreement between the Indemnitee and the Company, the Indemnitee agrees to serve
or continue to serve as a director and/or officer of the Corporation for so long
as he is duly elected or appointed or until such time as he resigns in writing.
2. Definitions.
-----------
(a) The term "Proceeding" shall include any threatened, pending or
completed action, suit or proceeding, whether brought in the name of the
Corporation or otherwise and whether of a civil, criminal or administrative or
investigative nature, including, but not limited to, actions, suits or
proceedings brought under or predicated upon the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, their respective state
counterparts or any rule or regulation promulgated thereunder, in which the
Indemnitee may be or may have been involved as a party or otherwise by reason of
the fact that the Indemnitee is or was a director and/or officer of the
Corporation, by reason of any action taken by him or of any inaction on his part
while acting as such director and/or officer, or by reason of the fact that he
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, whether or not he is serving in such capacity at the time any
indemnified liability or reimbursable expense is incurred.
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(b) The term "Expenses" shall include, but shall not be limited to,
damages, judgments, fines, settlements and charges, costs, expenses of
investigation and expenses of defense of legal actions, suits, proceedings or
claims and appeals therefrom, and expenses of appeal, attachment or similar
bonds. "Expenses" shall not include any judgments, fines or penalties actually
levied against the Indemnitee which the Corporation is prohibited by applicable
law from paying.
3. Indemnity in Third-Party Proceedings. Subject to Paragraph 8, the
------------------------------------
Corporation shall indemnify the Indemnitee in accordance with the provisions of
this Paragraph 3 if the Indemnitee is a party to, threatened to be made a party
to or otherwise involved in, any Proceeding (other than a Proceeding by the
Corporation itself to procure a judgment in its favor), by reason of the fact
that the Indemnitee is or was a director and/or officer of the Corporation or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against all Expenses actually and reasonably incurred by the
Indemnitee in connection with the defense or settlement of such Proceeding,
provided it is determined, pursuant to Paragraph 7 or by the court before which
such action was brought, that the Indemnitee acted in good faith and in a manner
that he reasonably believed to be in or not opposed to the best interests of the
Corporation and, in the case of a criminal proceeding, had no reasonable cause
to believe that his conduct was unlawful. The termination of any such Proceeding
by judgment, order of court, settlement, conviction or upon a plea of nolo
contendere or its equivalent shall not, of itself, create a presumption that the
Indemnitee did not act in good faith or in a manner that he reasonably believed
to be in or not opposed to the best interests of the Corporation, and with
respect to any criminal proceeding, that such person had reasonable cause to
believe that his conduct was unlawful.
4. Indemnity in Proceedings by or in the Name of the Corporation.
--------------------------------------------------------------
Subject to Paragraph 8, the Corporation shall indemnify the Indemnitee against
all Expenses actually and reasonably incurred by the Indemnitee in connection
with the defense or settlement of any Proceeding by or in the name of the
Corporation to procure a judgment in its favor by reason of the fact that the
Indemnitee was or is a director and/or officer of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, but only if he acted in good faith and in a manner that he
reasonably believed to be in or not opposed to the best interests of the
Corporation; provided, however, that no indemnification for Expenses shall be
made under this Paragraph 4 with respect to any claim, issue or matter as to
which the Indemnitee shall have been adjudged to be liable to the Corporation,
unless and only to the extent that the
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Court of Chancery or the court in which such Proceeding is brought shall
determine upon application that despite the adjudication of liability, but in
view of all the circumstances of the case, the Indemnitee is fairly and
reasonably entitled to indemnity for such expenses as such court shall deem
proper.
5. Indemnification of Expenses of Successful Party. Notwithstanding any
-----------------------------------------------
other provisions of this Agreement, to the extent that the Indemnitee has been
successful on the merits or otherwise in defense of any Proceeding or in defense
of any claim, issue or matter therein, including the dismissal of an action
without prejudice, the Indemnitee shall be indemnified against all Expenses
incurred in connection therewith.
6. Advances of Expenses. Expenses incurred by the Indemnitee pursuant
--------------------
to Paragraphs 3 and 4 in any Proceeding shall be paid by the Corporation in
advance of the determination of such Proceeding at the written request of the
Indemnitee, if the Indemnitee shall undertake to repay such amount to the extent
that it is ultimately determined that the Indemnitee is not entitled to
indemnification and shall agree that the Corporation shall be entitled to the
right to offset, subject to applicable law, such amounts owed to the Corporation
against any salary or other compensation that the Corporation is obligated to
pay Indemnitee.
7. Right of Indemnitee to Indemnification Upon Application; Procedure
------------------------------------------------------------------
Upon Application. Any indemnification or advance under Paragraph 3, 4 or 6
- ----------------
shall be made no later than 30 days after receipt of the written request of the
Indemnitee therefor, unless a determination is made within said 30-day period by
(a) the Board of Directors of the Corporation by a majority vote of a quorum
thereof consisting of directors who were not parties to such Proceedings, (b)
independent legal counsel in a written opinion (which counsel shall be appointed
if such a quorum is not obtainable), or (c) the stockholders of the Corporation
that the Indemnitee has not met the relevant standards for indemnification set
forth in Paragraphs 3 and 4.
The right to indemnification or advances as provided by this Agreement
shall be enforceable by the Indemnitee in any court of competent jurisdiction.
The Corporation shall bear the burden of proving that indemnification or
advances are not appropriate. The failure of the Corporation to have made a
determination that indemnification or advances are proper in the circumstances
shall not be a defense to the action or create a presumption that the Indemnitee
has not met the applicable standard of conduct. The Indemnitee's Expenses
incurred in connection with successfully establishing his right to
indemnification or advances, in whole or in part, in any such Proceeding shall
also be indemnified by the Corporation.
4
<PAGE>
8. Indemnification Hereunder Not Exclusive. The right to indemnification
---------------------------------------
provided by this Agreement shall not be exclusive of any other rights to which
the Indemnitee may be entitled under the Corporation's Certificate of
Incorporation, bylaws, any agreement, any vote of stockholders or disinterested
directors, the General Corporation Law of the State of Delaware or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office. The indemnification under this Agreement shall
continue as to the Indemnitee even though he may have ceased to be a director or
officer, and shall inure to the benefit of the heirs and personal
representatives of the Indemnitee.
9. Partial Indemnification. If the Indemnitee is entitled under any
-----------------------
provision of this Agreement to indemnification by the Corporation for a portion
of his Expenses actually and reasonably incurred by him in any Proceeding but
not, however, for the total amount thereof, the Corporation shall nevertheless
indemnify the Indemnitee for the portion of such Expenses to which the
Indemnitee is entitled.
10. Severability. If any provision of this Agreement or the application
------------
of any provision hereof to any person or circumstance is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to other persons or circumstances shall not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal shall be revised to the extent (and only to the extent) necessary to
make it enforceable, valid and legal.
11. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflict of laws thereof.
12. Notices. The Indemnitee shall, as a condition precedent to his right
-------
to be indemnified under this Agreement, give to the Corporation written notice
as soon as practicable of any claim made against him for which indemnity will or
could be sought under this Agreement. Notice to the Corporation shall be
directed to Four Media Company, 2813 West Alameda Avenue, Burbank, California
91505, Attention: Chairman of the Board (or at such other address or to the
attention of such other person as the Corporation shall designate in writing to
the Indemnitee). Notices to the Indemnitee shall be sent to the Indemnitee at
the address set forth after his name on the signature page of this Agreement (or
at such other add-
5
<PAGE>
resses the Indemnitee shall designate in writing to the Corporation).
FOUR MEDIA COMPANY
By:____________________________
Name: Robert T. Walston,
Chief Executive Officer
INDEMNITEE
_______________________________
6
<PAGE>
EXHIBIT 10.4
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 an asterisk indicating
deleted information.
AGREEMENT
DATED AS OF FEBRUARY 13, 1995
BETWEEN
MTV ASIA LDC
AND
FOUR MEDIA COMPANY ASIA PTE LTD.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE(S)
-------
<C> <S> <C>
1. USE OF PREMISES, CREWS, SERVICES AND EQUIPMENT.......................... 1
2. TERM; CANCELLATION OPTION; CANCELLATION FEE; AMELIORATION MEASURES...... 5
3. FAILURE TO SATISFY...................................................... 6
4. CREWS AND MEALS......................................................... 7
5. MATERIALS TO BE SUPPLIED BY MTVA........................................ 11
6. CONSIDERATION........................................................... 11
7. SECURITY; INSURANCE..................................................... 19
8. DELAYS OR ADDITIONAL EXPENSES DUE TO EQUIPMENT FAILURE OR 4MCA PERSONNEL 21
9. TERMINATION............................................................. 23
10. ENGINEERING AND MAINTENANCE............................................. 25
11. PERSONNEL............................................................... 27
12. PRINCIPAL MANAGERS...................................................... 28
13. OVERHEAD................................................................ 28
14. PUBLICITY; PRESS RELEASES............................................... 28
15. CLOSED SET.............................................................. 29
16. 4MCA REPRESENTATIONS, WARRANTIES AND COVENANTS.......................... 29
17. MTVA REPRESENTATIONS, WARRANTIES AND COVENANTS.......................... 30
18. INDEMNITIES............................................................. 32
19. FORCE MAJEURE........................................................... 34
20. ASSIGNMENT.............................................................. 35
21. WAIVER NOT CONSENT...................................................... 35
22. NOTICES................................................................. 35
23. APPLICABLE LAW; JURISDICTION............................................ 37
24. PROPRIETARY INFORMATION................................................. 38
</TABLE>
i
<PAGE>
<TABLE>
<C> <S> <C>
25. ADDITIONAL SERVICES...................................................... 39
26. ATTORNEYS' FEES.......................................................... 39
27. END OF TERM.............................................................. 40
28. ENTIRE AGREEMENT......................................................... 40
29. CONSENT NOT UNREASONABLY WITHHELD........................................ 40
30. SURVIVAL OF INDEMNITIES.................................................. 40
31. FURTHER INSTRUMENTS...................................................... 40
32. SEVERABILITY............................................................. 40
33. COUNTERPARTS............................................................. 41
34. GUARANTIES............................................................... 41
35. CHANGES IN TAX LAW....................................................... 41
36. REASONABLE EFFORTS....................................................... 41
37. CONTRAVENTION OF LAWS.................................................... 41
38. CHANGES IN LABOR LAW..................................................... 41
39. EXECUTION OF LEASE....................................................... 42
40. EMPLOYMENT CONTRACTS AND OTHER EMPLOYMENT DOCUMENTATION.................. 42
SCHEDULES................................................................ 44
</TABLE>
ii
<PAGE>
EXHIBIT 10.4
This Agreement (the "Agreement"), dated as of February 13, 1995, is entered
into by and between MTV Asia LDC, Treasury Building, 8 Shenton Way, #01-01,
Republic of Singapore 0106 ("MTVA"), and Four Media Company Asia PTE Ltd., 30
Choon Guan Street, Republic of Singapore 0207 ("4MCA").
1. USE OF PREMISES, CREWS, SERVICES AND EQUIPMENT
----------------------------------------------
1.1. 4MCA agrees to furnish for the use of MTVA certain premises located
at 30 Choon Guan Street, Republic of Singapore, as listed in, and of the size
described in, SCHEDULE A attached hereto and made a part hereof (collectively,
----------
the "Premises"). At no cost to MTVA, 4MCA shall renovate the Premises in
accordance with that certain floor plan which has been provided to MTVA by 4MCA,
which floor plan is attached hereto and made a part hereof as SCHEDULE F (the
----------
"Floor Plan"). By MTVA's execution of this Agreement, MTVA shall be deemed to
have approved the Floor Plan in the form of SCHEDULE F. If either party desires
----------
to implement any material change to the Floor Plan, any such change shall only
be implemented upon the prior written approval of the other party. MTVA shall
have the right to consult with 4MCA with respect to the design, carpeting and
painting of the Premises.
1.2. 4MCA agrees to furnish for the exclusive use of MTVA certain
production, on-line editing, audio mixing, subtitling, origination and library
personnel, all as more specifically described in SCHEDULE B attached hereto and
----------
made a part hereof, and any other similar personnel that are added pursuant to
Paragraphs 4.1(c) and 6.6 (collectively, the "Crews"). SCHEDULE B also sets
----------
forth each particular Crew position, the number of Crew members for each such
position, the work week and work hours for each Crew member, and the budgeted
total compensation for each Crew member.
1.3. 4MCA agrees to furnish certain services to enable MTVA to produce,
videotape and transmit programming to an interconnect on the terms and
conditions hereunder, including, without limitation, production studio services,
production control room services, on-line editing services, off-line editing
services, audio mixing services, graphics services, subtitling services,
origination services, videotape library services, and other services, all as
more particularly described in SCHEDULE C attached hereto and made a part hereof
----------
(collectively, the "Services"). MTVA acknowledges that the Services to be
provided hereunder shall be limited to those services which are capable of being
provided from the Premises (except for off-line editing, which shall be provided
from two edit bays located on premises leased by MTVA, for which 4MCA shall be
responsible solely for providing and maintaining certain off-line editing
equipment and shall not be responsible for off-line editing personnel), and
shall also be limited by the Equipment (as hereinafter defined) to be provided
hereunder pursuant to Paragraph 1.4.
1.4. 4MCA agrees to furnish and maintain certain equipment to enable MTVA
to produce, videotape and transmit programming to an interconnect on the terms
and conditions hereunder, as generally described in SCHEDULE C, and as more
----------
specifically detailed on an
1
<PAGE>
item-by-item basis in SCHEDULE D attached hereto and made a part hereof
----------
(collectively, the "Equipment").
1.5. 4MCA agrees to furnish a local satellite downlink capability to the
Premises to provide access to one or more satellite transponders as requested by
MTVA, on which MTVA programming may be carried, if and only if 4MCA makes the
determination, in its sole and absolute discretion, after using all reasonable
efforts, that the following conditions are or can be reasonably satisfied:
(a) the ability to construct, operate and maintain small aperture receive-
only antenna(s) is technically feasible;
(b) the landlord on whose property the antenna is to be placed grants
permission for the placement of such antenna;
(c) 4MCA is granted the appropriate licenses (the "TVRO License") to
install and operate the downlink antenna from the Singapore Broadcasting
Authority and any other appropriate governmental licensing agencies (in which
event the term of 4MCA's services under this Paragraph 1.5 shall be co-extensive
with the term of such licenses);
(d) 4MCA and MTVA can mutually agree on a reasonable fee for such downlink
services, which fee shall be in addition to the fees described in Paragraph 6.1
hereof; and
(e) MTVA obtains all applicable licenses, as required, for the signal to be
transmitted from 4MCA's downlink antenna at the Premises to MTVA's premises and
MTVA complies with all of the material terms and conditions of such licenses
(but only if MTVA requests that the signal be transmitted to MTVA's premises).
To the extent 4MCA defaults in its obligations as set forth in this
Paragraph 1.5, such default shall not be deemed a "Default" for purposes of
Paragraph 9.1 hereof, nor shall the technical specifications set forth in
SCHEDULE H be applicable to the services which may be provided pursuant to this
- ----------
Paragraph 1.5.
1.6. In connection with the origination services to be provided by 4MCA as
described on SCHEDULE C, 4MCA shall use all reasonable efforts to implement
----------
certain systems and procedures in order to maintain the reliability of the
origination services to be provided hereunder, which systems and procedures are
described in Paragraph 7.6 of SCHEDULE C.
----------
1.7. Subject to the terms of Paragraph 1.8 hereof, MTVA shall have the
right to inspect and approve the Premises prior to the commencement of the Term
(as defined in Paragraph 2.1) to determine compliance with subparagraphs (a),
(b) and (c) of this Paragraph
2
<PAGE>
1.7. 4MCA hereby acknowledges and agrees that MTVA shall only be obligated to
commence payments of the fees set forth in Paragraph 6 below on the Actual
Commencement Date (as defined in Paragraph 1.8(b) hereof) if and when:
(a) the Premises have been renovated in substantial compliance with the
Floor Plan;
(b) the Premises are operational for the use intended by and described in
this Agreement (except as set forth in Paragraph 1.10 hereof); and
(c) the Premises may be lawfully occupied, as determined by the appropriate
local authorities, and used for the intended purposes described herein. In
connection therewith, 4MCA shall deliver to MTVA copies of any and all
certificates or other documents it may possess evidencing the satisfaction of
this subparagraph (c), if applicable. MTVA acknowledges and agrees that,
notwithstanding 4MCA's failure to receive a Certificate of Statutory Completion
in connection with the Premises as evidence of compliance with this subparagraph
(c) as of the date 4MCA delivers the Commencement Notice (as hereinafter
defined) to MTVA, if 4MCA has received, as of such date, a Temporary Occupation
Permit which permits the Premises to be lawfully occupied and used in the manner
intended by and described in this Agreement, then 4MCA shall be deemed to have
satisfied this subparagraph (c) with respect to lawful occupancy of the
Premises.
1.8. MTVA shall determine in good faith whether the conditions set forth
in Paragraph 1.7 have been reasonably satisfied in accordance with the following
procedures:
(a) 4MCA shall notify MTVA in writing that the conditions set forth in
Paragraph 1.7 have been satisfied (the "Commencement Notice").
(b) MTVA shall have seven (7) business days from the date of its receipt of
the Commencement Notice to approve or disapprove the conditions set forth in
Paragraph 1.7. If MTVA approves the conditions set forth in Paragraph 1.7, MTVA
shall deliver written confirmation of such approval within the seven (7)-
business day period set forth above. If the date of such confirmation is on or
prior to April 15, 1995, then April 15, 1995 shall be the "Actual Commencement
Date" hereunder. If the date of such confirmation is after April 15, 1995, then
the date of such confirmation shall be the Actual Commencement Date hereunder.
If MTVA disapproves one or more of the conditions set forth in Paragraph 1.7,
MTVA shall deliver written notice of disapproval to 4MCA within such seven (7)-
business day period set forth above, specifying the particular reason(s) for
disapproval. MTVA's failure to respond in writing to the Commencement Notice
within seven (7) business days after receipt thereof shall be deemed MTVA's
approval of the conditions set forth in Paragraph 1.7 above and, in such event,
the Actual Commencement Date will be the later of (i) April 15, 1995 or (ii)
seven (7) business days after MTVA's receipt of the Commencement Notice.
3
<PAGE>
Notwithstanding the foregoing, if MTVA commences to utilize a portion of the
Premises, Crews, Services and Equipment pursuant to Paragraph 1.10 hereof in
connection with any particular activity to be provided hereunder in the manner
intended by, and described in, this Agreement, then MTVA shall not use or cite
such particular activity as a basis on which to disapprove the conditions set
forth in Paragraph 1.7 (unless such portion of the Premises, Services, Crews and
Equipment that are utilized in connection with such particular activity no
longer complies with the conditions set forth in Paragraph 1.7).
1.9. MTVA shall have the exclusive use of all Premises and Crews described
in SCHEDULES A and B during the Regular Hours (as defined in Paragraph 4.4) with
----------- -
respect to production, on-line editing, audio mixing, subtitling and graphics
Services and at all times with respect to origination and library Services.
MTVA shall be given scheduling priority over any other 4MCA customer in
connection with the production, on-line editing, audio mixing, subtitling and
graphics Premises and Crews during Overtime Hours, Weekend Hours and Holiday
Hours (all as defined in Paragraph 4.7), in accordance with the provisions set
forth in Paragraph 4.7. The production studio and production control rooms
shall be exclusively available to MTVA, unless 4MCA obtains MTVA's consent to
use such facilities for 4MCA's other customers, which consent may be withheld by
MTVA in its sole and absolute discretion. MTVA acknowledges that 4MCA may
provide services, facilities, personnel and equipment to other customers of 4MCA
which may be similar to the Premises, Services, Crews and Equipment to be
provided to MTVA hereunder. MTVA acknowledges that such similar facilities,
services, personnel and equipment may be provided by 4MCA from the Premises.
4MCA represents and warrants that its provision of facilities, services,
personnel and equipment to such other 4MCA customers will in no way infringe
upon MTVA's rights under this Agreement or adversely affect 4MCA's obligations
hereunder.
1.10. Prior to the Actual Commencement Date and subject to the next four
sentences of this Paragraph 1.10, at MTVA's request, 4MCA may provide a portion
of the Premises, Crews, Services and Equipment in accordance with the Pre-
Commencement Fee Schedule set forth on SCHEDULE G attached hereto and made a
----------
part hereof. If the Premises, Crews, Services and Equipment to be used in
connection with any particular activity to be provided hereunder (for example,
origination) satisfy the conditions set forth in Paragraph 1.7 for use in the
manner intended by, and described in, this Agreement prior to the Actual
Commencement Date, then, if MTVA requests the commencement of such particular
activity, 4MCA shall be obligated to commence the provision of such Premises,
Crews, Services and Equipment to MTVA and MTVA shall be obligated to commence
paying a prorated portion of the Monthly Base Fee (as defined in Paragraph
6.1(a)(ii)) for such Premises, Crews, Services and Equipment, in accordance with
the Pre-Commencement Fee Schedule. The date on which 4MCA commences its
provision of the Premises, Crews, Services and Equipment in connection with any
particular activity pursuant to the prior sentence shall be referred to as the
"Pre-Commencement Date". Notwithstanding the foregoing, if the Premises, Crews,
Services and Equipment to be used in connection with any particular activity to
be provided hereunder do not
4
<PAGE>
fully satisfy the conditions set forth in Paragraph 1.7 prior to the Actual
Commencement Date, but 4MCA and MTVA agree that MTVA shall nevertheless commence
utilizing such Premises, Crews, Services and Equipment in connection with such
particular activity in a manner other than as specifically intended for use by
and described in this Agreement, then (a) MTVA shall not be obligated to
commence payment in accordance with the Pre-Commencement Fee Schedule, but
rather shall pay to 4MCA an amount equal to 4MCA's actual documented costs
incurred in connection with the provision of such Premises, Crews, Services and
Equipment (but in no instance shall the amount be greater than the amount
payable in accordance with SCHEDULE G), and (b) MTVA shall not be obligated
----------
to pay for the full complement of Crew members in connection with such
particular activity, but rather shall be obligated to pay 4MCA's actual
documented costs in connection with those Crew members who are actually being
utilized during such pre-commencement period (but in no instance shall the
amount be greater than the amount payable in accordance with SCHEDULE G).
----------
4MCA's obligation to provide the Premises, Crews, Services and Equipment
pursuant to this Paragraph 1.10 shall at all times take priority over any
potentially conflicting arrangement or relationship with any other 4MCA customer
or other party.
2. TERM; CANCELLATION OPTION; CANCELLATION FEE; AMELIORATION MEASURES
------------------------------------------------------------------
2.1. The term of this Agreement (the "Term") shall commence on the Actual
Commencement Date and shall continue through and including April 14, 2002 (the
"Termination Date"), subject to earlier termination as provided herein.
2.2. (a) MTVA shall have the option, in its sole discretion, to cancel
this Agreement (the "Cancellation Option") as of the date which is five (5)
years from April 15, 1995 (the "Cancellation Date"), exercisable by written
notice to 4MCA no less than one (1) year prior to the Cancellation Date. If
MTVA fails to deliver such notice to 4MCA at least one (1) year prior to the
Cancellation Date, MTVA shall be deemed to have waived the Cancellation Option.
(b) If MTVA exercises the Cancellation Option, then on the Cancellation
Date, MTVA shall be obligated to pay to 4MCA a cancellation fee in an amount
equal to * of the actual aggregate
documented costs of the Initial Equipment, Installation and Wiring Expenditures
(as defined in, and determined pursuant to, Paragraph 6.4(a)), but in no event
to exceed * * (the
"Cancellation Fee").
2.3. If and when MTVA delivers written notice to 4MCA of its exercise of
the Cancellation Option in accordance with Paragraph 2.2(a) , 4MCA shall be
obligated to use all reasonable efforts during the one-year period prior to the
Cancellation Date to ameliorate 4MCA's potential business losses as the result
of MTVA's exercise of the Cancellation Option, including without limitation,
using all reasonable efforts to secure replacement customers to
5
<PAGE>
utilize the Premises, Services and Crews during the two-year period following
the Cancellation Date and/or using all reasonable efforts to sell the Equipment.
2.4. Notwithstanding the provisions of Paragraph 2.2(b), if 4MCA is
successful in finding a replacement customer or customers who will pay
substantially the same fee that MTVA would have paid hereunder during the two-
year period following the Cancellation Date, then MTVA shall not be obligated to
pay the Cancellation Fee to 4MCA.
2.5. If 4MCA is unable to find such replacement customer(s) but is able to
sell substantially all of the Equipment for an aggregate purchase price in
excess of the lesser of: (a) *
* of the actual aggregate documented costs of the Initial Equipment,
Wiring and Installment Expenditures (as determined pursuant to Paragraph 6.4(a))
or (b) *
* (such excess dollars to be referred to as the "Excess Equipment
Price"), then the Cancellation Fee shall be reduced on a dollar-for-dollar basis
by the amount of the Excess Equipment Price.
2.6. If 4MCA is able to find a replacement customer or customers who will
utilize a portion (but less than substantially all) of the Premises, Services
and Crews (but only with respect to those Crew members under written contract or
to whom severance would be owing upon termination of such Crew members'
services) during the two year period following the Cancellation Date, and is
also able to sell a portion of the Equipment, then 4MCA and MTVA shall negotiate
in good faith to determine the appropriate reduction in the Cancellation Fee.
4MCA shall negotiate in good faith with, and use all reasonable efforts to
contact, all potential buyers, customers and/or other parties in order to
accomplish the amelioration measures set forth in Paragraphs 2.3 through 2.6.
3. FAILURE TO SATISFY
------------------
In the event that the Premises do not satisfy the terms of subparagraphs
(a), (b) or (c) of Paragraph 1.7 above and such failure to satisfy (a "Premises
Failure") exists on or after April 15, 1995 (which shall not include a Premises
Failure that is directly caused by either (a) a Force Majeure Event or (b) any
unreasonable act or failure to act by MTVA (including without limitation and for
illustration purposes only, a Premises Failure relating to MTVA's approval
rights set forth in Paragraph 4.1(b) below) or (c) any other event not within
4MCA's control (including without limitation and for illustration purposes only,
(i) reasonably unforeseen delays in the delivery of any Equipment listed on
SCHEDULE D or (ii) the reasonably unforeseen failure of the Landlord to act
- ----------
regarding the installation of certain equipment by the Landlord pursuant to the
Lease or (iii) delays (which delays are reasonably unforeseen as of the date
hereof, or thereafter are unforeseen in the exercise by 4MCA of all reasonable
efforts) in the granting of appropriate required licenses and/or permits by the
appropriate local authorities, so long as 4MCA has taken all necessary actions
to obtain such required licenses and permits)), and
6
<PAGE>
the Premises Failure continues to exist as of May 15, 1995 (the "Penalty Date"),
then 4MCA shall be in material breach of this Agreement and MTVA shall have the
right, among other remedies available to it hereunder or at law or equity, to
terminate this Agreement forthwith and MTVA shall have no obligation to 4MCA of
any nature whatsoever (other than MTVA's pre-commencement payment obligations to
4MCA under Paragraph 1.10 hereunder, if applicable).
4. CREWS AND MEALS
---------------
4.1. (a) 4MCA shall furnish MTVA with the Crews described in SCHEDULE B
----------
on the terms set forth herein. The employment of all persons (and any
individual who replaces any such person during the Term) comprising the Crews
listed in SCHEDULE B will be subject to MTVA's reasonable approval, as more
----------
specifically set forth in Paragraph 4.1(b) below.
(b) SCHEDULE B attached hereto and made a part hereof sets forth the
----------
initial individual (by job description) and aggregate budgeted annualized Crew
costs of *
U.S. Dollars * (the "Budgeted Crew Costs") necessary for
implementation of this Agreement on April 15, 1995. For each individual Crew
member, the Budgeted Crew Costs include base compensation, benefits and taxes,
holiday compensation, if applicable, and an expatriate allowance, if applicable
(collectively for each individual Crew member "Total Compensation").
(i) From time to time after the execution of this Agreement but in any
event no less than thirty (30) days prior to April 15, 1995, 4MCA shall deliver
to MTVA a notice or notices containing the name(s) of proposed Crew member(s)
and corresponding proposed Total Compensation (each a "Crew Notice"). MTVA
shall have the right to reasonably approve or disapprove each Crew member for
any reason; provided, however, if MTVA desires to disapprove a particular Crew
member on the basis of Total Compensation alone, MTVA may only do so if the
proposed Total Compensation for such Crew member, as set forth in the Crew
Notice, exceeds the Total Compensation, by job title, for such Crew member as
set forth on SCHEDULE B. If MTVA disapproves a particular Crew member on the
----------
basis of proposed Total Compensation as set forth in the Crew Notice, MTVA shall
have thirty (30) days from the date of receipt of the particular Crew Notice to
find a replacement Crew member at a Total Compensation equal to or less than the
level set forth in the Crew Notice (even if such Total Compensation set forth in
the Crew Notice is in excess of the level set forth on SCHEDULE B). If MTVA is
----------
unable to find a replacement Crew member at a Total Compensation equal to or
less than that set forth in the Crew Notice within such thirty (30) day period,
MTVA shall be deemed to have approved the individual Crew member and
corresponding Total Compensation set forth in the Crew Notice. If MTVA locates
a replacement Crew member at a Total Compensation equal to or less than that set
forth in the Crew Notice, then 4MCA shall be obligated to hire such replacement
Crew member at such equal or lesser Total Compensation level.
7
<PAGE>
(ii) MTVA shall have fifteen (15) business days from the date of receipt of
a particular Crew Notice to disapprove a particular Crew member for any reason
other than Total Compensation. MTVA shall deliver notice to 4MCA of MTVA's
disapproval of such particular Crew Member within such fifteen (15) business day
period, stating the particular reason for MTVA's disapproval. MTVA may provide
such notice verbally or in writing, but if 4MCA so requests, MTVA shall confirm
any verbal notice in writing. If MTVA fails to notify 4MCA in writing of MTVA's
disapproval within such fifteen (15) business day period, MTVA shall be deemed
to have approved such particular Crew member (unless MTVA disapproves such
particular Crew member on the basis of Total Compensation, in which case the
provisions of subparagraph (i) above shall be applicable).
(iii) To the extent the aggregate actual Crew costs as of April 15, 1995
exceed the aggregate Budgeted Crew Costs (taking into account the possible
exercise by MTVA of the procedures set forth in this Paragraph 4.1(b)), then the
Annual Base Fee (as defined in Paragraph 6.1(a)) will be increased by an amount
equal to * of such difference.
(iv) To the extent the aggregate actual Crew costs as of April 15, 1995 are
less than the aggregate Budgeted Crew Costs (taking into account the possible
exercise by MTVA of the procedures set forth in this Paragraph 4.1(b)), then the
Annual Base Fee will be decreased by a net amount equal to * of such
difference.
(c) From and after the Actual Commencement Date and subject to paragraph
6.6 hereof, MTVA retains the right, in MTVA's sole and absolute discretion, to
add individual Crew members to, or remove individual Crew members from, the
complement of Crew members and negotiate the consideration paid for any such
additions or removals accordingly (and upon any such removal, MTVA, in its sole
and absolute discretion, may also elect to delete the corresponding Crew
position from the Crew complement). MTVA shall be billed monthly in an amount
equal to the monthly consideration to be paid for any additional Crew members
added by MTVA in accordance with this paragraph and Paragraph 6.6 hereof. If at
any time during the Term MTVA determines to cause the termination of Crew
members required hereunder, and if the particular Crew members whose services
are terminated hereunder have been employed pursuant to written long-term
contracts and/or would be entitled to receive severance payments upon
termination of employment pursuant to any written agreement or in accordance
with Local Laws and Practice (as hereinafter defined), then MTVA shall be
obligated to pay to 4MCA an amount equal to the aggregate severance payments
owing to any and all such terminated Crew members. As used in this Agreement,
the term "Local Laws and Practice" shall mean any and all applicable laws,
rules, regulations, statutes, acts, administrative requirements and related
legislation of the Republic of Singapore with respect to labor matters as such
matters relate to the Crews, and all other mandatory rules, regulations and
practices imposed by the Singapore government.
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4.2. 4MCA shall make the Crew members listed on SCHEDULE B under
----------
"Production Studio", "Production Control Room", "Production Audio Control Room"
and "Production Video Tape" and any other similar Crew members that are added to
the complement of Crew members pursuant to Paragraphs 4.1(c) and 6.6
(collectively, "Studio Crew") available to MTVA exclusively on a Monday through
Friday schedule, in accordance with the hours set forth on SCHEDULE B with each
----------
day consisting of nine hours, including a meal period of up to one hour (the
"Regular Production Hours"), except for the holidays set forth in SCHEDULE B-1
------------
("Holidays"). Weekly call schedules may be requested by MTVA no later than the
previous Friday at noon, and 4MCA shall use its best efforts to accommodate such
schedule. Daily call schedule amendments may be requested by MTVA by 6:00 p.m.
or at the end of the taping day, whichever is later, on the day prior to the
date such amended call schedule is to become effective, and 4MCA shall use its
best efforts to accommodate such schedule.
4.3. 4MCA shall make the Crew members listed on SCHEDULE B under "Edit 1",
----------
"Edit 2", "Edit 3" and "Edit Other" and any other similar Crew members that are
added to the complement of Crew members pursuant to Paragraphs 4.1(c) and 6.6
(collectively, "Edit Crew") and Crew members listed on SCHEDULE B under "Audio
----------
Mixing Room" and any other similar Crew members that are added to the complement
of Crew members pursuant to Paragraphs 4.1(c) and 6.6 (collectively, "Audio
Mixing Crew") available to MTVA exclusively on a Monday through Friday schedule,
in accordance with the hours set forth on SCHEDULE B, with each day consisting
----------
of nine hours including a meal period of up to one hour (the "Regular Edit and
Audio Mixing Hours"), except for Holidays. 4MCA shall use its best efforts to
accommodate requests for changes to the daily schedule, in accordance with
Paragraph 4.7 below. Regular Production Hours and Regular Edit and Audio Mixing
Hours shall sometimes collectively be referred to herein as the "Regular Hours".
4.4. 4MCA shall make the Crew members listed on SCHEDULE B under
----------
"Subtitling 1" and "Subtitling 1/2" and any other similar Crew members that are
added to the complement of Crew members pursuant to Paragraphs 4.1(c) and 6.6
(collectively, "Subtitling Crew") exclusively available to MTVA, with each week
consisting of seven days, in accordance with the shifts and hours set forth on
SCHEDULE B, with each day consisting of nine hours including a meal period of up
- ----------
to one hour, except for Holidays. 4MCA shall use its best efforts to
accommodate requests for changes to the daily schedule, in accordance with
Paragraph 4.7 below.
4.5. 4MCA shall make the Crew members listed on SCHEDULE B under
----------
"Origination" and any other similar Crew members that are added to the
complement of Crew members pursuant to Paragraphs 4.1(c) and 6.6 (collectively,
"Origination Crew") available to MTVA on an exclusive basis at all times during
the Term, each week to consist of 168 hours of continuous seven (7) day per week
coverage between and including Monday through Sunday, including all Holidays, in
eight and one-half hour shifts, including a meal period of one-half hour.
9
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4.6. 4MCA shall make the Crew members listed on SCHEDULE B under "Library
----------
Facility" and any other similar Crew members that are added to the complement of
Crew members pursuant to Paragraphs 4.1(c) and 6.6 (collectively, "Library
Crew") available to MTVA on an exclusive basis in accordance with the Monday
through Sunday schedule set forth in SCHEDULE B, in eight and one-half hour
----------
shifts, including a meal period of one-half hour, except for Holidays which will
be worked with a reduced Crew that is proportional to actual origination and
other related activities. 4MCA shall use its best efforts to accommodate
requests for changes to the Library Crew schedule, in accordance with Paragraph
4.7 below.
4.7. If MTVA requests that 4MCA provide the Studio Crew, Edit Crew,
Subtitling Crew and/or Audio Mixing Crew in excess of the Regular Hours, such
additional hours shall be deemed "Overtime Hours". If MTVA requests that 4MCA
provide the Studio Crew, Edit Crew, Subtitling Crew and/or Audio Mixing Crew
during a weekend, such hours shall be deemed "Weekend Hours". Notwithstanding
the above, work begun on a Friday which continues beyond midnight and is in
excess of Regular Hours shall be deemed Overtime and not Weekend Hours. If MTVA
requests that 4MCA provide the Studio Crew, Edit Crew, Subtitling Crew and/or
Audio Mixing Crew during a Holiday, the hours worked during the Holiday shall be
deemed "Holiday Hours", except that work begun on a non-Holiday which continues
into a Holiday shall not be deemed Holiday Hours. MTVA shall have priority over
any other 4MCA customer in connection with securing Crew members to work during
Overtime Hours, Weekend Hours and Holiday Hours; provided however, that MTVA
shall not unreasonably seek to extend its use of the Premises, Services and
Crews into Overtime Hours, Weekend Hours and/or Holiday Hours, and provided
further that MTVA shall use its best efforts to notify 4MCA within a reasonable
time period of its need for such Overtime Hours, Weekend Hours and/or Holiday
Hours.
4.8. MTVA shall use all reasonable efforts to provide each member of the
Studio Crew, Edit Crew, Audio Mixing Crew and Subtitling Crew with one one-hour
meal break during each full production, on-line editing, audio mixing or
subtitling day, the commencement of which meal break shall be determined by MTVA
in its sole discretion. In addition, Origination Crew members and Library Crew
members shall be provided with a meal break of up to one-half hour per each
eight and one-half hour shift, the commencement of which meal break shall be
determined by MTVA in its sole discretion. On days extending beyond the Regular
Hours, MTVA shall use its reasonable efforts to provide each member of the
Studio Crew, Edit Crew, Subtitling Crew and Audio Mixing Crew with an additional
meal break, the commencement of which break shall be determined by MTVA in its
sole discretion. Notwithstanding the foregoing, MTVA shall use all reasonable
efforts to conform to standard local industry practice in providing timely meal
breaks to Crew members hereunder (which shall not result in any increased cost
to MTVA hereunder).
10
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4.9. MTVA acknowledges and agrees that 4MCA shall not be responsible for
providing any off-line editing or graphics Crews hereunder. Any and all off-
line editing and/or graphics Services to be performed hereunder shall be
performed by MTVA's personnel.
4.10. Notwithstanding any other provision herein, the shifts and hours
set forth in SCHEDULE B may be adjusted by mutual agreement of the parties, in
----------
writing.
5. MATERIALS TO BE SUPPLIED BY MTVA
--------------------------------
5.1. MTVA shall be responsible for providing (at its cost):
(a) Videotape in such formats as MTVA shall deem appropriate, and such
audio tape, raw stock and videocassettes and data media, including disks,
diskettes and cartridges, as may be used by MTVA. All of the aforementioned
shall be of high quality material, and, to MTVA's knowledge, shall be free of
defect. Any defective tapes, raw stock and/or videocassettes causing down time
shall be the responsibility of MTVA. MTVA shall be liable for any consequential
or other unforeseen damages which reasonably result from such defective
materials only to the extent any damages are solely and directly caused by the
defective materials and not by defective Equipment or by operator error.
(b) All wardrobe, various props, sets, curtains, scrims, soft cyclorama,
certain "above-the-line" personnel and any additional support personnel required
by (i) MTVA's employees or (ii) talent hired by MTVA.
(c) Production and stage accessories not otherwise provided for in this
Agreement.
5.2. All materials and equipment supplied by MTVA in connection with this
Agreement may be stored at the Premises at no extra charge to MTVA, and MTVA's
materials and equipment shall be insured and secured by 4MCA in accordance with
the provisions of Paragraph 7 hereof.
6. CONSIDERATION
-------------
6.1. CONSIDERATION FOR PREMISES, CREW, SERVICES AND EQUIPMENT
--------------------------------------------------------
(a) Except as otherwise expressly provided for in this Agreement, in full
and complete consideration for 4MCA's provision of the Premises, Crews, Services
and Equipment in accordance herewith during the Term, MTVA shall pay to 4MCA and
4MCA shall accept from MTVA the sum of *
* (the "Base Fee"),
exclusive of taxes, in annual payments in the amount of *
* U.S.
11
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Dollars * ("Annual Base Fee"), payable in Singapore dollars, using a
1.0:1.5 exchange rate from U.S. Dollars to Singapore Dollars (i.e., the Annual
Base Fee will equal *
* Singapore Dollars * Singapore)), as follows:
(i) The first installment due on the Actual Commencement Date in the amount
of * U.S. Dollars *
if the Actual Commencement Date falls on the first day of a month. If the
Actual Commencement Date falls on a day other than the first day of a month, the
first installment shall be paid on the Actual Commencement Date and shall be
equal to the prorated portion of *
* U.S. Dollars * for such partial month.
(ii) Subsequent installments due on the first day of each consecutive month
of the Term in advance (beginning with the first day of the month following the
Actual Commencement Date and terminating on the first day of the month preceding
the Termination Date), each installment in the amount of *
* U.S. Dollars * , except that if the
Term ends on a day other than the last day of a month, then the final
installment shall be paid on the first day of such month and shall equal the
prorated portion of * U.S.
Dollars * for such partial month. Each monthly installment fee shall
be referred to as the "Monthly Base Fee".
(b) Notwithstanding the above payment schedule, the Annual Base Fee shall
be increased annually commencing one year from the Actual Commencement Date by
* percent * over the prior year's Annual Base Fee. In addition, unless
otherwise stated herein or agreed to by the parties, any and all other stated
costs and charges payable by MTVA hereunder shall be subject to an annual
increase of * commencing one year from the Actual Commencement Date, over the
prior year's stated costs and charges.
(c) Notwithstanding the above payment schedule, the Annual Base Fee may
increase or decrease pursuant to the terms of Paragraphs 4.1(b) and may decrease
pursuant to the terms of Paragraphs 6.4(a) and/or 6.4(b).
(d) Any costs that are incurred by 4MCA during the Term of this Agreement
in order for 4MCA to perform its obligations under this Agreement (other than
the amounts which MTVA is expressly required to pay pursuant to this Agreement,
including without limitation, those amounts set forth in Paragraphs 4.1(c), 6.1,
6.2, 6.5, 6.6 and 6.7) shall be the sole and exclusive responsibility of 4MCA,
except that MTVA shall be responsible for the payment of all existing and new
sales and service taxes and other similar taxes applicable to the Premises,
Services and Equipment, prorated for the period of MTVA's actual use and/or
occupancy of the Premises, Services and Equipment.
12
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(e) Notwithstanding the above, 4MCA shall have the one-time right, at any
time prior to the Actual Commencement Date, to elect to receive a portion of any
and/or all of the payments required to be made under Paragraphs 6.1(a)(i) and
(ii) in U.S. Dollars. Upon any such election by 4MCA hereunder, the payment
schedules set forth Paragraph 6.1 shall be adjusted accordingly and the parties
agree to be bound thereby.
(f) All payments of the Monthly Base Fee, together with any other amounts
to be paid by MTVA hereunder, shall be paid in Singapore dollars by wire
transfer of immediately available funds to a bank to be designated by 4MCA and
delivered in writing to MTVA no less than seven (7) business days prior to the
Actual Commencement Date, provided that should local banking and/or currency
laws, rules or regulations (collectively, "Currency Rules") at any time prohibit
the making of such payments (or any portion thereof) in accordance with this
Paragraph 6.1(f), then (a) the parties shall agree in good faith to alternative
payment arrangements and (b) MTVA agrees that in such instances, 4MCA shall
nevertheless remain entitled to the full payment that 4MCA would have received
as a result of MTVA making payment in the manner contemplated herein but for
such Currency Rules. If 4MCA exercises the one-time right to elect to receive a
portion of any or all of the payments required to be made under Paragraphs
6.1(a)(i) and (ii) in U.S. dollars, at such time as 4MCA notifies MTVA in
writing of such election, 4MCA shall specify the U.S. location to which such
funds should be sent via wire transfer of immediately available funds.
6.2. OVERTIME, WEEKEND AND HOLIDAY SERVICES AND CREW
-----------------------------------------------
(a) MTVA will pay Overtime Hours for Services worked by the Studio Crew,
Edit Crew, Audio Mixing Crew and Subtitling Crew in excess of the Regular Hours,
in accordance with SCHEDULE B-2 attached hereto and made a part hereof. For
------------
each Overtime Hour that MTVA requests 4MCA to provide, MTVA agrees to pay the
hourly fee set forth on SCHEDULE B-2, prorated for less than a full Studio Crew
------------
or Edit Crew pursuant to the formula described in Paragraph 6.2(d). The fee for
any Overtime Hours, Weekend Hours or Holiday Hours shall be prorated to the
quarter-hour.
(b) MTVA agrees to pay 4MCA and 4MCA agrees to accept the applicable
amounts set forth on SCHEDULE B-2 for a full complement of Services and Crews
------------
that MTVA requests 4MCA to provide which are deemed Weekend Hours or Holiday
Hours (i.e., not including services of the Crews begun after 5 PM on a Friday
-----
that continue beyond midnight in excess of Regular Hours, which shall be deemed
Overtime Hours, or services of the Crews begun on a non-holiday that continue
into a Holiday), prorated for less than a full Studio Crew or Edit Crew pursuant
to the formula described in Paragraph 6.2(d).
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(c) If MTVA procures other services of 4MCA in excess of the Regular Hours,
the charges for such additional time shall be agreed upon by MTVA and 4MCA in
good faith and shall in no event exceed the lowest rate then charged by 4MCA for
similar services or crew.
(d) If MTVA requests that 4MCA provide less than a full complement of
----
Studio Crew and/or Edit Crew in connection with any Overtime, Weekend or Holiday
Hours, then MTVA shall pay 4MCA the applicable amount set forth on SCHEDULE B-2
------------
with respect to studio Services and Studio Crew and/or edit Services and Edit
Crew (as the case may be), reduced as follows: MTVA shall designate those
individual Studio Crew members and/or Edit Crew members whose presence is not
required with respect to such Overtime, Weekend or Holiday Hours. The actual
base salary of each such designated Studio Crew member and/or Edit Crew member
as of the Actual Commencement Date (as increased annually pursuant to the terms
of this Agreement) shall be divided by 2080 (40 hours per week multiplied by 52
weeks per year) and the quotient shall be multiplied by 1.5. The resulting
product with respect to each such designated Studio Crew member and/or Edit Crew
member shall be deducted from the hourly fee set forth on SCHEDULE B-2 with
------------
respect to studio Services and Studio Crew members and/or edit Services and Edit
Crew members, as applicable.
(e) There shall be no charge to MTVA for Overtime Hours, Holiday Hours or
Weekend Hours without the express written authorization of MTVA (via its
production manager or other designated representative).
(f) Crew utilization during Overtime Hours, Weekend Hours and Holiday Hours
shall be subject, in all instances, to availability of particular Crew members.
Notwithstanding the foregoing, 4MCA shall use all reasonable efforts to provide
the full complement of Crew members requested by MTVA during Overtime, Weekend
or Holiday Hours (even if 4MCA cannot provide certain individually-identified
Crew members during such periods).
6.3. ACCESS TO PREMISES
------------------
Unless expressly provided to the contrary herein, MTVA and its personnel
and other representatives shall have the full right of access to the Premises,
on a twenty-four (24) hour, seven (7) days per week basis, for the purpose of
producing, videotaping and transmitting programming to an interconnect and all
related activities thereto. MTVA represents and warrants that, notwithstanding
the full right of access provided pursuant to the preceding sentence, under no
circumstances shall MTVA and/or its personnel interfere in any manner with
4MCA's provision of services, facilities, personnel and equipment to other
customers of 4MCA, to the extent such provision of services, facilities,
personnel and equipment is permissible hereunder. MTVA further covenants that
(a) neither it nor any of its personnel shall utilize such right of access for
any purposes other than in connection with the terms and conditions of this
14
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Agreement and (b) MTVA and its personnel shall be subject to all security
measures implemented by 4MCA pursuant to the terms of this Agreement, including
without limitation, those security measures described in Paragraph 7.1 herein.
6.4. INITIAL CAPITAL EXPENDITURES AND BUILD-OUT COSTS
------------------------------------------------
(a) SCHEDULE D attached hereto and made a part hereof sets forth 4MCA's
----------
budgeted initial capital expenditures on an itemized basis relating to
Equipment, installation and wiring of the Premises but excluding start-up and
build-out costs of the Premises (the "Initial Equipment, Installation and Wiring
Expenditures") of *
Dollars U.S. Dollars * (the "Initial Equipment, Installation and
Wiring Expenditure Budget"). If the proposed cost of any item of Equipment
required to implement the terms of this Agreement (without regard to any
increased services pursuant to Paragraph 25 or elsewhere) exceeds the cost for
such item on the Initial Equipment, Installation and Wiring Expenditure Budget
by the greater of * or * then MTVA shall have the right to disapprove
such item and to designate a piece of replacement Equipment which 4MCA shall be
required to purchase, provided such Equipment is reasonably compatible with the
other items of Equipment to be installed pursuant to this Agreement. If MTVA
fails to disapprove a particular item of Equipment within seven (7) business
days after receiving written notification from 4MCA of the proposed cost of such
item of Equipment, then MTVA shall be deemed to have approved such item of
Equipment at such proposed cost. If the aggregate actual documented costs of
the Initial Equipment, Installation and Wiring Expenditures required to
implement the terms hereof (without regard to any increased services pursuant to
Paragraph 25 or elsewhere), which documentation shall be presented to MTVA no
later than thirty (30) days after the Actual Commencement Date, are lower than
the Initial Equipment, Installation and Wiring Expenditure Budget (taking into
account the possible exercise by MTVA of the approval procedures set forth in
this paragraph), then for each * Dollar * decrease in
actual documented costs of the Initial Equipment, Installation and Wiring
Expenditures from the Initial Equipment, Installation and Wiring Expenditure
Budget, the Annual Base Fee shall decrease by *
Dollars * (it being understood and agreed that the calculation of any
decrease in the Annual Base Fee in accordance with this Paragraph 6.4(a) shall
be based on such * to * proportion). The Monthly Base Fee shall
be decreased accordingly, effective as of the Actual Commencement Date (i.e. all
amounts that have been paid in excess of such decreased amount prior to the
effectiveness of the foregoing calculation (the "Capital Credit") shall be
deducted from the next adjusted Monthly Base Fee to be paid hereunder and any
subsequent adjusted Monthly Base Fees as required to reduce the Capital Credit
to zero). If the aggregate actual documented costs of the Initial Equipment,
Installation and Wiring Expenditures exceed the Initial Equipment, Installation
and Wiring Expenditure Budget (without taking into account any increased
services pursuant to Paragraph 25 or elsewhere), there shall be no increase in
the Annual Base Fee or Monthly Base Fee based upon such increased costs. For
illustration purposes only, assume that within 30 days after the Actual
Commencement Date, 4MCA delivers documentation to MTVA which
15
<PAGE>
demonstrates that the aggregate actual documented costs of the Initial
Equipment, Installation and Wiring Expenditures total *
* * resulting in a
decrease of * Dollars * from the Initial Expenditure
Budget. An amount equal to * Dollars *
would be deducted from the Annual Base Fee in each year of the Term, and the
Monthly Base Fee would be reduced accordingly.
(b) 4MCA's budgeted initial expenditures relating to start-up and build-out
costs of the Premises, together with possible overages in connection with
Initial Equipment, Installation and Wiring Expenditures (collectively, the
"Build-Out Costs"), total *
* Dollars * all in accordance with the Floor Plan
(the "Initial Build-Out Budget"). If the aggregate actual documented Build-Out
Costs required to implement the terms hereof (based on the Floor Plan and
without regard to any increased services pursuant to Paragraph 25 or elsewhere),
which documentation shall be presented to MTVA no later than thirty (30) days
after the Actual Commencement Date, are lower than the Initial Build-Out Budget,
then for each * Dollar * decrease in actual documented
Build-Out Costs from the Initial Build-Out Budget, the Annual Base Fee shall
decrease by * Dollars * (it being
understood and agreed that the calculation of any decrease in the Annual Base
Fee in accordance with this Paragraph 6.4(b) shall be based on such *
to * proportion). The Monthly Base Fee shall be decreased accordingly,
effective as of the Actual Commencement Date (i.e. all amounts that have been
paid in excess of such decreased amount prior to the effectiveness of the
foregoing calculation (the "Build Out Credit") shall be deducted from the next
adjusted Monthly Base Fee to be paid hereunder and any subsequent adjusted
Monthly Base Fees as required to reduce the Build Out Credit to zero). For
illustration purposes only, assume that within thirty (30) days after the Actual
Commencement Date, 4MCA delivers documentation to MTVA which demonstrates that
the aggregate actual documented Build-Out Costs total *
* Dollars * resulting in a
decrease of * in actual Build-Out Costs from the Initial Build-Out
Budget. An amount equal to * Dollars *
would be deducted from the Annual Base Fee in each year of the Term, and the
Monthly Base Fee would be reduced accordingly. If the actual initial Build-Out
Costs exceed the Initial Build-Out Budget (without taking into account any
increased services pursuant to Paragraph 25 or elsewhere), there shall be no
increase in the Annual Base Fee or the Monthly Base Fee based upon such
increased costs.
(c) Notwithstanding the foregoing provisions contained in subparagraphs (a)
and (b) above, if MTVA request changes and/or additions to the Floor Plan that
would result in an increase in the Build Out Costs and/or the Initial Equipment,
Installation and Wiring Expenditures, and 4MCA agrees to make such changes
and/or additions to the Floor Plan, then 4MCA and MTVA shall negotiate in good
faith to determine the appropriate increase, if any, in the Annual Base Fee.
16
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6.5. ADDITIONAL EQUIPMENT
--------------------
(a) From and after the Commencement Date, MTVA may from time to time
request that 4MCA make available to MTVA certain additional equipment and/or
facilities of 4MCA not otherwise provided hereunder in connection with MTVA's
production, post-production or related activities, and 4MCA agrees to provide
such additional equipment and/or facilities to MTVA, to the extent such
equipment and/or facilities are reasonably available. In consideration for
4MCA's provision of such equipment and/or facilities pursuant to this paragraph,
MTVA shall pay 4MCA a mutually agreed rental price not to exceed 4MCA's then-
current rate card for such services. If MTVA requests documented
substantiation of such costs, 4MCA agrees to provide the same in a timely
manner.
(b) At MTVA's request and according to MTVA's need, 4MCA shall provide
supplementary equipment from an outside source as requested throughout the Term
of this Agreement, so long as such supplementary equipment is reasonably
available. The cost of such equipment shall be at a mutually agreed upon rate
and shall be borne by MTVA.
*
*
*
*
*
*
*
*
*
*
*
*
*
*
(ii) If 4MCA elects not to secure the Additional Equipment for MTVA, or
MTVA elects not to secure the Additional Equipment from 4MCA, MTVA may then rent
or lease the Additional Equipment from any outside source engaged by MTVA,
provided such Additional Equipment is reasonably compatible with the existing
Equipment located at the Premises and is delivered to 4MCA in good and proper
working order. Any Additional Equipment installed from an outside source
engaged by MTVA shall be installed and maintained at MTVA's expense and
liability or, if MTVA elects, MTVA may engage 4MCA to install and maintain such
Additional Equipment, at costs acceptable to MTVA. Notwithstanding the
foregoing, if any Additional Equipment is to be installed in areas of the
Premises relating to origination Services, then 4MCA shall install and maintain
such Additional Equipment, at costs
17
<PAGE>
acceptable to MTVA. 4MCA shall have the right to inspect the Additional
Equipment prior to installation to confirm that such Additional Equipment is not
defective and is reasonably compatible with the existing Equipment required
pursuant to this Agreement. MTVA shall be solely responsible for any damages to
the Additional Equipment and/or any materials supplied by MTVA hereunder which
are a direct result of any installation of Additional Equipment by a person or
an entity other than 4MCA or 4MCA's designee. Further, MTVA shall be liable to
4MCA for any damages to 4MCA's equipment, personnel and/or the Premises which
are a direct result of such installation by a person or an entity other than
4MCA or 4MCA's designee.
6.6. ADDITIONAL CREW
---------------
MTVA may request that additional Crew members be added to or removed from
the Crew complement provided by 4MCA in SCHEDULE B at any time and from time to
----------
time, at MTVA's sole and absolute discretion, subject to the provisions of
Paragraph 4.1(c). Upon any such removal, MTVA, in its sole and absolute
discretion, may also elect to delete the corresponding Crew position from the
Crew complement. In the event that 4MCA provides any additional Crew members
pursuant to MTVA's request, MTVA agrees to pay and 4MCA agrees to accept payment
with respect thereto in accordance with a rate card to be negotiated in good
faith by the parties. In the event 4MCA fails to provide MTVA with additional
crew members pursuant to MTVA's request therefor, MTVA shall have the right to
engage such person or persons as MTVA's employees.
6.7. OVERAGES; CREDITS TO MTVA
--------------------------
(a) 4MCA shall invoice MTVA weekly for all amounts due in excess of the
consideration payable as set forth in Paragraph 6.1 (the "Overages"). Each
Overage invoice shall be delivered to MTVA within 10 business days after the
date the Overage fee was incurred, or such Overage shall be deemed waived by
4MCA. MTVA shall have the right to reasonably contest any Overages by requiring
4MCA to provide written documentation substantiating any such Overages. To the
extent the parties cannot agree on a particular Overage invoice, both parties
shall submit the relevant calculations and any relevant documentation to a
mutually approved independent third-party accounting firm of international
standing who shall promptly render its decision as to the appropriate Overage in
writing , which decision shall be final and binding on the parties. If such
accounting firm determines that the Overage was either properly invoiced or
should have been a higher amount, then MTVA shall bear the costs of such
accounting firm. If such accounting firm determines that the Overage invoice
was improperly invoiced in exceeding the actual amount that should have been
invoiced to MTVA, then 4MCA shall bear the costs of such accounting firm.
Payment of any uncontested Overages shall be payable thirty (30) days after the
delivery to MTVA of such invoice. Payment of any contested Overage shall be
made within ten (10) days of MTVA's receipt of the independent third-party
accounting firm's written decision, such payment to be in the amount specified
in such written decision.
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(b) To the extent that any amounts paid by MTVA to 4MCA pursuant to this
Paragraph 6 are in excess of the amounts actually owed for the period in
question, 4MCA shall promptly refund to MTVA such overpayment.
7. SECURITY; INSURANCE
-------------------
7.1. 4MCA shall at all times be responsible for providing reasonable care
and reasonable security for the studio, edit, origination, storage areas,
videotape storage and all other areas where MTVA's personnel or property may at
any or all times be located or have access to. Such security measures shall
include, without limitation, a minimum of one security guard in the reception
area that is immediately adjacent to and a part of the Premises, at all times
during MTVA's production hours. 4MCA shall provide a card-key lock or security
key pad system on all entrances to the Premises, which card-key lock or security
key pad system shall be approved in advance by MTVA. Accordingly, access to the
Premises shall be limited to MTVA and its authorized employees and visitors,
4MCA and its authorized employees and visitors (and with respect to 4MCA's
visitors, to the extent prior approval of MTVA has been obtained), and with
respect to certain Premises, 4MCA's other customers (but only to the extent use
of the Premises by such customers is permitted hereunder). In addition, MTVA
may provide additional guards at MTVA's expense during production hours;
provided however, that such additional security shall in no way reduce 4MCA's
obligations to provide reasonable security hereunder. Notwithstanding the
foregoing, if for any reason, including without limitation, the appearance of
high-visibility talent in connection with any MTVA production, extraordinary
security is required (beyond that which would already be provided pursuant to
this Paragraph 7.1), the cost of any and all such extraordinary security
measures shall be borne solely by MTVA.
7.2. 4MCA shall be liable for any and all personal injury and property
damage arising from 4MCA's employees', agents', invitees' or 4MCA's grossly
negligent or willful acts or omissions or 4MCA's material breach of any
representation, warranty, covenant or agreement in this Agreement. MTVA shall
be liable for any and all personal injury and property damage arising from
MTVA's employees', agents', invitees' or MTVA's grossly negligent or willful
acts or omissions or MTVA's material breach of any representation, warranty,
covenant or agreement in this Agreement.
7.3. 4MCA shall maintain fire, theft and comprehensive general personal
and property liability insurance in a form and in amounts satisfactory to MTVA,
which insurance shall also cover all personnel and property on the Premises and
all equipment and materials owned by MTVA as set forth on a schedule to be
provided by MTVA to 4MCA prior to the Actual Commencement Date, naming MTVA and
its parent companies, Viacom International Inc and Viacom Inc. (and any two
other parties as MTVA may designate) as additional insureds. 4MCA shall commit
to, and the parties will cooperate with each other in connection with,
19
<PAGE>
obtaining appropriate insurance coverage for any additional MTVA-owned equipment
and/or materials delivered to the Premises during the Term.
7.4. In addition, 4MCA shall maintain Comprehensive General Liability
insurance and All Risk Property insurance, covering MTVA's interest in all
property located on or around the Premises, and the liability of 4MCA to third
parties, including MTVA's personnel, arising out of the furnishing by 4MCA of
the Services and Crews. 4MCA will maintain such coverage in a form satisfactory
to MTVA and in the amounts set forth below. The policies obtained by 4MCA in
accordance herewith shall remain in effect throughout the Term.
Workman's Compensation and employer's liability
Coverage A - Statutory
Coverage B - Minimal Amount of $1,000,000 (U.S.)
Comprehensive General Liability
Combined Single Limit-Per Occurrence $1,000,000 (U.S.)
Umbrella Liability
$3,000,000 (U.S.) in excess of Primary Insurance
With respect to the Comprehensive General Liability, Umbrella Liability and
All Risk Property Damage coverages scheduled above, MTVA and its parent
companies, Viacom International Inc. and Viacom Inc. (and any two other parties
designated by MTVA), shall be named as additional insureds. With respect to All
Risk Property Damage Coverage, MTVA, Viacom International Inc. and Viacom Inc.
(and any other two parties designated by MTVA) shall be named as loss payees
with respect to their interest in property in the care, custody and control of
4MCA.
7.5. 4MCA shall ensure that each insurance company providing coverage
under Paragraphs 7.3 and 7.4 shall be licensed to do business in the Republic of
Singapore and shall be authorized to issue the policies listed hereunder. All of
the policies referred to above shall be written as primary insurance coverage
only, and shall not be deemed to be in excess of, or to contribute to any,
coverage carried by MTVA, Viacom International Inc., Viacom Inc. or any other
direct or indirect subsidiary or affiliate thereof with respect to the same
risks. 4MCA shall ensure that each insurer providing coverage hereunder shall
provide MTVA with written notice of any change in such insurer, coverage,
material change or reduction thereof (including limits, loss of coverage,
provisions or forms, notice of termination, cancellation or non-renewal or of
aggregate erosion thereon) at least thirty (30) days prior to the proposed
effective date thereof. 4MCA represents and warrants that it will secure
liability insurance and workman's compensation insurance of the type and in the
amounts set forth above with Chubb. 4MCA shall deliver to MTVA certificates of
insurance prior to or upon the execution of this Agreement
20
<PAGE>
evidencing that the coverages identified in Paragraphs 7.3 and 7.4 are in full
force and effect (and also indicating the additional insureds and loss payees as
required herein). MTVA will be provided with renewal certificates upon request.
7.6. MTVA will provide 4MCA with a Workman's Compensation certificate for
its employees and shall obtain liability insurance covering its employees, of
the same type and in the same amounts as set forth in Paragraphs 7.3 and 7.4,
and with respect to such liability insurance, naming 4MCA and Four Media Company
as additional insureds.
8. DELAYS OR ADDITIONAL EXPENSES DUE TO EQUIPMENT FAILURE OR 4MCA
--------------------------------------------------------------
PERSONNEL
- ---------
8.1. If the equipment provided or maintained by 4MCA hereunder (including,
without limitation, property owned by MTVA) ceases to operate properly, causing
an unreasonable delay in production, or unreasonable delays in production occur
due to 4MCA's personnel (including, without limitation, late arrival of
personnel) (any such event, a "Production Failure"), then, except for gross
negligence on the part of 4MCA or 4MCA's personnel (which shall be covered
pursuant to Paragraph 18 hereof) and notwithstanding any other provision of this
Agreement to the contrary, 4MCA's sole liability (but only with respect to the
consequences of a Production Failure) shall be the rights afforded to MTVA as
set forth in subparagraphs (a), (b), and (c) below in connection with any such
Production Failure, and MTVA at its sole option and within 48 business hours may
elect to:
(a) *
*
*
* ; or
(b) *
*
*
* or
(c) *
*
*
8.2. If MTVA extends the Term pursuant to the option set forth in
Paragraph 8.1(a) above, and such extension conflicts with either services,
personnel and/or equipment being provided to other customers of 4MCA, then,
notwithstanding such conflict, MTVA shall have priority over any other customer
of 4MCA and 4MCA shall fully perform its obligations hereunder without regard to
any such conflict.
21
<PAGE>
8.3. If MTVA desires to extend the Term pursuant to Paragraph 8.1(a)
above, but such extension violates the terms of the Lease, then 4MCA agrees to
pay MTVA in an amount equal to the fees that would have been paid to 4MCA for
services performed during such extension, had the Term been extended in
accordance with Paragraph 8.1(a).
8.4. 4MCA shall not be responsible for any delays or additional expenses
due to equipment failure which is the direct result of the servicing of such
equipment by personnel provided by MTVA.
8.5. With respect to any advertising that is not aired as a result of any
negligent act or negligent omission by 4MCA (other than in connection with a
loss of origination of the signals, as described in Paragraph 9.1(b), or a
failure or total loss of the signals, as described in Paragraphs 9.1(c) and (d)
respectively), 4MCA shall be liable for all costs, losses, expenses, claims,
liabilities and damages (collectively, "Damages") incurred by MTVA in connection
with, or arising from, any such negligent act or negligent omission, including
without limitation, all lost advertising revenue that would have been received
by MTVA had such advertising actually aired. At MTVA's option, the Damages
shall be payable directly to MTVA by 4MCA or shall be deducted from any of the
installment payments due for 4MCA pursuant to Paragraph 6.1 hereof.
Notwithstanding anything to the contrary contained herein:
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
(c) 4MCA shall not be liable for any Damages with respect to advertising
that is not aired as a direct result of (i) any Force Majeure event, (ii) any
act or
22
<PAGE>
omission to act by MTVA or (iii) any other reason other than the negligent act
or negligent omission by 4MCA.
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
9. TERMINATION
-----------
9.1. MTVA may, without prejudice to any of its rights hereunder or at law
or equity, upon giving appropriate notice in accordance with Paragraph 22,
terminate this Agreement (which shall extinguish its obligations to 4MCA
hereunder except as otherwise expressly set forth herein) at any time upon the
occurrence of any of the following events (except that if any such event occurs
as a result of a Force Majeure Event, as defined in Paragraph 19, then the
provisions of Paragraph 19 shall apply, rather than the termination provisions
set forth below):
(a) if 4MCA shall fail to observe or perform any of the material terms or
conditions hereof (a "Default") and after MTVA has served notice in accordance
with Paragraph 22 specifying the Default and requiring the same to be remedied,
the Default results in a delay in production or post-production of MTVA
programming for 24 hours or more after
23
<PAGE>
receipt of such notice, and 4MCA fails to either cure the Default or provide
alternative production or post-production facilities satisfactory to MTVA within
such 24-hour period; or
(b) if 4MCA commits a Default, and after MTVA has served notice in
accordance with Paragraph 22 specifying the Default and requiring the same to be
remedied, the Default continues and results in a loss of origination of the
signals (audio and/or video) for * or more after receipt of such
notice, and 4MCA fails to either cure the Default or provide alternative
origination facilities satisfactory to MTVA within such * period; or
(c) if the signals fall below any of the levels specified in SCHEDULE H
----------
(which event shall constitute a Default hereunder) and after MTVA has served
notice specifying the Default and requiring the same to be remedied, the signals
continue to fall below any of the levels specified in SCHEDULE H for a period of
----------
12 hours or more after receipt of such notice; or
(d) if by reason of failure of the origination facilities and/or
maintenance and repairs to the origination facilities there is a total loss of
the signals for any individual feed for either:
(i) * in the aggregate in any * day period for any
individual feed; or
(ii) * in the aggregate in any * day period for any
individual feed; or
(iii) * separate periods, each lasting longer than * minutes in
any * day period, for any individual feed; or
(e) if the control and/or ownership of 4MCA passes, directly or indirectly,
to a person or entity engaged in the production and/or distribution of
television programming (via satellite or otherwise) in competition with MTVA; or
(f) if 4MCA or Four Media Company seeks relief under any applicable
bankruptcy statute, is placed in receivership, makes any assignment for the
benefit of creditors or commences the winding-up of its business, and any such
action is not dismissed within thirty (30) days of the commencement of such
action.
(g) without limiting any of MTVA's other rights or remedies provided
hereunder or at law or equity in the event of a Default or otherwise, if there
is a conflict between any provision of this Agreement and the Lease (as defined
in Paragraph 16.2) which (i) prevents 4MCA from effectuating any material term
or provision hereunder or (ii)
24
<PAGE>
results in a material adverse effect on any of MTVA's rights, whether express or
implied, under this Agreement (either of (i) or (ii) shall constitute a Default
hereunder), and after MTVA has served notice in accordance with Paragraph 22
specifying the Default and requiring the same to be remedied, the Default
continues for a period of 48 hours or more after receipt of such notice.
9.2. 4MCA may, without prejudice to any of its rights hereunder or at law
or equity, upon giving appropriate notice in accordance with Paragraph 22,
terminate this Agreement (which shall extinguish its obligations to MTVA
hereunder except as otherwise expressly set forth herein) at any time upon the
occurrence of any of the following events:
(a) subject to the proviso set forth in the first sentence of Paragraph
6.1(f) hereunder, if any payment required to be made by MTVA hereunder (other
than Overages which are in dispute) is not made within * after the
date on which 4MCA notifies MTVA that MTVA's payment is past due (a "Payment
Default Date"), and 4MCA has given MTVA an additional * written
notice of termination to MTVA following the Payment Default Date, provided that
if MTVA delivers payment to 4MCA during such * period following the
Payment Default Date, such termination notice shall cease to be effective; or
(b) if MTVA or Viacom International Inc. seeks relief under any applicable
bankruptcy statute, is placed in receivership, makes any assignment for the
benefit of creditors or commences the winding-up of its business, and any such
action is not dismissed within thirty (30) days of the commencement of such
action.
9.3. Notwithstanding any other provision herein, neither party shall have
the right to exercise termination rights hereunder if such party is in material
default of any of its obligations hereunder.
10. ENGINEERING AND MAINTENANCE
---------------------------
10.1. 4MCA agrees to provide MTVA with engineering coverage through the
availability of at least one engineer on-site or on-call 24 hours a day, 7 days
a week throughout the Term. 4MCA agrees to dedicate at least 40 hours per week
for the maintenance of the studio, edit and origination Equipment. 4MCA shall
provide to MTVA or its designees a weekly schedule in advance showing the
engineering coverage, including the names of the engineers and hours to be
worked. 4MCA shall keep accurate records of maintenance performed on all
Equipment and provide ready access to these records at all times. 4MCA shall
provide the following services, which shall include, without limitation:
(a) Routine maintenance of the Equipment: The Equipment shall be tested
and maintained in accordance with manufacturers' then current specifications,
recommendations and good engineering practice. If no such specifications or
recommendations
25
<PAGE>
have been issued by the manufacturer, then testing and maintenance shall be
performed in accordance with good engineering practice. In all cases of lack of
documentation of specifications, 4MCA shall consult with a designee of MTVA as
to what course of action should be taken.
(b) Routine alignment of origination Equipment: All Equipment shall be
realigned at least three times a year at a time and date to be agreed with MTVA
at least 4 weeks in advance. Further, 4MCA shall cooperate with the uplink and
interconnect service provider in relation to the alignment of the main and
standby audio and video circuits and uplink. Such alignment shall be carried
out in accordance with then current manufacturers' specifications and good
engineering practice. Under no circumstances shall any alignment be conducted
in such a manner as knowingly or negligently will result in the interruption or
loss of origination of the signals. If interruption is necessary for the above
purpose, 4MCA shall obtain MTVA's written approval before conducting any
alignment or maintenance.
(c) Fault detection and restoration: 4MCA shall use its best efforts to
correct any fault, loss, defect, or interruption to the signals (or any part
thereof) immediately after it becomes aware of the same or reasonably should
have become aware of the same. Upon any fault, loss, defect or interruption
that results in the loss of the signals (or any part thereof), 4MCA shall notify
MTVA immediately. All other faults, losses, defects or interruptions shall be
reported to MTVA on the next working day, stating the time, date, cause and the
remedial course of action taken or to be taken.
10.2. 4MCA shall have a documented contingency plan agreed to between MTVA
and 4MCA which specifies the course of action to be taken by 4MCA in the event
of catastrophic failure of the origination Equipment. A copy of the contingency
plan shall be supplied to MTVA prior to the Actual Commencement Date (or the
Pre-Commencement Date, if applicable) and will be updated in agreement with MTVA
annually, or at such shorter intervals as either party shall deem necessary, but
in no event more frequently than every three months.
10.3. The technical suitability of recordings and other transmissions made
with the Equipment described in SCHEDULE D and all other Equipment provided by
----------
4MCA shall at all times be in accordance with then currently accepted television
broadcast standards, practices and regulations (including without limitation
those of BR (Former CCIR), EBU and SMPTE).
10.4. The line of demarcation between the origination signal and the
common carrier ("Carrier") shall be as follows:
(a) For unencrypted and uncompressed signals (whether analog or digital),
including video (with vertical blanking interval ("VBI") signals) and one or two
stereo pairs (whether analog or digital), the line of demarcation shall be
located between the final
26
<PAGE>
output of the originated audio and video signals and the Carrier-provided
customer premise equipment ("CPE"), which in turn interfaces to Carrier's
terrestrial circuits ("Terrestrial Channels").
(b) For encrypted analog signals, including scrambled video (with VBI
signals) and one or two encoded stereo audio pairs, the line of demarcation
shall be located between the output of the scrambling equipment (with
distribution and/or monitoring equipment associated with the operation of the
scrambling equipment) and the input to Carrier-provided CPE, which in turn
interfaces to Carrier's Terrestrial Channels.
(c) For digital compression signals, including one or more digitally
compressed video signals with accompanying digitally compressed audio channels
and other digital signals, the line of demarcation shall be situated between the
output of the digital compression encoder system (with distribution and/or
monitoring equipment associated with the operation of the compression equipment)
and Carrier-provided CPE, which in turn interfaces to Carrier's Terrestrial
Channels.
(d) Provided that 4MCA maintains all origination equipment in conformity
with manufacturer's specifications, then except for any gross negligence by 4MCA
and/or its employees in connection with the use of any such equipment, the
failure of any encryption and/or compression equipment, and all related
equipment (including without limitation, multiplexors, modems, changeover units
and control computers, and also including without limitation, any of such
equipment purchased and/or provided by MTVA), which failure results in the
degradation or loss of the originated signals, shall not trigger the provisions
of Section 9.1 hereunder, notwithstanding any other provision of this Agreement
to the contrary.
10.5. 4MCA shall only be required to operate radio frequency ("RF")
equipment, including, without limitation, wireless microphones, wireless
intercom, receive-only satellite antenna and similar equipment, within the
operating parameters and conditions granted by the local telecommunication
authority and in a manner so as not to cause harm to third parties.
11. PERSONNEL
---------
11.1. 4MCA shall be responsible for all benefits, wages, payroll, and
withholding taxes that may become due with respect to all 4MCA personnel,
including subcontractors engaged by 4MCA or personnel engaged through such
subcontractors in connection with this Agreement. It is the intent of the
parties hereunder that 4MCA is and shall be an independent contractor. All Crew
or other persons providing services hereunder (which are hired by 4MCA) shall be
employees of 4MCA and not MTVA.
27
<PAGE>
11.2. Unless otherwise herein provided, 4MCA covenants that MTVA shall
have no responsibility or liability to or on behalf of any persons or entities
whose services are furnished by 4MCA pursuant to this Agreement or otherwise,
and 4MCA will indemnify MTVA and hold harmless MTVA from any and all claims,
costs, expenses or damages arising out of the employment by 4MCA of personnel
engaged in a strike, boycott, or work slow-down, except in connection with a
Force Majeure Event. 4MCA covenants that it will use its best efforts to employ
qualified replacement workers, subject to MTVA's prior approval, to perform the
services required herein. Notwithstanding the above, if 4MCA is unable to
obtain such replacement workers to fulfill 4MCA's obligations herein, which
results in an unreasonable delay in production (i.e. a delay in production of 24
hours or more) then, MTVA shall have the right to terminate this Agreement
without further obligation to 4MCA, except in connection with a Force Majeure
Event.
12. PRINCIPAL MANAGERS
------------------
If both Robert Walston and Gavin Schutz cease to be actively employed by
4MCA or its parent corporation, or cease to be actively engaged in the
administration of the 4MCA facility or the servicing of MTVA'S relationship with
4MCA, and such individuals are not replaced to the satisfaction of MTVA, then
MTVA may terminate this Agreement upon one month's written notice to 4MCA.
During the Term of this Agreement, MTVA shall pay to 4MCA a monthly fee of up to
* (consistent with the provisions of Paragraph 35) in order to induce 4MCA
to ensure that the oversight and administrative duties described in the prior
sentence will be available throughout the Term. Such monthly fee shall not be
subject to any annual increases during the Term.
13. OVERHEAD
--------
4MCA shall be responsible for providing and maintaining, *
* all basic utilities, services and any other related systems, in proper
working order, necessary for MTVA to use the Premises in accordance with the
purposes set forth herein, including without limitation, plumbing facilities,
adequate heat, air conditioning, power, working lights, equipment maintenance,
set storage space, garbage removal, and maintenance of the studio, edit and
origination facilities and office space, by a cleaning service. The maintenance
shall include, among other services, regular cleaning of all facilities and
reasonable maintenance necessitated as a result of normal wear and tear.
14. PUBLICITY; PRESS RELEASES
-------------------------
14.1. 4MCA shall not release or authorize the release of any advertising
or other publicity in connection with this Agreement, the operations of MTVA,
the use of the 4MCA facilities by MTVA, or in connection with MTVA or its
affiliated companies, without the prior written approval of MTVA.
28
<PAGE>
14.2. MTVA represents and warrants, and 4MCA acknowledges and agrees, that
MTVA (or its parent or an affiliated company) currently owns all rights in the
names and trademarks: "MTV ASIA", "MTV: MUSIC TELEVISION", and any other names,
marks, logos, copyrights and other intellectual property, and the good will
associated therewith. 4MCA shall not acquire any right, title or interest of
any nature in such property or goodwill as a result of the services to be
performed hereunder and the transactions contemplated hereby. In addition, 4MCA
shall not use any such property in any manner without MTVA's prior written
consent other than as expressly provided for in this Agreement.
15. CLOSED SET
----------
The studio set will be closed at all times, except that persons designated
by MTVA and all 4MCA employees listed as studio Crew members on SCHEDULE B (and
----------
any other 4MCA employees and/or guests approved in advance by MTVA) may enter.
16. 4MCA REPRESENTATIONS, WARRANTIES AND COVENANTS
----------------------------------------------
4MCA represents, warrants and covenants (as applicable) to MTVA as follows:
16.1. 4MCA has the full corporate power and authority to enter into
this Agreement and perform its obligations hereunder.
16.2. 4MCA will occupy the Premises by virtue of its rights as a
tenant under a lease (the "Lease") to be executed between Singapore
Telecommunications Ltd., 375 Tanjong Katong Rd., Singapore 1543, Republic of
Singapore ("Landlord") and 4MCA.
16.3. As of the date of execution of the Lease, the Lease will be in
full force and effect without default thereunder by 4MCA, and without default
thereunder by Landlord (but only to the extent such default by Landlord would
materially adversely affect MTVA's rights, or 4MCA's obligations, hereunder (a
"Material Landlord Default")).
16.4. 4MCA shall comply with all of its obligations under the Lease
and shall immediately provide to MTVA copies of any notices, including default
notices, given to 4MCA under the Lease.
16.5. 4MCA shall advise MTVA of any Material Landlord Defaults, and
provide copies to MTVA of any notices to be given to Landlord.
16.6. To the extent applicable to this Agreement, 4MCA shall not
modify or amend the Lease or waive any rights thereunder (to the extent that
such modification, amendment or waiver would materially adversely affect MTVA's
rights hereunder) or allow same to terminate or expire prematurely, without
prior written consent of MTVA.
29
<PAGE>
16.7. Under the Lease, 4MCA shall have the right to effectuate all of
the terms and provisions hereunder, without violation of the Lease.
16.8. 4MCA will be in compliance, as of the Actual Commencement Date
(or, if applicable, as of the Pre-Commencement Date), and will continue to
comply, with all applicable government laws, rules, regulations and
administrative requirements, including without limitation, environmental laws,
zoning laws, and applicable fire safety codes and regulations, to the extent
necessary to perform its obligations hereunder without any material adverse
effect on MTVA's rights or obligations hereunder.
16.9. 4MCA will procure, prior to the Actual Commencement Date (or
the Pre-Commencement Date, if applicable), all licenses, permits or other
authorizations or exemptions necessary for performing its obligations hereunder
(unless the failure to obtain such licenses, permits or other authorizations or
exemptions would not have any material adverse effect on MTVA's rights or 4MCA's
obligations hereunder), and shall deliver copies of all such licenses, permits
or other authorizations or exemptions to MTVA, upon MTVA's written request.
4MCA shall maintain such licenses, permits and other authorizations and/or
exemptions in good standing with the appropriate governmental authorities.
Notwithstanding the foregoing, 4MCA shall not be deemed in breach of any
representation, warranty or covenant contained herein on account of any
withdrawal or revocation of the TVRO License, so long as such withdrawal or
revocation was beyond the reasonable control of 4MCA to prevent.
16.10. The representations, warranties and covenants contained in
Paragraphs 16.2 through 16.7 above are subject to the execution of the Lease as
more particularly provided in Paragraph 39 below.
17. MTVA REPRESENTATIONS, WARRANTIES AND COVENANTS
----------------------------------------------
MTVA hereby represents, warrants and covenants (as applicable) to 4MCA as
follows:
17.1. MTVA has the full corporate power and authority to enter into
this Agreement and perform its obligations hereunder.
17.2. MTVA will be in compliance, as of the Actual Commencement Date
(or, if applicable as of the Pre-Commencement Date), and will continue to
comply, with all applicable governmental laws, rules, regulations and
administrative requirements to the extent necessary to perform its obligations
in connection with this Agreement without any material adverse effect on 4MCA's
rights or obligations hereunder.
30
<PAGE>
17.3. To the best of MTVA's knowledge, (a) none of the programming
content provided by MTVA and/or its suppliers to 4MCA for the purposes of this
Agreement shall infringe upon the rights of third parties, (b) MTVA owns,
licenses or otherwise has the right to use, and will continue to own, license,
or otherwise have the right to use all such programming content, and (c) all
necessary consents, approvals, licenses and other rights from third parties
(including governmental agencies) required for the production and transmission
of such programming content pursuant to this Agreement have been obtained.
17.4. During the Term, MTVA will not, directly or indirectly, employ
or solicit, or receive or accept the performance of services by, any employee of
4MCA, or directly or indirectly assist any other person, firm or entity in the
solicitation of 4MCA's employees, without 4MCA's prior written approval.
17.5. MTVA will procure a valid broadcasting license issued by the
appropriate governmental authorities prior to the Actual Commencement Date (or
the Pre-Commencement Date, if applicable), and all other material licenses,
permits or other similar authorizations or exemptions necessary for carrying on
its broadcasting business (collectively "Broadcasting Licenses") and otherwise
to effectuate the terms of this Agreement. MTVA shall deliver copies of the
Broadcasting Licenses and all such other licenses, such permits and other
similar authorizations to 4MCA, upon 4MCA's written request. MTVA shall
maintain the Broadcasting Licenses and all such other licenses, permits and
other similar authorizations in good standing with the appropriate governmental
authorities.
17.6. During the Term, MTVA will not operate and/or use the Premises
and the Equipment provided by 4MCA to transmit or in any other way assist in the
transmission of a foreign broadcasting service, unless MTVA has obtained prior
written approval from the Singapore Broadcasting Authority to receive and
transmit such foreign broadcasting service.
17.7. MTVA shall not be deemed to be in breach of any representation,
warranty or covenant contained herein on account of any withdrawal or revocation
of the Broadcasting Licenses (or agreements in principle with the relevant
Singapore broadcasting authorities with respect to the same) (any such
withdrawal or revocation, a "Revocation"), so long as the Revocation was beyond
the reasonable control of MTVA to prevent. MTVA acknowledges and agrees that,
notwithstanding any Revocation which was beyond the reasonable control of MTVA
to prevent, MTVA shall be obligated to continue to pay the Monthly Base Fee to
4MCA; provided however, 4MCA shall use reasonable efforts to mitigate MTVA's
payment obligations hereunder in the event of a Revocation which was beyond the
reasonable control of MTVA to prevent, which efforts may result in a reduction
of MTVA's payment obligations hereunder. Notwithstanding the foregoing, MTVA
shall not be obligated to continue to pay the Monthly Base Fee to 4MCA upon a
Revocation if and only if such Revocation is caused solely and directly by any
act or omission of 4MCA: (a) which is either (i) not expressly authorized by
MTVA or (ii) not performed in a manner consistent with the authority implied in
MTVA's grant
31
<PAGE>
to 4MCA of the right to provide the Premises, Crews, Services and/or Equipment
hereunder; and (b) which is either (i) performed in a grossly negligent manner
---
or (ii) performed with the knowledge that such act violates the Broadcasting
Licenses.
18. INDEMNITIES
-----------
18.1. In addition to any other indemnification obligations set forth
in this Agreement, 4MCA shall at all times indemnify and hold harmless MTVA, its
parent, subsidiaries, affiliates, successors, licensees, and assigns, and their
respective officers, directors, agents, representatives, employees, and
designees, from and against and from any and all claims, damages, liabilities,
liens, costs and expenses, including reasonable counsel fees (herein
collectively called "claims"), arising out of (a) any material breach by 4MCA of
any representation, warranty, covenant, obligation or agreement made by 4MCA
hereunder, or (b) any grossly negligent acts or omissions of 4MCA, its
employees, representatives, guests, agents or invitees in connection with the
Premises, Services or Crew provided herein.
If a claim by a third party is made against MTVA, and MTVA intends to
seek indemnity with respect thereto under Paragraph 18.1 of this Agreement, MTVA
shall promptly (and in any case within 30 days of such claim being formally
made) give 4MCA written notice of such claim. 4MCA shall have thirty days after
receipt of such notice to assume and control the defense of such claim at its
expense and through counsel of its choice, with the prior written consent of
MTVA. 4MCA's counsel shall be reasonably satisfactory to MTVA. If in MTVA's
reasonable judgment a conflict of interest may exist between MTVA and 4MCA with
respect to such claim, MTVA shall be entitled to select counsel of its own
choosing, in which event 4MCA shall be obligated to pay the fees and expenses of
such counsel, to the extent that the same are reasonable.
If 4MCA elects not to defend against any claim that is brought
pursuant to Paragraph 18.1, then it shall within the 30 days set forth in the
preceding paragraph, promptly so notify MTVA and, in such event, MTVA shall
thereupon again be entitled to assume and control the defense of such a claim
through counsel of its choice. In any circumstance where 4MCA elects not to
defend such claim, 4MCA shall promptly pay all reasonable attorneys',
accountants' and other advisors' fees and expenses of MTVA in connection with
the assumption and defense of such claim. If 4MCA exercises its right to
undertake the defense against any such claim as provided above, MTVA shall
cooperate with 4MCA in such defense and make available to 4MCA, at 4MCA's
expense, all pertinent records, materials and information in its possession or
under its control related thereto as is reasonably requested by 4MCA.
Anything in this Paragraph 18.1 to the contrary notwithstanding, (a)
if there is a reasonable probability in the judgment of MTVA that a claim may
materially and adversely affect MTVA (monetarily or otherwise), MTVA will have
the right to defend and co-defend and with the consent of 4MCA (which consent
shall not be unreasonably withheld) compromise and
32
<PAGE>
settle such claim, and (b) 4MCA will not, without the prior written consent of
MTVA, settle or compromise any claim or consent to entry of any judgment
relating to any such claim, which settlement, compromise or judgment does not
include as an unconditional term thereof the giving by the claimant or the
plaintiff to MTVA, a full, complete and unconditional release from all
liabilities in respect of such claim.
18.2. In addition to any other indemnification obligations set forth
in this Agreement, MTVA shall at all times indemnify and hold harmless 4MCA, its
parent, subsidiaries, affiliates, successors, licensees and assigns, and their
respective officers, directors, agents, representatives, employees, and
designees from and against any and all claims, damages, liabilities, liens,
costs and expenses, including reasonable counsel fees (herein collectively
called "claims") arising out of (a) any material breach by MTVA of any
representation, warranty, covenant, obligation or agreement made by MTVA
hereunder, (b) any grossly negligent acts or omissions of MTVA or its employees,
representatives, guests, invitees or agents in connection with performing its
obligations hereunder, (c) the content of any programming delivered by MTVA or
its suppliers to 4MCA pursuant to this Agreement, including without limitation,
any claim for libel, slander, copyright infringement or programming content, or
(d) any Revocation. In connection with subparagraph (d) of this Paragraph 18.2,
4MCA acknowledges that, if such Revocation was beyond the reasonable control of
MTVA to prevent, 4MCA shall use reasonable efforts to mitigate MTVA's payment
obligations hereunder.
If a claim by a third party is made against 4MCA, and 4MCA intends to
seek indemnity with respect thereto under Paragraph 18.2 of this Agreement, 4MCA
shall promptly (and in any case within 30 days of such claim being formally
made) give MTVA written notice of such claim. MTVA shall have thirty days after
receipt of such notice to assume and control the defense of such claim at its
expense and through counsel of its choice, with the prior written consent of
4MCA. MTVA's counsel shall be reasonably satisfactory to 4MCA. If in 4MCA's
reasonable judgment a conflict of interest may exist between MTVA and 4MCA with
respect to such claim, 4MCA shall be entitled to select counsel of its own
choosing, in which event MTVA shall be obligated to pay the fees and expenses of
such counsel, to the extent that the same are reasonable.
If MTVA elects not to defend against any claim that is brought
pursuant to Paragraph 18.2, then it shall within 30 days set forth above,
promptly so notify 4MCA and, in such event, 4MCA shall thereupon again be
entitled to assume and control the defense of such claim through counsel of its
choice. In any circumstance where MTVA elects not to defend such claim MTVA
shall promptly pay all reasonable attorneys', accountant' and other advisors'
fees and expenses of 4MCA in connection with the assumption and defense of such
claim. If MTVA exercises its right to undertake the defense against any such
claim as provided above, 4MCA shall cooperate with MTVA in such defense and make
available to MTVA, at MTVA's expense, all pertinent records, materials and
information in its possession or under its control related thereto as is
reasonably requested by MTVA.
33
<PAGE>
Anything in this Paragraph 18.2 to the contrary notwithstanding, (a)
if there is a reasonable probability in the judgment of 4MCA that a claim may
materially and adversely affect 4MCA (monetarily or otherwise), 4MCA will have
the right to defend and co-defend and with the consent of MTVA (which consent
shall not be unreasonably withheld) compromise and settle such claim, and (b)
MTVA will not, without the prior written consent of 4MCA, settle or compromise
any claim or consent to entry of any judgment relating to any such claim, which
settlement, compromise or judgment does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to 4MCA, a full, complete
and unconditional release from all liabilities in respect of such claim.
19. FORCE MAJEURE
-------------
19.1. For the purposes of this Paragraph 19, a "Force Majeure Event"
shall be deemed to be any acts of God; natural catastrophes; governmental acts,
omissions or enactments; national emergencies; insurrections; riots; wars; fire;
flood; explosion; or strikes; lock-outs or other labor difficulties beyond the
control of the parties hereto. Governmental action which prohibits MTVA from
broadcasting any or all of its programming shall not be deemed a Force Majeure
Event.
19.2. If either 4MCA or MTVA is unable to timely perform any of its
obligations hereunder because of a Force Majeure Event, then 4MCA or MTVA, as
the case may be, shall not be deemed in breach or in default hereunder by reason
thereof (such party to be referred to hereunder as the "Non-Performing Party"
and the other party to be referred to as the "Terminating Party").
19.3. If a Force Majeure Event prevents the timely performance of any
of the obligations of 4MCA or MTVA hereunder, then:
(a) Only if 4MCA is the Non-Performing Party, the Term shall be
automatically extended for a period equal to the period of the delay without
payment of any additional compensation (so long as such extension does not
violate the terms of the Lease), subject to the provisions of subparagraph (b)
below.
(b) If the delay lasts more than twenty (20) days or if it is
reasonably apparent that such a delay will last for twenty (20) or more days,
then the Terminating Party shall have the right, by written notice given to the
Non-Performing Party, to immediately terminate this Agreement as of the date the
notice is received as set forth in Paragraph 22. If the Force Majeure Event
ceases prior to the expiration of the twenty (20)-day period, and such notice
has been delivered to the Non-Performing Party, then such notice shall be deemed
rescinded.
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(c) If MTVA terminates this Agreement as provided in subparagraph (b)
above, 4MCA shall immediately return to MTVA all amounts paid by MTVA for
Services and/or Crew not yet actually furnished by 4MCA (provided that MTVA
shall be responsible for all amounts due for Premises, Services, Crews and/or
Equipment actually provided during the period prior to termination for such
Force Majeure Event). If 4MCA terminates this Agreement as provided in
subparagraph (b) above, MTVA shall immediately pay to 4MCA all amounts due for
Premises, Services, Crews and/or Equipment actually provided during the period
prior to termination for such Force Majeure Event.
20. ASSIGNMENT
----------
MTVA and 4MCA may each assign this Agreement to any party which, at the
time of such transfer, (a) owns or controls MTVA or 4MCA, as the case may be,
(b) which MTVA or 4MCA, as the case may be, owns or controls, or (c) with which
MTVA or 4MCA, as the case may be, is under common ownership or control, or as
part of the sale or transfer of all or substantially all of the assets or equity
of MTVA or 4MCA, respectively. In addition, in connection with financing to be
obtained by 4MCA, MTVA hereby consents to 4MCA's assignment of 4MCA's rights to
the payments contemplated under this Agreement to any bank or other financing
source. In any other case, neither party may otherwise assign any of its
rights, benefits or obligations hereunder without the prior written consent of
the other party, which consent shall not be unreasonably withheld (it being
understood and agreed that 4MCA shall not assign its rights hereunder in
violation of Paragraph 9.1(e)). A party's failure to respond in writing to a
request for consent to assignment within five (5) business days after receipt of
such request shall be deemed consent to such assignment. The provisions of
Paragraph 12 hereof shall remain in effect in the event of any assignment
hereof. Any purported assignment and/or transfer in violation of this paragraph
shall be null and void.
21. WAIVER NOT CONSENT
------------------
Any waiver of any breach of this Agreement shall not be construed to be a
continuing waiver or consent to any subsequent breach by any party hereto.
22. NOTICES
-------
Any and all notices or demands under this Agreement shall be served either
by messenger (i.e., delivered to the business of the party but not necessarily
placed in the party's hands or delivered in the presence of the party) or by
registered or certified mail, postage prepaid, overnight mail or express courier
service or by facsimile or telecopy transmission. If served by messenger,
service conclusively shall be deemed received on the date of service. If served
by registered or certified mail, postage prepaid, service conclusively shall be
deemed received three business days after deposit with the United States or the
Singapore postal service (provided however, that if service is to be effected
from the United States to Singapore or vice versa,
35
<PAGE>
service shall conclusively be deemed received ten business days after deposit
with the United States or the Singapore postal service, as the case may be). If
served by overnight mail or express courier service, service shall conclusively
be deemed received three business days after prepaid dispatch with an
internationally recognized overnight mail or express courier service. If served
by facsimile or telecopy transmission, service shall conclusively be deemed made
on the date and at the time imprinted on any such notice by the receiving
facsimile or telecopy machine.
To MTVA: Scott Davis
Executive Vice President
Viacom Network Operations
1515 Broadway
New York, NY 10036
Fax No. (212) 258-8295
With copies to: Lois Peel Eisenstein, Esq.
Senior Vice President
Business Affairs and General Counsel
MTV Networks
1515 Broadway
New York, NY 10036
Fax No. (212) 258-8358
Regional Counsel - MTV Asia LDC
Treasury Building
8 Shenton Way #01-01
Republic of Singapore 0106
Fax No. 65-221-1061
To 4MCA: Director of Technical Operations
Four Media Company Asia PTE Ltd.
30 Choon Guan Street
Republic of Singapore 0207
Fax No. 65-220-0328
36
<PAGE>
With copies to: Robert T. Walston
Four Media Company
303 N. Glenoaks Blvd.
6th Floor
Burbank, California 91502
Fax No. (818) 846-5197
and Jill A. Cossman, Esq.
Greenberg, Glusker, Fields,
Claman & Machtinger
1900 Avenue of the Stars
Suite 2000
Los Angeles, California 90067
Fax No. (310) 553-0687
and Leow Su Mei
Lee & Lee
Level 19, UIC Building
No. 5 Shenton Way
Singapore 0106
Fax No. 65-2250438
Either party may change the name and/or address to which notices are to be sent
hereunder by giving written notice of such change in accordance with this
Paragraph 22.
23. APPLICABLE LAW; JURISDICTION
----------------------------
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York and the federal laws of the
United States of America, without regard to conflict of laws principles. Any
legal action or proceeding with respect to this Agreement shall be subject to
the non-exclusive jurisdiction of any courts located in New York, New York, and,
by execution and delivery of this Agreement, both paries hereby irrevocably
accept for themselves and in respect of their property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Each of 4MCA and
MTVA hereby irrevocably designates, appoints and empowers Steinhardt Partners,
L.P. (or any affiliate or successor thereof) and MTV Networks, respectively,
with offices on the date hereof at 605 Third Avenue, New York, New York 10158
and 1515 Broadway, New York, New York 10036, respectively, as its designee,
appointee and agent to receive, accept and acknowledge for and on its behalf, in
respect of its property, service of any and all legal process, summons, notices
and documents which may be served in any such action or proceeding. Each of
4MCA and MTVA hereby waives any objection which it may now or hereafter have to
the laying of venue of any of the aforesaid actions or proceedings arising out
of or in connection with this Agreement brought in the courts
37
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referred to above and hereby further irrevocably waives and agrees not to plead
or claim in any such court that any such action or proceeding brought in any
such court has been brought in an inconvenient form.
24. PROPRIETARY INFORMATION
-----------------------
24.1. 4MCA and MTVA acknowledge that in the course of 4MCA's
provision of services to MTVA hereunder, either party may become acquainted with
certain "Proprietary Information" of the other party. "Proprietary Information"
of either party shall mean any information relating to such party's business,
business concepts, and/or ideas relating to programming and/or other products,
including all intellectual property pertaining to the foregoing (regardless of
the stage of development of such) (collectively the "Products"), which is not
generally known other than by such party. Proprietary Information may include,
without limitation, the concepts, ideas, designs, formats, and contents of the
Products and the overall marketing and business plan with respect to the
Products; and may include, without limitation, plot lines, designs, devices,
characters, stories, treatments, outlines, sketches, videos, copyrights, and any
actual or contemplated trademark, trade name or service mark. Each party agrees
that it shall not use, disclose, disseminate or otherwise communicate, directly
or indirectly, in whole or in part, during the term of this Agreement, any
Proprietary Information of the other party, except as necessary to implement the
terms of this Agreement, without the other party's prior written consent, nor
shall either party permit any of its representatives, subsidiaries, parent
entity, or any third party person acting for or on its behalf, to do any of the
foregoing. In addition, neither party shall reproduce or copy or summarize any
Proprietary Information of the other party without such other party's prior
written consent in each instance. 4MCA shall cause each and every Crew member
employed by 4MCA pursuant to this Agreement, as well as any other 4MCA employee
who may have access to MTVA's Proprietary Information, to agree to be bound by
this Paragraph 24. The obligations set forth in this Paragraph 24.1 shall
survive the termination or cancellation of this Agreement.
24.2. As a pre-condition to the employment of any Crew member, each
such Crew member shall execute a "work made for hire" agreement in a form
acceptable to MTVA. In addition, 4MCA and its employees hereby acknowledge and
agree that (a) all artistic, literary, dramatic, musical and other materials
created by 4MCA hereunder, together with the results and proceeds of 4MCA's
provision of the Services, Premises, Equipment and Crews hereunder (the
"Materials"), are "works made for hire" (as such term is defined in the United
States Copyright Act) for MTV Networks ("MTVN"), and (b) MTVN is the owner of
the Materials under copyright, in and for all means of exploitation now known or
hereinafter devised, upon creation of such Materials. To the extent that any of
the Materials are not deemed to be "works made for hire" for MTVN, 4MCA hereby
assigns to MTVN all rights for all purposes throughout the world for the full
period of copyright and all extensions and renewals thereof in and for all means
of exploitation now known or hereinafter devised. 4MCA acknowledges and agrees
that neither it nor any third party or person (other than MTVN) has any
copyrights in the Materials
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and any copyright resides in MTVA as the sole owner of such rights, and 4MCA
hereby quitclaims and assigns any rights in the copyright and hereby waives any
and all moral rights with respect thereto. If requested by MTVN, 4MCA shall
execute and deliver to MTVN an acknowledgment, quitclaim and assignment
necessary to give effect to the foregoing in a form approved in advance by MTVN.
24.3. Upon termination of the Term or any earlier termination of this
Agreement pursuant to the terms hereunder, each party shall promptly return to
the other party all manuals, documents, files, reports, programming, videotapes,
Proprietary Information and any other data, materials or property belonging to
such other party.
24.4. MTVA shall cause all of its employees who may have access to
4MCA's Proprietary Information to agree to be bound by Paragraphs 24.1 and 24.3.
25. ADDITIONAL SERVICES
-------------------
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
26. ATTORNEYS' FEES
---------------
In the event of any dispute arising in connection with this Agreement, the
court in such action shall award all costs and expenses of suit and a reasonable
sum as attorneys' fees to the party who, in light of the issues litigated and
the court's decision on those issues, was more successful in the action. The
more successful party need not be the party who recovers a judgment or order
nominally in its favor in the action. If a party voluntarily dismisses an
action, a reasonable sum as attorneys' fees shall be awarded to the other party.
39
<PAGE>
27. END OF TERM
-----------
On or before expiration or termination of this Agreement, MTVA shall remove
all of its property from the Premises within ten (10) working days following
termination or expiration of this Agreement, leaving the Premises in
substantially the same condition as of the Commencement Date, ordinary wear and
tear excepted. MTVA shall be liable for actual damages incurred by 4MCA to the
Premises (including any and all equipment) in connection with MTVA's removal of
its property, ordinary wear and tear excepted.
28. ENTIRE AGREEMENT
----------------
This Agreement supersedes any prior agreements or understandings, oral or
written between the parties hereto and represents their entire understanding and
agreement with respect to the subject matter hereof and can be amended,
supplemented or changed, and any provision hereof can be waived, only by a
written instrument signed by the party against whom enforcement of any such
amendment, supplement, modification of waiver is sought.
29. CONSENT NOT UNREASONABLY WITHHELD
---------------------------------
Except as otherwise specifically provided herein, in all instances where
either 4MCA or MTVA has consent or approval rights, such consent or approval
shall not be unreasonably withheld.
30. SURVIVAL OF INDEMNITIES
-----------------------
The indemnities contained herein shall survive the termination or
cancellation of this Agreement.
31. FURTHER INSTRUMENTS
-------------------
Each party agrees to execute any further documents and/or instruments and
perform any further acts deemed necessary or desirable to give full effect to
the provisions of this Agreement.
32. SEVERABILITY
------------
If any term or provision of this Agreement is judged invalid or
unenforceable, such term or provision shall be deemed deleted and shall not
affect the validity or enforceability of the remaining terms and provisions of
this Agreement.
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33. COUNTERPARTS
------------
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original and together shall constitute a single instrument.
34. GUARANTIES
----------
MTVA's obligations hereunder shall be guaranteed by Viacom International
Inc. pursuant to the terms of the Guaranty in the form attached hereto on
SCHEDULE I-1. 4MCA's obligations hereunder shall be guaranteed by Four Media
- ------------
Company pursuant to the terms of the Guaranty in the form attached hereto on
SCHEDULE I-2.
- ------------
35. CHANGES IN TAX LAW
------------------
To the extent that any Singapore laws, rules and/or regulations concerning
the payment of GST are rescinded or materially modified, the parties shall
appropriately adjust fees to be paid hereunder.
36. REASONABLE EFFORTS
------------------
Unless otherwise provided to the contrary herein, each party shall use all
reasonable efforts to fulfil its obligations hereunder.
37. CONTRAVENTION OF LAWS
---------------------
Notwithstanding any other provision to the contrary herein, neither party
shall be required to undertake any action in order to satisfy its obligations
hereunder, which action would violate the provisions of any Local Laws or
Practice, or any other applicable laws, rules, regulations, statutes and
administrative requirements (unless such violation would have no material
adverse impact on the applicable party hereunder, or on such applicable party's
ability to satisfy or fulfill its obligations hereunder).
38. CHANGES IN LABOR LAW
--------------------
To the extent that any Local Laws and Practice are modified and/or
rescinded during the Term, and such modification and/or rescission has a
material impact on the Total Compensation payable to Crew members hereunder,
and/or any such modification and/or rescission of any Local Laws and Practice
materially adversely affects 4MCA's ability to provide Crew members during the
hours and at the times set forth in SCHEDULE B, then the parties agree to
----------
negotiate in good faith in order to appropriately adjust the fees payable by
4MCA hereunder and/or the scheduled times and/or hours required to be worked by
Crew members hereunder, as applicable.
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39. EXECUTION OF LEASE
------------------
4MCA covenants to use all good faith efforts to agree upon and execute the
Lease. The Lease shall contain all terms and conditions necessary to enable
4MCA to fulfil its obligations to MTVA hereunder. If the Lease has not been
fully executed and delivered by 4MCA and the Landlord by February 15, 1995, then
this Agreement shall terminate as of such date and neither 4MCA nor MTVA shall
have any further obligations or liability hereunder. 4MCA shall notify MTVA on
or before February 16, 1995 as to the execution and delivery of the Lease by all
parties. 4MCA's failure to so notify MTVA shall be deemed notice to MTVA that
the Lease has not been executed and delivered by all parties.
40. EMPLOYMENT CONTRACTS AND OTHER EMPLOYMENT DOCUMENTATION
-------------------------------------------------------
40.1. 4MCA shall provide to MTVA copies of all employment
agreements or other documentation reflecting offers of employment or similar
agreements (collectively, "Employment Documents") prior to the Actual
Commencement Date (or prior to the Pre-Commencement Date, if applicable). 4MCA
shall provide to MTVA copies of any and all modifications and/or amendments to
the Employment Documents within 15 business days after the date of such
modification and/or amendment. In connection with any Crew member that is
employed by 4MCA after the Actual Commencement Date, 4MCA shall provide to MTVA
copies of the Employment Documents in connection with such Crew member within 15
days after the commencement of such Crew member's employment.
40.2. In addition to any other rights of MTVA hereunder, MTVA
shall have the right to approve, with respect to any and all existing Crew
members: (a) any renewal of any such Crew member's employment, and (b) any
changes in (i) the duration of any such Crew member's employment or (ii) any
such Crew member's severance arrangement. If 4MCA fails to obtain MTVA's
approval with respect to a particular existing Crew member pursuant to the prior
sentence and MTVA subsequently requests the removal by 4MCA of such Crew member,
then 4MCA shall remove such Crew member, and if such removal leads 4MCA to
terminate such Crew member's employment, then 4MCA shall assume all costs
incurred in connection therewith, including severance, if applicable.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"MTVA"
MTV ASIA LDC
By: /s/ Scott Davis
_________________________________
Scott Davis
Title: Executive Vice President
"4MCA"
FOUR MEDIA COMPANY ASIA PTE LTD.
By: /s/ Robert T. Walston
_________________________________
Robert T. Walston
Title: Managing Director
43
<PAGE>
SCHEDULES
---------
A PREMISES
B CREWS AND BUDGETED CREW COSTS
B-1 HOLIDAYS
B-2 OVERTIME
C SERVICES
D INITIAL EQUIPMENT, INSTALLATION AND WIRING
EXPENDITURE BUDGET
E [INTENTIONALLY OMITTED]
F FLOOR PLAN
G PRE-COMMENCEMENT FEE SCHEDULE
H TECHNICAL SPECIFICATIONS
I-1 FORM OF GUARANTY FOR VIACOM INTERNATIONAL INC.
I-2 FORM OF GUARANTY FOR FOUR MEDIA COMPANY
44
<PAGE>
EXHIBIT 10.5
SCHEDULE I-1
FORM OF GUARANTY TO BE EXECUTED
BY VIACOM INTERNATIONAL INC.
<PAGE>
GUARANTY
This Guaranty ("Guaranty") is entered into as of February 13, 1995 by
Viacom International Inc., a Delaware corporation ("Guarantor"), in favor of
Four Media Company Asia PTE Ltd. ("4MCA").
In order to induce 4MCA to enter into that certain Agreement dated as of
February 13, 1995 (the "Agreement") between 4MCA and MTV Asia LDC ("MTVA"),
which is a wholly-owned subsidiary of (a) Guarantor and (b) MTV Asia Development
Company, Inc. (a wholly-owned subsidiary of Guarantor), and for other valuable
consideration, receipt of which is hereby acknowledged, Guarantor hereby
irrevocably, absolutely, unconditionally guarantees to 4MCA the prompt, punctual
and full performance and payment when due of any and all obligations of MTVA
under the Agreement and the prompt performance of any and all of the terms,
conditions and covenants agreed to be performed by MTVA under the Agreement,
irrespective of the value, genuineness, validity, regularity or enforceability
of the Agreement or any term or provision of any other document relating to the
obligations or any other circumstance, to the extent any of the foregoing might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor (all such obligations, terms, conditions and covenants are hereinafter
collectively referred to as the "Obligations"). The term "Obligations" is used
herein in its most comprehensive sense and includes any and all advances, debts,
obligations and liabilities heretofore, now or hereafter made, incurred or
created under the Agreement, whether voluntary or involuntary and whether due or
not due, absolute or contingent, liquidated or unliquidated, determined or
undetermined, and whether recovery upon any of the Obligations may be or
hereafter become unenforceable.
This Guaranty has been duly authorized, executed and delivered by Guarantor
and constitutes the legal, valid and binding obligation of Guarantor,
enforceable in accordance with its terms.
Guarantor hereby expressly waives diligence, presentment, demand for
payment, protest, benefit of any statute of limitations affecting MTVA's
liability under the Agreement or the enforcement of this Guaranty, benefit of
any act or omission by 4MCA which directly or indirectly results in or aids the
discharge of MTVA or any of the Obligations by operation of law or otherwise,
all notices whatsoever, including, without limitation, notice of acceptance of
this Guaranty and the incurring of the Obligations, and any requirement that
4MCA exhaust any right, power or remedy or proceed against MTVA or any other
guarantor, or any other security for, or any other party liable for, any of the
Obligations. Guarantor specifically agrees that it will not be necessary or
required, and Guarantor shall not be entitled to require, that 4MCA file suit or
proceed to assert or obtain a claim for personal judgment against MTVA for the
Obligations or to make any effort at collection or enforcement of the
Obligations from MTVA or file suit or proceed to obtain or assert a claim for
personal judgment against any other guarantor or other party liable for the
Obligations or make any effort at collection of the
1
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Obligations from any such party or exercise or assert any other right or remedy
to which 4MCA is or may be entitled in connection with the Obligations or any
guaranty thereof or assert or file any claim against the assets of MTVA or any
other person liable for this Guaranty or the Obligations, or any part thereof,
before or as a condition of enforcing the liability of Guarantor under this
Guaranty.
Until payment and performance in full of the Obligations, Guarantor waives
any right to enforce any remedy of 4MCA which 4MCA now or may hereafter have
against MTVA, any other guarantor or any other person and waives any benefit
of, or any right to participation in, any security whatsoever now or hereafter
held by 4MCA. Guarantor waives any defense Guarantor may have based upon any
election of remedies by 4MCA which impairs or nullifies guarantor's subrogation
rights or Guarantor's rights to proceed against MTVA for reimbursement,
including, without limitation, any loss of rights Guarantor may suffer by reason
of any rights, powers or remedies of MTVA in connection with any state, federal
or foreign anti-deficiency laws or any other laws limiting, qualifying or
discharging the Obligations.
The liability of Guarantor hereunder shall be reinstated and revived and
the rights of 4MCA shall continue if and to the extent that for any reason any
payment or performance by or on behalf of MTVA is rescinded or must be otherwise
restored by 4MCA, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, all as though such amount had not been paid or such
act had not been performed. The determination as to whether any such payment or
performance must be rescinded or restored shall be made by 4MCA in this sole
discretion; provided, however, that if 4MCA chooses to contest any such matter
at the request of Guarantor, Guarantor agrees to indemnify and hold harmless
4MCA with respect to all costs (including, without limitation, attorneys' fees)
of such litigation.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, this Guaranty has been duly executed and delivered by
Guarantor as of the date first above written.
VIACOM INTERNATIONAL INC., a Delaware
corporation
By: /s/ Mike Fricklas
---------------------------------
Its: Senior Vice President and
---------------------------
Deputy General Counsel
2
<PAGE>
EXHIBIT 10.6
SCHEDULE I-2
FORM OF GUARANTY TO BE EXECUTED
BY FOUR MEDIA COMPANY
<PAGE>
GUARANTY
This Guaranty ("Guaranty") is entered into as of February 13, 1995 by Four
Media Company, a Delaware corporation ("Guarantor"), in favor of MTV Asia LDC
("MTVA").
In order to induce MTVA to enter into that certain Agreement dated as of
February 13, 1995 (the "Agreement") between MTVA and Four Media Company Asia PTE
Ltd. ("4MCA"), a wholly-owned subsidiary of Guarantor, and for other valuable
consideration, receipt of which is hereby acknowledged, Guarantor hereby
irrevocably, absolutely and unconditionally guarantees to MTVA the prompt,
punctual and full performance and payment when due of any and all obligations of
4MCA under the Agreement and the prompt performance of any and all of the terms,
conditions and covenants agreed to be performed by 4MCA under the Agreement,
irrespective of the value, genuineness, validity, regularity or enforceability
of the Agreement or any term or provision of any other document relating to the
Obligations or any other circumstance, to the extent any of the foregoing might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor (all such obligations, terms, conditions and covenants are
hereinafter collectively referred to as the "Obligations"). The term
"Obligations" is used herein in its most comprehensive sense and includes any
and all advances, debts, obligations and liabilities heretofore, now or
hereafter made, incurred or created under the Agreement, whether voluntary or
involuntary and whether due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined, and whether recovery upon any of the
Obligations may be or hereafter become unenforceable.
This Guaranty has been duly authorized, executed and delivered by Guarantor
and constitutes the legal, valid and binding obligation of Guarantor,
enforceable in accordance with its terms.
Guarantor hereby expressly waives diligence, presentment, demand for
payment, protest, benefit of any statute of limitations affecting 4MCA's
liability under the Agreement or the enforcement of this Guaranty, benefit of
any act or omission by MTVA which directly or indirectly results in or aids the
discharge of 4MCA or any of the Obligations by operation of law or otherwise,
all notices whatsoever, including, without limitation, notice of acceptance of
this Guaranty and the incurring of the Obligations, and any requirement that
MTVA exhaust any right, power or remedy or proceed against 4MCA or any other
guarantor, or any other security for, or any other party liable for, any of the
Obligations. Guarantor specifically agrees that it will not be necessary or
required, and Guarantor shall not be entitled to require, that MTVA file suit or
proceed to assert or obtain a claim for personal judgment against 4MCA for the
Obligations or to make any effort at collection or enforcement of the
Obligations from 4MCA or file suit or proceed to obtain or assert a claim for
personal judgment against any other guarantor or other party liable for the
Obligations or make any effort at collection of the Obligations from any such
party or exercise or assert any other right or remedy to which MTVA is or may be
entitled in connection with the Obligations or any guaranty thereof or assert or
file
1
<PAGE>
any claim against the assets of 4MCA or any other person liable for this
Guaranty or the Obligations, or any part thereof, before or as a condition of
enforcing the liability of Guarantor under this Guaranty.
Until payment and performance in full of the Obligations, Guarantor waives
any right to enforce any remedy of MTVA which MTVA now or may hereafter have
against 4MCA, any other guarantor or any other person and waives any benefit of,
or any right to participation in, any security whatsoever now or hereafter held
by MTVA. Guarantor waives any defense Guarantor may have based upon any election
of remedies by MTVA which impairs or nullifies Guarantor's subrogation rights or
Guarantor's rights to proceed against 4MCA for reimbursement, including, without
limitation, any loss of rights Guarantor may suffer by reason of any rights,
powers or remedies of 4MCA in connection with any state, federal or foreign
anti-deficiency laws or any other laws limiting, qualifying or discharging the
Obligations.
The liability of Guarantor hereunder shall be reinstated and revived and
the rights of MTVA shall continue if and to the extent that for any reason any
payment or performance by or on behalf of 4MCA is rescinded or must be otherwise
restored by MTVA, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, all as though such amount had not been paid or such
act had not been performed. The determination as to whether any such payment or
performance must be rescinded or restored shall be made by MTVA in its sole
discretion; provided, however, that if MTVA chooses to contest any such matter
at the request of Guarantor, Guarantor agrees to indemnify and hold harmless
MTVA with respect to all costs (including, without limitation, attorneys' fees)
of such litigation.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, this Guaranty has been duly executed and delivered by
Guarantor as of the date first above written.
FOUR MEDIA COMPANY, a Delaware
corporation
By: /s/ Robert T. Walston
------------------------------------
Its: CEO
--------------------------------
<PAGE>
EXHIBIT 10.7
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 an asterisk indicating
deleted information.
<PAGE>
EXHIBIT 10.7
FOUR MEDIA COMPANY ASIA PTE. LTD.
30 CHOON GUAN STREET
REPUBLIC OF SINGAPORE 079809
January 18, 1996
MTV Asia LDC
Treasury Building
8 Shenton Way #31-01
Republic of Singapore
Re: Agreement dated as of February 13, 1995 between MTV Asia LDC and
Four Media Company Asia PTE Ltd. (the "Agreement") -- Adjustment
--------------------------
of Annual Base Fee
---------------------------
Ladies and Gentlemen:
With the completion of the reconciliation of budgeted vs. actual expenses
described in Schedule B (Crews and Budgeted Crew Costs) and Schedule D (Initial
Equipment, Installation and Wiring Expenditure Budget) of the Agreement, as
modified by the letter dated May 16, 1995, the following adjustments will be
made in the Annual Base Fee (all amounts are in US dollars, except as provided
in Paragraph 4 below):
1. The actual aggregate Crew costs are less than the aggregate Budgeted
Crew Costs as follows:
Budget *
Actual *
Variance *
Section 4.1(b)(iv)
Adjustment Amount *
The actual aggregate Initial Equipment, Installation and Wiring
Expenditures are less than Initial Equipment, Installation and Wiring
Expenditure Budget as follows:
Budget *
Actual *
Variance *
Section 6.4(a)
Adjustment Amount *
-----------
Aggregate Adjustment Amount *
Sections 4.1(b)(v) and 6.4(a))
<PAGE>
MTV Asia LDC
January 18, 1996
Page 2
2. In accordance with Sections 4.1(b)(iv) and 6.4(a) of the Agreement,
the Annual Base Fee shall be reduced by * each year. As a result, the Monthly
Base Fee shall be reduced by * each month. The adjustment shall be applied
retroactively to all payments of the Monthly Base Fee since April 15, 1995, the
Commencement Date of the Agreement. In addition, the adjusted Annual Base Fee
will serve as the basis for the annual increase referenced in Section 6.1(b) of
the Agreement.
3. The actual start-up and build-out costs exceed the Initial Build-Out
Budget as follows:
Budget *
Actual *
Variance *
In accordance with Section 6.4(b) of the Agreement, the Annual Base Fee
shall not be adjusted as a result of this variance.
4. A one-time charge in the amount of * (Singapore Dollars) will be
billed to reimburse Four Media Company Asia for costs associated with certain
employees.
5. All capitalized terms used and not defined in this letter shall have
the meanings set forth in the Agreement.
6. Retroactive adjustments shall be reflected in the form of a Credit
Memo directed to your attention. Future monthly contractual billing will be at
the adjusted amount.
7. Appropriate adjustments for Pre-commencement Fees will be calculated
and submitted under cover of a separate letter.
Yours truly,
FOUR MEDIA COMPANY ASIA PTE LTD.
By: /s/ Robert Walston
-------------------------------------
Robert T. Walston, Managing Director
[SIGNATURES CONTINUED ON PAGE 3]
<PAGE>
MTV Asia LDC
January 18, 1996
Page 3
ACCEPTED AND AGREED:
MTV ASIA LDC
By: /s/ Scott Davis
--------------------------
Its: Executive VP
-----------------------
cc: Ms. Laurie Goldstein
<PAGE>
EXHIBIT 10.8
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 an asterisk indicating
deleted information.
<PAGE>
EXHIBIT 10.8
UPLINK-PLAYBACK SERVICE
DEAL MEMORANDUM
This Deal Memorandum, when signed by the undersigned representatives of
their respective companies, will confirm the material deal points agreed upon
during discussions for an agreement between Compact Video Services, Inc. (CVS) a
California Corporation, and TVN Entertainment Corporation a Delaware Corporation
("TVN"), whereby CVS will design, construct, operate and maintain a fully
staffed and equipped, co-located Uplink/Playback facility for TVN's seventeen
(17) channel national direct broadcast satellite ("DBS") television programming
services ("TVN Service") which will be transmitted for TVN by CVS to AT&T's
Telstar 303 satellite. After execution of this document, the mutual objective of
the parties is the preparation and execution, as soon as reasonably feasible, of
a more definitive agreement, which will include these essential terms and such
other terms, conditions, representations and warranties as the parties and their
respective counsel mutually determine are necessary and appropriate to further
evidence the parties' agreement. These deal points are as follows:
1. CVS will provide the following services for TVN:
(a) CVS will design and construct a Tape Playback facility for the TVN
Service, in accordance with a diagram to be mutually agreed upon within thirty
(30) days from the date hereof, and then attached hereto as Exhibit A, and
utilizing the tape/playback equipment set forth on an Exhibit B which will be
mutually agreed upon within seven (7) days from the date hereafter starting with
the July equipment list previously supplied by CVS to TVN. Thereafter, CVS will
operate and maintain this facility for TVN utilizing the CVS staff set forth on
Exhibit C, such that it will remain fully operational on a 24 hour per day,
seven (7) day a week basis, for the term hereof, providing uninterrupted video
and audio service on each of TVN's seventeen (17) channels. CVS is aware that
TVN intends for up to twelve (12) of such channels to offer pay-per-view ("PPV")
----
movies or services requiring 24 hour tape playback, the master tapes for which
it shall be TVN's sole responsibility to license and arrange to make available
to CVS for playback purposes, and for up to ten (10) of such channels to offer
----
"basic" or "pay tier" television programs, which CVS will uplink as
"turn-around" services provided that the total number of channels will not
exceed 17 channels. It shall be TVN's sole responsibility to obtain such license
rights as are required to turn-around/retransmit such basic and/or pay tier
services.
Page 1
<PAGE>
(b) CVS will design and construct an Uplink facility co-located with the
Playback facility in accordance with the diagram to be mutually agreed upon
within thirty (30) days from the date hereof, and then attached hereto as
Exhibit D, utilizing the uplink equipment and the encryption, decryption and
control computer equipment set forth on an Exhibit E which will also be mutually
agreed upon within thirty (30) days from the date hereof, starting with the July
6, 1989 equipment list previously supplied by CVS to TVN. Thereafter, CVS will
operate and maintain this facility for TVN utilizing the CVS staff set forth on
Exhibit C, such that it will remain fully operational on a 24 hour per day,
seven (7) day a week basis for the term hereof, providing uninterrupted video
and audio service on each of TVN's seventeen (17) channels. It shall be TVN's
sole responsibility to provide access to seventeen (17) specified transponders
on AT&T's Telestar 303 for CVS transmission of the TVN Service.
(c) TVN may subsequently request that certain Exhibit B and E equipment be
replaced with upgraded or newer equipment, the incremental increased cost for
which shall be paid by TVN.
(d) CVS will handle all shipping and receiving of tape material from TVN's
suppliers and TVN will be responsible for providing the blank tape stock and for
payment of all shipping costs. CVS will check all incoming tapes for both
technical quality and timing, and in the event CVS finds quality problems, it
will report such problems to TVN management. CVS will provide all the required
duplication for backup tapes, and will provide TVN with post-production editing
services, as required, to produce/post produce interstitial/promotional material
for air. CVS will provide TVN with post-production services of up to 40 hours
per week at no additional cost. CVS will provide the full range of technical
operations support required to playback and uplink the TVN programs to the
satellite, including consumer type receiving equipment to monitor each channel.
CVS will provide office space and parking at the facilities for eight (8) TVN
employees. At least half of such offices shall be available to TVN on or before
January 15, 1990. CVS will keep a daily log for each channel of playback
service, with these logs being forwarded to TVN on a weekly basis. CVS will
provide space to library the program tape and interstitial/promotional tape
material for the TVN Service per Exhibit A. CVS will provide appropriate
security facilities and personnel, including a tape vault and log-in, log-out
requirements, for the storage, transfer (dubbing) and playback of all tape (or
otherwise recorded) materials, including licensed materials, provided by or on
behalf of TVN. It shall be TVN's responsibility to obtain required
authorization/clearance for CVS to perform the backup tape transfer/dubbing
function, and CVS shall cause these functions to be performed under conditions
which assure there will be no unauthorized duplication of tapes.
Page 2
<PAGE>
(e) The CVS post-production services at said facility provided to TVN will
include:
(1) A dedicated edit bay with a full time chyron capable editor; 40 hrs
per week
(2) A dedicated chyron machine in the edit bay
(3) two channels of ADO
(4) Tape stock to be provided to TVN at CVS cost plus * and
(5) Buy-back of used TVN tape stock at * of the price paid for same by
TVN to CVS
(f) CVS will provide TVN with use of CVS uplinks for Beta Tests by TVN, on
a pre-scheduled basis (i.e., if time is available on an uplink(s) when requested
by TVN, CVS will provide that uplink(s) time to TVN).
(g) TVN will provide CVS with program schedules/logs seven (7) days prior
to scheduled air date, however, CVS will use its best efforts to accommodate any
schedule changes provided CVS by TVN. TVN will handle formal contact with the
studios and/or production houses for access to available promotional materials,
and TVN will be responsible for developing the promotional and interstitial
material to be used by CVS to "build" the tape materials for air. TVN will
designate an individual(s) to serve as the designated interface person(s)
between TVN administrative operation and the CVS technical support operation, so
that ongoing operational and technical matters can be handled efficiently and
expeditiously.
2. CVS agrees that after the signing of this Agreement by the parties,
upon the delivery by TVN to CVS of the Security L/C (as in hereinafter defined
in Exhibit H), and a mutually agreeable AT&T "MTL" Letter, CVS will order and
obtain all equipment reflected in Exhibit K and CVS will continue to timely
order and obtain the balance of the equipment as it is agreed upon. AT&T and TVN
may review the CVS equipment purchase order records to verify the orders. CVS
agrees that the initial staffing for the Playback and Uplink facilities shall be
as shown on Exhibit C, but in any event it shall be CVS' continuing
responsibility at all times to provide sufficient staff so as to provide the
referenced services as described, so that all transmissions to the satellite
meet or exceed the specifications and standards set forth in Exhibit F. These
facilities shall be co-located at 2813 & 2901 W. Alameda Avenue, Burbank, CA,
and CVS shall provide access for AT&T to interface its Info I ANI System. TVN
recognizes that CVS may offer time to other CVS customers on the back-up uplink
and downlinks provided for TVN, however, CVS represents and warrants to TVN that
TVN will be and at all times shall remain the primary customer for the
facilities assigned to TVN, with the right to priority use of these services at
these facilities, and services provided to other customers will not interfere
with the operation or transmission of, or be directly competitive with, TVN's
programming services.
Page 3
<PAGE>
Directly competitive shall mean that such facilities cannot be offered for use
to customers as part of a pay-per-view service for the TVRO market. It is
expressly understood that CVS shall be free to use CVS' facilities not assigned
to TVN without any limitation whatsoever.
3. (a) CVS represents and warrants that the TVN transmissions from these
Uplink-Playback facilities shall meet or exceed the audio and video quality
standards and specifications set forth on Exhibit F, and that construction of
the referenced facilities and services shall be (i) substantially completed and
operational for on-air testing by TVN on March 1, 1990 (the "On-Air Test Date")
and (ii) fully complete and operational for the commencement of the TVN service
on all seventeen (17) of TVN's leased transponders on T303 on or before March
30, 1990 (the "Operational Date"). CVS represents and warrants to TVN that CVS
has full and complete authority to provide these facilities and services at
CVS's Burbank location as above described.
(b) TVN has previously requested during the prior 40 days that CVS not
contact the various equipment vendors regarding this TVN project and CVS
represents and warrants that it has not done so. CVS and TVN agree that the
referenced paragraph 3(a) completion dates are predicated on the availability of
said equipment from vendors in time sufficient to enable CVS to meet the
required completion dates. If not, the completion dates and the Exhibit J
Liquidated Damages Provisions shall be extended accordingly. CVS agrees that it
will advise TVN immediately, upon learning that any of the ordered equipment is
not available for delivery in time sufficient to enable CVS to meet required
completion dates.
(c) If the referenced facilities and services are not completed and fully
operational as represented, the parties agree that CVS shall pay to TVN as
liquidated damages the sums reflected on Exhibit J for each day of delay, the
parties having recognized and agreed that it would be extremely difficult to
forecast or determine in advance the amount of damage caused TVN by such delay.
The foregoing sum represents the parties best effort to fairly compensate TVN
for such unanticipated delay. CVS shall have no liability to TVN if such delays
are caused by Acts of God, or acts of third parties which are beyond the
reasonable control of CVS.
(d) If CVS shall have provided TVN with confirmation that the requisite
equipment has been ordered by CVS as agreed hereinabove, TVN shall pay to CVS
the sum of * (the "TVN Front End Payment"), payable as follows:
pursuant to paragraph 3(e) hereof AT&T shall deliver to CVS, on behalf of TVN,
* in cash on December 1, 1989, and * on each of January 1, 1990,
February 15, 1990 and the date when the facilities and services are completed
and fully operational per paragraph 3(a).
Page 4
<PAGE>
(e) TVN represents and warrants that AT&T is now holding TVN's *
irrevocable letter of credit issued by Citibank in favor of AT&T, which is
secured by a * Citibank Time Deposit owned by TVN. TVN and AT&T agree
(the latter by separate letter) that said * letter of credit will be
utilized for purposes of providing CVS with (1) the * Security L/C
required to fulfill TVN's Termination Liability obligation pursuant to Exhibit H
hereof and (2) the * required to be paid by TVN to CVS pursuant to
paragraph 3(d). AT&T and TVN will jointly facilitate the timely issuance by
Citibank (or other bank of similar representation) of said * Security
L/C in favor of CVS. AT&T and TVN will jointly facilitate the delivery to CVS of
each required * payment, using * of the * TVN Time
Deposit for this purpose. Each such * payment shall be paid to CVS on the
agreed dates upon CVS having provided to TVN and AT&T documentary proof that CVS
has ordered the equipment which CVS is required to order per Exhibits B and E
hereunder.
4. The term for CVS' provision of these services and TVN's obligation to
accept service shall be five (5) years, commencing March 30, 1990 and continuing
through March 29, 1995.
5. TVN shall pay to CVS monthly, as the price for the services provided to
TVN by CVS hereunder, the sums set forth on Exhibit I hereto. The *
payable to CVS by TVN as above provided in paragraph 3(d), when paid, shall be
deemed a prepayment by TVN of the first monthly payment due, one half of the
next four (4) monthly payments due, and a partial payment for the sixth monthly
payment due per Exhibit I. Thereafter, CVS shall bill TVN for services rendered
on the first of each month, with payment due from TVN to CVS thirty (30) days
thereafter. There shall be no additional charges for CVS' services specified
herein to TVN; any additional services requested by TVN from CVS from time to
time (i.e., occasional uplink services for special events or feeds) shall be
billed separately by CVS to TVN at the completion of service, and due net 30
days from date of invoice, at the lower of the rates set forth on Exhibit G, or
the CVS rates in effect at the time of the request for other major users of such
CVS services.
Page 5
<PAGE>
6. (a) In the event TVN fails to make any payment when due, including,
-------------------------------------------------------------------
without limitation to deliver the Security L/C or the TVN Front End Payment,
- ----------------------------------------------------------------------------
provided CVS has timely performed in accordance with this Deal Memorandum, CVS
- ------------------------------------------------------------------------------
shall give TVN written notice of any such default, and TVN will have seven (7)
- ------------------------------------------------------------------------------
days within which to cure such default. If TVN fails to timely cure such
- ------------------------------------------------------------------------
default, CVS may terminate this Agreement (without any further obligation or
- ----------------------------------------------------------------------------
liability on its part), with termination liability as specified in Exhibit H,
- -----------------------------------------------------------------------------
which termination liability shall be shared between CVS, TVN and American
- -------------------------------------------------------------------------
Telephone & Telegraph, Inc. ("AT&T") as specified on Exhibit H. AT&T's and TVN's
- ---------------------------------------------------------------
respective termination liabilities shall be referred to as the Minimum
Termination Liability ("MTL"). If CVS willfully or through gross negligence
--------------------------------------------
fails to provide service as required hereunder, TVN shall give CVS written
- ---------------------------
notice of any such default and CVS shall have seven (7) days within which to
cure such default. If CVS fails to timely cure such default, TVN may terminate
this Agreement without further payment to CVS and TVN shall have the right to
procure these services elsewhere. Nothing contained in this paragraph shall be
construed as limiting the audio and video standards and specifications with
which CVS must comply per paragraph 3(a).
(b) In the event TVN elects to terminate this Deal Memorandum under
circumstances where CVS is not in default of its obligations hereunder, then, if
TVN shall, within 120 days of such termination, obtain the CVS provided
services (or any portion thereof) from another Uplink/Playback facility, TVN
shall pay to CVS, as liquidated damages and not as penalty, it being agreed that
it would be extremely difficult to forecast or determine in advance the amount
of damage caused CVS by such termination, an amount equal to the present
value, as of the date of such termination, of all unpaid monthly service charges
from TVN to CVS through the end of the term of this Deal Memorandum, discounted
to present value at the rate of prime at Citibank plus 2%.
7. All announcements or press releases to the industry or otherwise
----------------------------------------------------------------
concerning the subject matter of this Deal Memorandum and the transactions
- --------------------------------------------------------------------------
documented herein shall require the approval of both companies. TVN shall have
- ------------------------------------------------------------------------------
the right to issue the initial, mutually approved, announcement or release.
- ---------------------------------------------------------------------------
Copies of all such announcements may be shown to each company's senior executive
- --------------------------------------------------------------------------------
officers and directors prior to release.
- ----------------------------------------
Page 6
<PAGE>
8. The parties agree to proceed expeditiously and in good faith to prepare
and execute a mutually acceptable written agreement continuing provisions in
accord with the foregoing, together with such other terms, conditions,
warranties and representations as each may determine are reasonably necessary
and appropriate to protect its respective interests.
9. CVS shall hold in confidence and not disclose to third parties any of
the planning, financial and/or operating information provided to CVS by TVN in
connection with the negotiation of this Deal Memorandum, any subsequent
agreement and the continued performance by CVS hereunder.
10. (a) The parties acknowledge and agree that, in providing these playback
and uplink satellite transmission services, CVS will be required to operate in
accordance with the practices and procedures of the carrier, AT&T, from whom
satellite transponder space or other transmission facilities are utilized, and
to the extent that such carrier's practices and procedures are inconsistent with
the terms hereof, such practices and procedures will control CVS's performance
hereunder.
(b) The satellite uplink transmission services to be provided by CVS
hereunder are subject to regulation by the Federal Communications Commission
(the "FCC"). Throughout the term hereof, CVS will obtain and keep current all
licenses, permits and other approvals of the FCC or other governmental bodies
required for CVS to perform such services for TVN. CVS's performance hereunder
will at all times comply with the rules and regulations of the FCC, and any
other applicable rules and regulations, and to the extent they are inconsistent
with the terms hereof, such rules and regulations will control CVS's performance
hereunder.
(c) CVS will obtain and keep current all licenses, permits, and other
approvals required under local (city, county, state) and federal law,
regulation, or ordinance for CVS to perform the services above described.
Page 7
<PAGE>
11. If TVN has provided for a Minimum Termination Liability or Guarantee
in form mutually acceptable to CVS and TVN for the encryption, decryption and
computer control equipment, set forth on Exhibit E, to be used for these
purposes at the Uplink facility, CVS will purchase said equipment and TVN agrees
that it will buy back all such equipment from CVS on or before June 30, 1990 at
the price paid by CVS for this equipment, and if such payment is not tendered to
CVS on or before June 30, 1990, then such nonpayment will become an event of
default subject to the MTL payment described in Exhibit H. TVN represents, to
CVS that the cost to CVS of such encryption-decryption computer control
equipment shall not exceed * . TVN may arrange for the purchase and
delivery of such equipment to CVS for use at the Uplink facility. In either
event, CVS shall be responsible for installation of such equipment and
instruction of its personnel in its use and TVN shall be responsible for all
loading and operation of the control computer and all subscriber decoder box
authorization and deauthorization. CVS will, at its expense, provide rack space
in the Exhibit A facility for this equipment, provide sufficient electrical
power to operate such equipment, and will install and operate such equipment in
accordance with TVN's instruction. CVS will coordinate electrical telephone line
and modem installment, and the charges therefor shall be included in the price
to be paid by TVN per Exhibit I. CVS shall not be liable for any failure of
TVN's encryption or decryption equipment, nor the cost of parts or third party
service, freight or any other costs as may be incurred in maintaining this
equipment. At the direction of TVN, CVS will obtain service for this equipment
and will invoice TVN for all costs incurred thereby. TVN may add, remove or
change this equipment as TVN deems necessary. All such changes by TVN at CVS
facilities must be made while accompanied by CVS personnel so as not to cause
service outages or other interference with CVS operations and provided those
changes do not impair CVS's ability to perform under this agreement. CVS will
provide TVN and its representatives and contractors with access at all
reasonable times to these Uplink and/or Playback facilities and equipment on
reasonable notice, and as may be required in emergencies.
12. CVS will perform all routine and emergency maintenance on the
Playback/Uplink facilities and all Exhibit B and E equipment on a 24 hours per
day, 7 days per week basis in order to maintain uninterrupted service per
Exhibit F.
Page 8
<PAGE>
12. EXCEPT AS EXPRESSLY SET FORTH IN THIS DEAL MEMORANDUM, CVS MAKES NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED AS TO THE CONDITION OF ANY
FACILITY CONSTRUCTED PURSUANT TO THIS DEAL MEMORANDUM OR ANY EQUIPMENT USED IN
CONNECTION THEREWITH, OR THE MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE THEREOF. CVS AND TVN SHALL SHARE IN ANY APPLICABLE MANUFACTURER
WARRANTIES FOR THE BENEFIT OF THE PARTIES TO THE EXTENT OF THEIR RESPECTIVE
INTERESTS, BUT ONLY TO THE EXTENT THAT SUCH MANUFACTURER WARRANTIES PERMIT.
13. (a) Payment of the charges set forth in this Deal Memorandum shall
entitle TVN to receive only the services expressly described herein, and all
other extra, or additional service which TVN may wish to obtain from CVS shall
only be supplied to TVN as provided in paragraph 5.
(b) TVN agrees to indemnify, defend and hold CVS harmless from and against
any and all losses, liabilities, costs and expenses, including reasonable
attorneys' fees, arising out of or related to claims made against CVS based on
(i) the content of TVN's programming, including without limitation any claim of
libel, slander or infringement of copyright, (ii) injury to person or damage to
property as a result of the activity of TVN employees or agents within their
area of responsibility, as provided hereunder. This indemnification shall
survive any termination of this Deal Memorandum, unless and until replaced by a
subsequent agreement.
(c) CVS agrees to indemnify, defend and hold TVN harmless from and against
any and all losses, liabilities, damages, costs and expenses, including
reasonable attorneys' fees, arising out of or relating to claims made against
TVN based on (i) injury to person or damage to property as a result of the
activities of and services provided by CVS or its agents and employees
hereunder, including without limitation their actions in designing,
constructing, operating and/or maintaining these facilities and equipment, and
in playing back, transmitting, and uplinking TVN's programming, (ii)
interference by the playback transmission or uplinking activities of CVS with a
third party's transmission, (iii) the failure of CVS to transmit TVN programming
in accordance with this Deal Memorandum, in which case CVS' indemnity obligation
shall be limited to a refund of a prorated part of the monthly service payment
made by TVN for the period during which such transmission failure shall have
occurred, and (iv) CVS' failure to maintain necessary licenses. This
indemnification shall survive any termination of this Deal Memorandum, unless
and until replaced with a subsequent agreement.
Page 9
<PAGE>
(d) Neither party shall be subject to consequential or indirect damages or
payment for lost profits as a result of any acts, omissions, or other
performance or non-performance requirements under this agreement, except as may
result from the gross negligence of a party in performing hereunder.
(e) Neither party has any authority to make any statement, representation,
warranty or other commitment on behalf of the other party, and this Deal
Memorandum does not create any agency, employment, partnership, joint venture
or similar relationship between the parties.
(f) Neither party may assign any rights or obligations under this Agreement
without the prior written consent of the other party, such consent not to be
unreasonably withheld, provided, however, that either party may assign its
rights hereunder without the consent of the other party to any entity with which
it any be merged or consolidated or which acquires all or substantially all of
its assets, provided that such entity agrees in writing to assume all of the
obligations of TVN or CVS as the case any be, hereunder.
(g) All notices which either party may be required or desire to give to the
other party hereunder shall be given by personal service or by registered or
certified mail, return receipt requested, addressed to:
For TVN: Stuart Z. Levin
President and
Chief Executive Officer
TVN Entertainment Corporation
100 Wilshire Blvd., Suite 1650
Santa Monica, CA 90401
with a copy to: Arthur Fields
Senior Executive V.P.
For CVS: John H. Sabin
Senior V.P. - CFO
William H. Tillson
V.P. of Satellite &
Distribution Services
Compact Video Services, Inc.
2813 W. Alameda Avenue
Burbank, CA 91505
with a copy to: Zellermayer Gratch & Jacobs, P.C.
950 Third Avenue
11th Floor
New York, NY 10022
Attention: Andrew B. Reinhard
Page 10
<PAGE>
at the current address for each party. Either party may change the person or
address for notice upon prior written notification to the other party.
(h) No waiver of any breach hereof shall constitute a waiver of any other
breach of the same or any other provision hereof, and no waiver shall be
effective unless made in writing. In the event that any provisions hereof shall
be judged illegal or unenforceable by a court of competent jurisdiction, such
provision shall be severed and the entire agreement shall not fail but the
balance of this agreement shall continue in full force and effect.
(i) TVN and CVS acknowledge that they have read this entire Deal
Memorandum and that it constitutes the entire agreement and understanding
between the parties hereto, and supersedes any and all prior or contemporaneous
oral or written communications or negotiations with respect to the subject
matter hereof, all of which are merged herein. This Deal Memorandum shall not be
modified, amended or any way altered except by an instrument in writing signed
by both of the parties hereto.
(j) This Deal Memorandum shall be construed and enforced in accordance
with the internal laws of the State of California. Any dispute between the
parties regarding the interpretation, enforcement or alleged breach hereof shall
be resolved by arbitration by the parties before the American Arbitration
Association in Los Angeles, California in accordance with their Commercial
Arbitration Rules, each party to bear the arbitrators expenses equally.
COMPACT VIDEO SERVICES, INC. TVN ENTERTAINMENT CORPORATION
By: /s/ WILLIAM H. TILLSON By: /s/ STUART Z. LEVIN
------------------------------ ------------------------------
William H. Tillson Stuart Z. Levin
Title: V.P. Satellite and Title: President and CEO
--------------------------- ---------------------------
Distribution Services
Date: 11-20-89 Date: 11-20-89
---------------------------- ---------------------------
Page 11
<PAGE>
[LETTERHEAD OF COMPACT VIDEO]
January 3, 1990
TVN Entertainment Corporation
100 Wilshire Boulevard
Santa Monica, CA 90401
Gentlemen:
We refer to the Deal Memorandum, dated November 20, 1989 ("the Agreement"),
between you ("TVN") and us ("Compact") and, more particularly, to Section 3(a)
thereof which provides, among other things, for an "On-Air Test Date" and an
"Operational Date" (as those terms are defined therein) of March 1 and March 30,
1990, respectively. This letter will confirm the agreement between TVN and
Compact that such dates will be extended by that number of days elapsing from
December 1, 1989 (including that day) to the day on which the first installment
of the TVN Front End Payment (as that term is defined in the Agreement) is made
(including that day), subject to the force majeure provisions of Section 3(c) of
----- -------
the Agreement. The TVN Front End Payment (as that term is defined in the
Agreement) shall be payable by TVN to CVS as follows: * on January 3,
1990, and * on each of February 1, 1990, March 1, 1990 and the date when
the facilities and services are completed and fully operational per paragraph
3(a) of the agreement as above amended.
The foregoing notwithstanding, Compact will use its best efforts to meet the
originally scheduled On-Air Test Date and Operational Date provided in the
Agreement.
Very truly yours,
COMPACT VIDEO SERVICES, INC
By: /s/ William H. Tillson
-------------------------------
Name: William H. Tillson
-----------------------------
Title: V.P. Satellite and
----------------------------
Distribution Services
----------------------------
ACCEPTED AND AGREED TO:
TVN ENTERTAINMENT CORPORATION
By: /s/ Stuart Z. Levin
------------------------------
Name: Stuart Z. Levin
----------------------------
Title: CEO
---------------------------
<PAGE>
[LETTERHEAD OF COMPACT VIDEO SERVICES, INC.]
April 17, 1990
Mr. Stu Levin
TVN Entertainment Corporation
100 Wilshire Boulevard
Santa Monica, CA 90401
Dear Stu:
This letter, when signed by TVN Entertainment Corporation (TVN) and Compact
Video Services, Inc. (CVS) will serve to amend our "Uplink - Playback Service
Deal Memorandum" dated November 20, 1989.
1. Schedule of Services -
April 15 - May 15, 1990 and thereafter - One promotional (barker) channel shall
- --------------------------------------
be transmitted by CVS to T303 24 hours per day (unencrypted). There will be
occasional testing by TVN on one or two T303 transponders of encrypted
transmission during this period.
May 15 - June 15, 1990 - Testing by TVN utilizing playback, encryption and
- ----------------------
transmission services on up to 15 T303 transponders concurrently, Monday through
Friday, eight hours per day.
June 15 - August 1, 1990 - Full testing of entire system on all 15 T303
- ------------------------
transponders 24 hours per day.
August 1, 1990 on - Full transmission.
- -----------------
2. Schedule of Charges -
April 15 - May 14, 1990 - No charge
- -----------------------
May 15 - June 14, 1990 - *
- ----------------------
June 1, 1990 - * (if facility is completed and fully operational -
- ------------
balance of TVN Front End Payment)
<PAGE>
Mr. Stu Levin
April 17, 1990
Page Two
June 15 - July 31, 1990 - * * in cash, payable in two
- -----------------------
installments of * each due on June 15, 1990 and July 15, 1990 and
* by application of the * TVN Front End Payment)
- ----------------------------------------------------------------
August 1 - August 31, 1990 - *
- --------------------------
September 1, 1990 - End of Term - As provided in Exhibit I, beginning with the
- -------------------------------
balance of year one.
Commencing August 1, 1990 and provided TVN has secured its equity financing of
- ------------------------------------------------------------------------------
* the balance of the * TVN Front End Payment *
- ---------------------------------------------------------------------------
shall be applied against the monthly charges to the extent of * per
- --------------------------------------------------------------------------
month until it has been exhausted. Should TVN have failed to secure its
- -----------------------------------------------------------------------
financing by August 1, 1990, then the * per month application of the
- ---------------------------------------------------------------------------
balance of the * TVN Front End Payment will be postponed until such
- ----------------------------------------------------------------------------
time as the financing has been secured.
- ---------------------------------------
3. TVN's $1 million L/C will be reduced by * commencing June 15, 1993
unless TVN has secured its financing. Provided TVN has secured its financing,
TVN's L/C will be reduced by * per month commencing June 15, 1991, as
provided in the Deal Memorandum. If at any time after June 15, 1991 TVN secures
its financing, TVN's L/C will be reduced, pro rata from that month until June 1,
1995, so that an equal amount is reduced each month and the L/C is released in
full by June, 1995.
4. The "Operational Date" for paragraph 3(a) of the "Uplink - Playback Service
Deal Memorandum" shall be June 1, 1990. The term of this Agreement (per
paragraph 4) and the monthly payment schedule as provided in Exhibit I shall be
June 15, 1990 through June 14, 1995.
5. CVS shall provide TVN with 40 hours of on-line editing per week commencing
April 15, 1990, until the edit facility reflected in paragraph 1(e)(1) of the
"Uplink - Playback Service Deal Memorandum" is completed.
<PAGE>
Mr. Stu Levin
April 17, 1990
Page Three
6. Concurrently with the execution of this amendment, CVS shall provide TVN
with written confirmation from CVS' lessor, in form acceptable to TVN, that said
lessor has provided a firm commitment to lease CVS the equipment described in
Exhibit B to the Deal Memorandum required by CVS for CVS to perform its
obligations reflected in the "Uplink - Playback Service Deal Memorandum".
7. Except as expressly provided above, and in the parties January 3, 1990
letter amendment, all other terms, conditions and provisions of the referenced
Deal Memorandum shall remain in full force and effect.
Agreed and Accepted:
COMPACT VIDEO SERVICES, INC.
By: /s/ WILLIAM H. TILLSON
-----------------------------------
Name: WILLIAM H. TILLSON
---------------------------------
Title: V.P. Satellite and Distribution
--------------------------------
Agreed and Accepted:
TVN ENTERTAINMENT CORPORATION
By: /s/ ARTHUR FIELDS
-----------------------------------
Name: ARTHUR FIELDS
---------------------------------
Title: Senior Executive Vice President
--------------------------------
<PAGE>
[LETTERHEAD OF COMPACT VIDEO SERVICES, INC.]
June 14, 1990
Mr. Stu Levin
TVN Entertainment Corporation
100 Wilshire Boulevard
Santa Monica, CA 90401
Dear Stu:
This letter, when signed by TVN Entertainment Corporation (TVN) and Compact
Video Services, Inc. (CVS) will serve to amend our Agreement of April 17, 1990.
1. Schedule of Services -
April 15 - May 15, 1990 and thereafter - One promotional (barker) channel shall
- --------------------------------------
be transmitted by CVS to T303 24 hours per day (unencrypted). There will be
occasional testing by TVN on one or two T303 transponders of encrypted
transmission during this period.
May 15 - June 15, 1990 - 1" playback of one promotional (barker) channel and
- ----------------------
transmission of this playback to 2 T303 transponders 24 hours per day seven (7)
days per week. One channel will be encrypted and one channel will be
unencrypted. Purchase by CVS of additional equipment for TVN Encryption Center
as reflected in the attached.
June 15 - August 1, 1990 - Continuation of May 15 - June 15, 1990 playback and
- ------------------------
transmission services, including testing on additional transponders. Full
testing of playback and transmission and of the entire system on all 15 T303
transponders 24 hours per day commencing on July 1, 1990.
August 1, 1990 on - Full transmission.
- -----------------
2. Schedule of Charges -
April 15 - May 14, 1990 - No charge
- -----------------------
May 15 - June 14, 1990 - * (due June 20, 1990).
- ----------------------
<PAGE>
Mr. Stu Levin
June 14, 1990
Page Two
June 15 - July 31, 1990 - * (payable in three installments of *
- -----------------------
due on July 15, 1990, * due August 1, 1990, and * due on August
15, 1990 provided the facility is completed and fully operational)
August 1 - August 31, 1990 - * (due August 31, 1990)
- --------------------------
September 1, 1990 - End of Term - As provided in Exhibit I, beginning with the
- -------------------------------
balance of year one.
Commencing August 1, 1990 and provided TVN has secured its equity financing of
* the TVN Front End Payment * shall be applied against the
monthly charges to the extent of * per month until it has been exhausted.
Should TVN have failed to secure its financing by August 1, 1990, then the
* per month application of the balance of the * TVN Front End
Payment will be postponed until such time as the financing has been secured.
3. TVN's $1 million L/C will be reduced by * commencing June 15, 1993
unless TVN has secured its financing. Provided TVN has secured its financing,
TVN's L/C will be reduced by * per month commencing June 15, 1991, as
provided in the Deal Memorandum. If at any time after June 15, 1991 TVN secures
its financing, TVN's L/C will be reduced, pro rata from that month until June 1,
1995, so that an equal amount is reduced each month and the L/C is released in
full by June, 1995.
4. The "Operational Date" for paragraph 3(a) of the "Uplink - Playback Service
Deal Memorandum" shall be July 1, 1990. The term of this Agreement (per
paragraph 4) and the monthly payment schedule as provided in Exhibit I shall be
June 15, 1990 through June 14, 1995.
5. CVS shall provide TVN with 40 hours of on-line editing per week commencing
April 15, 1990, until the edit facility reflected in paragraph 1(e)(1) of the
"Uplink - Playback Service Deal Memorandum" is completed.
<PAGE>
Mr. Stu Levin
June 14, 1990
Page Three
6. Except as expressly provided above, and in the parties January 3, 1990
letter amendment, all other terms, conditions and provisions of the referenced
Deal Memorandum shall remain in full force and effect.
Agreed and Accepted:
COMPACT VIDEO SERVICES, INC.
By: /s/ WILLIAM H. TILLSON
-----------------------------------
Name: WILLIAM H. TILLSON
---------------------------------
Title: V.P. Satellite and
--------------------------------
Distribution Services
Agreed and Accepted:
TVN ENTERTAINMENT CORPORATION
By: /s/ ARTHUR FIELDS
-----------------------------------
Name: ARTHUR FIELDS
---------------------------------
Title: Senior Executive Vice President
--------------------------------
<PAGE>
AMENDMENT TO UPLINK-PLAYBACK
----------------------------
SERVICE DEAL MEMORANDUM
-----------------------
THIS AMENDMENT TO UPLINK PLAYBACK SERVICE DEAL MEMORANDUM ("Amendment"),
dated as of March 3, 1993, is made by COMPACT VIDEO SERVICES, INC., a
California corporation ("CVS"), and TVN ENTERTAINMENT CORPORATION, a Delaware
corporation ("TVN").
WHEREAS, CVS and TVN entered into a Uplink-Playback Service Deal Memorandum
dated November 20, 1989 (the "Deal Memorandum"); and
WHEREAS, CVS and TVN desire to amend the Deal Memorandum in certain
respects, all as set forth in this Amendment.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. Definitions. All capitalized terms used herein and not defined herein
-----------
shall have the meanings ascribed to them in the Deal Memorandum.
2. Revised Monthly Charge. Exhibit I to the Deal Memorandum is hereby
---------------------- ---------
revised to provide that the price for services provided by CVS to TVN under the
Deal Memorandum shall be * per month from January 1, 1993 until the end
of the term.
3. Letter of Credit. TVN and CVS acknowledge that TVN owes CVS *
----------------
for services rendered by CVS to TVN under the Deal Memorandum through December
31, 1992 (collectively, the "Amount"). Notwithstanding anything to the contrary
contained in the Deal Memorandum, TVN agrees that CVS shall be entitled,
immediately upon
<PAGE>
execution hereof, to draw on the full amount of the Security L/C in
consideration of execution of this Amendment and in full satisfaction of TVN's
obligation to pay the Amount and any other amounts owed to CVS for services
rendered by CVS to TVN under the Deal Memorandum through December 31, 1992. The
parties acknowledge that as of the date hereof, the amount of the Security L/C
is *
4. Level of Service. The Deal Memorandum is hereby amended to provide as
----------------
follows:
(i) The services CVS is to provide to TVN under the Deal Memorandum shall
extend only to twelve (12) channels. TVN may utilize up to twelve (12) of such
channels to offer pay-per-view movies or services requiring 24 hour tape
playback, the master tapes for which shall be TVN's sole responsibility to
license and arrange to make available to CVS for playback purposes, and up to
ten (10) of such channels for "basic" or "pay tier" television programs, which
CVS will uplink as "turn-around" services, provided that the total number of
channels shall not exceed twelve (12) and CVS will not be required to uplink
more than eleven (11) channels; and
(ii) The staffing levels and equipment complements that CVS is required to
utilize and maintain during the term of the Deal Memorandum shall be the
staffing levels and equipment complements being maintained and utilized by CVS
in connection with its services to TVN under the Deal Memorandum as of January
1, 1993. Notwithstanding the foregoing, should TVN default under the Deal
-2-
<PAGE>
Memorandum, as amended hereby, and fail to cure such default as provided in the
Deal Memorandum, as amended hereby, and CVS elects to terminate its agreement
with TVN, and AT&T elects to assume TVN's obligations under the Deal Memorandum
in connection with satisfying AT&T's share of the Minimum Termination
Liability, then the service levels that CVS shall be required to provide during
the remainder of the term of the Deal Memorandum, as amended hereby, shall be as
set forth in the Deal Memorandum prior to this Amendment.
5. Elimination of Tape Stock Buy Back Provision. Section 1(e) of the Deal
--------------------------------------------
Memorandum is hereby amended to: (i) delete Section 1(e)(5) thereof; (ii) to
delete the word "and" at the end of Section 1(e)(4); (iii) to replace the comma
at the end of Section 1(e)(4) with a period; and (iv) to add the phrase ",and"
at the end of Section 1(e)(3).
6. Right of First Refusal. The Deal Memorandum is hereby amended to add
----------------------
thereto a Section 13(l), which shall read as follows:
"(l) In the event TVN proposes to enter into any agreement or
arrangement with any person other than CVS relating to the providing of
any uplink and/or playback services (the "Services") to TVN for any
period commencing after the end of the term of this Deal Memorandum,
TVN shall deliver a notice (the "First Refusal Notice") in writing to
CVS stating TVN's bona fide intention to enter into such an agreement
or relationship and the terms of the proposed agreement or
relationship. For a period of fifteen (15) days after its receipt of
the First Refusal Notice, CVS shall have the option ("Option") to
enter into an agreement or arrangement with TVN to provide such
Services on terms
-3-
<PAGE>
substantially equivalent to those set forth in the First Refusal
Notice. If CVS wishes to exercise the Option it shall give TVN written
notice within the fifteen (15) day term of the Option and, within
fifteen (15) days after the date CVS gives notice of its exercise of
the Option, CVS and TVN shall enter into a written agreement pursuant
to which CVS shall provide TVN with, and TVN will accept, the Services
specified in the First Refusal Notice on substantially the terms set
forth in the First Refusal Notice. If CVS does not exercise the
Option, at any time within thirty (30) days from the expiration of the
term of the Option (the "Agreement Period"), TVN may enter into an
agreement pursuant to which a third person shall render the Services
specified in the First Refusal Notice to TVN on the terms, or on terms
which are not materially less favorable to TVN than those, set forth
in the First Refusal Notice. If TVN does not enter into such an
agreement within the Agreement Period, TVN shall be required again to
comply with the provisions of this Section 13(l) before it may enter
into any agreement or arrangement for the provision of any Services to
TVN. Notwithstanding anything to the contrary contained herein,
Section 13(d) hereof shall not apply to this Section 13(l). This
Section 13(l) shall survive any termination or expiration of this Deal
Memorandum, unless and until replaced by a subsequent agreement."
7. Option to Extend. The Deal Memorandum is hereby amended to add
----------------
thereto a Section 13(m), which shall read as follows:
"(m) CVS hereby grants TVN an option to extend the term of this
Deal Memorandum to June 15, 1997. In order to exercise such option,
TVN must provide CVS with written notice of the extension of the term
of this Deal Memorandum to June 15, 1997 not later than December 31,
1994."
8. Long Form Agreement. The Deal Memorandum is hereby amended to delete
-------------------
therefrom Section 8 thereof.
9. Deal Memorandum in Full Force. The Deal Memorandum, as
-----------------------------
-4-
<PAGE>
amended by this Amendment, shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
date first written above.
COMPACT VIDEO SERVICES, INC. TVN ENTERTAINMENT CORPORATION
By: /s/ John Sabin By: /s/ Stuart Levin
---------------------------- ----------------------------
Title: Sr. Vice President Title: President
------------------------- -------------------------
Date: 3-3-93 Date: 3-3-93
-------------------------- --------------------------
The undersigned hereby acknowledges and accepts the foregoing amendment to
the Deal Memorandum dated November 20, 1989 between Compact Video Services,
Inc., a California corporation ("CVS"), and TVN Entertainment Corporation, a
Delaware corporation, and agrees that such amendment, to the best of its
knowledge and information, does not impair or affect the undersigned's
obligation to CVS pursuant to the Minimum Termination Liability (as such term is
defined in the Deal Memorandum) to CVS in accordance with the provisions of the
Deal Memorandum.
AMERICAN TELEPHONE & TELEGRAPH, INC.
By: /s/ TED CORUS
---------------------------------
Name: TED CORUS
-------------------------------
Title: MARKETING MANAGER -
------------------------------
SKYNET(R) TRANSPONDER SERVICES
<PAGE>
EXHIBIT 10.9
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 an asterisk indicating
deleted information.
<PAGE>
EXHIBIT 10.9
[LETTERHEAD OF FOUR MEDIA COMPANY]
March 18, 1996
Mr. Stuart Z. Levin
President and Chief Executive Officer
TVN Entertainment Corporation
2901 West Alameda Avenue
Burbank, CA 91505
RE: Amendment to Uplink Playback Service Deal Memorandum
Dear Mr. Levin:
1 . Purpose. The purpose of this letter agreement is to set forth the amended
-------
terms and conditions of the Uplink Playback Service Deal Memorandum dated
November 20, 1989, as amended from time to time (collectively the "Deal
Memo"), between TVN Entertainment Corporation ("TVN") and Four Media
Company and its predecessor in interest (collectively "4MC"), under which
4MC will continue to provide the uplink, playback and other services
described in the Deal Memo ("U/P Services").
2. Extended Term. The "Extended Term" of the Deal Memo is August 1, 1995
-------- ----
through January 31, 1998; however, at any time after July 31, 1997 if TVN
reduces the number of programming channels being serviced by 4MC, the
Monthly Charges and Monthly Payments shall be reduced pro-rata. Provided
that TVN is not in default of any of its obligations to 4MC, TVN shall have
the option to renew on the same terms for two (2) additional consecutive
six (6) month periods. TVN must exercise each such option by written notice
to 4MC at least 60 days prior to the expiration of the Extended Term and
each such renewal term.
3. Services. The U/P Services shall continue to be provided by 4MC to TVN
--------
during the Extended Term and any renewal term at levels and in the manner
currently being provided during for TVN. Upon TVN's request, the U/P
Services may be modified to accommodate TVN's strategic and business
objectives, as mutually agreed by the parties.
<PAGE>
[SECOND PAGE LETTERHEAD OF FOUR MEDIA COMPANY]
The monthly payments for the U/P Services after March 1, 1996 are reduced as set
forth below:
<TABLE>
<CAPTION>
FOR U/P Services Monthly Charge Monthly Payments
Rendered During For U/P Services Required by TVN
---------------- ---------------- ----------------
<S> <C> <C>
August 1995 * *
September 1995 * *
October 1995 * *
November 1995 * *
December 1995 * *
January 1996 * *
February 1996 * *
March 1996 * *
April 1996 * *
May 1996 * *
June 1996 * *
July 1996 * *
August 1996 * *
September 1996 * *
October 1996 * *
November 1996 * *
December 1996 * *
Monthly thereafter through
the end of the Extended Term
or any Renewal Term
</TABLE>
Commencing in June, 1996, the U/P Services shall include uplink of TVN'S
digital signals to five (5) transponders on the Galaxy IX Satellite.
Monthly Charges for the period February, 1996 through July, 1996 are to be
paid by TVN one-half on or before the 15th of each month, and one-half on
or before the 30th or 31st of the month for which the service was billed.
5. Arrearages. TVN acknowledges that as of July 31, 1995 it was in arrears in
----------
the amount of $1,150,000 for U/P Services provided by 4MC to TVN pursuant
to the Deal Memo ("Past Arrearage"). Payments made by TVN during August,
September, October, November and December 1995 and January 1996, were
applied by 4MC to the Past Arrearage, leaving a Past Arrearage balance
of $1,050,000 as of January 31, 1996. 4MC acknowledges receipt of the
Monthly Payments Required for the period August 95 - January 96, as well as
a partial payment of $75,000 for February 1996. All payments received after
January 31, 1996 will be first applied to the current Monthly Charges and
then to the Past Arrearage.
<PAGE>
[SECOND PAGE LETTERHEAD OF FOUR MEDIA COMPANY]
The monthly payments required for Past Arrearage and Extended Term Arrearage are
as follows:
<TABLE>
<CAPTION>
Cumulative
Past Extended
Month Arrearage Term Arrearage Total Arrearage
- ------------------ --------- -------------- ----------------
<S> <C> <C> <C>
August 1995 * * *
September 1995 * * *
October 1995 * * *
November 1995 * * *
December 1995 * * *
January 1996 * * *
February 1996 * * *
March 1996 * * *
April 1996 * * *
May 1996 * * *
June 1996 * * *
July 1996 * * *
</TABLE>
6. Arrearage Deferral. In consideration for TVN's agreement to the terms and
------------------
conditions specified herein, 4MC will defer payment on the Total Arrearage
to future periods. TVN acknowledges that if all payments are made by TVN as
required pursuant to the Payment Schedule in paragraph 4, the Total
Arrearage will be $2,700,000 as of August 1 , 1996.* The Total Arrearage
plus interest at 8% shall be paid by TVN in 36 equal monthly installments
of $84,047.87 each on or before the 3Oth of each month, beginning June 30,
1996. Any unpaid balance of this Arrearage shall be immediately payable
upon the expiration or termination of this Amendment.
7. Other Services. TVN acknowledges the receipt of 4MC invoices totaling
--------------
* for additional, non U/P Services rendered outside the Deal Memo
during periods prior to August 1, 1995. As additional consideration for
TVN's agreement to the terms and conditions specified herein, *
* * In addition, 4MC has invoiced TVN the
sum of * for non-U/P services rendered outside the Deal Memo from
August 1, 1995 to February 29, 1996. TVN will review such invoices and
within two (2) days immediately following the signing of this Amendment,
the parties will arrive at a mutually agreed figure for what TVN owes 4MC
for such invoices; that figure shall be added to the * owed, and
this total sum will be payable with interest at * in 24 equal monthly
installments due on or before the 30th of each month, beginning March 30,
1996. Any unpaid balance owed thereon shall be immediately payable upon the
expiration or termination of this Amendment.
*Excluding deduction of the June and July 1996 installment payments per
paragraph 6.
<PAGE>
[SECOND PAGE LETTERHEAD OF FOUR MEDIA COMPANY]
8. Payment for Other Playback-Uplink Services. TVN owes 4MC an additional
------------------------------------------
* for other, non-Deal Memo playback-uplink services, for PandAmerica
and Adultvision. TVN agrees to bring this amount current by paying one-half
(1/2) of this sum upon execution of this Amendment, and the other half on
April 30, 1996.
9. Other Services at Cost. As additional consideration for TVN's agreement to
----------------------
the terms and conditions specified herein, TVN shall have the right, during
the Extended Term, to utilize all unbooked 4MC services, facilities and
equipment at 4MC (Burbank), including 4MC personnel, facilities, editing,
chyron, duplication and sound and other services available from 4MC, to be
billed only for 4MC's actual costs for labor and stock.
10. Payment for Other Services. The amounts due for any other services provided
------- ------------------
by 4MC after the date hereof, including but not limited to, sound,
duplication, editing (exceeding the 40 hours per week to which TVN is
entitled per the Deal Memo) and equipment rental, will be paid within 30
days of invoice date.
11. Default. Non-payment of any Monies when due will constitute default by
-------
TVN and TVN shall be subject to immediate termination of services unless
paid by TVN within three (3) business days after receiving written notice
from 4MC.
12. Complete Agreement. The Deal Memo amended by this agreement, constitutes
------------------
the entire Agreement between the parties with respect to the subject matter
hereof and it supersedes any other communications between the parties which
shall be of no force or effect.
13. Interpretation. All Capitalized terms used, but not defined, herein shall
--------------
have meanings as may be ascribed to them in the Deal Memo.
14. Future Digital Services. The parties anticipate that during a sixty (60)
------ ----------------
day period after this Deal Memo Amendment is signed, they will negotiate in
good faith the terms and conditions of a new comprehensive Uplink/Playback
Services Agreement for 4MC to provide combined analog/digital uplink,
playback and other services for TVN's existing analog C-Band satellite
business and for the digital cable and satellite business which TVN has
announced it will launch from Hughes' Galaxy IX satellite during mid-1996.
TVN will provide 4MC with the system specifications TVN requires for the
analog/digital uplink and playback services it will require to transmit
digital and analog programming to the cable and satellite industries. 4MC
will then provide a complete system plan meeting such specifications, with
diagrams, schematics and lists of required equipment, software, and
personnel, and quote a total monthly fee for providing all such services,
including playback and uplink of TVN's digitally compressed programming
(video, audio, and data) to the Galaxy IX satellite, which 4MC estimates
will cost approximately * per month. 4MC will spend up
to * as needed to effect the design, delivery, installation
and commissioning of the new TVN digital programming service, including
acquisition of digital servers and all related equipment (excluding digital
encoders) needed to store, playback and uplink at least 40
<PAGE>
[SECOND PAGE LETTERHEAD OF FOUR MEDIA COMPANY]
digital servers and all related equipment (excluding digital encoders)
needed to store, playback and uplink at least 40 channels of digitized TVN
programming, with no increase in such monthly fee. If the parties are
unable to arrive at such comprehensive Agreement for 4MC to provide these
services for TVN on mutually agreed terms during such sixty (60) day period
either party may terminate such negotiations upon ten (10) days written
notice to the other party, but this Amendment shall nonetheless remain in
full force and effect.
If you agree with the forgoing terms please so indicate by executing this letter
in the space provided below and returning one original document to 4MC at your
earliest convenience.
Very truly yours,
/s/ John H. Donlon
John H. Donlon
President
Agreed to this 21 day of March, 1996
TVN ENTERTAINMENT CORPORATION
By: /s/ Stuart Levin
---------------------------------
Title: Pres. CEO
-------------------------------
<PAGE>
EXHIBIT 10.10
AGREEMENT
for term loan facilities
for
FOUR MEDIA COMPANY ASIA PTE LTD
Lee & Lee
5 Shenton Way, Level 19
UIC Building
Singapore 0106
<PAGE>
CONTENTS
--------
<TABLE>
<CAPTION>
Clause Heading Page No
- ------ ------- -------
<S> <C> <C>
1. Purpose and Definitions 1
2. The Term Loan Facility 5
3. Fees and Expenses 8
4. Payments and Accounts 9
5. Representations and Warranties 10
6. Undertakings 13
7. Conditions 17
8. Events of Default 18
9. Default Interest and Indemnities 21
10. Unlawfulness and Increased Costs 21
11. Set-off 23
12. Assignment 23
13. Notices and Other Matters 23
14. Law 24
<CAPTION>
Schedule
- --------
<S> <C> <C>
1. Form of Drawdown Notice 25
2. List of Documents and Evidence 26
</TABLE>
<PAGE>
THIS AGREEMENT is dated 22 February 1995 and made BETWEEN
(1) FOUR MEDIA COMPANY ASIA PTE LTD a company incorporated in Singapore
and having its registered office at 9 Penang Road #13-21, Park Mall,
Singapore 0923 (the "BORROWER"); and
(2) THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED a company
incorporated in Hong Kong and having a place of business at 40-A
Orchard Road #01-00, MacDonald House, Singapore 0923 (the "Bank").
BY WHICH IT IS AGREED as follows: -
1. PURPOSE AND DEFINITIONS
-----------------------
1.01 This Agreement sets out the terms and conditions upon and subject to
which the Bank agrees to make available to the Borrower loan and
other facilities to be used in connection with the financing and/or
refinancing of the acquisition of certain machinery and equipment.
1.02 In this Agreement, unless the context otherwise requires:-
"Advance" means the drawing or (as the case may be) drawings of
Tranche 1 made by the Borrower pursuant to Clause 2;
"Assignment" means a first legal assignment (in form and substance
satisfactory to the Bank) executed or to be executed by the Borrower
of all its present and future rights title and interest in and to
all moneys from time to time payable under or contemplated by the
MTV Contract by way of security for the performance of the
Borrower's obligations under this Agreement;
"Bank" includes the successors in title and assigns of the Bank;
"Banking Day" means a day (other than Saturday or Sunday or a public
holiday) on which banks are open for business generally in
Singapore;
"Cancellation Date" has the meaning ascribed thereto in the MTV
Contract;
"Cancellation Option" has the meaning ascribed thereto in the MTV
Contract;
"Confirmation Date" means the Actual Commencement Date (as defined
in the MTV Contract);
"Debenture" means a first debenture (in form and substance
satisfactory to the Bank) executed or to be executed by the Borrower
over all its assets and undertakings by way of security for the
performance of the Borrower's obligations under this Agreement;
"Deed of Subordination" means a deed of subordination (in form and
substance
<PAGE>
2
satisfactory to the Bank) to be executed by the Guarantor;
"Dollars" and "S$" mean the lawful currency of Singapore and (in respect
of all payments to be made under this Agreement) mean immediately
available and freely transferable funds;
"Drawdown Notice" means the notice substantially in the terms of Schedule
1;
"Drawdown Period" means:
(i) in relation to Tranche 1 the period commencing from the date of
this Agreement and ending on 31 May 1995; and
(ii) in relation to Tranche 2 the period commencing from the
Confirmation Date and ending on 30 June 1995,
or ending on such earlier date (if any) on which the obligations of the
Bank are terminated pursuant to Clause 8.02 or 10;
"Event of Default" means any of the events or circumstances described in
Clause 8.01;
"Facilities" includes the Term Loan Facility;
"First Repayment Date" means the date falling 25 months after the First
Drawdown Date;
"First Drawdown Date" means the date of the first drawdown or utilization
of the Facilities;
"Guarantee" means the guarantee (in form and substance satisfactory to
the Bank) of the Borrower's obligations under this Agreement given or to
be given by the Guarantor in favour of the Bank;
"Guarantor" means Four Media Company, U.S.A. a corporation incorporated
in the state of Delaware, the United States of America with its principal
place of business at 2813 West Alameda Avenue, Burbank, California 91505-
4455, U.S.A.;
"Indebtedness" means any obligation for the payment or repayment of
money, whether present or future, actual or contingent;
"Interest Payment Date" means the last day of an Interest Period;
"Interest Period" means each period for the calculation of interest in
respect of an Advance calculated in accordance with Clause 2.08;
<PAGE>
3
"Machinery and Equipment" means the machinery and equipment in relation
to the provision of production and/or post production facilities to be
financed, inter alia, by the Term Loan Facility;
"MTV Asia LDC" means a company incorporated in Cayman Islands with its
registered office at Caledonian Bank & Trust Limited, P.O. Box 1043,
Grand Cayman, Cayman Islands, B.W.I.;
"MTV Contract" means the contract entered or to be entered into by the
Borrower with MTV Asia LDC under the terms of which the Borrower will,
inter alia, make available to MTV Asia LDC its premises, crew members,
certain equipment and production and/or post-production facilities in
consideration of which MTV Asia LDC will, inter alia, pay to the Borrower
a monthly fee;
"Prime Rate" means the rate of interest from time to time publicly quoted
by the Bank to be its prime rate for loans in Dollars);
"Project Costs" means the aggregate costs of the setting up and
construction of the production and/or post production facilities,
including without limitation, the costs of the Machinery and Equipment,
installation and wiring of the said facilities and any and all start-up
costs in connection with the said facilities;
"Repayment Dates" means the First Repayment Date and each of the 59 dates
falling at successive monthly intervals thereafter;
"Security Documents" means the Assignment, the Debenture, the Guarantee,
the Deed of Subordination and any other document from time to time
executed by way of security for the performance of the Borrower's
obligations under this Agreement;
"Taxes" includes all present and future taxes, levies, imposts, duties,
fees or charges of whatever nature together with interest thereon and
penalties in respect thereof and "Taxation" shall be construed
accordingly;
"Term Loan" means the principal amount owing to the Bank in respect of
the Term Loan Facility at any relevant time;
"Term Loan Facility" means the facility made available by the Bank
pursuant to Clause 2;
"Term Loan Interest Payment Date" means:
(a) in respect of an Advance, the Interest Payment Date; and
(b) in respect of Tranche 2, the Tranche 2 Interest Payment Date;
<PAGE>
4
"Term Loan Interest Period" means:
(a) in respect of an Advance, the Interest Period; and
(b) in respect of Tranche 2, the Tranche 2 Interest Period;
"Termination Date" means the date falling 84 months after the First
Drawdown Date;
"Tranche 1" means that portion of the Term Loan made available to the
Borrower pursuant to Clause 2.01(a) or (as the case may be) the aggregate
principal amount owing to the Bank in respect thereof;
"Tranche 2" means that portion of the Term Loan made available to the
Borrower pursuant to Clause 2.01(b) or (as the case may be) the aggregate
principal amount owing to the Bank in respect thereof;
"Tranche 2 Drawdown Date" means the date, being a Banking Day, on which
Tranche 2 is, or is to be, drawndown;
"Tranche 2 Drawdown Notice" means a notice substantially in the terms of
Schedule 1;
"Tranche 2 Interest Payment Date" means the last day of a Tranche 2
Interest Period;
"Tranche 2 Interest Period" means each period for the calculation of
interest in respect of Tranche 2 calculated in accordance with Clause
2.08; and
"US Dollars" and "US$" mean the lawful currency of the United States of
America and (in respect of all payments to be made under this Agreement)
mean immediately available and freely transferable funds;
"Year 1" means the period commencing from the First Drawdown Date and
ending on the date falling one year from the first Drawdown Date;
"Year 2" means the period commencing from the date falling immediately
after the end of Year 1 and ending on the date falling two years from the
First Drawdown Date;
"Year 3" means the period commencing from the date falling immediately
after the end of Year 2 and ending on the date falling three years from
the First Drawdown Date;
"Year 4" means the period commencing from the date falling immediately
after the end of Year 3 and ending on the date falling four years from
the First
<PAGE>
5
Drawdown Date;
"Year 5" means the period commencing from the date falling immediately
after the end of Year 4 and ending on the date falling five years from
the First Drawdown Date;
"Year 6" means the period commencing from the date falling immediately
after the end of Year 5 and ending on the date falling six years from the
First Drawdown Date;
"Year 7" means the period commencing from the date falling immediately
after the end of Year 6 and ending on the date falling on the Termination
Date.
1.03 Clause headings and the table of contents are inserted for convenience of
reference only and shall be ignored in the interpretation of this
Agreement. In this Agreement, unless the context otherwise requires,
references to Clauses and Schedules are to be construed as references to
clauses of and schedules to, this Agreement and references to this
Agreement include its Schedules, words importing the plural shall include
the singular and vice versa and references to a person shall be construed
as references to an individual, firm, company, corporation,
unincorporated body of persons or any State or any agency thereof and
references to a time of day shall be to Singapore time.
2. THE TERM LOAN FACILITY
----------------------
2.01 The Bank, relying upon the representations and warranties in Clause 5,
agrees to lend to the Borrower in respect of the Term Loan Facility upon
and subject to the terms of this Agreement the principal sum of up to
S$16,950,000 comprising:
(a) Tranche 1 not exceeding the principal sum of S$15,093,000; and
(b) Tranche 2 not exceeding the principal sum of S$1,857,000.
2.02 (a) Subject to the terms and conditions of this Agreement, each Advance
shall be made to the Borrower following receipt by the Bank of a
Drawdown Notice no later than 10 a.m. on the third Banking Day
before the date on which the proposed Advance is intended to be
made. The Drawdown Notice shall be effective on actual receipt by
the Bank and, once given, shall, subject as provided in this
Agreement, be irrevocable.
(b) Subject to the terms and conditions of this Agreement, Tranche 2
shall be made to the Borrower in full following receipt by the Bank
of the Tranche 2 Drawdown Notice no later than 10 a.m. on the third
Banking Day before the proposed Tranche 2 Drawdown Date. The
Tranche 2 Drawdown Notice shall be effective on actual receipt by
the Bank and, once given,
<PAGE>
6
shall, subject as provided in this Agreement, be irrevocable.
2.03 Each Advance and Tranche 2 may only be drawndown on a Banking Day falling
within the Drawdown Period. Each Advance and Tranche 2 shall be used by
the Borrower in connection with the financing or refinancing of the
acquisition of the Machinery and Equipment but the Bank need not check
that it does so.
2.04 No Advance shall be made unless:
(a) each Advance is of a minimum of S$1,000,000;
(b) the applicable Drawdown Notice is accompanied by evidence
satisfactory to the Bank (including, without limitation, such
invoices acceptable to the Agent) confirming the costs of the
relevant part of the Machinery and Equipment; and
(c) the amount of the Advance requested in the applicable Drawdown
Notice is not more than the costs of the relevant part of the
Machinery and Equipment as confirmed pursuant to (b) above.
2.05 (a) Upon receipt of a Drawdown Notice complying with the terms of this
Agreement the Bank shall, subject to the provisions of Clause 7, on
the date specified in the Drawdown Notice make the requested
Advance available to the Borrower on the Drawdown Date in
accordance with Clause 4.02.
(b) Upon receipt of the Tranche 2 Drawdown Notice complying with the
terms of this Agreement the Bank shall, subject to the provisions
of Clause 7, on the date specified in the Tranche 2 Drawdown Notice
make Tranche 2 available to the Borrower on the Tranche 2 Drawdown
Date in accordance with Clause 4.02.
2.06 (a) All or any part of Tranche 1 undrawn at the end of the Drawdown
Period applicable thereto shall thereupon be automatically
cancelled and the Borrower shall pay a cancellation fee calculated
in accordance with the provisions of Clause 2.13.
(b) All or any part of Tranche 2 undrawn at the end of the Drawdown
Period applicable thereto shall thereupon be automatically
cancelled and the Borrower shall pay a cancellation fee calculated
in accordance with the provisions of Clause 2.13.
2.07 (a) Up to but not including the Confirmation Date the Borrower shall
pay interest on each Advance or, as the case may be, Tranche 1 in
respect of each Interest Period relating thereto on each Interest
Payment Date at the rate per annum determined by the Bank to be the
aggregate of (i) three per
<PAGE>
7
cent per annum and (ii) the Prime Rate calculated on a basis of a
year of 365 days.
(b) From and after the Confirmation Date the Borrower shall pay
interest on each Advance or, as the case may be, Tranche 1 in
respect of each Interest Period relating thereto on each Interest
Payment Date at the rate per annum determined by the Bank to be the
aggregate of (i) one point two five per cent. per annum and (ii)
the Prime Rate calculated on a basis of a year of 365 days.
(c) The Borrower shall pay interest on Tranche 2 in respect of each
Tranche 2 Interest Period relating thereto on each Tranche 2
Interest Payment Date at the rate per annum determined by the Bank
to be the aggregate of (i) one point two five per cent. per annum
and (ii) the Prime Rate calculated on a basis of a year of 365
days.
2.08 Every Interest Period and Tranche 2 Interest Period shall be of the
duration of one month but so that:
(a) (i) the first Interest Period in respect of each Advance shall
commence on its Drawdown Date and end on the same day as the
then current Interest Period in respect of Tranche 1 and each
subsequent Interest Period shall commence forthwith upon the
expiry of the previous Interest Period;
(ii) the first Tranche 2 Interest Period shall commence on the
Tranche 2 Drawdown Date and each subsequent Tranche 2 Interest
Period shall commence forthwith upon the expiry of the
previous Tranche 2 Interest Period; and
(b) if the final Interest Period and/or Tranche 2 Interest Period would
otherwise overrun the Termination Date, then such Interest Period
and/or Tranche 2 Interest Period (as the case may be) shall be
abridged so as to end on that date.
2.09 The Borrower shall repay the Term Loan by 60 instalments, one such
instalment to be repaid on each of the Repayment Dates. The principal
amount of each such instalment shall, subject to the provisions of this
Agreement, be S$282,500 or such other lower amount as the Bank may from
time to time agree.
2.10 Upon giving not less than 30 Banking Days' notice to that effect to the
Bank, the Borrower may prepay the Term Loan after the end of the Drawdown
Period in whole or part (being S$250,000 or any larger sum which is an
integral multiple of S$250,000) on any Term Loan Interest Payment Date
upon payment of a prepayment fee at the rate of one per cent. on the
principal amount prepaid together with accrued interest to the date of
prepayment.
<PAGE>
8
2.11 Every notice of prepayment shall be effective only on actual receipt by
the Bank, shall be irrevocable and shall oblige the Borrower to make such
prepayment on the date specified. No amount prepaid may be redrawn and
any amount prepaid pursuant to Clause 2.10 shall be applied in reducing
the repayment instalments under Clause 2.10 in inverse order of their due
dates for payment. The Borrower may not prepay the Term Loan or any part
thereof save as expressly provided in this Agreement.
2.12 The Borrower may by one month's advance notice to that effect to the Bank
(effective only on actual receipt) cancel the Term Loan Facility which
has not been borrowed or requested in a Drawdown Notice or the Tranche 2
Drawdown Notice in whole or in part (being S$250,000 or any larger sum
which is an integral multiple of S$250,000) upon payment of a
cancellation fee of one per cent. of the cancelled amount of the Term
Loan Facility. Any such notice of cancellation, once given, shall be
irrevocable.
3. FEES AND EXPENSES
-----------------
3.01 The Borrower shall pay to the Bank on the date falling at three-monthly
intervals after the date of this Agreement commitment fee at a rate of
0.25 per cent. per annum computed on the daily unutilized amount of the
Term Loan Facility which remain available for drawing under this
Agreement.
3.02 The Borrower shall pay to the Bank on the date falling one year after the
date of this Agreement and on each anniversary thereof a facility fee of
S$3,000 or such other amount as the Bank may at its sole discretion
determine provided that such facility fee shall not exceed the sum of
S$10,000 per year.
3.03 The Borrower shall pay to the Bank on demand: -
(a) all expenses (including legal, printing and out-of-pocket expenses)
incurred by the Bank in connection with the negotiation,
preparation and execution of this Agreement or the Security
Documents and of any amendment or extension of or the granting of
any waiver or consent under this Agreement or the Security
Documents;
(b) all expenses (including legal, printing and out-of-pocket expenses
on a full indemnity basis) incurred by the Bank in connection with
the enforcement of, or preservation of any rights under, this
Agreement and the Security Documents or otherwise in respect of the
moneys owing thereunder together with interest at the respective
rates referred to in Clause 9.01 from the date on which such
expenses were expended to the date of payment (as well after as
before judgment); and
(c) all goods and services, value added and other similar taxes payable
on all
<PAGE>
9
such expenses.
3.04 The Borrower shall pay all stamp, documentary, registration or other like
duties (including any duties payable by the Bank) imposed on or in
connection with this Agreement or the Security Documents and shall
indemnify the Bank against any liability arising by reason of any delay
or omission by the Borrower to pay such duties or taxes.
4. PAYMENTS AND ACCOUNTS
---------------------
4.01 All payments to be made by the Borrower under this Agreement shall be
made in full, without any set-off or counterclaim whatsoever and, subject
as provided in Clause 4.05, free and clear of any deductions or
withholdings, in the currency in which such sum is payable on the due
date to such account as the Bank may specify to the Borrower for this
purpose.
4.02 All sums to be advanced by the Bank to the Borrower under this Agreement
shall be remitted in the currency in which such sum is to be advanced to
such account as the Borrower may specify to the Bank for this purpose.
4.03 When any payment would otherwise be due, or any Interest Period would
otherwise end, on a day which is not a Banking Day, the next following
Banking Day shall be substituted for such day unless such next following
Banking Day falls in the next calendar month in which case the
immediately preceding Banking Day shall be substituted therefor.
4.04 All interest, commissions and other payments of an annual nature under
this Agreement shall accrue from day to day and be calculated on the
basis of actual days elapsed and a 365 day year. Any certificate or
determination of the Bank as to any rate or interest or any other amount
payable under this Agreement shall, in the absence of manifest error, be
conclusive and binding on the Borrower.
4.05 If at any time the Borrower is required to make any deduction or
withholding in respect of Taxes from any payment to the Bank under this
Agreement, the sum due from the Borrower in respect of such payment shall
be increased to the extent necessary to ensure that, after the making of
such deduction or withholding, the Bank receives on due date a net sum
equal to the sum which it would have received had no such deduction or
withholding been required to be made and the Borrower shall indemnify the
Bank against any losses or costs incurred by the Bank by reason of any
failure of the Borrower to make any such deduction or withholding. The
Borrower shall promptly deliver to the Bank any receipts, certificates or
other proof evidencing the amounts (if any) paid or payable in respect of
any deduction or withholding as aforesaid.
4.06 If following any such deduction or withholding as is referred to in
Clause 4.05
<PAGE>
10
from any payment by the Borrower, the Bank shall receive or be granted a
credit against or remission for any Taxes payable by it, the Bank shall,
subject to the Borrower having made any increased payment in accordance
with Clause 4.05 and to the extent that the Bank can do so without
prejudicing the retention of the amount of such credit or remission and
without prejudice to the right of the Bank to obtain any other relief or
allowance which may be available to it, reimburse the Borrower with such
amount as the Bank shall in its absolute discretion certify to be the
proportion of such credit or remission as will leave the Bank (after such
reimbursement) in no worse position that it would have been in had there
been no such deduction or withholding from the payment by the Borrower as
aforesaid.
4.07 The Bank shall maintain an account evidencing the amounts from time to
time lent by, owing to and paid to it under this Agreement. Such account
shall, in the absence of manifest error, be conclusive as to the amount
from time to time owing by the Borrower under this Agreement.
5. REPRESENTATIONS AND WARRANTIES
------------------------------
5.01 The Borrower hereby represents and warrants to the Bank that: -
(a) the Borrower is a limited liability company and the Guarantor is a
corporation duly incorporated and validly existing under the laws
of their respective countries of incorporation with full power and
authority to own their respective properties and assets and to
carry on their respective businesses;
(b) the Borrower has full power and authority to enter into this
Agreement and the Security Documents to which it is a party, to
borrow and incur indebtedness hereunder, to comply with the
provisions of and to perform all its obligations under this
Agreement and the Security Documents to which it is a party and has
taken all necessary corporate and other action to authorize the
borrowing hereunder and the execution, delivery and performance of
this Agreement and the Security Documents to which it is a party;
(c) the Guarantor has full power and capacity to enter into the
Security Documents to which it is a party, to comply with the
provisions thereof and to perform all of its obligations
thereunder;
(d) this Agreement constitutes and the Security Documents when executed
and delivered will constitute, valid and legally binding, direct
and unconditional obligations of the parties thereto respectively;
(e) no Event of Default or event or circumstance which constitutes or
which with the giving of notice or lapse of time and/or
determination of
<PAGE>
11
materiality or other condition would become an Event of Default has
occurred and is continuing;
(f) none of the Borrower and the Guarantor is in breach of or default
under any law or order applicable to it or under any agreement or
other instrument to which it is a party or by which it or any of
its respective assets may be bound or affected or to which any
other person is a party for whom the Borrower or the Guarantor is
responsible by reason of any guarantee, indemnity, law or order;
and no event or omission has occurred which entitles (or may, with
the giving of notice and/or the lapse of time and/or the fulfilment
of any other condition, entitle) any creditor or creditors of the
Borrower or the Guarantor to declare any Indebtedness of any of
them due and payable prior to its specified maturity or to cancel
or terminate any loan or other credit facility or to decline to
make any advances or further advances thereunder;
(g) (i) except as otherwise disclosed to the Bank in writing before
the date of this Agreement, no litigation, arbitration or
administrative proceeding involving a claim of a sum exceeding
US$150,000 before or of any court, tribunal, arbitrator or
governmental authority is presently taking place, pending or
to its knowledge (having made all reasonable enquiries)
threatened against the Guarantor or any of its properties or
assets other than those which, in the opinion of the Bank, are
of a frivolous or vexatious nature;
(ii) no litigation, arbitration or administrative proceeding
involving a claim of a sum exceeding S$500,000 before or of
any court, tribunal, arbitrator or governmental authority is
presently taking place, pending or to its knowledge (having
made all reasonable enquiries) threatened against the Borrower
or any of its properties or assets other than those which, in
the opinion of the Bank, are of a frivolous or vexatious
nature;
(h) all (if any) consents, authorizations, approvals and waivers from
and resolutions of the holders of any class of shares in or from
any of the creditors of, the Borrower or from any other party to
any relevant deed or document or from any governmental or other
authority required by the Borrower or the Guarantor in order for
the Borrower to borrow up to the full amount of the Facilities
and/or to execute, deliver and perform their respective obligations
under this Agreement and the Security Documents have been duly
obtained and passed and are in full force and effect;
(i) neither the execution and delivery of this Agreement or the
Security Documents nor the drawing or utilization by the Borrower
of the full amount of the Facilities hereunder, nor the performance
or observance by the Borrower and the Guarantor of any of their
respective obligations
<PAGE>
12
hereunder will or would: -
(i) conflict with, or result in any breach of or default under,
any provision of any law, order, agreement, instrument,
franchise, concession, licence, permit, liability, obligation
or duty applicable to the Borrower or the Guarantor or by
which they are bound; or
(ii) cause any limit on any of the borrowing, guaranteeing,
charging or other powers of the Borrower or the Guarantor or
any of them (whether imposed by its Memorandum or Articles of
Association or other incorporation documents or by agreement,
instrument or otherwise), or upon any of the powers of the
Board of Directors of the Borrower or the Guarantor to
exercise any of such powers, or any other limit affecting the
Borrower or the Guarantor to be exceeded; or
(iii) create or result in, or (except for the Security Documents)
oblige the Borrower or the Guarantor to create, any lien,
charge, security interest or other encumbrance on the whole
or any part of the Borrower's or the Guarantor's property,
assets or revenues, present or future;
(j) the latest audited balance sheets and profit and loss accounts of
the Borrower and the Guarantor, respectively, delivered to the Bank
have been prepared in accordance with the accounting principles
generally accepted in their respective countries of incorporation
and on the basis of accounting policies consistently applied, and
present fairly and accurately the results of the operations of the
Borrower for the relevant accounting period and the financial
position of the Borrower at the end of the accounting period to
which they relate;
(k) there has been no material adverse change in the business, assets,
liabilities, profits, prospects or condition of the Borrower or the
Guarantor since the date of the accounts referred to in Clause
5.01(j);
(l) the information supplied to the Bank by the Borrower concerning
itself and the Guarantor and all related matters are to the best of
its knowledge and belief (having made all reasonable enquiries)
true and accurate and do not contain any material mis-statement of
fact or omit to state a material fact or any fact necessary to make
any statement contained therein not misleading and all the
forecasts and projections contained therein were made after due and
careful consideration on its part, are based on the best
information available to it and on fair and reasonable assumptions
and are, in its considered opinion, fair and reasonable in the
circumstances prevailing at the time such forecasts and projections
were
<PAGE>
13
made and in the light of the assumptions made, and the Borrower is
not aware at the date of this Agreement of any fact which might
have a material effect on any of the information or on any of such
assumptions or which constitutes a material fact for inclusion in
the information or which might necessitate a material revision to
any of the said forecasts or projections; and
(m) the Borrower is the wholly-owned subsidiary of the Guarantor and
more than 50 per cent. of the issued and paid-up share capital of
the Guarantor is ultimately owned by entities controlled by
Michael Steinhardt (Passport No. ).
5.02 The Borrower hereby represents and warrants to and undertakes with the
Bank that each of the representations and warranties in Clause 5.01 (with
the substitution in Clauses 5.01(j) and (k) of references to the then
most recent audited balance sheets and profit and loss accounts of the
Borrower and the Guarantor, respectively, if those referred to in
paragraphs (j) and (k) as at that date shall not then be the most recent
such accounts) will be true and accurate in all respects (other than any
considered by the Bank not to be material) as though made on each date on
which the Facilities are utilized and each Interest Payment Date with
reference to the facts and circumstances subsisting on each such date.
6. UNDERTAKINGS
------------
6.01 The Borrower hereby undertakes with the Bank from the date of this
Agreement and for so long thereafter as the Term Loan or any other sum
hereunder or under any of the Security Documents remains outstanding: -
(a) that the Borrower shall, and shall procure that the Guarantor
shall, furnish to the Bank annually as soon as possible and in any
event not later than 180 days after the close of their respective
financial years their respective audited financial statements
consisting of a balance sheet as of the close of such respective
financial years and a statement of profit and loss for the period
then ended in accordance with generally accepted accounting
practices in the Borrower's and the Guarantor's respective
countries of incorporation and principles consistently applied and
the Borrower shall also furnish to the Bank such other information
in respect of its financial condition or otherwise as the Bank may
from time to time reasonably require;
(b) that the Borrower will take out and maintain or cause to be taken
out and maintained with such insurance company as may be reasonably
approved by the Bank all risk policies of insurance as the Bank may
from time to time approve, fully insuring the assets of the
Borrower against, inter alia, loss or damage by fire and all other
risks commonly covered with
<PAGE>
14
respect to properties of a similar kind and such policies shall be
in such amounts and shall contain such terms and provision as shall
be approved by the Bank and such terms and provisions shall not be
varied without the prior consent in writing of the Bank and shall
contain standard mortgagee clauses naming the Bank as loss payee
and the Borrower will punctually pay all premia payable in respect
of the said policies of insurances and submit to the Bank receipts
for such payment, and if the Borrower fails to comply with the
provisions of this sub-clause the Bank may at its discretion (but
without any obligation on its part to do so) have such insurance
effected at the cost of the Borrower and all moneys paid by the
Bank in respect of such insurances shall on demand be repaid to the
Bank and until repayment shall be added to the Term Loan and bear
interest accordingly and all other statutory powers of insurance
for the said sum may be exercised by the Bank;
(c) that the Borrower shall not except at the request or with the
consent of the Bank effect or keep on foot any insurance against
any risk in respect of any of the Borrower's assets where any
insurance hereinbefore mentioned has been effected or kept on foot;
(d) that the Borrower and the Guarantor shall duly pay and discharge
all taxes, assessments and governmental charges upon them or
against their respective properties prior to the date on which
penalties become attached thereto other than those in respect of
which the Borrower and/or the Guarantor (as the case may be) is
contesting in good faith;
(e) that the Borrower will carry on and conduct its affairs in a proper
and efficient manner and will keep or cause to be kept all its
properties, assets and plant in a good state of repair and
condition in accordance with good commercial practice (fair wear
and tear excepted);
(f) that the Borrower shall maintain all such consents, authorizations,
approvals, waivers and resolutions as are referred to in Clause
5.01(h), take immediate steps to obtain (and notify immediately the
Bank of the taking of such steps) any others which may become
necessary or advisable for the purposes mentioned in Clause
5.01(h), comply with all conditions and restrictions (if any)
imposed in connection with any of the foregoing and maintain or
accomplish any filing or registration which may be or become
necessary or advisable for such purposes;
(g) that the Borrower shall forthwith notify the Bank in writing of any
such litigation, arbitration or administrative proceeding as is
referred to in Clause 5.01(g) which is brought against the Borrower
or the Guarantor, or any of the respective properties or assets of
any of them, or which, to the Borrower's knowledge, is threatened
and the amount of any relevant contingent liability if such amount
is ascertainable;
<PAGE>
15
(h) that the Borrower will not declare, pay or make any dividend or
other distribution, whether of an income or capital nature and
whether in cash or in specie, in respect of any accounting period
without the prior written consent of the Bank (such consent not to
be unreasonably withheld);
(i) that the Borrower shall not repay or redeem any share capital;
(j) that the Borrower will not (otherwise than pursuant to this
Agreement) create or agree to create or permit to arise any
mortgage, charge, debenture, pledge, lien or other encumbrance
(save for liens arising by operation of law and in the ordinary
course of trading and pledges over its properties, assets and/or
services acquired pursuant to documentary credits opened in the
ordinary course of trading for the purpose of financing acquisition
thereof) over or in respect of any of its present or future
undertaking, properties, assets, rights or revenues, or any part
thereof, including its uncalled capital (if any) for the time
being;
(k) that unless otherwise first agreed in writing by the Bank the
Borrower will not at any time form or acquire any subsidiary or
subscribe or agree to subscribe for any shares of any subsidiary or
make loans or (except in the ordinary course of trading) transfer
any assets or grant any credit to any subsidiary or related
corporation;
(l) that it will procure that unless otherwise first agreed in writing
by the Bank no alteration shall be made to the general nature of
the business of the Borrower as carried on at the date of this
Agreement which would constitute a substantial alteration and no
alteration shall be made to its Memorandum and Articles of
Association relating to its borrowing powers and principal business
activities;
(m) that the Borrower will not cause or suffer itself, to undergo any
reorganization, take-over, reconstruction or amalgamation or any
schemes of compromise or arrangement without the prior written
approval of the Bank;
(n) that (other than pursuant to this Agreement) the Borrower shall not
without the prior written consent of the Bank (such consent not to
be unreasonably withheld) borrow or raise any moneys from any bank
or financial institution or advance moneys or give financial
accommodation exceeding in the aggregate the sum of S$150,000 to
any person;
(o) that the Borrower shall notify the Bank of the occurrence of an
Event of Default or an event or circumstance which constitutes or
which with the giving of notice or lapse of time and/or
determination of materiality or other condition would constitute an
Event of Default or of a material
<PAGE>
16
adverse change in the business, assets or general condition of the
Borrower or the Guarantor which could materially affect the ability
of the Borrower or the Guarantor to perform their respective
obligations under this Agreement and/or the Security Documents;
(p) that the Borrower will ensure that during Year 1 and Year 2 all of
the Borrower's Indebtedness to its Directors and shareholders
(including, without limitation, the Indebtedness amounting to
US$5,762,000) will be subordinated to all amounts owing to the Bank
(both actual and contingent) under this Agreement and the Security
Documents save and except as follows:
(i) a maximum amount of up to S$3,000,000 may be repaid to the
Guarantor in Year 1; and
(ii) a further maximum amount of up to S$3,000,000 may be repaid to
the Guarantor in Year 2.
(q) that the Borrower shall supply immediately on request by the Bank
all information regarding the Borrower's operations, finances and
affairs as may be reasonably required;
(r) that the Borrower shall not except on an arm's length basis and in
the ordinary course of its business as now conducted by it part
with, transfer, sell or otherwise dispose of or attempt to part
with, transfer, sell or otherwise dispose of any of its
undertakings, properties or assets;
(s) that the Borrower shall not permit or suffer to permit any change
of its shareholders and the Guarantor shall not permit or suffer to
permit any change in control of more than 50 per cent. of its
issued and paid-up share capital;
(t) that the Borrower shall not grant issue or extend any guarantee or
indemnity or enter into any other form of contractual undertaking
or arrangement of similar effect in respect of any Indebtedness or
obligations, actual or contingent, of any other person whatsoever
except in the usual and ordinary course of trading as now conducted
by it and its subsidiaries and for the purpose of the carrying on
by it, or the relevant subsidiary, of its business;
(u) that the Borrower will, from the date of this Agreement up to the
Confirmation Date, on a monthly basis, provide to the Bank a
progress report on the setting up of the production and/or post
production facilities and all other salient particulars relating to
the production and/or post production facilities;
<PAGE>
17
(v) that, in the event at any time the Project Costs exceed the
aggregate of (i) the principal amount of the Term Loan; (ii) the
equity injection of S$3,000,000 into the Borrower by the Guarantor
and (iii) the loan from the Guarantor of the principal amount of
the Dollar equivalent of US$5,762,000 if converted at the Bank's
spot rate of exchange on that day, the Borrower will finance, or
will procure that the Guarantor will finance, such excess costs
from funds outside the Facilities; and
(w) that the Borrower will use its best endeavours to ensure that
neither Robert Walston nor Gavin Schutz will leave the employment
of the Borrower and the Guarantor, respectively and Robert Walston
will remain a Director of the Borrower and the Guarantor,
respectively.
6.02 The Borrower undertakes with the Bank that, during the periods set out in
the left column of the schedule below, it will procure that the
respective Gearing Ratio set out in the right column of the schedule
below shall not be exceeded: -
<TABLE>
<CAPTION>
Period Gearing Ratio
------ -------------
<S> <C>
Year 1 2.4:1
Year 2 2.3:1
Year 3 2.2:1
Year 4 1.5:1
Year 5 1.5:1
Year 6 and Year 7 1.1:1
</TABLE>
In this Clause 6.02, "Gearing Ratio" means the ratio of (a) the aggregate
of the Borrower's Indebtedness to banks and financial institutions to
(b) the aggregate of (i) the Borrower's shareholders' loans to the
Borrower; (ii) the Borrower's shareholders' funds and (iii) the
Borrower's retained earnings.
7. CONDITIONS
----------
7.01 The obligation of the Bank:
(a) to make available the Facilities shall be subject to the condition
that the Bank, or its duly authorized representative, shall have
received, no later than five Banking Days before the first
utilization of any of the Facilities the documents and evidence
specified in Schedule 2 in form and substance satisfactory to the
Bank; and
(b) to permit any utilization of the Facilities in Singapore Dollars
shall be subject to the condition that the Monetary Authority of
Singapore shall have given (and not withdrawn) its consent for that
purpose in accordance with MAS Notice 621.
<PAGE>
18
7.02 The obligation of the Bank to comply with any request for utilization of
the Facilities is subject to the further conditions that at the time of
the request for, and at the time of, such utilization: -
(a) the representations and warranties set out in Clause 5.01 (and so
that the representation and warranty in Clause 5.01(j) shall for
this purpose refer to the then latest financial statements
delivered under Clause 6.01(a)) are true and correct on and as of
each such time as if made with respect to the facts and
circumstances existing at such time; and
(b) no Event of Default or event or circumstance which constitutes or
which with the giving of notice or lapse of time and/or
determination of materiality or other condition would constitute an
Event of Default shall have occurred and be continuing or would
result from the proposed utilization of the Facilities.
8. EVENTS OF DEFAULT
-----------------
8.01 Each of the following events shall be an Event of Default:-
(a) if the Borrower fails to pay any sum under this Agreement and/or
the Security Documents within three Business Days of the due date
thereof or if payable on demand within five Business Days of such
demand being made by the Bank;
(b) if the Borrower or the Guarantor shall fail or threatens to fail to
perform or observe any of its obligations hereunder or under the
Security Documents or any of them and in any case (except where the
Bank considers that such failure is not capable of remedy) such
failure shall continue for a period of 14 days following the date
of the service by the Bank on the Borrower of notice requiring the
same to be remedied; or
(c) if any representation or warranty made or deemed to be made by the
Borrower or the Guarantor in or pursuant to this Agreement or the
Security Documents or any of them or in any notice, certificate,
instrument, document or statement contemplated hereby or thereby or
made or delivered pursuant hereto or thereto is or proves to have
been untrue or inaccurate in any respect considered by the Bank to
be material; or
(d) if any of the consents, authorizations, approval, waivers or
resolutions referred to in Clause 5.01(h) shall be modified in a
manner unacceptable to the Bank or shall be wholly or partly
revoked, withdrawn, suspended or terminated or shall expire and not
be renewed or shall otherwise fail to remain in full force and
effect and such circumstances are reasonably
<PAGE>
19
considered by the Bank to be material; or
(e) if in respect of the Borrower or the Guarantor: -
(i) any Indebtedness shall become capable of being declared due
prematurely by reason of default in its obligations in
respect of the same or it shall fail to make any payment in
respect thereof on the due date for such payment or within
any applicable grace period in respect thereof, or the
security for any such Indebtedness shall become enforceable;
(ii) any application or petition shall be presented or any order
shall be made by a competent court or other appropriate
authority or any resolution shall be passed for its
bankruptcy, liquidation, winding up or dissolution (as the
case may be) or in respect of the Borrower, any application
or petition shall be presented or order shall be made by a
competent court or other appropriate authority or any
resolution passed for the appointment of a liquidator,
judicial manager, trustee or similar official of it or of all
or a material part of its assets;
(iii) an encumbrancer takes possession of or a receiver is
appointed over its undertaking or the whole or any part of
its chattels, properties, assets, rights or revenues or a
distress or execution or other similar process shall be
levied or enforced upon or sued out against a material part
of its chattels, properties, assets, rights or revenues;
(iv) it shall stop payment to creditors generally or shall be
unable to or admits inability to pay its debts as they fall
due or proposes or enters into any composition or other
arrangement for the benefit of its creditors generally;
(f) if, in the opinion of the Bank it shall become impossible or
unlawful for the Borrower or the Guarantor to fulfil any of their
respective undertakings or obligations contained herein or in the
Security Documents or any of them or for the Bank to exercise the
rights or any of them vested in it under the aforesaid documents or
otherwise; or
(g) if anything shall be done or suffered or omitted to be done by the
Borrower or the Guarantor which, in the reasonable opinion of the
Bank imperils or may imperil the performance of the obligations or
the security created by this Agreement, the Security Documents or
any of them; or
(h) if any legal proceedings suits or actions of any kind whatsoever
whether
<PAGE>
20
criminal or civil) shall be instituted against the Borrower and/or
the Guarantor which in the opinion of the Bank may materially and
adversely affect the Borrower's or the Guarantor's ability to
perform their respective obligations under this Agreement or the
Security Documents such opinion so formed being binding and
conclusive on the Borrower or the Guarantor (as the case may be);
or
(i) if the Borrower or the Guarantor shall transfer or otherwise
dispose of all or substantially all of their respective assets to
any person, firm or corporation; or
(j) if the Borrower is declared by the Minister to be a declared
company under the provisions of Part IX of the Companies Act (Cap
50); or
(k) if there is any material adverse change in the nature of the
business, assets or general conditions of the Borrower or the
Guarantor or if there is any change in the shareholding of the
Borrower or in the control of more than 50 per cent. of the issued
and paid-up share capital of the Guarantor without the prior
written consent of the Bank; or
(l) if, in the opinion of the Bank, the security in the Security
Documents or the business of the Borrower is in jeopardy; or
(m) if any event occurs (including, without limitation, the repudiation
or termination of the MTV Contract) which, in the opinion of the
Bank acting in good faith, is likely to materially and adversely
affect the Borrower's or the Guarantor's ability to perform or
comply with all or any of their respective obligations under this
Agreement or the Security Documents
Provided that, notwithstanding any other provision herein or in the
Security Documents, neither the exercise by MTV Asia LDC of the
Cancellation Option pursuant to the terms of the MTV Contract nor the
Borrower's performance of its obligations under Clause 2.3 of the MTV
Contract shall constitute an Event of Default.
8.02 The Bank may at any time after the happening of an Event of Default or
any notice pursuant to Clause 6.01(o) shall have been given by the
Borrower, so long as such Event of Default is continuing, by notice in
writing to the Borrower declare that: -
(a) the Facilities are immediately cancelled; and
(b) all amounts owing by the Borrower under this Agreement have become
immediately due and payable;
<PAGE>
21
and the Borrower shall forthwith make payment of all such amounts.
8.03 If any moneys owing contingently under this Agreement are paid to the
Bank as a result of a declaration pursuant to Clause 8.02, then the
moneys so received may be credited by the Bank to a cash collateral
account in the name of the Borrower. Such account and the moneys standing
to its credit shall stand charged to the Bank by way of security for the
performance of the Borrower's obligations in respect of which such sum
was paid.
9. DEFAULT INTEREST AND INDEMNITIES
--------------------------------
9.01 The Borrower shall pay interest on sums not paid on due date under this
Agreement from due date up to the date of actual payment (as well after
as before judgment) at a rate of six per cent. (6%) per annum above the
Prime Rate or at such other rate as the Bank may from time to time at its
sole discretion determine.
9.02 The Borrower shall indemnify the Bank against any loss (including loss of
interest) or expense which the Bank shall certify as incurred by it as a
consequence of (i) any default in payment by the Borrower of any sum
under this Agreement when due, (ii) the occurrence of any Event of
Default, (iii) any prepayment of any moneys being made under Clause 10
or (iv)) any moneys not being advanced for any reason after they have
been requested other than the Bank's failure to make such advance in
default of its obligations hereunder, including, in any such case, but
not limited to, any loss or expense incurred in maintaining or funding
such moneys or in liquidating or re-employing deposits from third parties
acquired to effect or maintain any proposed utilization of the
Facilities.
9.03 No payment to the Bank under this Agreement pursuant to any judgment or
order of any court or otherwise shall operate to discharge the
obligations of the Borrower in respect of which it was made unless and
until payment in full shall have been received in Dollars, and to the
extent that the amount of any such payment shall on actual conversion
into Dollars fall short of the amount of the relevant obligation
expressed in Dollars, the Bank shall have a further and separate cause of
action against the Borrower for the recovery of such sum as shall after
conversion into Dollars be equal to the amount of the shortfall.
10. UNLAWFULNESS; INCREASED COSTS; CANCELLATION OF MTV CONTRACT
-----------------------------------------------------------
10.01 If any law or regulation or any order of any court, tribunal or authority
binding upon the Bank renders it unlawful for the Bank to make available
or to fund any of the Facilities then the Bank shall forthwith notify the
Borrower and the Banks' obligation to make the Facilities available shall
forthwith cease. If it shall be
<PAGE>
22
unlawful for the Bank to maintain or fund any amounts outstanding in
respect of the Facilities then the Bank shall give notice to the Borrower
requiring the Borrower to prepay without prepayment fee all moneys
outstanding (whether contingently or otherwise), under this Agreement
either (i) forthwith or (ii) on a future specified date and the Borrower
shall prepay such moneys in accordance with such notice, together with
accrued interest thereon to the date of prepayment and all other sums
payable by the Borrower under this Agreement and the Bank's obligation
under this Agreement shall thereupon terminate. Any amount prepaid
pursuant to this Clause 10.01 in respect of a contingent obligation may
be applied by the Bank in the manner described in Clause 8.04.
10.02 If any law or regulation or any order of any court, tribunal or authority
binding upon the Bank taking effect after the date of this Agreement or
if compliance by the Bank with any direction, request or requirement
(whether or not having the force of law) of any competent governmental or
other authority shall: -
(a) subject the Bank to Taxes or change the basis of Taxation of the
Bank with respect to any payment under this Agreement (other than
Taxes or Taxation on the overall net income of the Bank); or
(b) impose, modify or deem applicable any capital adequacy, liquidity
or reserve requirements or other prudential or similar
requirements or require the making of any special deposits against
or in respect of any assets or liabilities of, deposits with or for
the account of, or loans by, the Bank; or
(c) impose on the Bank any other condition with respect to this
Agreement or its obligations under this Agreement,
and, as a result of any of the foregoing, the cost to the Bank of making
the Facilities available or maintaining or funding any amounts
outstanding in respect of them is increased or the amount payable or the
effective return to the Bank under this Agreement is reduced, the
Borrower shall on demand pay to the Bank the amount which the Bank
specifies is required to compensate the Bank for such increased cost or
reduction. Such specification by the Bank as to the amount required to
compensate the Bank for such increased cost or reduction shall, in the
absence of manifest error, be conclusive and binding on the Borrower.
10.03 The Borrower shall, upon its receipt of written notice from MTV Asia LDC
of its intention to exercise the Cancellation Option, forthwith notify
the Bank thereof and shall prepay all moneys outstanding (whether
contingently or otherwise) under this Agreement on the Cancellation Date,
together with accrued interest thereon to the date of prepayment, a
prepayment fee at the rate of zero point five per cent. on the principal
amount prepaid and all other sums payable by the Borrower under this
Agreement and the Bank's obligations under this Agreement shall thereupon
terminate.
<PAGE>
23
11. SET-OFF
-------
11.01 The Borrower authorizes the Bank to debit any account of the Borrower
with the Bank at any of its branches in or towards satisfaction of any
sum then due and payable from the Borrower to the Bank whether such
liability is actual or contingent, principal or collateral or several or
joint, notwithstanding that such debiting may result in the Borrower's
account or accounts being overdrawn. For this purpose the Bank is
authorized to purchase with the moneys standing to the credit of such
account such other currencies as may be necessary to effect such
application.
12. ASSIGNMENT
----------
12.01 This Agreement shall be binding upon, and enure for the benefit of, the
Bank and the Borrower and their respective successors. The Borrower may
not assign or transfer any of its rights or obligations under this
Agreement. The Bank may assign all or any part of its rights or transfer
all or any part of its obligations under this Agreement to any bank or
other financial institution having the ability to perform this Agreement.
If the Bank assigns all or any part of its rights or transfers all or any
part of its obligations as provided in this Clause 12.01 all relevant
references in this Agreement and the Security Documents to the Bank shall
thereafter be construed as a reference to the Bank and/or its assignee(s)
or transferee(s) (as the case may be) to the extent of their respective
interests.
12.02 The Bank may disclose to the Guarantor, to a potential assignee or
transferee or to any other person who may propose entering into
contractual relations with the Bank in relation to this Agreement such
information about the Borrower as the Bank shall consider appropriate.
13. NOTICES AND OTHER MATTERS
-------------------------
13.01 Every notice or other communication under this Agreement shall be in
writing, delivered personally by prepaid letter or telex addressed to the
relevant party at its address stated above or to any telex number which
is published as belonging to it (or such other address or telex number as
is notified by one party to the other under this Agreement). Every notice
or other communication shall, subject as otherwise provided in this
Agreement, be deemed to have been received, in the case of a letter when
delivered personally or five days after it has been put into the post
and, in the case of a telex, at the time of despatch with confirmed
answerback of the addressee appearing at the beginning and end of the
transmission (provided that if the date of despatch is not a Banking Day
it shall be deemed to have been received at the opening of business on
the next such Banking Day).
<PAGE>
24
13.02 Time is of the essence of this Agreement but no failure or delay on the
part of the Bank to exercise any power, right or remedy under this
Agreement shall operate as a waiver thereof nor shall any single or
partial exercise by the Bank of any power, right or remedy preclude any
other power, right or remedy. The remedies provided in this Agreement are
cumulative and are not exclusive of any remedies provided by law.
13.03 This Agreement may only be amended by instrument in writing signed by or
on behalf of all parties affected by such amendment.
13.04 If at any time any one or more of the provisions herein or in the
Security Documents is or becomes invalid, illegal or unenforceable in any
respect under any law, the validity, legality and enforceability of the
remaining provisions hereof and thereof shall not in any way be affected
or impaired thereof.
14. LAW
---
14.01 This Agreement is governed by and shall be construed in accordance with
the laws of Singapore and the Borrower irrevocably and unconditionally
submits to the non-exclusive jurisdiction of the Singapore courts.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly
executed.
<PAGE>
25
SCHEDULE 1
----------
Form of [Drawdown Notice/Tranche 2 Drawdown Notice]*
----------------------------------------------------
Date:
To: The Hongkong and Shanghai Banking Corporation Limited
[40-A Orchard Road #01-00
MacDonald House
Singapore 0923
Facility Agreement dated.....................1995
-------------------------------------------------
We refer to the above Facility Agreement and hereby give you notice that we wish
to draw [an Advance of S$............/Tranche 2 of S$1,857,000]* on............
19... The funds should be credited to [name and number of account] with [bank in
Singapore].
We confirm that: -
(i) no event or circumstance has occurred and is continuing which
constitutes, or which with the giving of notice of lapse of time or both
would constitute, an Event of Default;
(ii) the representations and warranties contained in Clause 5.01 of the
Facility Agreement (and so that the representation and warranty in
Clause 5.01(j) for this purpose refers to the latest audited financial
statements of the Borrower and the Guarantor, respectively) are true and
correct at the date hereof as if made with respect to the facts and
circumstances existing at such date; and
(iii) there has been no material adverse change in (a) our or Four Media
Company's business operations or (b) our or Four Media Company's
financial position from that set forth in the financial statements
referred to in (ii) above.
Words and expressions defined in the Facility Agreement shall have the same
meanings when used herein.
For and on behalf of
FOUR MEDIA COMPANY ASIA PTE LTD
.......................
(* Delete where inapplicable)
<PAGE>
26
SCHEDULE 2
----------
Documents and evidence
----------------------
required as conditions precedent
--------------------------------
(a) A copy, certified as a true, complete and up to date copy by an authorized
officer of the incorporation documents of the Borrower.
(b) A copy, certified as a true copy by an authorized officer, of resolutions
of the Board of Directors of the Borrower and the Guarantor evidencing
approval of this Agreement and the Security Documents to which it is a
party and authorizing its appropriate officers to execute and deliver this
Agreement and the Security Documents to which it is a party and to give all
notices and take all other action required under this Agreement and the
Security Documents.
(c) A set of specimen signatures of the persons referred to in paragraph (b)
above, duly authenticated on behalf of the Borrower.
(d) The Certificate of Incumbency (in form and substance satisfactory to the
Bank) signed and sealed by the Secretary of the Guarantor.
(e) A copy, certified as a true copy by an authorized officer, of all
authorizations required by the Borrower to authorize, or required by the
Borrower and the Guarantor in connection with, the execution, delivery,
performance, validity, enforceability and admissibility in evidence of this
Agreement and the Security Documents.
(f) The Security Documents and the MTV Contract duly executed by the Borrower
and/or the Guarantor and (where applicable) duly stamped, together with
such further documentation as may be required in connection with the
registration, completion and perfection in all respects of the security
thereby created.
(g) Legal opinions (in form and substance satisfactory to the Bank) by
solicitors in the relevant jurisdictions in respect of (i) the Guarantor's
entry into and performance of the Guarantee and the Deed of Subordination
and (ii) MTV Asia LDC's entry into and performance of the MTV Contract.
(h) Evidence satisfactory to the Bank that (i) Michael Steinhardt (Passport
No. ) controls the entities which ultimately hold more than 50
per cent. of the issued and paid-up share capital of the Guarantor; (ii)
the Guarantor is the legal and beneficial owner of all the shares in the
Borrower; (iii) the Guarantor has made loans of up to US$5,762,000 to the
Borrower and (iv) the equity injection and loans referred to in (ii) and
(iii) above have been utilized by the Borrower to partially fund the
acquisition of the Project Costs.
<PAGE>
27
(i) An independent auditor's report confirming that the Borrower's issued and
paid-up capital is at least S$3,000,000.
(j) Bank references satisfactory to the Bank from the Borrower's bankers.
<PAGE>
Agreement
28
SIGNED for and on behalf of )
FOUR MEDIA COMPANY ASIA PTE ) /s/ Robert Walston
LTD in the presence of: )
/s/ John Sabin
Signed by Lilian Yap Ah Wan )
as Attorney for THE HONGKONG )
AND SHANGHAI BANKING )
CORPORATION LIMITED )
acting under )
a Power of Attorney dated )
the 11th day of May 1983 )
(a copy of which was deposited) ) /s/ Lilian Wan
in the Registry, Supreme )
Court, Singapore on the 23rd day )
of June 1983 and registered )
as No. 2654 of 1983) in the )
presence of: )
/s/ Cheng Wei Lin
<PAGE>
EXHIBIT 10.11
Dated the day of 1995
---- --------
Between
FOUR MEDIA COMPANY ASIA PTE LTD
And
FOUR MEDIA COMPANY
And
THE HONG KONG AND SHANGHAI BANKING
CORPORATION LIMITED
---------------------------
DEED OF SUBORDINATION
---------------------------
LEE & LEE
5 SHENTON WAY, LEVEL 19
UIC BUILDING
SINGAPORE 0106
<PAGE>
CONTENTS
--------
<TABLE>
<CAPTION>
Clause Heading Page No.
- ------ ------- --------
<C> <S> <C>
1 Definitions 1
2 The Subordinated Debt 3
3 Trust 4
4 Proceedings Concerning Subordinated 5
Debt
5 Certificates 5
6 Preservation of Rights 5
7 Representations and Warranties 6
8 Notices and Other Matters 7
9 Assignment 8
10 Law 8
</TABLE>
<PAGE>
DEED OF SUBORDINATION
---------------------
THIS DEED OF SUBORDINATION is dated the 22 day of February 1995
and made BETWEEN:
(1) FOUR MEDIA COMPANY ASIA PTE LTD a company incorporated in
Singapore and having its registered office at 9 Penang Road
#13-21, Park Mall, Singapore 0923 (the "Borrower");
(2) FOUR MEDIA COMPANY a corporation incorporated in the state of
Delaware in the United States of America and having a place of
business at 2813 West Alameda Avenue, Burbank, California
91505-4455, United States of America (the "Subordinated
Lender"); and
(3) THE HONG KONG AND SHANGHAI BANKING CORPORATION LIMITED a
company incorporated in Hong Kong and having a place of
business at 40-A Orchard Road #01-00 MacDonald House, Singapore
0923 (the "Bank").
WHEREAS:
-------
(A) Under the terms of a facility agreement dated 22 February 1995,
the Bank has agreed to make banking facilities of an aggregate principal amount
of Singapore Dollars Sixteen Million Nine Hundred and Fifty Thousand
(S$16,950,000) available to the Borrower in connection with the Borrower's
acquisition of certain machinery and equipment for its operations.
(B) The execution and delivery of this Deed of Subordination is one
of the conditions precedent to the obligations of the Bank under such facility
agreement.
1. DEFINITIONS
-----------
(1) In this Deed, unless the context otherwise requires:
"Facility Agreement" means an agreement dated 22 February 1995
made between the Borrower and the Bank (as from time to time
amended or supplemented);
"Distribution" means a distribution whether in cash or in
specie in any Insolvency Proceeding (whether made by a
liquidator or by any other person having the conduct of the
Insolvency Proceeding);
<PAGE>
DEED OF SUBORDINATION
---------------------
THIS DEED OF SUBORDINATION is dated the day of
1995 and made BETWEEN:
(1) FOUR MEDIA COMPANY ASIA PTE LTD a company incorporated in
Singapore and having its registered office at 9 Penang Road
#13-21, Park Mall, Singapore 0923 (the "Borrower");
(2) FOUR MEDIA COMPANY a corporation incorporated in the state of
Delaware in the United States of America and having a place of
business at 2813 West Alameda Avenue, Burbank, California
91505-4455, United States of America (the "Subordinated
Lender"); and
(3) THE HONG KONG AND SHANGHAI BANKING CORPORATION LIMITED a
company incorporated in Hong Kong and having a place of
business at 40-A Orchard Road #01-00 MacDonald House, Singapore
0923 (the "Bank").
WHEREAS:
-------
(A) Under the terms of a facility agreement dated
1995, the Bank has agreed to make banking facilities of an aggregate principal
amount of Singapore Dollars Sixteen Million Nine Hundred and Fifty Thousand
(S$16,950,000) available to the Borrower in connection with the Borrower's
acquisition of certain machinery and equipment for its operations.
(B) The execution and delivery of this Deed of Subordination is one
of the conditions precedent to the obligations of the Bank under such facility
agreement.
1. DEFINITIONS
-----------
(1) In this Deed, unless the context otherwise requires:
"Facility Agreement" means an agreement dated 1995
made between the Borrower and the Bank (as from time to time
amended or supplemented);
"Distribution" means a distribution whether in cash or in
specie in any Insolvency Proceeding (whether made by a
liquidator or by any other person having the conduct of the
Insolvency Proceeding);
<PAGE>
2
"Encumbrance" means any mortgage, charge (whether fixed or
floating), pledge, lien, hypothecation, assignment, security
interest, tide retention or other encumbrance of any kind
securing or any right conferring a priority of payment in
respect of any obligation of any person but does not include
liens arising in the ordinary course of trading and not by way
of contract and "Encumber" and "Encumbered" are to be construed
accordingly;
"Insolvency Proceeding" means any proceeding for the winding up
or dissolution of the Borrower or analogous proceeding pursuant
to which its assets or capital will be distributed (whether
compulsory, voluntary or subject to the supervision of the
court);
"Subordinated Debt" means the principal moneys of up to
US$5,762,000 which are now or may at any time and from time to
time after the date of this Deed be or become owing by the
Borrower to the Subordinated Lender and all fees, costs and
expenses owing by the Borrower to the Subordinated Lender in
connection therewith; and
"Superior Debt" means all present and future indebtedness or
liabilities (whether contingent or otherwise) of the Borrower
to the Bank under or in connection with the Facility Agreement.
(2) Unless otherwise stated or otherwise so required, terms defined
in the Facility Agreement shall have the same meanings where used in this Deed.
(3) Clause headings and the table of contents are inserted for
convenience of reference only and shall be ignored in the interpretation of this
Deed.
(4) In this Deed, unless the context otherwise requires:
(a) references to Clauses are to be construed as references to
clauses of this Deed;
(b) references to (or to any specified provision of) this Deed or
any other document shall be construed as references to this
Deed, that provision or that document as in force for the time
being and as amended in accordance with the terms thereof or,
as the case may be, with the agreement of the relevant parties
and (where such consent is, by the terms of this Deed or the
relevant document, required to be obtained as a condition to
such amendment being permitted) the prior written consent of
the Bank;
(c) words importing the plural shall include the singular and vice
versa;
<PAGE>
3
(d) references to a person shall be construed as including
references to an individual, firm, company, corporation,
unincorporated body of persons or any State or any agency
thereof; and
(e) references to the Borrower, the Subordinated Lender and the
Bank include their respective successors and permitted assigns.
2. THE SUBORDINATED DEBT
---------------------
(1) Except with the prior written consent of the Bank, the
Subordinated Debt shall not be paid, repaid, assigned, Encumbered or charged
until the expiry of Year 2.
(2) Except with the prior written consent of the Bank, at any time
before the expiry of Year 2 (whether before or after any Insolvency Proceeding)
the Subordinated Lender will not and is not entitled to:
(a) claim, receive, require, accept or demand payment or repayment
of the Subordinated Debt;
(b) exercise any right of combination, consolidation, set-off or
counterclaim in respect of the Subordinated Debt; or
(c) assign or otherwise Encumber the Subordinated Debt or any
interest in any rights which it may have from time to time
against the Borrower in respect of the whole or any part of the
Subordinated Debt or demand or accept any security or
guarantee, indemnity or other assurance against loss in respect
of the Subordinated Debt from the Borrower or any other person.
(3) The Superior Debt will be deemed not to have been discharged if
any payment (whether made directly or through the exercise by the Bank of any
set-off, security or other rights available to it) by or on behalf of the
Borrower to the Bank is subsequently set aside, avoided or reduced under any
applicable law or proves to have been invalid for any reason whatsoever.
(4) The Subordinated Lender undertakes with the Bank that before
the expiry of Year 2, it will not without the prior written consent of the Bank:
(a) waive any of its rights in respect of the Subordinated Debt or
agree to any amendment to the terms on which the Subordinated
Debt was made available to the Borrower; or
(b) borrow or accept any loans or advances in any form from the
Borrower or accept or take any gift or procure any security
given
<PAGE>
4
or issued by the Borrower for or in connection with any
indebtedness or liabilities of the Subordinated Lender; or
(c) cause or permit the Borrower to sell or in any way dispose of
any of the Borrower's assets to it or any other person save at
arm's length and for good, valuable and adequate consideration
which is fully paid in cash forthwith upon such sale or
disposition.
(5) Notwithstanding any other provision herein, the Subordinated
Debt may be repaid to the Subordinated Lender in accordance with the provisions
of Clause 6.01(p) of the Facility Agreement.
3. TRUST
-----
(1) If the Superior Debt has not been paid or repaid in full and
the Borrower becomes subject to any Insolvency Proceeding the Subordinated
Lender will use its best endeavours to recover the Subordinated Debt from the
Borrower and prove all of its claims in the Insolvency Proceeding and will hold
on trust for the Bank and pay over to the Bank on demand all Distributions
(whether in cash or in specie) received by it and the proceeds of the exercise
of any set-off (notwithstanding the provisions of Clauses 2(2) and (4) by it in
respect of the Subordinated Debt.
(2) If the Subordinated Lender does not file valid and proper
claims in any Insolvency Proceeding at least 30 days before the expiration of
the time to file the claims then the Bank is hereby irrevocably authorized to
file the claims on behalf of the Subordinated Lender (but without any obligation
on the Bank to do so and without affecting any remedy available to the Bank
against the Subordinated Lender for failure to comply with its obligations under
Clause 3(1)).
(3) Any Distribution to which the Subordinated Lender would be
entitled but for the provisions of this Deed will be paid or delivered by the
liquidator or other person making the Distribution directly to the Bank until
the Superior Debt has been paid or repaid in full and each Subordinated Lender
authorizes and directs any liquidator or other person making the Distribution to
do so.
(4) If, notwithstanding the provisions of this Deed to the
contrary, at any time any sum is paid to or received (whether by way of set-off
or otherwise) by or any security is created by the Borrower or any other party
in favour of the Subordinated Lender in respect of the Subordinated Debt that
sum or security (as the case may be) will be held by the Subordinated Lender on
trust for and in favour of the Bank and in the case of sums paid to or received
by the Subordinated Lender, the Subordinated Lender will immediately pay over
that sum to the Bank.
(5) The Subordinated Lender agrees that any sum received by it
pursuant to Clauses 3(1) or 3(4) will be held by it on trust to be applied:
<PAGE>
5
(a) first, in or towards payment or repayment of the Superior Debt;
(b) secondly, in or towards payment or repayment of the
Subordinated Debt; and
(c) thirdly, in payment to the Borrower.
4. PROCEEDINGS CONCERNING SUBORDINATED DEBT
----------------------------------------
Subject to Clause 3 of this Deed, the Subordinated Lender shall
not and shall not be entitled to, demand or require or institute any proceedings
of any kind for or take any step whatsoever to obtain, or with a view to
obtaining, payment or repayment of the Subordinated Debt until the expiry of
Year 2.
5. CERTIFICATES
------------
Any certificate of the Bank as to the amount of the Superior
Debt shall, in the absence of manifest error, be conclusive and binding on the
Subordinated Lender.
6. PRESERVATION OF RIGHTS
----------------------
(1) The rights of the parties to this Deed shall continue
notwithstanding any rule or principle of law to the contrary until the expiry of
Year 2.
(2) The Bank may without the consent of the Subordinated Lender and
without affecting the rights of the Bank hereunder and without giving notice to
the Subordinated Lender:
(a) discontinue, increase, reduce or vary in any way or renew any
of the facilities granted by the Bank to the Borrower or the
terms and conditions thereof or grant any new or increased
facilities or increase any rate of interest or charge; or
(b) allow the Borrower or any other person any time, consideration
or indulgence or compound with the Borrower or any other
person; or
(c) enter into, renew, vary, release, refrain from perfecting,
enforcing, recovering, realising or taking any present or
future security, guarantee, indemnity, other assurance against
loss or other agreement or right which the Bank now or in
future hold(s) from the Borrower or any other person; or
<PAGE>
6
(d) enter into, renew, vary or termmate any agreement or
arrangement with the Borrower or any other person; or
(e) make any concession to the Borrower or do anything or omit,
neglect to do or delay in doing anything which (but for this
clause) might operate to release or reduce any obligation of
the Subordinated Lender under this Deed.
(3) The obligations of the Subordinated Lender under this Deed
will not be affected by:
(a) any guarantee, indemnity or other assurance against loss or
security present or future held by the Bank being defective,
void or unenforceable or the failure of the Bank to take any
guarantee, indemnity or other assurance against loss or
security; or
(b) any of the obligations intended to be established by this Deed
being or becoming invalid or unenforceable; or
(c) any compromise or arrangement under the Companies Act (Cap.
50) or any analogous foreign law.
7. REPRESENTATIONS AND WARRANTIES
------------------------------
The Subordinated Lender represents and warrants to the Bank as
follows:
(a) it is duly incorporated and validly existing under the laws of
the state of Delaware, United States of America and has power
to execute, deliver and perform its obligations under this
Deed; all necessary action has been taken to authorize the
execution, delivery and performance of this Deed and this Deed
constitutes valid and legally binding obligations of the
Subordinated Lender enforceable in accordance with its terms;
(b) the execution, delivery and performance by it of this Deed
will not (i) contravene any existing law, regulation or
authorization to which it is subject, (ii) result in any breach
of or default under any agreement or other instrument to which
it is a party or is subject or (iii) contravene any provision
of its Memorandum or Articles of Association/name of
constitutive documents;
(c) except as otherwise disclosed to the Bank in writing before the
date hereof, no litigation, arbitration or administrative
proceeding involving a claim of a sum exceeding US$150,000 is
pending or,
<PAGE>
7
to the knowledge of its officers threatened against it or any
of its assets other than those which, in the opinion of the
Bank, are of a frivolous and vexatious nature;
(d) every consent, authorization, licence or approval of
governmental or public bodies or authorities, if any, required
by the Subordinated Lender to authorize, or required by the
Subordinated Lender in connection with, the execution,
delivery, validity, enforceability or admissibility in evidence
of this Deed or the performance by the Subordinated Lender of
its obligations under this Deed has been obtained or made and
is in full force and effect and there has been no default in
the observance of the conditions or restrictions (if any)
imposed in, or in connection with, any of the same;
(e) it is not (nor would with the giving of notice or lapse of time
or the satisfaction of any other condition or any combination
thereof be) in breach of or in default under any agreement
relating to Indebtedness to which it is a party or by which it
may be bound; and
(f) no Default has occurred and is continuing.
8. NOTICES AND OTHER MATTERS
-------------------------
(1) Every notice, request, demand or other communication under this
Deed shall:
(a) be in writing delivered personally or by prepaid letter, telex
or fax;
(b) be deemed to have been received, subject as otherwise provided
in this Deed, in the case of a letter when delivered personally
or fourteen (14) days after it has been put into the post and,
in the case of a telex or fax, at the time of despatch
(provided that if the date of despatch is not a Banking Day it
shall be deemed to have been received at the opening of
business on the next such Banking Day); and
(c) be sent to the recipient at its address, telex or fax number
set out on the execution pages of this Deed or to such other
address, telex or fax number as has been notified by the
recipient to the other parties to this Deed.
(2) The Borrower and the Subordinated Lender shall jointly and
severally on demand pay to the Bank all costs and expenses incurred in the
enforcement of, or the preservation of any rights under, this Deed.
<PAGE>
8
9. ASSIGNMENT
----------
(1) This Deed shall be binding upon, and enure for the benefit of,
each of the parties hereto and their respective successors.
(2) The Borrower and the Subordinated Lender may not assign or
transfer any of their respective rights or obligations under this Deed.
10. LAW
---
(1) This Deed shall be governed by and construed in accordance with
the laws of Singapore and the parties hereto irrevocably submit to the non-
exclusive jurisdiction of the Singapore courts.
(2) If at any time any one or more of the provisions hereof is or
becomes invalid, illegal or unenforceable in any respect under any law, the
validity, legality and enforceability of the remaining provisions hereof shall
not in any way be affected or impaired thereby.
IN WITNESS WHEREOF the parties hereto have caused this Deed
to be duly executed.
<PAGE>
9
THE BORROWER
- ------------
The Common Seal of FOUR MEDIA ) [SEAL APPEARS HERE]
COMPANY ASIA PTE LTD was hereunto )
affixed in the presence of: )
/s/ Robert Walston - Director
/s/ J. Schutz - Director
Address: 9 Penang Road #13-21,
Park Mall, Singapore 0923
THE SUBORDINATED LENDER
- -----------------------
FOUR MEDIA COMPANY, The Corporate Seal of
a Delaware Corporation, FOUR MEDIA COMPANY
was hereunto duly affixed:
By: /s/ Robert Walston
---------------------------------
Robert T. Walston [SEAL APPEARS HERE]
Chief Executive Officer
Address: 2813 West Alameda Avenue
Burbank, California 91505-4455
United States of America
Fax: (818) 846 5197
Before me,
.................
Notary Public
<PAGE>
STATE OF CALIFORNIA )
) SS:
COUNTY OF LOS ANGELES )
On February 16, 1995, before Lana L. Torres, a Notary Public,
--------------
personally appeared Robert T. Walston, 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 my hand and official seal.
Signature /s/ Lana L. Torres
------------------------
(Seal)
[NOTARY SEAL FOR LANA L. TORRES]
<PAGE>
10
THE BANK
- --------
SIGNED SEALED AND DELIVERED )
by Lilian Yap Ah Wan )
as Attorney for THE HONG KONG AND )
SHANGHAI BANKING CORPORATION )
LIMITED acting under a )
Power of Attorney dated the 11th day )
of May, 1983 (a copy of ) /s/ Lilian Wan
which was deposited in the )
Registry of the Supreme Court, )
Singapore on the 23rd day of )
June, 1993 and registered )
as No. 2654 of 1983) in the )
presence of: - )
/s/ Cheng Wei Lin
Address: 40-A Orchard Road #01-00
MacDonald House
Singapore 0923
TELEX: HSBC RS21259
Fax: 338-1894
<PAGE>
EXHIBIT 10.12
FOUR MEDIA COMPANY ASIA PTE LTD (1)
AND
THE HONGKONG AND SHANGHAI (2)
BANKING CORPORATION LIMITED
---------------------------------
DEED OF DEBENTURE
---------------------------------
LEE & LEE
5 SHENTON WAY
LEVEL 19
UIC BUILDING
SINGAPORE 0106
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
Clause Heading Page No.
- ------ ------- --------
<S> <C> <C>
1. Interpretation 1
2. Covenant to pay 3
3. Security 3
4. Representations and Warranties 6
5. Covenants by the Borrower 7
6. Further Assurance 13
7. Powers of the Bank 13
8. Appointment and Powers of Receiver 15
9. The Bank, Receivers and Purchasers 18
10. Power of Attorney 19
11. Exclusion of the Borrower's Powers 20
of Leasing, etc.
12. Protections for The Bank and 20
Any Receiver
13. Continuing Security 21
14. Currency Clauses 21
15. Set-Off 22
16. Costs and Expenses 22
17. Miscellaneous 23
18. Law 24
</TABLE>
<PAGE>
THIS DEED OF DEBENTURE is dated 22 February 1995 and made BETWEEN:
(1) FOUR MEDIA COMPANY ASIA PTE LTD a company incorporated in SINGAPORE
and having its registered office at 9 Penang Road #13-21, Park Mall,
Singapore 0923 (the "Borrower"); and
(2) THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED a company
incorporated in Hong Kong and having a place of business at 40-A
Orchard Road #01-00, MacDonald House, Singapore 0923 (the "Bank").
WHEREAS:
(A) The Bank has agreed to make available to the Borrower a term loan
facility of up to S$16,950,000.00 on and subject to the terms and
conditions of the Facility Agreement dated 22 February 1995.
(B) The Borrower has agreed to execute this Deed in favour of the Bank to
secure (i) its obligations in respect of the Facilities and (ii) any
other obligations which it may hereafter from time to time incur to
the Bank on any other account whatsoever.
NOW THIS DEED WITNESSES as follows:
1. INTERPRETATION
--------------
1.01 In this Deed:
"assets" means, in relation to the Borrower, all of its goodwill,
undertaking, property, assets, rights and revenues whatsoever;
"Bank" includes its successors and assigns;
"Business Day" means a day (other than a Saturday or a Sunday) on
which banks are open for business in Singapore;
"Borrower" includes its successors;
"Charged Assets" means the assets of the Borrower described in
Clauses 3.01 and 3.02;
"CLPA" means the Conveyancing and Law of Property Act (Cap 61);
"Debts" means the assets of the Borrower described Fifthly in
Clause 3.01;
"Facilities" means the term loan facility of up to Singapore Dollars
Sixteen Million and Nine Hundred and Fifty Thousand (S$16,950,000.00)
granted by the
<PAGE>
-2-
Bank to the Borrower in the sole and absolute discretion of the Bank
on the terms and conditions set out in the Facility Agreement dated
22 February 1995 (the "Facility Agreement") (as the same may be
amended, modified, varied or supplemented from time to time) between
the Bank and the Borrower;
"Fixed Charge Assets" means the assets of the Borrower First,
Secondly, Fourthly and Sixthly described in Clause 3.01;
"Floating Charge Assets" means the assets of the Borrower Thirdly,
Fifthly and Seventhly described in Clause 3.O1;
"Indebtedness" means any obligation for the payment or repayment of
money, whether present or future, actual or contingent;
"Receiver" means any one or more receivers, receivers and managers
and/or judicial managers appointed by the Bank in respect of the
Borrower or over all or any of the Charged Assets;
"Secured Obligations" means all moneys, obligations and
liabilities described in Clause 2; and
"Securities" means the assets of the Borrower described Secondly
Thirdly and Fourthly in Clause 3.01 and in Clause 3.02.
1.02 Clause headings and the table of contents are inserted for
convenience of reference only and shall be ignored in the
interpretation of this Deed.
1.03 In this Deed unless the context otherwise requires:
(a) references to Clauses are to be construed as references to
clauses of this Deed;
(b) references to (or to any specified provision of) this Deed or
any other document shall be construed as references to this
Deed, that provision or that document as in force for the
time being and as amended in accordance with the terms thereof
or, as the case may be, with the agreement of the relevant
parties and (where such consent is, by the terms of this Deed
or the relevant document, required to be obtained as a
condition to such amendment being permitted) the prior written
consent of the Bank;
(c) references to any statute, rule or regulation shall include such
statute, rule or regulation as from time to time amended,
repealed or replaced;
(d) words importing the plural shall include the singular and vice
versa; and
(e) references to a person shall be construed as including
references to an individual, firm, company, corporation,
unincorporated body of persons or any State or any agency
thereof.
<PAGE>
-3-
2. COVENANT TO PAY
---------------
2.01 The Borrower hereby covenants with the Bank that it will pay to the
Bank when due (whether by demand, at maturity, by acceleration or
otherwise howsoever) all moneys and discharge all obligations and
liabilities whether actual or contingent now or hereafter due owing or
incurred to the Bank by the Borrower in whatever currency denominated
(whether alone or jointly, whether as principal or surety and whether
under the terms of or in connection with the Facilities or any
variation extension renewal or replacement of the terms thereof or on
any other account whatsoever or otherwise howsoever) including all
loans or advances from time to time made by the Bank to the Borrower
thereunder or thereon together with interest to date of payment at the
rates and upon such terms as may from time to time be agreed
commission valuation and other fees and other charges (on a full and
unqualified indemnity basis) and all legal and other costs charges and
expenses incurred by the Bank in relation thereto.
2.02 The Borrower shall pay interest (as well after or during as before any
demand or judgment or the liquidation or judicial management of the
Borrower) at the rate of six per cent. (6%) per annum above the rate
of interest from time to time publicly quoted by the Bank to be its
prime rate for loans in Singapore Dollars ("the Default Rate") or at
such other rate as the Bank may from time to time at its sole
discretion determine on any sum due and owing under this Deed or
hereby covenanted to be paid and secured hereby from the date on which
such sum falls due and owing until the date of actual receipt of such
sum (and all accrued interest) by the Bank and in the event of it not
being paid such interest shall be compounded with monthly rests or
such other periodic rests as the Bank may determine from time to time
in accordance with the usual practice of the Bank.
3. SECURITY
--------
3.01 Subject as hereinafter provided the Borrower as beneficial owner
hereby mortgages, charges and assigns to the Bank as a continuing
security for the payment and discharge of the Secured Obligations:
FIRST the immoveable property of the Borrower both present and
future and all buildings and fixtures (including trade
fixtures) from time to time on any such property all liens
charges options agreements rights and interests over land
both present and future and all plant machinery vehicles
computers and office and other equipment of the Borrower
both present and future and any substitution or replacement
thereof and all the accessories and parts pertaining
thereto and the full benefit of all warranties and
maintenance contracts for any of the same (excluding stock
in trade of the Borrower).
SECONDLY each and every of those stocks shares bonds and securities
of any kind whatsoever whether marketable or otherwise in
any
<PAGE>
-4-
company or entity registered in the name of the Borrower or
its nominee and all rights interests titles and benefits of
the Borrower both present and future thereto and therein and
incidental thereto the certificates or other documents of
title for which are deposited with the Bank by the Borrower
from time to time (but excluding any of the same pledged
pursuant to Clause 3.02).
THIRDLY each and every of those stocks shares bonds and securities
of any kind whatsoever whether marketable or otherwise in
any company or entity whether bearer or registered in the
name of the Borrower or its nominee including without
prejudice to the generality of the foregoing, any book-entry
securities and all rights interests titles and benefits of
the Borrower both present and future thereto and therein and
incidental thereto (but excluding any of the same pledged
pursuant to Clause 3.02 or mortgaged pursuant to Secondly
above).
FOURTHLY all the rights titles and benefits of the Borrower
whatsoever, present or future under or arising out of any
contract for the sale or purchase of any stocks shares bonds
or securities of any kind whatsoever in any company or
entity to which the Borrower may be a party (whether as
principal or agent) whether now or at any time in the
future (whether directly or through any agent or nominee)
together with all the Borrower's rights and title and
interest in and to any security for the performance of any
such contract and all claims, remedies and revenues accruing
to or received or derived by or available to the Borrower in
respect of any such contracts or security (but excluding any
book debts charged pursuant to the premises Fifthly
described).
FIFTHLY all book and other debts revenues and claims both present
and future (including things in action which may give rise
to a debt revenue or claim and the proceeds of such debts
revenues and claims) due or owing or which may become due or
owing to or purchased or otherwise acquired by the Borrower
and the full benefit of all rights and remedies relating
thereto including but not limited to any negotiable or non-
negotiable instruments guarantees indemnities debentures
legal and equitable charges and other security reservation
or proprietary rights rights of tracing liens and all other
rights and remedies of whatsoever nature in respect of the
same Provided always that no property mortgaged charged
pledged or assigned pursuant to Secondly, Thirdly or
Fourthly above or Clause 3.02 shall be mortgaged charged
pledged or assigned pursuant to this Clause Fifthly.
SIXTHLY the uncalled capital goodwill and all patent applications
<PAGE>
-5-
trade marks trade names registered designs and
copyrights and all licences and ancillary and connected
rights relating to the intangible property both present
and future of the Borrower.
SEVENTHLY the whole of the undertaking and all other property
assets and rights of the Borrower whatsoever and
wheresoever both present and future including but not
limited to the stock in trade of the Borrower wheresoever
and the premises First, Secondly, Fourthly and Sixthly
described (if and in so far as the charges thereon herein
contained shall for any reason be ineffective as fixed
charges) and all assets acquired after the date or dates
upon which the floating security hereby created
crystallises.
3.02 The Borrower hereby pledges and agrees to pledge to and in favour of
the Bank as a continuing security for the payment of all moneys and
the discharge of all obligations and liabilities hereby covenanted to
be paid or otherwise hereby secured each and every of those
instruments, bonds, certificates and other documents of any kind
whatsoever whether marketable or otherwise now or at any time
hereafter deposited by the Borrower with the Bank the title to and
property in which are capable of passing by delivery.
3.03 The Borrower hereby declares that the security hereby created shall
extend to and include all dividends and interest paid or payable on
or in respect of any of the Securities after the date of this Deed and
all stocks, shares, rights money or property accruing or offered by
way of redemption, bonus, preference, option or otherwise to or in
respect of the Securities and all allotments, accretions, offers,
rights, benefits and advantages whatsoever accruing, offered or
arising in respect of the same Provided that nothing in this Clause
3.03 shall be construed as placing on the Bank any obligation or
liability whatsoever in respect of any of the foregoing.
3.04 The charges created by this Deed shall rank:
(a) as regards the Fixed Charged Assets, as first fixed charges; and
(b) as regards the Floating Charge Assets, as first floating charges
(subject to Clause 3.05).
3.05 Save as permitted under this Deed, (i) if the Borrower mortgages,
charges, pledges or assigns or otherwise encumbers (whether by way of
fixed or floating security) any of the Floating Charge Assets or
attempts so to do without the prior consent in writing of the Bank or
(ii) if any person levies or attempts to levy any distress execution
sequestration or other process against any of the Floating Charge
Assets or (iii) if under any other security created by the Borrower
with the consent of the Bank, any floating charge is converted to a
fixed charge, or (iv) if the Bank gives notice to that effect to the
Borrower, then (and in each such case) the charge hereby created over
the assets the subject thereof shall
<PAGE>
-6-
automatically without notice operate as a fixed charge instantly such
event occurs.
3.06 The Borrower hereby agrees that the Bank may at any time without
notice after making demand on the Borrower for all or any sums hereby
secured and notwithstanding any settlement of account or other matter
whatsoever combine or consolidate all or any of the then existing
accounts of the Borrower including accounts in the name of the
Borrower jointly with others held by the Bank.
4. REPRESENTATION AND WARRANTIES
-----------------------------
4.01 The Borrower hereby represents and warrants to the Bank that:
(a) the Borrower is validly existing under the laws of Singapore and
the Borrower has power to execute, deliver and perform its
obligations under this Deed; all necessary action has been taken
to authorize the execution, delivery and performance of the same,
and this Deed constitutes valid and legally binding obligations
of the Borrower enforceable in accordance with its terms;
(b) the execution, delivery and performance by the Borrower of this
Deed will not result in any breach of or default under any
agreement, licence, consent or other instrument to which the
Borrower is a party or is subject or contravene any provision of
the Borrower's Memorandum or Articles of Association;
(c) with regard to any Charged Assets in existence at the date
hereof, the Borrower is, and with regard to any Charged Assets
coming into existence at any time hereafter, the Borrower will on
the date on which such Charged Assets come into existence be the
true and lawful owner thereof at law and in equity free from any
encumbrance, other than the charge, assignment or pledge created
or made hereunder;
(d) the Borrower has or will have (as the case may be) good right and
title to deposit, pledge, mortgage, charge, assign and/or
transfer the said Charged Assets, subject to the interests of the
Bank created hereunder;
(e) all contracts and rights comprising the property described
Fourthly and Fifthly in Clause 3.01 from time to time are and
will be in full force and effect;
(f) there are no proceedings involving a claim of a sum exceeding
S$500,000 pending before any court or to the knowledge of the
Borrower threatened against or affecting the Borrower and no
proceedings are before any government agency or administrative
body pending or to the knowledge of the Borrower threatened
against it or any of its assets other than those which, in the
opinion of the Bank, are of a frivolous or vexatious nature and
to the best of the knowledge and belief of the Borrower, the
Borrower
<PAGE>
-7-
has complied with all applicable statutes and regulations and
with the requirements of all governmental authorities having
jurisdiction over it;
(g) the certified true copies of the Memorandum and Articles of
Association and the Board Resolutions of the Borrower delivered
to the Bank are true and accurate copies of the corporate records
of the Borrower;
(h) the Borrower is not in default in the payment or performance of
any of its obligations for borrowed money;
(i) there is no provision in any existing mortgage, trust deed,
contract, licence, franchise, concession or agreement binding on
the Borrower which is being contravened or breached by the
execution of this Deed or by the Borrower's performance or
observance of any of its obligations hereunder; and
(j) no event or circumstance which constitutes or which will with the
giving of notice or lapse of time or both would constitute an
event described in Clause 7.01 has occurred and is continuing.
4.02 The representations and warranties in Clause 4.01 shall be deemed to
be repeated by the Borrower on and as of each day of the currency of
this Deed as if made with reference to the facts and circumstances
existing at each such date.
5. COVENANTS BY THE BORROWER
-------------------------
5.01 The Borrower hereby covenants with the Bank that during the
continuance of this security the Borrower will at all times:
(a) conduct and carry on its business and affairs in a proper and
efficient manner and in accordance with sound technical financial
industrial and managerial standards and practices including the
maintenance of adequate records with qualified personnel and in
accordance with its Memorandum and Articles of Association and
will not save with the prior written consent of the Bank make
substantial alteration in the nature of or mode of conduct of
that business and keep or cause to be kept proper books of
account relating to such business;
(b) observe and perform all covenants and stipulations from time to
time affecting its immovable property or the mode of user or
enjoyment of the same and not without the prior consent in
writing of the Bank enter into any onerous or restrictive
obligations affecting any such property or "develop" any such
property within the meaning of Section 13 of the Planning Act
(Chapter 232) as from time to time amended and any orders and
regulations thereunder nor do or suffer or omit to be done any
act matter or thing whereby any provision of any Act of
Parliament order or regulation from time to time in force
affecting any such property is
<PAGE>
-8-
infringed;
(c) observe and perform all covenants and stipulations from time to
time affecting its patents patent applications trade marks and
trade names registered designs and copyrights and all other
industrial or intangible property or any licence or ancillary or
connected rights from time to time relating to industrial or
intangible property and preserve maintain and renew when
necessary or desirable all such licences and rights;
(d) keep all its buildings and erections and all plant machinery
fixtures fittings vehicles computers and office and other
equipment and effects and every part thereof in good and
substantial repair and in good working order and not pull down or
remove or sell or otherwise dispose of any of the same without
the prior consent in writing of the Bank except in cases where
such dismantling pulling down or removal shall in the opinion of
the Borrower be rendered necessary by reason of the same being
worn out or damaged or advisable, in which case the Borrower
shall replace such fixtures and fittings with property of similar
nature and value. If the Borrower is at any time in default in
complying with this covenant the Bank shall be entitled but not
bound to repair and maintain the same with power for the Bank its
agent and their respective employees upon giving reasonable
notice thereof to the Borrower to enter any of the Borrower's
property during normal business hours at times convenient to the
Borrower acting in a reasonable manner for that purpose or to
inspect the same and any sum expended by the Bank shall be
repayable by the Borrower to the Bank on demand together with
interest at the Default Rate;
(e) at its own expense insure and keep insured all its property and
effects whatsoever of an insurable nature with insurers
previously approved by the Bank in writing against loss or damage
by fire civil commotion explosion earthquake subsidence landslip
heave aircraft and articles dropped therefrom flood storm
lightning burst pipes theft malicious damage impact and such
other risks and contingencies as the Bank shall from time to time
request to the full insurable value thereof from time to time
including architects, surveyors, engineers and all other
professional fees and demolition charges together with
consequential loss for three years in the joint names of the
Borrower and the Bank and with the policy containing such
provisions concerning and protecting the interests of the Bank as
the Bank may require (including without limitation, provisions
showing the Bank's interests as Mortgagee and prohibiting the
cancellation of the policy or policies without the insurers
having given not less than fourteen (14) days' prior written
notice to the Bank) and maintain such other insurance policies
(in the joint names of the Borrower and the Bank) containing like
provisions concerning and protecting the interests of the Bank
(including without limitation, a provision showing the Bank's
interests as Mortgagee) as are normally maintained by prudent
companies carrying on similar businesses and duly pay within one
week of the same becoming due all premiums and other moneys
necessary for effecting and keeping up such
<PAGE>
-9-
insurances and on demand produce to the Bank the policies of such
insurance and proof of such payments failing which the Bank may
but shall not be bound to take out or renew such insurances in
any sum which the Bank may think expedient and all moneys
expended by the Bank under this provision shall be reimbursed by
the Borrower on demand and shall until repayment be added to the
principal moneys hereby secured and bear interest at the Default
Rate from the date of payment by the Bank. All moneys to be
received by virtue of any insurance maintained or effected by the
Borrower (whether or not in pursuance of the obligations
hereunder) are to be payable to the Bank (and the Borrower hereby
charges all its rights and interest in and to all such monies to
the Bank and agrees that any such monies not paid by the insurers
directly to the Bank shall be held on trust for the Bank) and
shall at the option of the Bank be applied in replacing restoring
or reinstating the property or assets destroyed damaged or lost
(any deficiency being made good by the Borrower) or (save in the
case of leasehold premises) in reduction of the moneys
obligations and liabilities hereby secured or applied in such
manner as the Bank shall require;
(f) punctually pay and indemnify the Bank and any Receiver appointed
by the Bank against all existing and future rent rates taxes
duties charges assessments impositions and outgoings whatsoever
(whether imposed by agreement statute or otherwise and whether in
the nature of capital or revenue and even if wholly novel) now or
at any time during the continuance of this security payable in
respect of the Charged Assets or any part thereof or by the owner
or occupier thereof and comply with all laws regulations rules
and orders relating to the carrying on of its business on the
land and/or premises constituting the Charged Assets. If any such
sums shall be paid by the Bank or by any such Receiver the same
shall be repaid by the Borrower on demand with interest at the
Default Rate;
(g) take out and maintain a policy of insurance in respect of the
Borrower's liability or potential liability to its employees
under the common law or the Workmen's Compensation Act (Cap. 354)
or any statutory modification thereof for the time being in
force;
(h) furnish and provide the Bank with and permit the Bank to obtain
all such statements information explanation and data as the Bank
may reasonably require regarding the affairs operations
administration financial or other whatsoever state or condition
of the Borrower or any of the matters in this Clause mentioned;
(i) forthwith notify the Bank in writing of the occurrence if any of
the events mentioned in Clause 7.01;
(j) insofar as may be necessary amend its Memorandum and Articles of
Association so as to enable it to observe and perform all the
covenants undertakings terms stipulations conditions and other
provisions of this Deed;
<PAGE>
-10-
(k) get in and realise all Debts in the ordinary course of its
business and not (without the prior consent in writing of the
Bank) charge or otherwise dispose of nor save in the ordinary
course of business and on normal commercial terms release
exchange compound set off or grant time or indulgence or
otherwise deal (or purport so to do) with all or any of the same;
(l) observe and perform all its covenants and obligations under and
in respect of the Facilities;
(m) at all times permit the Bank to hold and retain the following:
(i) all deeds and documents of title relating to all immovable
and movable property hereby charged from time to time
belonging to the Borrower (and the insurance policies
relating thereto);
(ii) without prejudice to the generality of the foregoing, all
stocks and share certificates and documents of title
relating to the Securities and such deeds of transfer in
blank and other documents as the Bank may from time to
time require for perfecting its title to the Securities
(duly executed by or signed on behalf of the registered
holder) or for vesting or enabling the Bank to vest the
same in itself or its nominees or in any purchaser; and
(iii) all assurance policies from time to time effected by the
Borrower on the lives of key employees;
(n) hold any document referred to in Clause 5.01(m) other than
documents relating to the property Thirdly charged in Clause 3.01
which may not be deposited with the Bank at any time in trust for
the Bank and will keep the same safe and undefaced;
(o) forthwith and from time to time whenever so required by the Bank
give written notice of this Deed and the assignments herein
contained to any party to whom the Bank may require such notice
to be given in such form as the Bank may require (inter alia)
giving authority (irrevocable without the consent in writing of
the Bank) for such party to pay all moneys from time to time
payable by such party to the Bank under or by virtue of any
obligation due to the Borrower the benefit of which is hereby
charged or assigned to the Bank, and to issue and deliver all
certificates and other documents in respect of such obligation
direct to the Bank or to its order;
(p) do all things which may be necessary to cause all moneys agreed
to be paid to the Borrower to become payable;
(q) during the continuance of this security duly observe and perform
all covenants and stipulations by which it is bound affecting
the Securities and will duly and punctually pay all calls
instalments and other payments that
<PAGE>
-11-
may be made or become due in respect of any part of the
Securities. If any conditional or preferential or other right to
subscribe for shares or securities in or any other option shall
be offered with respect to any part of the Securities the
Borrower shall with the Bank's consent pay to the Bank any
necessary moneys required for the subscription or the exercise of
any such right or option. In default of the Borrower so doing the
Bank may make such payments and all sums paid by the Bank for
that purpose with interest thereon at the Default Rate shall be
repaid by the Borrower on demand and until paid in full shall be
secured by the Charged Assets;
(r) permit any officer of the Bank or other agents authorized by the
Bank upon its or their giving reasonable prior notice thereof
access to and the right of inspection during normal business
hours at times convenient to the Borrower acting in a reasonable
manner of all the premises, equipment, books, accounting and
other records of the Borrower for the time being subject to the
charges hereby created or any of them (and if the Bank reasonably
thinks fit) to have the same valued once a year at the expense of
the Borrower by a valuer appointed by the Bank;
(s) deliver to the Bank copies of the Borrower's monthly unaudited
financial statements not later than 30 days after the end of the
quarter to which they relate; and
(t) deliver to the Bank not later than 180 days after the close of
the financial year to which it relates:-
(i) the balance sheet and profit and loss account showing the
true position of the Borrower's affairs as at the close of
its financial year duly audited and certified by the
auditors for the time being of the Borrower which said
auditors shall have been approved by the Bank;
(ii) the Auditors' and Directors' Reports accompanying the said
balance sheet and profit and loss account; and
(iii) a copy of the Annual Return which the Borrower is required
by law to file with the Registrar of Companies.
The Borrower shall also from time to time give such other
information explanation and materials about the assets,
liabilities and affairs of the Borrower as the Bank may
reasonably require.
5.02 The Borrower hereby further covenants with the Bank that during the
continuance of this security the Borrower will not:
(a) save in the ordinary course of its business as now conducted by
it and on normal arms' length terms (without the prior consent in
writing of the Bank) lease rent let sublet hire out or part with
possession or custody of any of the property or assets comprised
in this security or grant any licence
<PAGE>
-12-
or permission to any person to occupy use or operate the same;
(b) (without the prior consent in writing of the Bank) form or
acquire any subsidiary or transfer lease or dispose of any
Charged Assets to any subsidiary save on terms previously
approved in writing by the Bank;
(c) do or cause or permit to be done anything which may in any way
depreciate jeopardise or otherwise prejudice the value to the
Bank of the security hereby charged;
(d) effect any form of reconstruction whatsoever including (without
prejudice to the generality thereof) amalgamation with any other
company, material change of shareholders or other schemes of
compromise or arrangement affecting its present condition except
with the prior written consent of the Bank;
(e) (without the prior consent in writing of the Bank) permit any
person:
(i) to be registered as proprietor under the Land Titles Act
(Chapter 157) or the Registration of Deeds Act (Chapter 269)
of any immovable property present or future and from time to
time hereby charged nor create or permit to arise any
overriding interest affecting such property; or
(ii) to become entitled to any proprietary right or interest
which might affect the value of any land fixtures or fixed
plant and machinery hereby charged;
(f) sell assign (by way of security or otherwise) discount factor
pledge charge or otherwise dispose of the Floating Charge Assets
or any part thereof or deal with the same otherwise than in
accordance with Clause 5.01(k);
(g) create or attempt to create or permit to subsist any mortgage
debenture charge or pledge upon or permit any lien or other
encumbrance (save a lien arising by operation of law in the
ordinary course of trading) to arise on or affect the Charged
Assets or any part thereof;
(h) part with possession transfer sell lease or otherwise dispose of
the Charged Assets or any part thereof or attempt or agree so to
do except (i) in the case of assets charged by way of floating
charge only which may be transferred, sold, leased or otherwise
disposed of at market value in the usual course of business as
now conducted and for the sole purpose of carrying on the
----
Borrower's business and (ii) in such manner as may be permitted
under Clause 5.01(k); and
(i) grant, issue or extend any guarantee or indemnity or enter into
any other form of contractual undertaking or arrangement of
similar effect in respect of any indebtedness or obligations,
actual or contingent, of any other
<PAGE>
-13-
person whatsoever except in the usual and ordinary course of
trading as now conducted by it and its subsidiaries and for the
purpose of the carrying on by it, or the relevant subsidiary, of
its business.
5.03 If the Bank receives notice of any subsequent mortgage charge
assignment or other disposition affecting the Charged Assets or any
part thereof or interest therein the Bank may open a new account for
the Borrower; if the Bank does not open a new account then unless the
Bank gives express written notice to the contrary to the Borrower the
Bank shall nevertheless be treated as if it had done so at the time
when it received such notice and as from that time all payments made
by or on behalf of the Borrower to the Bank shall be credited or be
treated as having been credited to a new account and shall not operate
to reduce the amount due from the Borrower to the Bank at the time
when the Bank received notice.
6. FURTHER ASSURANCE
-----------------
6.01 The Borrower shall at any time if and when reasonably required by the
Bank execute such further legal or other mortgage fixed or floating
charges or assignments in favour of the Bank as the Bank shall from
time to time require over all or any of the Charged Assets both
present and future including but not limited to all the immoveable
properties the Securities and the book and other debts revenues and
claims of the Borrower and all rights and remedies relating thereto
both present and future (including any vendor's lien) by way of
security for the payment and discharge of the Secured Obligations such
further mortgages charges or assignments to be prepared by or on
behalf of the Bank at the cost of the Borrower and to contain an
immediate power of sale without notice a clause excluding Section 21
and the restrictions contained in Section 25 of the CLPA and such
other provisions for the benefit of the Bank as the Bank may require.
7. POWERS OF THE BANK
------------------
7.01 The principal moneys hereby secured or any part thereof for the time
being outstanding and all other moneys hereby secured and all unpaid
interest which has accrued hereunder shall become immediately payable
and the security enforceable:-
(a) if the Borrower fails to pay any sum owing to the Bank within
three Business Days of the due date thereof or if payable on
demand within five Business Days of such demand being made by the
Bank;
(b) if the Borrower shall fail to perform or observe any of its
obligations hereunder and in any case (except where the Bank
considers that such failure is not capable of remedy) such
failure shall continue for a period of 14 days next following the
date of the service by the Bank on the Borrower of notice
requiring the same to be remedied; or
<PAGE>
-14-
(c) if any representation or warranty made or deemed to be made by
the Borrower in or pursuant to this Deed or in any notice,
certificate, instrument, document or statement contemplated
hereby or thereby or made or delivered pursuant hereto or thereto
is or proves to have been untrue or inaccurate in any respect
considered by the Bank to be material; or
(d) if the Charged Assets or any part thereof are seized or
expropriated or are subject to compulsory purchase or acquisition
whether subject to compensation or not or is wholly or
substantially destroyed; or
(e) if in respect of the Borrower:-
(i) any Indebtedness shall become capable of being declared
due prematurely by reason of default in its obligations in
respect of the same or it shall fail to make any payment
in respect thereof on the due date for such payment, or
the security for any such Indebtedness shall become
enforceable and on account thereof the Bank is of the
opinion that the Borrower may be unable to meet its
obligations hereunder;
(ii) any application or petition shall be presented or any
order shall be made by a competent court or other
appropriate authority or any resolution shall be passed
for its liquidation, winding up or dissolution (as the
case may be) or any application or petition shall be
presented or order shall be made by a competent court or
other appropriate authority or any resolution passed for
the appointment of a liquidator, judicial manager, trustee
or similar official of it or of all or a substantial part
of its assets;
(iii) an encumbrancer takes possession of or a receiver is
appointed over its undertaking or the whole or any part of
its chattels, properties, assets, rights or revenues or
distress or execution or other similar process shall be
levied or enforced upon or sued out against a material
part of its properties or assets;
(iv) it shall stop payment to creditors generally or shall be
unable to pay its debts within the meaning of any
applicable legislation relating to insolvency, liquidation
or winding up, or enter into any composition or other
arrangement for the benefit of its creditors generally or
it shall cease substantially to carry on business;
(f) it in the opinion of the Bank, it shall become impossible or
unlawful for the Borrower to fulfil its undertakings or
obligations contained herein or for the Bank to exercise the
rights or any of them vested in it hereunder; or
(g) if anything shall be done or suffered or omitted to be done by
the Borrower which, in the reasonable opinion of the Bank,
imperils or may imperil the performance of the obligations or the
security created by this Deed; or
<PAGE>
-15-
(h) if any legal proceedings suits or actions of any kind whatsoever
whether criminal or civil shall be instituted against the
Borrower which, in the opinion of the Bank, will materially and
adversely affect the Borrower's ability to perform its
obligations under this Deed, such opinion so formed being binding
and conclusive on the Borrower; or
(i) if the Borrower shall transfer or otherwise dispose of all or
substantially all of its assets to any person, firm or
corporation;
(j) if the Borrower is declared by the Minister to be a declared
company under the provisions of Part IX of the Companies Act (Cap
50); or
(k) if there shall occur a material adverse change in the business,
assets, or general condition of the Borrower or any change in the
shareholding of the Borrower; or
(l) if, in the opinion of the Bank, the security hereunder or the
business of the Borrower is in jeopardy; or
(m) if any event occurs which gives the Bank reasonable grounds for
believing that the Borrower may fail or be unable to perform or
comply with its obligations under this Deed.
7.02 Upon the occurrence of any of the above events, the Bank may exercise
without further notice and without any statutory restriction (in
particular the restrictions in Section 25 of the CLPA) and whether or
not a Receiver shall have been appointed all the powers conferred on
mortgages by the CLPA as hereby varied or extended and all the powers
and discretions hereby conferred either expressly or by reference on
the Bank or any Receiver without being liable as mortgagee in
possession unless the Bank and/or the Receiver shall have acted in
wilful default or fraudulently.
7.03 Section 21 of the CLPA shall not apply to this security or to any
security given to the Bank pursuant hereto.
7.04 The statutory powers of leasing conferred on the Bank shall be
extended so as to authorize the Bank to lease and make agreements for
leases at a premium or otherwise and to accept surrenders of leases
and grant options as the Bank shall consider expedient and without the
need to observe any of the provisions of Section 23 of the CLPA.
8. APPOINTMENT AND POWERS OF RECEIVER
----------------------------------
8.01 At any time after the principal moneys interests and other moneys
hereby secured shall have become payable pursuant to Clause 7, the
Bank may in writing under its Common Seal or by its Attorney or under
the hand of any authorized officer for the time being of the Bank
appoint any person to be a Receiver of the Charged
<PAGE>
-16-
Assets or any part thereof (with power to authorize any joint Receiver
to exercise any power independently of any other joint Receiver) and
may from time to time fix his or their remuneration and may remove any
Receiver so appointed and appoint another in his place. If any part of
the Charged Assets is excluded from the Receiver's appointment, such
exclusion shall not prevent the Bank from subsequently appointing the
Receiver (or his substitute) to that part. A Receiver so appointed
shall be the agent of the Borrower and the Borrower shall be solely
responsible for his acts or defaults (other than acts of fraud or
wilful default) and for his remuneration and such Receiver so
appointed shall have all the powers conferred from time to time on
receivers by statute and in the case of the powers conferred by the
CLPA without the restrictions contained in Section 25 of the CLPA and
in addition power on behalf and at the cost of the Borrower
(notwithstanding liquidation of the Borrower) to do or omit to do
anything which the Borrower could do or omit to do in relation to the
Charged Assets or any part thereof and in particular (but without
limitation) any such Receiver may:
(a) enter into, take possession of collect and get in all or any of
the Charged Assets, exercise in respect of the Securities all
voting or other powers or rights available to the Borrower or to
the owner or a holder thereof generally in such manner as he may
think fit and give and receive such notices and bring defend or
discontinue any proceedings or submit to arbitration in the name
of the Borrower or otherwise as may seem expedient to him;
(b) carry on manage develop reconstruct amalgamate or diversify the
business of the Borrower or any part thereof or to enter into
arrangement with respect to the business of the Borrower or any
part thereof with any person or concur in so doing and for the
purpose of the said business to employ such agent managers
accountants servants and workmen upon such terms as to
remuneration or otherwise as the Receiver shall think proper;
perform vary or cancel obligations of the Borrower under any
contract on such terms as he may think fit; lease or otherwise
acquire and develop or improve properties or other assets without
being responsible for loss or damage unless such loss or damage
is occasioned by his own fraud or wilful default and raise or
borrow any money from or incur any other liability to the Bank or
others on such terms with or without security as he may think fit
and so that any such security may be or include a charge on the
whole or any part of the Charged Assets ranking in priority to
this security or otherwise;
(c) without the restrictions imposed by Section 25 of the CLPA or the
need to observe any of the provisions of Section 23 of the CLPA
sell by public auction or private contract let surrender or
accept surrenders grant licences or rescind or repudiate or
accept repudiation of or otherwise dispose of or deal with all or
any of the Charged Assets or concur in so doing in such manner
for such consideration and generally on such terms and conditions
as he may think fit with full power to convey let surrender
accept surrenders of or otherwise transfer or deal with such
Charged Assets in the
<PAGE>
-17-
name and on behalf of the Borrower or otherwise and so that
covenants and contractual obligations may be granted and assumed
in the name of and so as to bind the Borrower (or other the
estate owner) if he shall consider it necessary or expedient so
to do and to vary any contract for sale and resell without being
answerable for any loss occasioned thereby unless such loss is
occasioned by his own fraud or wilful default. Any such sale
lease or disposition may be for cash debenture or other
obligations shares stock securities or other valuable
consideration and be payable immediately or by instalments spread
over such period as he shall think fit and so that any
consideration received or receivable shall ipso facto forthwith
be and become charged with the payment of all moneys obligations
and liabilities hereby secured. Plant machinery and other
fixtures fittings and equipment may be severed and sold
separately from the premises containing them and the Receiver may
apportion any rent and the performance of any obligations
affecting the premises sold without the consent of the Borrower;
(d) promote the formation of companies with a view to the same
purchasing leasing licensing or otherwise acquiring interests in
all or any of the Charged Assets or otherwise, arrange for such
companies to trade or cease to trade and to purchase lease
licence or otherwise acquire all or any of the Charged Assets on
such terms and conditions whether or not including payment by
instalments secured or unsecured as he may think fit;
(e) make any arrangement or compromise or enter into or cancel any
contracts which he shall think expedient and to do any other act
or thing which a receiver appointed under the CLPA would have
power to do;
(f) make and effect such repairs renewals and improvements to the
Charged Assets or any part thereof as he may think fit and
maintain renew take out or increase all insurances;
(g) appoint managers agents officers and employees for any such
purposes or to guard or protect the Charged Assets at such
salaries and commissions and for such periods and on such terms
as he may determine and dismiss the same;
(h) make calls conditionally or unconditionally on the members of the
Borrower in respect of uncalled capital as he may think fit;
(i) sign any document execute any deed and do all such other acts and
things as may be considered by him to be incidental or conducive
to any of the matters or powers aforesaid or to the realisation
of the Bank's security constituted by this Deed and which he
lawfully may or can do as agent of the Borrower and use the name
of the Borrower for all the above purposes;
(j) have access to and make use of the premises plant equipment and
accounting and other records of the Borrower and the services of
its staff for all or any of the above purposes;
<PAGE>
-18-
(k) generally to do or cause to be done such acts or things which the
Borrower may have done in the ordinary conduct of its business as
well for the protection as for the improvement of the property
and assets comprised in this security.
8.02 The powers of appointment of a receiver hereunder shall be in addition
and without prejudice to any statutory or other powers of the Bank
hereunder or otherwise and so that such powers shall be and remain
exercisable by the Bank notwithstanding that an appointment under the
provisions hereof shall be subsisting or has been withdrawn.
9. THE BANK, RECEIVERS AND PURCHASERS
----------------------------------
9.01 All money received by the Bank or by any Receiver appointed by the
Bank in the exercise of any powers conferred by this Deed shall be
applied by the Receiver subject to the claims of all secured or
unsecured creditors (if any) ranking in priority to this Deed: -
FIRST, in payment of all costs charges and expenses of and incidental
-----
to the appointment of the Receiver and the exercise by him of all or
any of the powers aforesaid including the reasonable remuneration of
the Receiver and all outgoings properly paid by him.
SECONDLY, in or towards payment to the Bank of all interest accrued
--------
hereunder and remaining unpaid.
THIRDLY, in or towards payment to the Bank of all principal and other
-------
moneys due.
FOURTHLY, any surplus shall be paid to the Borrower.
--------
The Borrower agrees that the Bank may and the Bank is hereby
authorized to, apply all or any of the money received by the Bank or
by any Receiver appointed by the Bank in exercise of any powers
conferred by this Deed in or towards the provision of cash collateral
for the contingent obligations and liabilities of the Borrower to the
Bank hereby secured, which cash collateral may be held on such account
at such bank as the Bank may decide in its discretion and shall itself
be an asset of the Borrower charged pursuant to this Deed.
9.02 No purchaser or other person shall be bound or concerned to see or
enquire whether the right of the Bank or any Receiver to exercise any
of the powers hereby conferred has arisen or not or be concerned with
notice to the contrary or with the propriety of the exercise or
purported exercise of such powers.
9.03 The Borrower hereby covenants with the Bank on demand to pay all costs
charges and expenses incurred by the Bank or by any such Receiver or
which it or he shall properly incur in or about the enforcement
preservation or attempted
<PAGE>
-19-
preservation of this security or of the Charged Assets or any of them
on a full indemnity basis with interest at the Default Rate from the
date of payment by the Bank or such Receiver save such costs, charges
and expenses resulting from the Bank's or such Receiver's fraud
negligence or wilful default. Any such Receiver shall be entitled to
remuneration appropriate to the work and responsibilities involved
upon the basis of charging from time to time adopted by the Receiver
in accordance with the current practice of his firm without the
restrictions imposed by Section 29(6) of the CLPA.
9.04 Neither the Bank nor any such Receiver shall be liable to account as
mortgagee in possession in respect of all or any of the Charged Assets
nor be liable for any loss upon realisation in connection therewith
for which a mortgagee in possession may be liable as such unless such
loss is occasioned by the Bank's and/or the Receiver's own fraud or
wilful default.
9.05 The Borrower hereby agrees to indemnify the Bank and any such Receiver
against all losses actions claims expenses demands or liabilities
whether in contract or otherwise now or hereafter incurred by it or
him or by any manager agent officer or employee for whose liability
act or omission the Bank or any such Receiver may be answerable (i)
for anything done or omitted in the exercise or purported exercise of
the powers herein contained unless the same is occasioned by the
Bank's and/or the Receiver's own fraud wilful default or negligence or
(ii) occasioned by any breach by the Borrower of any of its covenants
or other obligations to the Bank. The Borrower shall so indemnify the
Bank and any such Receiver on demand and shall pay interest on the
sums demanded at the Default Rate.
9.06 Any sale or other disposition by the Bank or by any of its nominees or
by a Receiver may be made upon such terms as the Bank or Receiver may
think fit.
9.07 The Borrower undertakes to give the Bank and the Receiver all
facilities necessary or expedient in the opinion of the Bank or the
Receiver for enforcing the security hereby created including such
possession or information as may be required for that purpose and the
Borrower shall do such acts and things and shall execute all such
assurances and instruments as the Receiver in the exercise of any of
the powers hereby conferred upon him shall reasonably require.
10. POWER OF ATTORNEY
-----------------
10.01 The Borrower by way of security hereby irrevocably appoints the Bank
and the persons deriving title under it and separately any Receiver
appointed hereunder severally to be its Attorney in its name and on
its behalf and as its act and deed or otherwise to execute and
complete in favour of the Bank or the Bank's nominees or of any
purchaser any documents which the Bank may require for perfecting its
title to or for vesting the Charged Assets both present and future in
the Bank or its nominees or in any purchaser, and otherwise generally
to sign seal deliver and otherwise perfect any such legal or other
mortgage or assignment referred to in Clause 6 and at any time after
the principal moneys interests and
<PAGE>
-20-
other moneys hereby secured shall have become payable pursuant to
Clause 7 to receive all moneys hereby charged or assigned to the Bank
and to give an effectual discharge for such moneys and to take
proceedings and other steps for the recovery of all such moneys or any
part thereof) in the name of the Borrower or for the Bank and to make
allowances, agree accounts and give time or other indulgence to any
surety or other person liable and otherwise generally to sign seal and
deliver all such deeds assurances agreements and documents and to do
all such acts and things as may be required for the full exercise of
all or any of the powers hereby conferred or which may be deemed
expedient by the Bank or the Receiver on or in connection with any
sale lease disposition realisation or getting in by the Bank or any
such Receiver of the Charged Assets or any part thereof or in
connection with any other exercise of any power hereunder. The
Borrower hereby covenants with the Bank and any such Receiver that on
request the Borrower will ratify and confirm all deeds assurances
agreements documents acts and things and all transactions entered into
by the Bank or such Receiver or by the Borrower at the instance of the
Bank or such Receiver in the exercise or purported exercise of its or
his powers and the Borrower irrevocably acknowledges and agrees that
such power of attorney is inter alia given to secure the performance
of the obligations owed to the Bank and any such Receiver by the
Borrower.
11. EXCLUSION OF THE BORROWER'S POWERS OF LEASING ETC.
-------------------------------------------------
11.01 During the continuance of this security the statutory and any other
powers of leasing (including, without limitation those set out in
section 23(1) of the CLPA) letting entering into agreements for leases
or lettings and accepting or agreeing to accept surrenders of leases
or tenancies shall not in relation to the Charged Assets or any part
thereof be exercisable by the Borrower nor shall the Borrower part
with possession of the same or any part thereof nor confer any licence
right or interest to occupy nor grant any licence or permission to
assign underlet or part with possession of the same or any part
thereof nor agree suffer or permit any variation or addition to the
terms of any lease tenancy or licence other than in the ordinary
course of its business as now conducted by it and on normal arms'
length terms without in every such case obtaining the prior written
consent of the Bank.
12. PROTECTIONS FOR THE BANK AND ANY RECEIVER
-----------------------------------------
12.01 The Bank and any Receiver appointed by the Bank are hereby authorized
to compromise or settle any dispute arising out of or in connection
with the Charged Assets on such terms as the Bank or any such Receiver
may in its absolute discretion from time to time decide to do and the
Borrower shall keep the Bank and any such Receiver fully and
effectually indemnified from and against all actions losses claims
proceedings costs demands and liabilities whether in contract tort or
otherwise which may be suffered or incurred by the Bank or such
Receiver under or by virtue of the Charged Assets or any such
compromise or settlement in respect thereof (i) for anything done or
omitted in the exercise or purported
<PAGE>
-21-
exercise of the powers herein contained unless the same shall be
occasioned by the Bank's and/or the Receiver's own fraud, wilful
default or negligence or (ii) occasioned by the breach by the Borrower
of any of its covenants or other obligations to the Bank.
12.02 Neither the Bank nor any Receiver shall be under any duty to make any
enquiry as to the nature or sufficiency of any payment received by it
(but immediately upon receipt of any payment shall notify the Borrower
of the amount received and relevant details of the obligations in
respect of which such payment was made) or to make any claim or take
any other action or do any deed act or thing for the purpose of
collecting moneys or enforcing any rights against any of the Charged
Assets nor shall they be under any liability to the Borrower for any
loss or damage occasioned by the exercise of the powers conferred by
this Deed or by any omission so to do unless the same shall be
occasioned by the Bank's and/or the Receiver's own fraud or wilful
default.
13. CONTINUING SECURITY
-------------------
13.01 This security shall be a continuing security notwithstanding any
settlement of account or other matters whatsoever and is in addition
to and shall not merge with or otherwise prejudice or affect any
contractual or other right or remedy or any guarantee lien pledge bill
mortgage or other security (whether created by the deposit of
documents or otherwise) now or hereafter held by or available to the
Bank and shall not be in any way prejudiced or affected thereby or by
the invalidity thereof or by the Bank now or hereafter dealing with
exchanging releasing varying or abstaining from perfecting or
enforcing any of the same or any rights which it may now or hereafter
have or giving time for payment or indulgence or compounding with any
other person liable.
13.02 Any settlement or discharge between the Bank and the Borrower shall be
conditional upon no security or payment to the Bank by the Borrower or
any other person being avoided or set aside or ordered to be refunded
or reduced by virtue of any provision or enactment relating to
bankruptcy, insolvency or liquidation for the time being in force and
the Bank shall be entitled to recover from the Borrower the value
which the Bank has placed upon such security or the amount of any such
payment as if such settlement or discharge had not occurred.
14. CURRENCY CLAUSES
----------------
14.01 All moneys received or held by the Bank or by a Receiver under this
Deed may from time to time be converted into such other currency as
the Bank considers necessary or desirable to cover the obligations and
liabilities actual or contingent of the Borrower in that other
currency at the then prevailing spot rate of exchange for purchasing
that other currency with the existing currency of the Bank (as
conclusively determined by the Bank). For the purposes of this Deed,
any amounts actually owing by the Borrower to the Bank in a foreign
currency shall
<PAGE>
-22-
be converted into Singapore Dollars in accordance with the foregoing
provisions of this Clause 14.01 on the date on which any floating
charge is converted into a fixed charge pursuant to Clause 3.06.
14.02 If and to the extent that the Borrower fails to pay on demand any
amount hereby secured due on demand the Bank may in its absolute
discretion without notice to the Borrower purchase at any time
thereafter so much of any other currency as the Bank considers
necessary or desirable to cover the obligations and liabilities of the
Borrower hereby secured in such currency at the then prevailing spot
rate of exchange for purchasing that other currency with the existing
currency of the Bank in Singapore (as conclusively determined by the
Bank) and the Borrower hereby agrees to indemnify the Bank against the
full cost (including all costs charges and expenses) incurred by the
Bank for such purchase.
14.03 No payment to the Bank (whether under any judgment or court order or
otherwise) shall discharge the obligation or liability actual or
contingent of the Borrower in respect of which it was made unless and
until the Bank shall have received payment in full in the currency in
which such obligations or liability was incurred and to the extent
that the amount of any such payment shall on actual conversion into
such currency fall short of such obligation or liability actual or
contingent expressed in that currency the Bank shall have a further
separate cause of action against the Borrower and shall be entitled to
enforce the charges hereby created and the assignment hereby effected
to recover the amount of the shortfall.
15. SET-OFF
-------
The Borrower authorizes the Bank to apply (without prior notice) any
credit balance (whether or not then due) to which it is at any time
beneficially entitled on any account (whether or not expressed in the
same currency as the banking facilities or expressed in gold, silver
or other precious metal or otherwise) or debit such account at any
office or branch of the Bank (whether in Singapore or elsewhere) in or
towards satisfaction of any moneys owing to the Bank actual or
contingent provided that such debiting shall not constitute or be
deemed to be a payment of such sums of money due or owing (except to
the extent of any amount in credit in such account) or a waiver of any
event of default hereunder. For that purpose, the Bank is authorized
to use all or any part of any such credit balance to buy such other
currencies as may be necessary to effect such application. The Bank
shall not be obliged to exercise any of its rights under this Clause,
which shall be without prejudice and in addition to any right of set-
of, combination of accounts, lien or other right to which it is at any
time otherwise entitled (whether by operation of law, contract or
otherwise).
16. COSTS AND EXPENSES
------------------
16.01 The Borrower shall pay to the Bank on demand all expenses (including
legal fees on a solicitor and client basis, printing and out-of-pocket
expenses) incurred by
<PAGE>
-23-
the Bank: (a) in connection with the negotiation, preparation,
execution and, registration of this Deed and of any amendment or
extension of or the granting of any consent or waiver under this Deed
and (b) in connection with, the enforcement of, or preservation of
any rights under this Deed or otherwise in respect of the moneys
secured by this Deed together with interest at the Default Rate from
the date on which such expenses were incurred to the date of payment
(as well after as before judgment) and all goods and services, value
added and other similar taxes payable on all such expenses.
16.02 The Borrower shall pay all stamp, documentary, registration or other
like duties (including any duties payable by the Bank) imposed on or
in connection with this Deed or the Charged Assets or any instrument
effecting or relating to the transfer or assignment of the Charged
Assets and all goods and services, value added and other similar taxes
payable on all such expenses and shall indemnify the Bank against any
liability arising by reason of any delay or omission by the Borrower
to pay such duties.
17. MISCELLANEOUS
-------------
17.01 No failure or delay by the Bank in exercising any right or remedy
shall operate as a waiver thereof nor shall any single or any partial
exercise or waiver of any right or remedy preclude its further
exercise or the exercise of any other right or remedy.
17.02 Nothing in this Deed shall (i) affect or prejudice any right of set-
off to which the Bank may be entitled as against the Borrower or (ii)
oblige the Bank to share with any other bank the proceeds of the
exercise of any such right of set-off.
17.03 Each of the provisions of this Deed are severable and distinct from
the others and if at any time one or more of such provisions is or
becomes invalid illegal or unenforceable the validity legality and
enforceability of the remaining provisions hereof shall not in any way
be affected or impaired thereby.
17.04 Any notice or demand for payment by the Bank hereunder shall without
prejudice to any other effective mode of making the same be deemed to
have been properly served on the Borrower if served on any one of the
Directors or on the Secretary of the Borrower or delivered or sent by
letter post or facsimile transmission to the Borrower at 30 Choon Guan
Street, Singapore 0207 or at such other address in Singapore as may be
notified to the Bank for such purpose. Any such notice or demand sent
by letter post shall be deemed to have been served on the addressee
when delivered personally or three days after it has been put in to
the post notwithstanding that it be undelivered or returned
undelivered and in proving such service it shall be sufficient to
prove that the notice or demand was properly addressed and posted. Any
notice or demand sent by telex or facsimile transmission on a Business
Day (being a day in Singapore other than a Saturday, Sunday or public
holiday) shall be deemed to have been served at the time of despatch
and, in the case of a telex, with confirmed answerback of the
addressee
<PAGE>
-24-
appearing at the beginning and end of the communication. Any such
notice or demand or any certificate as to the amount at any time
secured hereby shall be conclusive and binding upon the Borrower if
signed by a Vice President or other duly authorized officer of the
Bank to which the sum demanded shall be due.
17.05 Any appointment or removal of a Receiver under Clause 8 and any
consents hereunder may be made or given by writing signed or sealed
by any successors or assigns of the Bank and the Borrower hereby
irrevocably appoints each of the same to be its Attorney in the terms
and for the purposes set out in Clause 10.
17.06 Any change in the constitution of the Bank or its absorption into or
amalgamation with any other person or the acquisition of all or part
of its undertaking by any other person shall not in any way prejudice
or affect its rights hereunder.
17.07 The Borrower may not assign its rights or obligations hereunder. The
Bank may assign all or any part of its rights or benefits and/or
transfer all or part of its obligations under this Deed to any person
and following any such assignment and/or transfer the Bank shall
notify the Borrower of the identity of the assignee or transferee and
all references in this Deed to the Bank shall be read and construed as
references to the Bank and such assignee and transferee to the extent
of their respective interests. In the case of a transfer of the Bank's
obligations the Borrower shall look only to the transferee for the
performance of the obligations of the Bank transferred. The Bank may
disclose to any potential assignee or transferee or any other person
with whom the Bank may consider entering into contractual relations in
relation to this Deed such information about the Borrower as the Bank
shall consider appropriate.
18. LAW
---
18.01 This Deed shall be governed by and construed in accordance with
Singapore law.
IN WITNESS whereof this Deed has been executed.
<PAGE>
25
THE COMMON SEAL of )
FOUR MEDIA COMPANY ASIA PTE LTD ) [SEAL]
was hereunto affixed in the )
presence of:
/s/ Robert Walston
Director
/s/ J. Schutz
Director
SIGNED SEALED AND DELIVERED by )
as Attorney for THE HONGKONG AND )
SHANGHAI BANKING CORPORATION )
acting under a Power of Attorney )
dated the day of 11th May 1983 )
(a copy of which was deposited ) /s/ Lilian Wan
in the Registry, Supreme Court, ) --------------------
Singapore on the 23rd day of ) [SEAL]
June 1983 and registered as )
No. 2654 of 1983) in the )
presence of: )
/s/ Cheng Wei Lin
I, Marian Sng Su Ying an Advocate and Solicitor of the Supreme Court of
the Republic of Singapore practising in Singapore hereby certify that on the
21st day of February 1995 the Common Seal of FOUR MEDIA COMPANY ASIA PTE LTD was
duly affixed to the above written instrument at Singapore in my presence in
accordance with the regulations of the said Company (which regulations have been
produced and shown to me).
Witness my hand.
/s/ Marian Sng
<PAGE>
- 26 -
On this 22nd day of February 1995 before me, Cheng Wei Lin an Advocate and
Solicitor of the Supreme Court of the Republic of Singapore practising in
Singapore personally appeared "Lilian Yap Ah Wan" the Attorney of THE HONGKONG
AND SHANGHAI BANKING CORPORATION LIMITED who of my own personal knowledge I know
to be the identical person whose name "Sgd Lilian Yap Ah Wan" is subscribed
to the within written instrument and acknowledged that he had voluntarily
executed this instrument at Singapore.
Witnessed my hand.
/s/ Cheng Wei Lin
<PAGE>
EXHIBIT 10.13
Dated the day of 1995
---------------------------------------
Between
FOUR MEDIA COMPANY ASIA PTE LTD
And
THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED
----------------------
DEED OF ASSIGNMENT
----------------------
LEE & LEE
ADVOCATES & SOLICITORS
SINGAPORE
<PAGE>
CONTENTS
--------
<TABLE>
<CAPTION>
Clause Heading Page No.
- ------ ------- --------
<C> <S> <C>
1 Purpose and Definitions 1
2 Assignment 3
3 Undertakings 3
4 Further Assurance 4
5 Powers of The Bank 5
6 Representations 5
7 Appointment and Powers of Receiver 6
8 The Bank, Receivers and Purchasers 6
9 Power of Attorney 7
10 Protections for The Bank and Any Receiver 8
11 Continuing Security 8
12 Set-Off 9
13 Miscellaneous 9
Schedule
- --------
1 Powers of Receiver 11
2 Form of Notice to MTV Asia LDC 12
3 Acknowledgement 13
</TABLE>
<PAGE>
THIS ASSIGNMENT is dated 22 February 1995 and made BETWEEN:
(1) FOUR MEDIA COMPANY ASIA PTE LTD a company incorporated in Singapore and
having its registered office at 9 PENANG Road #13-21, Park Mall, Singapore
0923 (the "Borrower"); and
(2) THE HONG KONG AND SHANGHAIBANKING CORPORATION LIMITED a company
incorporated in Hong Kong and having a place of business at 40-A Orchard
Road #01-00, MacDonald House, Singapore 0923 (the "Bank").
WITNESSES as follows:
1. PURPOSE AND DEFINITIONS
-----------------------
1.01 Under the terms and subject to the conditions set out in a facility
agreement dated 22 February 1995 entered into between the Bank and the
Borrower, the Bank agreed to make available to the Borrower facilities of
up to an aggregate principal amount of Singapore Dollars Sixteen Million
Nine Hundred and Fifty Thousand (S$16,950,000-00) for the purposes
stated therein.
1.02 Under the terms of such facility agreement, the execution and delivery
of this Assignment is a condition precedent to the availability of the
facilities.
1.03 In this Assignment:
"Assigned Property" means all the assets assigned and/or charged to the
Bank pursuant to Clause 2.01 hereof;
"Bank" includes its successors in title and assigns;
"CLPA" means the Conveyancing and Law of Property Act (Cap. 61);
"Encumbrance" means any mortgage, charge (whether fixed or floating),
pledge, lien, hypothecation, assignment, trust arrangement, right of set-
off or security interest of any kind securing any obligation of any person
or any other type of preferential arrangement (including without
limitation title transfer and/or retention arrangements having a similar
effect) but does not include liens arising in the ordinary course of
trading by operation of law and not by way of contract;
"Facility Agreement" means the facility agreement dated 22 February 1995
entered into between the Bank and the Borrower pursuant to which the Bank
agreed on the terms and subject to the conditions therein set out to make
available to the Borrower credit facilities of up to the aggregate
principal sum of Singapore Dollars Sixteen Million Nine Hundred and Fifty
Thousand (S$16,950,000-00));
"MTV Asia LDC" means a company incorporated in Cayman Islands and having
<PAGE>
2
its registered office at Caledonian Bank & Trust Limited, P.O. Box 1043,
Grand Cayman, Cayman Islands, B.W.I.;
"MTV Contract" means the agreement entered or to be entered into between
MTV Asia LDC and the Borrower under the terms of which the Borrower
will, inter alia, make available to MTV Asia LDC its premises, crew
members, certain equipment and production and/or post-production
facilities in consideration of which MTV Asia LDC will, inter alia, pay
to the Borrower a monthly fee;
"Account" means an account opened or to be opened by the Borrower with
the Bank;
"Receiver" means any one or more receivers or receivers and managers
appointed by the Bank in respect of the Assigned Property or any part
thereof.
"Secured Obligations" means all obligations or liabilities for the
payment or repayment of money, whether as principal or as surety and
whether present or future, actual or contingent and all other obligations
and liabilities undertaken by the Borrower pursuant to or in connection
with the Facility Agreement; and
"Singapore Dollars" and "S$" mean the lawful currency of Singapore and
(in respect of all payments to be made under this Assignment) immediately
available and freely transferable funds.
1.04 Unless otherwise stated or otherwise so required, terms defined in the
Facility Agreement have the same meanings where used in this Assignment.
1.05 Clause headings and the table of contents are inserted for convenience of
reference only and shall be ignored in the interpretation of this
Assignment.
1.06 In this Assignment unless the context otherwise requires:
(a) references to Clauses and the Schedules are to be construed as
references to clauses of, and the schedule to, this Assignment and
references to this Assignment include the Schedules;
(b) references to (or to any specified provision of) this Assignment or
any letter or other document shall be construed as references to
this Assignment, that letter or other document or that provision as
in force for the time being and as amended supplemented or varied in
accordance with the terms thereof or, as the case may be, with the
agreement of the relevant parties and (where such consent is, by the
terms of this Assignment or the relevant letter or document,
required to be obtained as a condition to such amendment being
permitted) the prior written consent of the Bank;
(c) words importing the plural shall include the singular and vice
versa; and
<PAGE>
3
(d) references to a person shall be construed as including references to
an individual, firm, company, corporation, unincorporated body of
persons or any State or any agency thereof.
2. ASSIGNMENT
----------
2.01 The Borrower as beneficial owner by way of security for the payment and
discharge of the Secured Obligations hereby assigns and agrees to assign
absolutely to the Bank all its present and future rights, title and
interest in and to (i) all moneys from time to time payable under or
contemplated by the MTV Contract) and (ii) the moneys from time to time
standing to the credit of the Account (in each case) as a continuing
security to the Bank for the performance by the Borrower of all its
obligations under the Facility Agreement. Provided that the Borrower
shall, until the occurrence of an Event of Default, be permitted to
withdraw moneys from the Account for such purposes as it may deem fit so
long as the amount remaining in credit in the Account immediately
following each such withdrawal shall be not less than S$1,000,000.
2.02 Nothing in this Assignment shall impose on the Bank any obligation with
respect to the Account or the MTV Contract. The Borrower shall remain
fully responsible for the performance of all its obligations in relation
thereto.
2.03 Upon payment and discharge in full of all moneys outstanding and all
other liabilities and obligations owing or to be discharged the Bank
shall (at the request and cost of the Borrower) re-assign the Assigned
Property to the Borrower (or as it may direct).
3. UNDERTAKINGS
------------
3.01 The Borrower undertakes with the Bank that, until the Secured Obligations
have been paid and/or performed in full:
(a) it will deposit with the Bank in undefaced condition and permit the
Bank during the continuance of this security to hold and retain
certified true copies of all depository receipts and all other
documents relating to the Account and the MTV Contract including but
not limited to all variations extensions or replacements from time to
time made to any of such documents and pay to the Bank forthwith on
receipt all moneys from time to time received under or by virtue of
or arising out of or in connection with the Account or the MTV
Contract;
(b) it will produce to the Bank on request such information relating to
the Account and the MTV Contract as the Bank may from time to time
require;
<PAGE>
4
(c) it will duly and punctually perform and observe all the terms,
conditions and obligations imposed upon it by the MTV Contract and
the Facility Agreement and will use its best endeavours to procure
that MTV Asia LDC shall perform its obligations under the MTV
Contract;
(d) it will forthwith notify the Bank of any claims, notices or other
matters relating to or affecting the Account and/or the MTV Contract;
(e) it will not vary, extend, release, determine or rescind the Account
or the MTV Contract or grant time for payment or indulgence or
compound with, discharge, waive, release, set-off or vary the
liability of any other party thereto in any manner which might
materially and adversely affect its ability to perform its
obligations under the Facility Agreement and/or the Security
Documents without the prior written consent of the Bank;
(f) it will forthwith and from time to time whenever so required by the
Bank provide irrevocable authority to MTV Asia LDC for the payment to
the Account of all moneys due or owing in respect of the MTV
Contract;
(g) it will forthwith upon the execution of the MTV Contract or (as the
case may be) this Assignment give to MTV Asia LDC notice of
assignment in the form set out in Schedule 2 and other instructions
as the Bank may reasonably require and will procure the delivery to
the Bank within seven (7) days of the date of this Assignment an
acknowledgment by MTV Asia LDC of receipt of such notice and its
consent to this Assignment, such acknowledgment and consent to be in
the form of the letter set out in Schedule 3;
(h) it will forthwith upon receipt of any moneys pursuant to the MTV
Contract pay the same into the Account or such other account as the
Bank may from time to time specify;
(i) it will not, save as contemplated by this Assignment, create or
permit to arise, subsist or be extended, any Encumbrance over all or
any part of the Account or the MTV Contract or any of its rights,
title or interest therein or thereto;
(j) it will not sell assign discount factor or otherwise dispose of the
Account or the MTV Contract or attempt or agree so to do; and
(k) it will not do or cause or permit to be done anything which may in
any way depreciate jeopardise or otherwise prejudice the value of
the rights of the Bank hereunder.
4. FURTHER ASSURANCE
-----------------
4.01 The Borrower shall at any time when required by the Bank execute such
further
<PAGE>
5
Encumbrances and other documents in favour of the Bank as the Bank shall
from time to time require for perfecting the Bank's title to or for
vesting or enabling it to vest the full benefit of the assets hereby
assigned in the Bank or its nominee or in any purchaser, such
Encumbrances and other documents to be prepared by or on behalf of the
Bank at the cost of the Borrower and to contain an immediate power of
sale without notice, a clause excluding statutory restrictions on
consolidation or exercise of powers of sale (in particular, Sections 21
and 25 of the CLPA) and such other provisions as the Bank may require.
4.02 The Borrower will do or permit to be done each and every act or thing
which the Bank may from time to time require to be done for the purpose
of enforcing the Bank's rights hereunder and will allow the name of the
Borrower to be used as and when required by the Bank for that purpose.
5. POWERS OF THE BANK
------------------
5.01 If any of the Secured Obligations is not paid or discharged when due or
if requested by the Borrower, the Bank may without notice and without any
statutory restriction (in particular the restrictions in Section 25 of
the CLPA) and whether or not a Receiver shall have been appointed,
exercise all the powers conferred upon mortgagees by the CLPA or
otherwise in law or in equity as hereby varied or extended and all the
powers and discretions hereby conferred either expressly or by inference
on a Receiver including but without prejudice to the generality of the
foregoing) full power to break, call in and withdraw the Account or
otherwise to sell or dispose of the assets hereby assigned at such times
in such manner and generally on such terms and conditions and for such
consideration as the Bank may think fit with power to execute assurances
and give effectual receipts and do all other acts and things necessary or
desirable for completion of the withdrawal sale or other disposition and
the application of all moneys received by the Bank under or in connection
with the MTV Contract in or towards the payment or discharge of the
Secured Obligations.
5.02 No restriction on consolidation of mortgages (in particular Section 21 of
the CLPA) shall apply to this security or to any security given to the
Bank pursuant to this Assignment.
6. REPRESENTATIONS
---------------
The Borrower represents and warrants to the Bank that:
(a) the Borrower has absolute and beneficial title to the Account and the
MTV Contract free from all mortgages, charges, claims, liabilities,
disabilities or other encumbrances whatsoever; and
<PAGE>
6
(b) the Account and the MTV Contract are and will be (at all times prior
to redemption of this Assignment) free and clear of all liens,
claims, charges and encumbrances whatsoever arising from the acts or
omissions of the Borrower, save as created by this Assignment.
7. APPOINTMENT AND POWERS OF RECEIVER
----------------------------------
7.01 If any of the Secured Obligations is not paid or discharged when due or if
requested by the Borrower, the Bank may appoint any person to be a
Receiver of the Assigned Property or any part thereof (with power to
authorise any joint Receiver to exercise any power independently of any
other joint Receiver) and may from time to time fix his or their
remuneration and may remove any Receiver so appointed and appoint another
in his place.
7.02 A Receiver shall be the agent of the Borrower and the Borrower shall be
solely responsible for his acts or defaults and for his remuneration.
7.03 A Receiver shall have all the powers conferred from time to time on
receivers by the CLPA, including those contained in Section 25 but
excluding the restrictions in Sections 29(6) and 29(7), to do or omit to
do anything which the Borrower could do or omit to do in relation to the
Assigned Property or any part thereof. In particular (but without
limitation) a Receiver shall have power to do all or any of the acts and
things described in Schedule 1.
8. THE BANK RECEIVERS AND PURCHASERS
---------------------------------
8.01 All moneys received by the Bank or by any Receiver pursuant to this
Assignment shall be applied after the discharge of the remuneration and
expenses of the Receiver and all liabilities having priority thereto by
law in or towards satisfaction of such of the Secured Obligations and in
such order as the Bank in its absolute discretion may from time to time
decide.
8.02 No person shall be bound or concerned to see or enquire whether the right
of the Bank or any Receiver to exercise any of the powers conferred by
this Assignment has arisen or not or be concerned with notice to the
contrary or with the propriety of the exercise or purported exercise of
such powers. Neither the Bank nor any Receiver shall be under any duty to
make any enquiry as to the nature or sufficiency of any payment received
by them or to make any claim or take any other action or do any deed, act
or thing for the purposes of collecting any moneys or enforcing the Bank's
rights in the Assigned Property nor shall they be under any liability to
the Borrower for any damage occasioned by the exercise or the nonexercise
of the powers conferred by this Assignment unless such damage is
occasioned by the Bank's and/or the Receiver's own fraud or wilful
default.
<PAGE>
7
8.03 The Borrower undertakes with the Bank on demand to pay all costs, charges
and expenses incurred by the Bank or by any Receiver which any of them
shall properly incur in or about the enforcement, preservation or
attempted preservation of this security or of the Bank's rights in the
Assigned Property or any part thereof on a full indemnity basis, with
interest at the rate described in the Facility Agreement. Any Receiver
shall be entitled to remuneration appropriate to the work and
responsibilities involved upon the basis of charging from time to time
adopted by the Receiver in accordance with the current practice of his
firm.
8.04 Neither the Bank nor any Receiver shall be liable for any loss upon
realisation in respect of the Assigned Property or any part thereof unless
the same shall have been occasioned by its or his own fraud or wilful
default.
8.05 The Borrower shall indemnify the Bank and any Receiver against all losses,
actions, claims, expenses, demands or liabilities whether in contract,
tort or otherwise now or hereafter incurred by any of them or by any
manager, agent, officer or employee for whose liability, act or omission
any of them may be answerable or (i) for anything done or omitted in the
exercise or purported exercise of the powers herein contained unless the
same shall have been occasioned by its or his own fraud wilful default or
negligence or (ii) occasioned by any breach by the Borrower of any of its
undertakings or other obligations to the Bank. The Borrower shall so
indemnify the Bank and any Receiver on demand and shall pay interest on
the sum demanded at the rate and otherwise on the terms set out in Clause
8.03.
8.06 Any sale or other disposition by the Bank or by any of its nominees or by
a Receiver may be made upon such terms as the Bank or the Receiver may
think fit.
9. POWER OF ATTORNEY
-----------------
9.01 The Borrower by way of security irrevocably appoints the Bank or the
Bank's attorney or any of them or any person appointed by any of the
Bank's attorneys and separately any Receiver or the Receiver's attorney
to be its attorney in its name and on its behalf to execute and complete
in favour of the Bank, any Receiver or their respective nominees or any
purchaser any documents which the Bank or any Receiver may require for
perfecting the title of the Bank, such Receiver or their respective
nominees to the Assigned Property or any part thereof or for vesting the
same in the Bank, such Receiver or their respective nominees or in any
purchaser, and otherwise generally to sign, seal and deliver and otherwise
perfect any Encumbrance referred to in Clause 4 and at any time after any
of the Secured Obligations is not paid or discharged when due to exercise
in such manner as the Bank may deem fit any right or power conferred on
the Borrower by or in relation to the Assigned Property or any part
thereof, to perform or enforce any of the Borrower's rights in relation to
the moneys payable under or contemplated by the MTV Contracts, to pay any
moneys due thereunder and to ask, require,
<PAGE>
8
demand, receive, compound and give acquittance for any and all moneys and
claims for moneys due and to become due under or arising out of the MTV
Contract, to enforce any payment provision thereof, to give valid
receipts and discharges, to endorse any cheque or other instrument or
orders in connection therewith and generally to file any claim or take
any action or institute any proceedings which to the Bank may seem to be
necessary or advisable and to sign, seal and deliver all such deeds,
assurances, agreements and documents and to do all such acts and things
as may be required for the full exercise of all or any of the powers
conferred on the Bank or a Receiver by this Assignment or which may be
deemed expedient by the Bank or the Receiver in connection with any
disposition, realisation or getting in by the Bank or such Receiver of
the Assigned Property or any part thereof or in connection with any other
exercise of any power hereunder. The Borrower hereby agrees to ratify
allow and confirm whatsoever shall lawfully be done by any attorney by
virtue of this Clause 9.
10. PROTECTIONS FOR THE BANK AND ANY RECEIVER
-----------------------------------------
10.01 The Bank and any Receiver appointed by the Bank is authorised to
compromise or settle any dispute arising out of or in connection with the
Assigned Property or any part thereof and to terminate or vary the
payment provisions of the MTV Contract upon such terms as the Bank or
such Receiver may see fit. The Borrower shall keep the Bank, its
attorney(s) and any such Receiver and such Receiver's attorney(s) fully
indemnified from any proceedings or actions, losses, claims, costs,
demands and liabilities which may be suffered or incurred by the Bank,
its attorney(s) or any such Receiver or such Receiver's attorney(s) under
or by virtue of the Assigned Property or any action taken in relation
thereto unless the same shall have been occasioned by the Bank's, its
attorneys' and/or the Receiver's own fraud wilful default or negligence.
10.02 Neither the Bank nor any Receiver shall be under any duty to make any
enquiry as to the nature or sufficiency of any payment received by them
or to make any claim to take any other action or do any deed, act or
thing to enforce any rights and benefits to or collect any moneys hereby
assigned to the Bank or to which the Bank may at any time be entitled
hereunder nor shall they be under any liability to the Borrower for any
lawful damage occasioned by the exercise or the non-exercise of the
powers conferred by this Assignment unless the same shall have been
occasioned by the Bank's, its attorneys' and/or the Receiver's own
fraud or wilful default.
11. CONTINUING SECURITY
-------------------
11.01 This Assignment shall be a continuing security notwithstanding any
settlement of account or other matter whatsoever and is in addition to
and shall not merge with or otherwise prejudice or affect any contractual
or other rights or remedies or any
<PAGE>
9
guarantee, indemnity or Encumbrance now or hereafter held by or available
to the Bank and shall not be in any way prejudiced or affected thereby or
by the invalidity thereof or by the Bank now or hereafter dealing with,
exchanging, releasing, realising, varying or abstaining from perfecting
or enforcing any of the same or any rights which the Bank may now or
hereafter have or giving any time for payment or indulgence or
compounding with any other person liable.
12. SET-OFF
-------
12.01 The Borrower authorises the Bank to apply without notice any credit
balance (whether or not then due) to which the Borrower is then entitled
on the Account or any account of the Borrower with the Bank at any of its
branches in or towards satisfaction of any sum then due and payable from
the Borrower to the Bank under this Assignment. For this purpose the Bank
is authorised to purchase with the moneys standing to the credit of such
account such other currencies as may be necessary to effect such
application. The Bank shall not be obliged to exercise any right given to
it by this Clause 12.01 which shall be without prejudice and in addition
to any right of set-off, combination of accounts, lien or other right to
which it is at any time otherwise entitled (whether by operation of law,
contract or otherwise).
13. MISCELLANEOUS
-------------
13.01 No failure or delay by the Bank in exercising any right or remedy under
this Assignment shall operate as a waiver thereof nor shall any single or
any partial exercise or waiver of any right or remedy preclude its
further exercise or the exercise of any other right or remedy. The
remedies provided in this Assignment are cumulative and are not exclusive
of any remedies provided by law. No right of the Bank under this
Assignment may be waived except by an express waiver in writing.
13.02 This Assignment shall enure for the benefit of the Bank and its
successors and assigns. The Borrower may not assign or transfer any of
its rights or obligations under this Assignment. Any change in the
constitution of the Bank or its absorption into, or amalgamation with,
any other person or the acquisition of all or any part of its undertaking
by any other person shall not in any way prejudice or affect its rights
under this Assignment.
13.03 The Bank may disclose on a confidential basis to any person proposing to
enter into a contractual relationship with the Bank in respect of this
Assignment, such information about or relating to the Borrower (including
details of the Borrower's account(s) with the Bank) as the Bank shall
consider appropriate.
13.04 Each of the provisions of this Assignment are severable and distinct from
the
<PAGE>
10
others and if at any time one or more of such provisions is or becomes
invalid illegal or unenforceable the validity legality and enforceability
of the remaining provisions hereof shall not in any way be affected or
impaired thereby.
13.05 Every notice request demand or other communication under this Assignment
shall be given, and be deemed to have been received, in accordance with
the provisions of Clause 13 of the Facility Agreement.
13.06 This Assignment shall be governed by and construed in accordance with the
laws of Singapore.
IN WITNESS whereof this Assignment has been executed.
<PAGE>
11
SCHEDULE 1
----------
Powers of Receiver
------------------
1. To take possession of, collect and get in the Assigned Property or any
part thereof and all records, correspondence and other documents relating
thereto; bring, defend or discontinue any proceedings or submit to
arbitration in the name of the Borrower or otherwise as may seem
expedient to him.
2. To perform, vary or cancel all obligations of the Borrower under or in
respect of the Assigned Property or any part thereof on such terms as he
may think fit without being responsible for any loss or damage unless
such loss or damage is occasioned by his own fraud or wilful default.
3. To raise or borrow any money from or incur any other liability to the
Bank or others on such terms with or without security as he may think
fit, and so that any such security may be or include a charge on the
whole or any part of the Assigned Property or any part thereof ranking in
priority to this security or otherwise.
4. Without being subject to any statutory restrictions on his powers in any
jurisdiction or the need to observe any statutory limitations in any
jurisdiction including, without prejudice to the generality thereof, the
restrictions imposed by Section 25 of the CLPA or the need to observe any
of the provisions of Section 23 of the CLPA, to dispose of or deal with
the Assigned Property or any part thereof or concur in so doing in such
manner for such consideration and generally on such terms and conditions
as he may think fit with full power to transfer or otherwise deal with
the same in the name and on behalf of the Borrower or otherwise.
5. To promote the formation of companies with a view to the same purchasing
or otherwise acquiring interests in the Assigned Property or any part
thereof or otherwise on such terms, whether or not including payment by
instalments secured or unsecured, as he may think fit.
6. To sign any document, execute any deed and do all such other acts and
things as may be considered by him to be incidental or conducive to any
of the matters or powers aforesaid or to the realisation of the security
of the Bank and to sue in the name of the Borrower for all the purposes
aforesaid.
<PAGE>
12
SCHEDULE 2
----------
Form of Notice to MTV Asia LDC
------------------------------
(to be sent in duplicate)
To: [Name and address of MTV Asia LDC]----------[Date]
Agreement dated
- ----------------------------------------
We refer to the above agreement (the "Agreement") made between ourselves (1) and
yourselves (2).
Please note that we have assigned to The Hongkong and Shanghai Banking
Corporation Limited ("HSBC") all our present and future rights, title and
interest in and to all moneys from time to time payable under or contemplated by
the Agreement. Accordingly, please ensure that payments due to us under the
Agreement are paid to Four Media Company Asia Pte Ltd (A/C No._______) at [___].
The instructions contained in this letter are irrevocable unless HSBC gives its
written consent to the contrary.
Please acknowledge receipt of this Notice by signing the enclosed duplicate copy
and sending it to:
The Hongkong and Shanghai Banking Corporation Limited
40-A Orchard Road
MacDonald House
Singapore 0923
Attention: [________________]
____________________________________
For and on behalf of
FOUR MEDIA COMPANY ASIA PTE LTD
c.c. The Hongkong and Shanghai Banking Corporation Limited
(Attention: [_______________])
<PAGE>
13
SCHEDULE 3
----------
ACKNOWLEDGEMENT
---------------
[On the letterhead of MTV Asia LDC]
The Hongkong and Shanghai Banking Corporation Limited
40-A Orchard Road
MacDonald House
Singapore 0923
Attention: [______________________________]
Date ________________, 1995
Sirs:
FOUR MEDIA COMPANY ASIA PTE LTD ("THE COMPANY")
-----------------------------------------------
We hereby acknowledge receipt of a Notice of Assignment from the Company, a copy
of which is attached and of the particulars of the rights, benefits and
interests expressed to be assigned by the Assignment therein referred to and
confirm that we:
consent to the assignment of all the Company's present and future rights, title
and interest in and to all moneys from time to time payable under or
contemplated by the agreement dated [_________] made between ourselves and the
Company;
we have not give our consent for any prior charge, assignment or encumbrance of
any of the rights, benefits and interests thereby stated to be assigned to you;
and
will procure that payments are made to you in accordance with the authority and
instruction contained in such Notice.
Yours faithfully
For and on behalf of MTV Asia LDC
-------------------------
(Authorised Signatory)
<PAGE>
EXHIBIT 10.14
To: The Manager
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED
Office
---------------------------
GUARANTEE BY LIMITED COMPANY (LIMITED AMOUNT-UNDER SEAL)
1. DEFINITIONS
"Bank" means The Hongkong and Shanghai Banking Corporation Limited at any
of its offices and its successors and assigns;
"Banking Facilities" means such facilities, credit or other contractual
arrangements and accommodations as the Bank may make or continue to make
available to the Customer or to any other person at the request of the Customer,
to such extent and for so long as the Bank may think fit;
"Customer" means the person whose name and address are specified in the
Schedule;
"Default Interest" means interest at such rate as the Bank may specify,
compounded monthly if not paid on the dates specified by the Bank;
"Exchange Rate" means the rate for converting one currency into another
currency which the bank determines to be prevailing in the relevant foreign
exchange market at the relevant time, such determination to be conclusive and
binding on the Guarantor;
"Guaranteed Moneys" means (i) all moneys in any currency owing by the
Customer to the Bank at any time, actually or contingently, in any capacity,
alone or jointly with any other person, (ii) interest (including Default
Interest) on such moneys (both before and after any demand or judgment), to the
date on which the Bank receives payment, at the rates payable by the Customer or
which would have been payable but for any circumstance which restricts payment,
(iii) expenses of the Bank in enforcing this Guarantee on a full indemnity basis
and (iv) all other liabilities of the Customer to the Bank;
"Guarantor" means the person whose name and address are specified in the
Schedule and its successors;
"Maximum Liability" means the sum specified in the Schedule plus Default
Interest on that sum and expenses of the Bank in enforcing this Guarantee on a
full indemnity basis; where a liability for Guaranteed Moneys is incurred in a
currency different from the currency in which the Maximum Liability is stated
and the equivalent of that liability in the currency in which the Maximum
Liability is stated, calculated at the Exchange Rate, has increased since it was
incurred, that increase shall be added to the Maximum Liability;
"Person" includes an individual, firm, company, corporation and an
unincorporated body of persons; and
"Process Agent" means the person, if any, whose name and Singapore address
are specified in the Schedule.
2. GUARANTEE
2.01 In consideration of the Banking Facilities, the Guarantor irrevocably
and unconditionally guarantees to pay the Guaranteed Moneys to the Bank on
demand.
2.02 The liability of the Guarantor shall not exceed the Maximum
Liability.
2.03 The Guarantor shall pay Default Interest (to the extent that it is
not paid by the Customer) on the Guaranteed Moneys from the date of demand by
the Bank on the Guarantor until the Bank receives payment of the whole of the
Guaranteed Moneys (both before and after any demand or judgment or any
circumstance which restricts payment by the Customer).
2.04 A certificate of balance signed by any duly authorised officer of the
Bank shall be conclusive evidence against the Guarantor of the amount of the
Guaranteed Moneys owing at any time.
2.05 The Bank shall be entitled to retain this Guarantee and any security
it has in respect of the Guaranteed Moneys for such period as the bank may
certify to the Guarantor to be appropriate in order to protect the interests of
the Bank in respect of the Guaranteed Moneys.
3. CONTINUING AND ADDITIONAL SECURITY
3.01 This Guarantee is a continuing security and shall secure the whole of
the Guaranteed Moneys until one calendar month after receipt by the Bank of
notice in writing by the Guarantor or a liquidator or receiver of the Guarantor
to terminate it. Nevertheless and despite the giving of such notice, this
Guarantee shall continue to apply to the Guaranteed Moneys in respect of which
the Customer is or becomes actually or contingently liable up to such
termination and the Guarantor guarantees to pay such Guaranteed Moneys to the
Bank on demand whether that demand is made before, at the time of or after such
termination.
3.02 This Guarantee is in addition to, and shall not be affected by and
may be enforced despite the existence of any other guarantee or security held
by the Bank.
4. CUSTOMER'S ACCOUNTS
The Bank may, at any time and despite the termination of this Guarantee,
continue any existing account and open any new account in the name of the
Customer and no subsequent transactions, receipts or payments involving such new
accounts shall affect the liability of the Guarantor.
<PAGE>
5. PAYMENTS
5.01 Payments by the Guarantor shall be made to the Bank as specified by
the Bank without any set-off, counterclaim, withholding or condition of any kind
except that, if the Guarantor is compelled by law to make such withholding, the
sum payable by the Guarantor shall be increased so that the amount actually
received by the Bank is the amount it would have received if there had been no
withholding.
5.02 Payment by the Guarantor to the Bank shall be in the currency of the
relevant liability or, if the Bank so agrees in writing, in a different
currency, in which case the conversion to that different currency shall be made
at the Exchange Rate.
5.03 No payment to the Bank under this Guarantee pursuant to any judgment,
court order or otherwise shall discharge the obligation of the Guarantor in
respect of which it was made unless and until payment in full has been received
in the currency in which it is payable under this Guarantee and, to the extent
that the amount of any such payment shall, on actual conversion into such
currency, at the Exchange Rate, fall short of the amount of the obligation,
expressed in that currency, the Guarantor shall be liable for the shortfall.
5.04 Any moneys paid to the Bank in respect of the Guaranteed Moneys may
be applied in or towards satisfaction of the same or placed to the credit of
such account as the Bank may determine with a view to preserving its rights to
prove for the whole of the Guaranteed Moneys.
5.05 If any moneys paid to the Bank in respect of the Guaranteed Moneys
are required to be repaid by virtue of any law relating to insolvency,
bankruptcy or liquidation or for any other reason, the Bank shall be entitled to
enforce this Guarantee as if such moneys had not been paid.
6. SET-OFF
The Bank may, at any time and without notice, apply any credit balance to
which the Guarantor is entitled on any account with the Bank in or towards
satisfaction of the Guaranteed Moneys. For this purpose, the Bank is authorised
to purchase, at the Exchange Rate, such other currencies as may be necessary to
effect such application with the moneys standing to the credit of such account.
7. LIEN
The Bank is authorised to exercise lien over all property of the Guarantor
coming into the possession or control of the Bank, for custody or any other
reason and whether or not in the ordinary course of banking business, with power
for the Bank to sell such property to satisfy the Guaranteed Moneys.
8. GUARANTOR AS PRINCIPAL DEBTOR
The liability of the Guarantor under this Guarantee shall not be discharged
or otherwise affected by reason of the Bank entering into any agreement or
arrangement with the Customer or any other person or by reason of any legal
limitation, disability or incapacity or any other act, omission or circumstance
which, but for this provision, would discharge the Guarantor to any extent. Any
Guaranteed Moneys which may not be recoverable from the Customer for any such
reason shall be recoverable by the Bank from the Guarantor as principal debtor
by way of indemnity, on demand, together with Default Interest thereon in
accordance with Clause 2.03.
9. GUARANTOR AS TRUSTEE
9.01 The Guarantor shall not, until the whole of the Guaranteed Moneys
have been received by the Bank, exercise its rights of subrogation, indemnity,
set-off or counterclaim against the Customer or its rights to participate in any
security the Bank has in respect of the Guaranteed Moneys or, unless required by
the Bank to do so, to prove in the bankruptcy or liquidation of the Customer.
The Guarantor shall hold any amount recovered, as a result of the exercise of
any of such rights, on trust for the Bank and shall pay the same to the Bank
immediately on receipt.
9.02 The Guarantor has not taken any security from the Customer and agrees
not to do so until the Bank has received the whole of the Guaranteed Moneys. Any
security taken by the Guarantor in breach of this provision shall be held in
trust for the Bank as security for the Guaranteed Moneys and all moneys at any
time received in respect thereof shall be paid to the Bank immediately on
receipt.
10. NO WAIVER
No act or omission by the Bank pursuant to this Guarantee shall affect its
rights, powers and remedies hereunder or any further or other exercise of such
rights, powers or remedies.
11. ASSIGNMENT
The Guarantor may not assign or transfer any of its rights or obligations
hereunder. The Bank may assign any of its rights hereunder to a person in whose
favour it has made an assignment of all or any of the Banking Facilities.
12. COMMUNICATIONS
Any notice, demand or other communication under this Guarantee shall be in
writing addressed to the Guarantor at its registered office address or at the
last address registered with the Bank and addressed to the Bank at its office
specified in the Schedule or such other address as the Bank may notify to the
Guarantor for this purpose and may be delivered personally, by
<PAGE>
leaving it at such address, by post, facsimile transmission or telex and shall
be deemed to have been delivered to the Guarantor at the time of personal
delivery or on leaving it at such address or on the second day following the day
of posting or on the day of despatch, if sent by facsimile transmission or
telex, and to the Bank on the day of actual receipt.
13. SEVERABILITY
Each of the provisions of this Guarantee is severable and distinct from the
others and, if one or more of such provisions is or becomes illegal, invalid or
unenforceable, the remaining provisions shall not be affected in any way.
14. GOVERNING LAW AND JURISDICTION
14.01 This Guarantee is governed by and shall be construed in accordance with
the laws of Singapore.
14.02 The Guarantor submits to the non-exclusive jurisdiction of the Singapore
Courts and the Singapore Courts shall have the jurisdiction to hear and
determine any action in respect of the Guarantee herein but this Guarantee may
be enforced in the Courts of any competent jurisdiction.
15. PROCESS AGENT
In the event of any action in respect of the Guarantee herein being begun, the
process by which it is begun may be served on the Guarantor on the Process Agent
if any is specified in the Schedule.
For the purpose of accepting service of any writ of summons or any legal process
in Singapore in respect of any proceedings instituted in the Singapore Courts in
connection with this Guarantee, the Guarantor hereby irrevocably appoints the
Process Agent specified in the Schedule as its agent in Singapore for the said
purpose and, in this respect, the Process Agent hereby irrevocably accepts such
appointment as the Process Agent.
16. EXECUTION
This Guarantee has been entered into by the Guarantor under its common or
corporate seal, whichever may be affixed below on February 16, on 1995.
------------ --
SCHEDULE
Customer's Name FOUR MEDIA COMPANY ASIA PTE LTD
---------------------------------------------------------------
Address 9 PENANG ROAD #13-21, PARK MALL, SINGAPORE 0923
------------------------------------------------------------------------
Guarantor's Name FOUR MEDIA COMPANY
---------------------------------------------------------------
Address 2813 WEST ALAMEDA AVENUE, BURBANK, CALIFORNIA 91505-4455, U.S.A.
------------------------------------------------------------------------
Specified Sum in Respect of Maximum Liability The Principal Sum of Singapore
---------------------------------
Dollars 16.95 Million
---------------------
(S$16,950,000.00), all interest
thereon and all costs expenses and
other liabilities in relation
thereto.
Process Agent FOUR MEDIA COMPANY ASIA PTE LTD
------------------------------------------------------------------
Address 9 PENANG ROAD #13-21, PARK MALL, SINGAPORE 0923
------------------------------------------------------------------------
<PAGE>
The Corporate Seal of the Guarantor was )
hereunto affixed in the presence of: )
FOUR MEDIA COMPANY
a Delaware Corporation.
[CORPORATE SEAL]
By: /s/ Robert T. Walston
- ---------------------------- ------------------------------------
- ---------------------------- Name Robert T. Walston
---------------------
- ---------------------------- Designation: Chief Executive Officer
------------------------
Before me,
------------------------------------
Notary Public
(Where the Process Agent is a Company) [NOTARY PUBLIC SEAL]
The Common Seal of the Process Agent )
was hereunto affixed in the presence of: )
/s/ Robert T. Walston /s/ Gavin W. Schutz
- -------------------------------------- --------------------------------------
Director Director/Secretary
Name Robert T. Walston Name Gavin W. Schutz
---------------------------------- ----------------------------------
Identification Managing Director Identification Director
----------------------- -----------------------
(Where the Process Agent is an Individual)
Signed Sealed and Delivered by )
the Process Agent in the presence of: )
- --------------------------------------
Witness Signature
Name
----------------------------------
Identification
------------------------
Address
-------------------------------
- --------------------------------------
- --------------------------------------
<PAGE>
STATE OF CALIFORNIA )
) ss:
COUNTY OF LOS ANGELES )
On February 16, 1995, before me, Lana L. Torres, a Notary Public,
--------------
personally appeared Robert T. Walston, 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 my hand and official seal.
Signature /s/ LANA L. TORRES
------------------------
(Seal)
[NOTARY SEAL OF LANA L. TORRES]
<PAGE>
EXHIBIT 10.15
[LETTERHEAD OF GLOBAL ACCESS
TELECOMMUNICATIONS SERVICES, INC.]
Satellite Services Agreement
This is an agreement between Global Access Telecommunications Services, Inc.
("Global") and Four Media Company and its subsidiaries (collectively known as
"4MC"), dated as of April 12, 1996, in connection with satellite services
provided to 4MC. The terms of this Agreement are as follows:
1. TRANSPONDER USE. Global shall provide to 4MC the use of one C-band
---------------
transponder on the Galaxy IV satellite (the "Transponder"). The Transponder
is transponder 7 ("G4/7"). This Agreement constitutes an agreement for
"Fixed Term Service" as that term is used in the Standard Terms and
Conditions, incorporated pursuant to Paragraph 9 below. The Transponder has
been designated by Hughes Communications Galaxy, Inc. as a "Primary"
transponder as defined in the lease agreement between Hughes and The
Associated Press ("AP"). Pursuant to this Agreement, that designation is
confirmed, and 4MC shall have all rights as a result of that designation
assigned by AP to Global.
2. TERM. This Agreement shall commence September 1, 1996, and shall continue
----
through the end of operating life of the satellite as determined by Hughes
Communications Galaxy, Inc., or the operating carrier.
3. USAGE SCHEDULE. Global shall provide the Transponder 24 hours per day,
--------------
seven days per week during the term of this Agreement.
4. SERVICE RATES. The service rates for the Transponder shall be $150,000
-------------
per month.
5. PAYMENT. Payment of the service rates called for by Section 4 shall be as
-------
follows:
a. $150,000 payable on the last business day of the month for the
following month's service on the Transponder; the first being due,
therefore, on August 31, 1996, for the month of September 1996.
b. If 4MC fails to make any of these payments by the date specified above,
Global shall give 4MC written notice of such failure and 4MC shall have 10
business days from receipt of such notice to complete payment. If 4MC fails
to make the required payment within those 10 business days, 4MC will be
deemed in breach of this Agreement and Global shall have the rights
provided for in the Standard Terms and Conditions.
c. To the extent the foregoing provisions conflict with the provisions of
Section 4 of the Standard Terms and Conditions, the items set forth above
shall control.
<PAGE>
6. DEPOSITS. 4MC shall pay to Global a deposit of $150,000 by August 1, 1996,
--------
which shall be applied to the last month's service on the Transponder or to
any other payment due under this Agreement. No interest shall be paid on
this deposit.
7. THIRD PARTY AGREEMENTS. This Agreement is subject to Global's contracts
----------------------
with third parties through which it has obtained any portion of the rights
made available to 4MC under this Agreement. 4MC shall have no greater
rights or remedies against or with respect to Global under this Agreement
than Global has against such third parties under those contracts. This
Agreement is subject to the consent of AP which Global is in the process of
obtaining.
8. STANDARD TERMS AND CONDITIONS. Global's Standard Terms and Conditions are
-----------------------------
attached and considered an integral part of this Agreement. In the event of
conflict or difference between the terms of Global's Standard Terms and
Conditions, and/or the terms of this Agreement, the provision that is most
favorable to Global shall prevail.
9. NOTICE. Pursuant to Section 19(c) of the Standard Terms and Conditions, the
------
address for notices of the parties to this Agreement shall be as follows:
GLOBAL ACCESS TELECOMMUNICATIONS SERVICES, INC.
77 North Washington Street
Boston, MA 02114
FAX: 617-720-0803
Attention: Vice President, Sales
FOUR MEDIA COMPANY
2813 West Alameda Avenue
Burbank, CA 91505
FAX: 818-840-7286
Attention: John Donlon
<PAGE>
AGREED: AGREED:
FOUR MEDIA COMPANY GLOBAL ACCESS TELECOMMUNICATIONS
SERVICES, INC.
By: /s/ John Sabin By: /s/ Jack Morse
----------------------------- -------------------------------------
Title: Executive Vice President Title: Pres + CEO
-------------------------- ----------------------------------
Date: 4/12/96 Date: 4/12/96
--------------------------- -----------------------------------
<PAGE>
EXHIBIT 10.16
[LETTERHEAD OF GLOBAL ACCESS TELECOMMUNICATIONS SERVICES, INC.]
Satellite Services Agreement
This is an agreement between Global Access Telecommunications Services, Inc.
("Global") and Four Media Company and its subsidiaries (collectively known as
"4MC"), dated as of April 12, 1996, in connection with satellite services
provided to 4MC. The terms of this Agreement are as follows:
1. TRANSPONDER USE. Global shall provide to 4MC the use of one C-band
---------------
transponder on the Galaxy IV satellite (the "Transponder"). The
Transponder is transponder 5 ("G4/5"). This Agreement constitutes an
agreement for "Fixed Term Service" as that term is used in the Standard
Terms and Conditions, incorporated pursuant to Paragraph 8 below. The
Transponder has been designated by Hughes Communications Galaxy, Inc. as a
"Primary" transponder as defined in the lease agreement between Hughes
and The Associated Press ("AP"). Pursuant to this Agreement, that
designation is confirmed, and 4MC shall have all rights as a result of that
designation assigned by AP to Global.
2. TERM. This Agreement shall commence September 1, 1996, and shall continue
----
through August 31, 1999. This Agreement shall automatically renew for
consecutive one-year terms beginning September 1, 1999, but not in any
case for a term extending beyond the end-of-life of G4/5, unless 4MC
provides at least one year's prior written notice to Global of 4MC's
intent to terminate and the date of the proposed termination (which may not
be prior to August 31, 1999).
3. USAGE SCHEDULE. Global shall provide the Transponder 24 hours per day,
--------------
seven days per week during the term of this Agreement.
4. SERVICE RATES. The service rates for the Transponder shall be $150,000 per
-------------
month.
5. PAYMENT. Payment of the service rates called for by Section 4 shall be as
-------
follows:
a. $150,000 payable on the last business day of the month for the
following month's service on the Transponder; the first being due,
therefore, on August 31, 1996, for the month of September 1996.
b. If 4MC fails to make any of these payments by the date specified above,
Global shall give 4MC written notice of such failure and 4MC shall have 10
business days from receipt of such notice to complete payment. If 4MC
fails to make the required payment within those 10 business days, 4MC will
be deemed in breach of this Agreement and Global shall have the rights
provided for in the Standard Terms and Conditions.
c. To the extent the foregoing provisions conflict with the provisions of
Section 4 of the Standard Terms and Conditions, the items set forth above
shall control.
<PAGE>
6. DEPOSITS. 4MC shall pay to Global a deposit of $150,000 by August 1, 1996,
--------
which shall be applied to the last month's service on the Transponder or to
any other payment due under this Agreement. No interest shall be paid on
this deposit.
7. TERMINATION. 4MC may terminate this Agreement by written notice to Global
-----------
on or before May 1, 1996 if 4MC has not entered into an agreement prior to
that date with Warner Brothers Television, the Time Warner Entertainment
Company, the WB Network, or an affiliate of the Time Warner Company
(collectively referred to as "WB") for the provision of a full-time
transponder to WB beginning on or after May 1, 1996. 4MC may also terminate
this Agreement by written notice to Global on or after August 31, 2001,
upon occurrence of the following:
a. at least two year's prior notice to Global of 4MC's intent to terminate
and the date of the proposed termination (which may not be prior to August
31, 2001); and
b. upon payment of all amounts owed to Global for service prior to the
termination date.
8. THIRD PARTY AGREEMENTS. This Agreement is subject to Global's contracts
----------------------
with third parties through which it has obtained any portion of the rights
made available to 4MC under this Agreement. 4MC shall have no greater
rights or remedies against or with respect to Global under this Agreement
than Global has against such third parties under those contracts. This
Agreement is subject to the consent of AP which Global is in the process
of obtaining.
9. STANDARD TERMS AND CONDITIONS. Global's Standard Terms and Conditions are
-----------------------------
attached and considered an integral part of this Agreement. In the event
of conflict or difference between the terms of Global's Standard Terms and
Conditions, and/or the terms of this Agreement, the provision that is most
favorable to Global shall prevail.
10. NOTICE. Pursuant to Section 19(c) of the Standard Terms and Conditions,
------
the address for notices of the parties to this Agreement shall be as
follows:
GLOBAL ACCESS TELECOMMUNICATIONS SERVICES, INC.
77 North Washington Street
Boston, MA 02114
FAX: 617-720-0803
Attention: Vice President, Sales
FOUR MEDIA COMPANY
2813 West Alameda Avenue
Burbank, CA 91505
FAX: 818-840-7286
Attention: John Donlon
----------------------
-12-
<PAGE>
AGREED: AGREED:
FOUR MEDIA COMPANY GLOBAL ACCESS TELECOMMUNICATIONS
SERVICES, INC.
By: /s/ John Sabin By: /s/ Jack Morse
----------------------------- --------------------------------
Title: Executive Vice President Title: Pres + CEO
-------------------------- -----------------------------
Date: 4/12/96 Date: 4/12/96
--------------------------- ------------------------------
<PAGE>
EXHIBIT 10.17
GLOBAL ACCESS TELECOMMUNICATIONS SERVICES, INC.
Standard Terms and Conditions
1. Application of Terms and Conditions: Exclusion of Other or Additional
---------------------------------------------------------------------
Terms. These Standard Terms and Conditions are applicable to all Communications
- -----
Services provided by Global Access Telecommunications Services ("GATS") to the
customer ("Customer") pursuant to this Service Agreement ("Agreement").
COMMUNICATIONS SERVICES WILL BE PROVIDED ONLY ON THE FOLLOWING TERMS AND
CONDITIONS AND ANY CONFLICTING, DIFFERENT OR ADDITIONAL TERMS AND CONDITIONS
CONTAINED IN CUSTOMER'S ACKNOWLEDGMENT OR PURCHASE ORDER OR ELSEWHERE ARE HEREBY
OBJECTED TO BY GATS AND SHALL NOT CONSTITUTE PART OF THIS AGREEMENT. This
Agreement contains the full understanding of the parties with respect to the
subject matter hereof and supersedes any previous agreements between the parties
regarding such subject matter. This Agreement may not be amended, nor any of its
provisions waived, except by a writing executed by the party against which such
amendment or waiver is sought to be enforced.
2. Definitions. For purposes of this Agreement, the following terms
-----------
shall have the definitions set forth in this Section 2, as follows:
"Applicable Carrier" shall mean the person, corporation, partnership, firm or
------------------
other entity in control of the satellite, satellite transponder, microwave link,
uplink, downlink, analog copper and/or fiber optic facilities being used to
provide the Communications Services.
"Applicable Carrier's Tariff" shall mean the Applicable Carrier's Tariff for
---------------------------
Allowances for Interruptions, setting forth the policies of the Applicable
Carrier with regard to credits, allowances, refunds or payments in the event of
an interruption of Communications Services caused by the Applicable Carrier or
the Applicable Carrier's equipment, as well as the policies of the Applicable
Carrier with regard to payments, penalties and charges for cancellation of
Communications Services by the Customer.
"Communications Services" shall include (without limitation) satellite
-----------------------
transponder, transponder uplink/downlink, fiber optic, telephone line and/or
microwave capacity, as applicable to the services requested by Customer.
"Customer" shall mean any person, corporation, partnership, firm or other
--------
entity purchasing Communications Services under this Agreement, or any
employees, agents, parents, subsidiaries, affiliates, authorized users or
assigns of such person, corporation, partnership, firm or other entity.
"Customer Agent" shall mean any person, corporation, partnership, firm or other
--------------
entity transmitting signals to, from or via a satellite transponder or using
other Communications Services with the permission of or on behalf of a Customer.
"Exchange Rates" shall mean the rates at which US dollars are exchanged for the
--------------
relevant foreign currency as published in The Wall Street Journal, U.S. Edition.
"Fixed-Term Service" shall mean service contracted for by a Customer pursuant to
------------------
a Communications Circuit Lease Agreement with GATS.
"Occasional Service" shall mean service contracted for by a Customer pursuant
------------------
to the telephone and facsimile inquiry and confirmation process employed by
GATS, including without limitation, those Customers who have not placed a long-
term, full time order for Communications Services with GATS.
"Uplink/Downlink Agent" shall mean the person, corporation, partnership, firm or
---------------------
other entity engaged by Customer to transmit or receive Customer's signal to the
satellite transponder being used to provide the Communications Services.
3. Provision of Communications Services. GATS shall provide Customer,
------------------------------------
and Customer shall accept from GATS, Communications Services as specified by
Customer.
4. Payment of Charges. Customer shall pay all charges for Communications
------------------
Services furnished to or at the request of Customer on the first day of the
calendar period for which those charges are applicable or upon receipt of
invoice. If any payment for Communications Services is not received by GATS
within 30 days after the date of invoice, then such overdue amount shall be
subject to late payment charges at the lower of 18% per annum or the highest
---------
legally permissable rate of interest until the date payment is actually
received.
<PAGE>
5. International Service. Rates for international Communications Services
---------------------
are priced to Customer based on the Exchange Rate at the time service is
contracted for, subject to monthly adjustments to reflect changes in the
applicable published Exchange Rate on the first day of each month. Should the
carrier of non-U.S. Communications Services modify its tariff or the technical
parameters for Communications Services during the term of this Agreement, GATS
shall have the right correspondingly to modify the tariff or rate or technical
parameters of its Communications Services to Customer.
6. Limitation of GATS' Liability. (a) EXCEPTING ONLY LIABILITY FOR GATS'
-----------------------------
RECKLESS OR WILLFUL MISCONDUCT, GATS' LIABILITY ARISING OUT OF ITS PROVISION OF
COMMUNICATIONS SERVICES HEREUNDER, INCLUDING BUT NOT LIMITED TO LIABILITIES
ARISING OUT OF GATS' NEGLIGENCE, MISTAKES AND OMISSIONS, INTERRUPTIONS, DELAYS,
ERRORS, OR OTHER DEFECTS IN THE COMMUNICATIONS SERVICES OR BREACH OF CONTRACT OR
ARISING OUT OF THE FAILURE TO FURNISH COMMUNICATIONS SERVICES, WHETHER CAUSED BY
ACTS OF COMMISSION OR OMISSION, SHALL BE LIMITED TO THE EXTENSION OF ALLOWANCES
FOR INTERRUPTIONS AS SET FORTH IN SECTION 10 BELOW. SUCH ALLOWANCES FOR
INTERRUPTION SHALL BE THE SOLE REMEDY OF CUSTOMER, AUTHORIZED USER OR JOINT USER
AND THE SOLE LIABILITY OF GATS HEREUNDER. GATS' LIABILITY FOR DAMAGES OR LOSSES
OF ANY KIND ARISING OUT OF ITS FURNISHING COMMUNICATIONS SERVICES SHALL IN NO
EVENT EXCEED AN AMOUNT EQUAL TO ITS FIXED MONTHLY OR OTHER CHARGE ALLOCABLE TO
THE FAULTY OR DEFECTIVE SERVICE.
(b) NOTWITHSTANDING THE PROVISIONS OF THE PRECEDING SUBPARAGRAPH, GATS
SHALL NOT BE LIABLE TO CUSTOMER OR TO ANY AUTHORIZED OR JOINT USER FOR ANY LOSS
OF, DEFECTS IN OR ANY INABILITY TO FURNISH SERVICE DUE TO ACTS OF GOD, ACTS OF
GOVERNMENT, WARS, RIOTS, STRIKES, FAILURE OF A TRANSPONDER, FAILURE OF A
SATELLITE, FAILURE OF ANY OTHER TRANSMISSION EQUIPMENT OR OTHER CAUSES BEYOND
GATS' CONTROL.
(c) ANY AND ALL EXPRESS AND IMPLIED WARRANTIES RELATING TO THE SATELLITE
TRANSPONDERS. UPLINKS/DOWNLINKS, FIBER OPTIC SERVICE OR OTHER COMMUNICATIONS
SERVICES, INCLUDING BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A SPECIFIC PURPOSE OR USE, ARE EXPRESSLY DISCLAIMED. IN NO EVENT SHALL GATS
BE LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING, BUT NOT
LIMITED TO, LOST PROFITS), REGARDLESS OF THE FORESEEABILITY THEREOF, OCCASIONED
BY THE TERMINATION OF CUSTOMER'S RIGHTS TO USE, OR THE PREEMPTION OF OR THE
FAILURE OF, OR LOSS OF TECHNICAL QUALITY OF, THE SATELLITE TRANSPONDERS,
UPLINKS/DOWNLINKS, FIBER OPTIC SERVICE, OR OTHER COMMUNICATIONS SERVICES OR BY
ANY DELAY IN COMMENCEMENT OF THIS AGREEMENT OR BY ANY OTHER CAUSE OR MATTER
WHATSOEVER. CUSTOMER SHALL DEFEND, INDEMNIFY AND HOLD HARMLESS GATS FROM ANY
CLAIMS MADE UNDER A WARRANTY OR REPRESENTATION MADE BY CUSTOMER TO ANY THIRD
PARTY WITH RESPECT TO THE COMMUNICATIONS SERVICES.
7. Claims. GATS shall be indemnified, defended and saved harmless by
------
Customer from and against all loss, liability, damage and expense, including
reasonable attorneys' fees, due to claims arising out of the content of any
programming transmitted over GATS' facilities pursuant to this Agreement
including without limitation, any claim for libel, slander, or infringement of
copyright and any other claim resulting from any act or omission of Customer
arising from the use of GATS' facilities or Communications Services.
8. Obligations of the Customer. Customer shall make all arrangements with
---------------------------
other common carriers, stations, networks, sponsors, music licensing
organizations, performers, representatives or other parties for the
authorizations necessary to avail itself of the Communications Services. GATS
shall be indemnified, defended and saved harmless by Customer from any liability
arising out of failure to make such arrangements. Customer shall not use
Communications Services for an unlawful purpose, including (without limitation)
any use which constitutes a violation of any state or federal obscenity laws.
GATS shall have the right to terminate this Agreement and the Communications
Services provided hereunder without liability to Customer in the event that
GATS, its officers, employees or agents, or the Applicable Carrier, its
officers, employees or agents, becomes the subject of any investigation, or is
threatened with or made a party to any administrative proceeding or litigation,
related to the alleged illegal use of the Communications Services by the
Customer.
9. Non-Interference for Satellite Transmissions and Use of Other
-------------------------------------------------------------
Communications Services. (a) All transmissions to and from the satellite
- -----------------------
transponder or other use of Communications Services made by Customer and/or a
Customer Agent in connection with use of Communications Services pursuant to
this Agreement shall comply with all of the rules and regulations of the Federal
Communications Commission ("FCC"), other governmental agencies, carriers or
other authorities applicable to Customer and/or each Customer Agent with respect
to the Satellite Transponder or the Communications Services. Customer and each
Customer Agent will follow the established practices and procedures of the
Applicable Carrier for frequency coordination and will not utilize the
Communications Services in a manner which, under standard engineering practice,
would or might interfere with the use of or cause physical harm to any satellite
transponder, the satellite or any other communications facility. If, in GATS',
the Applicable Carrier's or other carrier's judgment, Customer's or any Customer
Agent's transmissions to or from or utilization of the satellite transponder or
other Communications Services (whether directly or through a Customer Agent),
interferes with or causes physical harm to any satellite transponder, the
satellite or any other communications facility, Customer agrees to cease or
cause to be ceased immediately all transmissions to and utilization of the
satellite transponder or other Communications Services upon notice thereof by
GATS or the carrier until such time as such transmission or utilization shall
not, in GATS' or the carrier's judgment, interfere with and shall not cause
physical harm to any satellite transponder, the satellite or any other
communications facility. In such event and in addition to GATS' other rights and
remedies hereunder, Customer agrees that
<PAGE>
its rights to use a portion of the satellite transponder or other Communications
Services in accordance with this Agreement shall be subject to GATS' right to
terminate this Agreement and all of Customer's rights hereunder without
liability to Customer and to take such action as may be necessary, appropriate
or desirable to terminate any such interference or physical harm by Customer and
each Customer Agent.
(b) To ensure that Customer and each Uplink/Downlink Agent's transmissions
to and from the satellite transponder and Customer's utilization of the
Communications Services (whether directly or through an Uplink/Downlink Agent)
does not so interfere with or cause physical harm to any transponder or
satellite, Customer and each Uplink/Downlink Agent, prior to any transmission to
the satellite transponder, must satisfy the uplink access requirements set forth
by the Applicable Carrier. Further, without limiting the generality of the
foregoing, if Customer's use involves video broadcasting, Customer agrees to
comply in all respects with Section 25.308 of the FCC rules regarding the
Automatic Transmitter Identification System.
10. Pre-emptible Nature of Communications Services. The satellite
----------------------------------------------
transponder and other Communications Services provided herein are not normally
protected and may be preempted and Customer acknowledges and agrees that it
sometimes may be necessary or advisable for the Applicable Carrier or other
carrier deliberately to preempt or interrupt Customer's use of the
Communications Services in order to protect the overall performance of each
satellite, fiber optic network or other communications facility, to comply with
its contractual obligations to third parties or for business or other technical
reasons. Such decisions shall be made by the owners or operators of the
satellite, fiber optic network or other communications facility at their sole
discretion and GATS shall have no liability to Customer as a result of such
decisions.
11. Allowances for Interruption. (a) Allowances for interruption of
---------------------------
Occasional Service usage will be in accordance with the Applicable Carrier's
Tariff. In the absence of an Applicable Carrier's Tariff, GATS policy for
allowances for interruption of Occasional Service shall apply as follows: (i)
When an interruption of an Occasional Service occurs for a period of 60 seconds
or more, credit is allowed on the basis of 5 minutes for each 5 consecutive
minutes or fraction thereof of interruption; (ii) Two or more interruptions
occurring during any period of 5 consecutive minutes shall be considered as one
interruption; (iii) Allowances will be based on the rate applicable to the
service being provided which was interrupted. The amount of the allowance is
proportionate to the total number of minutes in the applicable order which
includes the portion of service affected by the interruption; (iv) An
interruption of either the audio or video portion of the Communications Service
shall be considered an interruption of both; and (v) Other than the allowances
herein, GATS shall not be held liable for interruptions of service.
(b) Allowances for interruption of Fixed Term Service usage will be in
accordance with the Applicable Carrier's Tariff. In the absence of an
Applicable Carrier's Tariff, GATS' policy shall apply as follows: (i) When an
interruption of a Communications Service occurs for a period of 60 seconds or
more, credit is allowed on the basis of 5 minutes for each 5 consecutive minutes
or fraction thereof of interruption; (ii) Two or more interruptions occurring
during any period of 5 consecutive minutes shall be considered one interruption;
and (iii) An interruption of either the audio or visual portion of the
television channel shall be considered an interruption of both.
(c) An allowance will not be made where Customer fails to transmit or
receive a television, data or voice channel as a result of, or attributable in
whole or in part to: (i) Customer's negligence or willful acts, or the
negligence or willful acts of its officers, directors, agents, employees,
subsidiaries, parents, affiliates, customers, authorized users and viewing
subscribers, or any of them; (ii) The failure of local channels, transmission
lines or equipment provided by Customer, its subsidiaries, parents, affiliates,
authorized users, viewing subscribers, Customer Agents or any of them; (iii) Sun
outages, heavy precipitation or heavy cloud cover; or (iv) Customer's failure to
use the channel ordered.
(d) In no event shall GATS be liable for allowances for interruption
unless the claim for such allowance is made within fifteen (15) days after the
date Customer became aware or should have become aware of the interruption.
12. Denial of Service. In the event of nonpayment of any sum due, or of
-----------------
any violation of the Communications Act of 1934, as amended, or any Rules,
Regulations or Orders of the FCC or of the terms of this Agreement by Customer,
or the imposition by the FCC or any governmental authority having jurisdiction
of conditions on the provision of Communications Services which are unacceptable
to GATS or the Applicable Carrier, GATS may either temporarily deny service or
terminate the service without incurring liability to Customer.
13. Cancellation by Customer. (a) Occasional Service may be cancelled
------------------------
only by advance notice by Customer to GATS and upon payment of any applicable
cancellation charges. The specific charges to Customer, if any, will be those
of the Applicable Carrier's Tariff in effect at that time. In the absence of an
Applicable Carrier's Tariff, GATS' policy in effect at that time shall apply.
(b) Except as specifically provided herein, Fixed-Term Service may only be
cancelled upon the occurrence of all the following: written notice to GATS;
payment of total hourly, monthly or annual charges due for service previously
provided and for scheduled service that has not been provided as of the date of
cancellation; and payment of all other sums otherwise due through the term of
the Fixed-Term Service to be provided pursuant to this Agreement.
14. Taxes. If any sales taxes or similar charges or impositions are
-----
asserted against GATS after, or as a result of Customer's use of the
Communications Services, by any local, state, national, or international, public
or quasi-public governmental entity, Customer shall be solely responsible for
such taxes, charges or impositions.
-16-
<PAGE>
15. Title to Communications Facilities. This Agreement shall not, and
----------------------------------
shall not be deemed to, convey to Customer title of any kind to any of the
satellite transponders, transponder uplinks/downlinks, fiber optic links,
telephone lines, microwave facilities or other facilities utilized in connection
with the Communications Services.
16. No Transfer. Customer shall not, and shall not have the right to,
-----------
grant, sell, assign, encumber, permit the utilization of, license, lease,
sublease or otherwise convey, directly or indirectly, in whole or in part,
voluntarily or by operation of law, any of its rights under this Agreement
without the express written permission of GATS and/or the Applicable Carrier.
17. No Third-Party Beneficiary. The provisions of this Agreement are for
--------------------------
the benefit only of the parties hereto, and no third party may seek to enforce,
or benefit from these provisions, except that GATS and Customer acknowledge and
agree that the provisions of Section 9(a) hereof are intended for the benefit of
GATS, the Applicable Carrier and other carriers, and all other transponder,
fiber optic network and communications facility owners, users or transferees.
Both parties hereto agree that any other such transponder, fiber optic network
or communications facility owner, user or transferee shall have the right to
enforce, as a third-party beneficiary, the provisions of Section 8(a) hereof,
against Customer, directly in an action brought solely by such other
transponder, fiber optic network or communications facility owner, user or
transferee, or may join with GATS or any other transponder, fiber optic network
or communications facility owner, user or transferee in bringing an action
against Customer for violation of such Section.
18. Legal Expenses. If any proceeding is brought for the enforcement of
--------------
this Agreement, or because of an alleged or actual dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the prevailing party shall be entitled to recover reasonable attorneys' fees
and other costs and expenses incurred in such action or proceeding in addition
to any other relief to which such party may be entitled.
19. Miscellaneous. (a) This Agreement shall be governed and interpreted
-------------
by the laws of the Commonwealth of Massachusetts applicable to agreements made
and fully performed therein, except to the extent that the parties' respective
rights and obligations are subject to local, State and Federal laws or
regulations. Customer hereby consents to the jurisdiction of the federal and
state courts having a situs in Suffolk County, Massachusetts over any proceeding
-----
initiated with respect to the enforcement or interpretation of this Agreement.
Nothing in this Agreement shall be deemed to create any joint venture or
principal-agent relationship between GATS and Customer.
(b) Except as provided in Section 16, this Agreement shall insure to the
benefit of and be binding on the respective successors, permitted licensees and
permitted assigns of the parties hereto.
(c) All notices, consent, waivers or other communications given under this
Agreement shall be in writing, and be given by personal delivery, mail, telegram
or private wire, at the respective addresses of Customer and GATS set forth here
or at the most current address as may be supplied by such party to the other for
notice. Notice given by mail shall be considered to have been given three (3)
days after the date of mailing, postage prepaid certified or registered mail.
Notice given by telegram shall be considered to have been given on delivery of
such telegram to a telegraph office with charges therefore prepaid or to be
billed to the sender. Notice given by private wire shall be considered to have
been given when transmitted prepaid. Notice given by fax shall be considered to
have been given when actually received by the party to whom the fax is delivered
and receipt is telephonically confirmed.
<PAGE>
EXHIBIT 10.18
[LOGO OF GLOBAL ACCESS TELECOMMUNICATIONS SERVICES, INC.]
Four Media Company August 28, 1996
4813 West Alameda Avenue
Burbank, CA 91505
Attn: John Donlon
Dear Mr. Donlon:
As you know, there has been some discussion about whether or not Global Access
Telecommunication Services, Inc. ("Global") is required to obtain the consent
(the "Consents") of either The Associated Press ("AP") or Hughes Communications
Galaxy, Inc. ("Hughes") for the sublease to Four Media Company ("4MC") of
transponder 5 and 7 on Hughes' Galaxy IV satellite which are being subleased to
Global Access by AP and to AP by Hughes. While we do not necessarily believe the
Consents are required, we are nonetheless in the process of obtaining them at
this time and agree to use our best efforts to secure the Consents as soon as
possible.
However, since the obtaining of the Consents may be a time-consuming process and
it is in both Global's and 4MC's interest to expedite the implementation of the
satellite services contemplated by the agreements between Global and 4MC, Global
is proposing to amend the two agreements between Global and 4MC as set forth
below.
Therefore, this letter shall serve to amend the Satellite Services Agreement
between Global and 4MC dated April 12, 1996 for Transponder 5 on Hughes' Galaxy
IV satellite ("Agreement #1"), and the Satellite Services Agreement between
Global and 4MC dated April 12, 1996 for Transponder 7 on Hughes' Galaxy IV
satellite ("Agreement #2"), as follows:
1. The following shall be added to the Agreement #1 as Section 10, and to
Agreement #2 as Section 11:
"INDEMNIFICATION. Global agrees to indemnify and hold 4MC, its
----------------
directors, officers, employees, contractors, subcontractors, and
agents (collectively, the "4MC Indemnitees") harmless from, against
and with respect to any and all claims, damages, liabilities, costs
and expense (including reasonable attorneys fees) up to a limit of
an aggregate of $1,000,000 which are incurred in connection with any
claim against any of the 4MC Indemnities arising out of Global's
failure to obtain the Consents or establish with Hughes and AP that
such Consents are not required for the sublease of the Transponder
to 4MC. This indemnification will survive the obtaining of the
Consents by one (1) year, and shall thereafter be of no further
force and effect."
2. The following shall be added to Agreement #1 as Section 11:
"11. PREEMPTION. Should AP exercise it rights to preempt Global's
-----------
use of the Transponder pursuant to Paragraph 8.02(b) of the
Transponder Lease Agreement between AP and Global, dated as of July
6, 1995, Global agrees to provided to 4MC full-time use of
Transponder 11 on Galaxy IV, or another transponder acceptable to
both Global and 4MC (the "Replacement Transponder") for 4MC's use
pursuant to the terms of the Agreement between Global and 4MC."
3. The following shall be added to Agreement #2 as Section 12:
"12. PREEMPTION. Should AP exercise its right to preempt Global's
-----------
use of the Transponder pursuant to Paragraphs 8.02(b) of the
Transponder Lease Agreement between AP and Global, dated as of July
6, 1996, Global agrees to provide to 4MC full-time use of
Transponder 9 on Galaxy IV, or another transponder acceptable to
both Global and 4MC (the "Replacement Transponder") for 4MC's use
pursuant to the terms of the Agreement between Global and 4MC."
Please indicate your agreement to the above by signing in the space indicated
below. In the meantime, please call me if you have any questions.
Sincerely,
/s/ K Buckley
Keith Buckley
AGREED:
FOUR MEDIA COMPANY
By: /s/ John H. Donlon
------------------
Title: President
---------------
Date: 9/4/96
----------------
<PAGE>
EXHIBIT 10.20
DATED THIS ________ DAY OF __________ 199
Between
SINGAPORE TELECOMMUNICATIONS LIMITED
...Landlord
And
FOUR MEDIA COMPANY ASIA PTE LTD
...Tenant
............................................
LEASE
(OFFICE)
............................................
HELEN YEO & PARTNERS
ADVOCATES & SOLICITORS
11 COLLYER QUAY
#12-01 THE ARCADE
SINGAPORE 0104
FCL/ALSY/LP/94078915
<PAGE>
CONTENTS
--------
CLAUSE HEADING PAGE
- ------ ------- ----
1. INTERPRETATION 1
2. THE DEMISE 2
3. TERM OF THE LEASE 2
4. RENT AND SERVICE CHARGE 2
4.1 Rent 2
4.2 Service Charge 3
4.3 Payment 3
5. DEPOSIT 3
6. MODE OF PAYMENT 4
7. PERMITTED USE OF THE PREMISES 4
8. TENANT'S COVENANTS 4
9. LANDLORD'S COVENANTS 4
10. LANDLORD NOT LIABLE 4
11. TERMINATION 5
11.1 Proviso for re-entry 5
11.2 Landlord's rights to rectify breach etc 6
12. DESTRUCTION 6
13. HOLDING OVER 6
14. OPTION TO RENEW 7
15. TRANSFER TO MANAGEMENT CORPORATION 8
16. MISCELLANEOUS 8
16.1 Notices 8
16.2 Landlord's consent 9
16.3 Costs and expenses 9
16.4 No waiver 9
16.5 Title 9
16.6 No Lodging of Caveat Registration or Subdivision 9
16.7 No representations 9
16.8 Severance 10
16.9 Governing law and submission to jurisdiction 10
<PAGE>
ii.
CLAUSE HEADING PAGE
- ------ ------- ----
SCHEDULE 1
- RIGHTS GRANTED TO TENANT 11
SCHEDULE 2
- RIGHTS RESERVED BY THE LANDLORD 12
1. Easements 12
2. Power for Landlord to deal with adjoining 12
property and the Common Area
3. Access to and Main Doors of the Building 13
4. Name and Address of Building 13
5. Rules and Regulations 13
6. Operating Hours 13
7. Landlord's rights to interest for 13
late payments
8. Removal of property after expiry or earlier 13
determination of tenancy
9. Landlord's right to assign 14
SCHEDULE 3
- PART A
- TENANT'S COVENANTS 15
1. Rent and Service Charge 15
2. Utilities and Telecommunication Services 15
3. Property tax and goods and services tax 15
4. Insurance 16
5. Repair 16
6. Alterations 17
7. Notices 17
8. To permit the Landlord to inspect 18
9. To grant the Landlord right of access to 18
the Premises
10. Yield up in repair at the end of the Term 19
11. Loading And Electrical Installation 19
12. Rules and Regulations 19
13. Advertisements and signs 20
14. Compliance with statutes etc 20
15. Indemnity by Tenant 20
16. Assignment and subletting 20
17. Name of Tenant 21
<PAGE>
iii.
CLAUSE HEADING PAGE
- ------ ------- ----
- PART B
- RULES AND REGULATIONS OF THE BUILDING 22
1. Obnoxious or inflammable substances 22
2. Illegal or immoral purpose 22
3. Sales, auction, exhibition or public 22
meeting and Music
4. Pest And Livestock 22
5. Incense 22
6. Residential Purpose And Cooking 22
7. Cleanliness 22
8. Infectious diseases 22
9. Annoyance or nuisance 22
10. Aerials, masts and antenna 22
11. Fire and Alarm systems 23
12. Loading And Electrical And Other 23
Installations
13. Avoidance of Landlord's insurance policies 23
14. Vendors 24
15. Building Exterior, Windows And Security 24
16. Obstruction 24
17. Use of convenience 24
18. Use of lifts 25
19. Carparks, Temporary parking and Loading
bays 25
20. Soliciting 25
21. Landlord's Housekeeping Rules 25
22. Fire Drills 25
SCHEDULE 4
- LANDLORD'S COVENANTS 26
1. Quiet enjoyment 26
2. Property tax 26
3. Management of the Building 26
ANNEXURE A
- PLAN OF THE PREMISES 27
ANNEXURE B
- LANDLORD'S HOUSEKEEPING RULES 28
<PAGE>
THIS LEASE is made the day of 1996 Between:
----------
(1) SINGAPORE TELECOMMUNICATIONS LIMITED, a company incorporated in
Singapore and having its registered office at 31 Exeter Road, Comcentre,
Singapore 239732 (the "Landlord"); and
(2) FOUR MEDIA COMPANY ASIA PTE LTD, a company incorporated in Singapore and
having its registered office at 30 Choon Guan Street, Singapore 079809
(the "Tenant").
WHEREBY IT IS AGREED as follows:
1. INTERPRETATION
--------------
1.1 In this Lease the following words and expressions shall, unless the
context otherwise requires, have the following meanings;
"Building" means the building situate at 30 Choon Guan Street and known
as City South Exchange.
"Common Area" means all parts of and all facilities and fixtures and
fittings in the Building used or intended for or capable of being used
or enjoyed in common by all the occupiers of the Building including,
without limitation, (i) all passageways, staircases, lifts and
escalators (if any); (ii) all refuse chutes, drains, sewers, pipes,
wires, cables, and ducts; and (iii) all driveways, carparks and open
spaces;
"Conducting Media" means drains, sewers, conduits, flues, gutters,
gullies, channels, ducts, shafts, watercourses, fire sprinklers, pipes,
cables, cable racks, wires and mains or any of them;
"Deposit" means the sum deposited by the Tenant with the Landlord
pursuant to Clause 5;
"Landlord" includes its successors, assigns and all persons entitled to
the reversion immediately expectant upon the determination of this
Lease;
"Lease" includes any instruments supplemental to this Lease and any
amendments or variations to this Lease agreed in writing between the
Landlord and Tenant;
"Management Corporation" means a management corporation of the Building
established under the Land Titles (Strata) Act, Chapter 158;
"month" means a calendar month;
"Operating Hours" means the hours between 8:00 a.m. and 5:00 p.m. on
weekdays and 8:00 a.m. and 1:00 p.m. on Saturdays (Sundays and gazetted
public holidays excluded) or such hours as the Landlord may prescribe
from time to time;
"Payment Date" means the date as defined in Clause 4.3;
"Permitted Use" means the use of the Premises as an office and no other
purpose;
"Premises" means the premises on the 6th floor of the Building
containing a floor area of 569 square feet, which, for identification
only, is delineated in red in the plan annexed in this Lease as Annexure
A;
"Rent" means the rent referred to in Clause 4.1;
"Rules and Regulations" means the rules and regulations of the Building
and any part thereof as prescribed by the Landlord, as set out in Part B
of Schedule 3 and
<PAGE>
-2-
which may be suspended, deleted, expanded or otherwise amended or
updated in any way from time to time;
"Services" means the services to be provided by the Landlord as defined
in paragraph 3 of Schedule 4;
"Tenant" includes, if the Tenant is an individual, his personal
representatives and permitted assigns, or if the Tenant is a company,
its successors in title and permitted assigns;
"Tenant's Occupiers" means the Tenant's servants, agents, independent
contractors, licensees, sub-tenants (if consented to by the Landlord),
invitees, customers and any person claiming rights to use, enjoy, visit
or be at the Premises expressly or by implication with the Tenant's
consent or authority;
"Term" means the term granted by this Lease pursuant to Clause 3; and
"year" means a calendar year.
1.2 In any case where the Tenant is placed under a restriction by reason of
the covenants and conditions contained in this Lease, the restriction
shall be deemed to include the obligation on the Tenant not to permit or
allow the infringement of the restriction by any of the Tenant's
Occupiers.
1.3 Where the context so admits, words in this Lease importing the singular
meaning shall include the plural meaning and vice versa, words for the
masculine gender shall include the feminine and neuter gender and vice
versa and words denoting natural persons shall include corporation and
firms and all such words shall be construed interchangeably in that
manner.
1.4 References in this Lease to any statutes or statutory instruments shall
include and refer to any statutes or statutory instruments amending,
consolidating or replacing them respectively from time to time and for
the time being in force.
2. THE DEMISE
----------
In consideration of the Rent and Service Charge and the covenants
reserved by and contained in this Lease, the Landlord HEREBY DEMISES to
the Tenant ALL the Premises TOGETHER WITH the rights set out in Schedule
1 but EXCEPTING AND RESERVING to the Landlord the rights as stated in
Schedule 2, TO HOLD the Premises unto the Tenant for the Term, YIELDING
AND PAYING to the Landlord during the Term, the Rent and Service Charge
in accordance with Clause 4.
3. TERM OF THE LEASE
-----------------
The Term of the Lease is two (2) years commencing from the 15th day of
December 1994 and expiring on the 14th day of December 1996.
4. RENT AND SERVICE CHARGE
-----------------------
4.1 Rent
----
The Rent shall be calculated at the monthly rate of $3.30 per square
foot of the floor area of the Premises. The monthly Rent is Dollars One
Thousand Eight Hundred and Seventy seven and cents eighty only
($1,877.80).
<PAGE>
-3-
4.2 Service Charge
--------------
4.2.1 The Service Charge shall be calculated at the monthly rate of $0.80 per
square foot of the floor area of the Premises. The monthly Service
Charge is Dollars Four Hundred and Fifty five and cents twenty only
($455.20). Payment of such service charge is for estimated outgoings
costs and expenses incurred or chargeable for the provision of,
including but without limitation to, air-conditioning to the Premises,
security guards and/or security system, cleaning of Common Area and
lifts and the maintenance thereof.
4.2.2 In the event of any increase in the costs expenses and outgoings of the
Landlord for providing the Services, the Landlord shall be entitled to
increase the Service Charge by an amount equal to so much of the extra
costs, expenses and outgoings as is attributable to the Premises. Any
increase in the Service Charge shall be payable from the date specified
in the Landlord's notice. In the event that the Tenant disagrees with
such increase by written notice to the Landlord, the audited account
from the Landlord's appointed auditor (the cost and expense of the
auditor shall be borns by the Tenant) shall be final, conclusive and
binding on the Tenant, both as to the Tenant's liability for such
increase and the amount thereof.
4.2.3 For the avoidance of doubt, upon termination of this Lease for any
reason whatsoever, the Tenant shall have no claim for any refund of the
Service Charge paid by it.
4.3 Payment
-------
The Rent and Service Charge shall be payable in advance on the first day
of each month (each a "Payment Date"), without any deduction or
withholding whatsoever. On or before the date of commencement of the
Term, the Tenant shall pay to the Landlord the pro-rated Rent and
Service Charge calculated from the date of commencement of the Term up
to and including the day immediately preceding the next Payment Date,
and thereafter the Rent and Service Charge shall be paid on each
succeeding Payment Date.
5. DEPOSIT
-------
5.1 The Tenant shall, on or before the execution of this Lease, deposit with
the Landlord a sum equivalent to three (3) months Rent and Service
Charge by cash.
The Deposit shall be maintained throughout the Term at an amount
equivalent to the prevailing amount of three (3) months' Rent and
Service Charge. The Tenant shall, within fourteen (14) days of demand
by the Landlord, pay such sum to the Landlord as may be necessary to
ensure that the Deposit is maintained at such equivalent amount.
5.2 The Deposit shall be held by the Landlord as security for the due
performance and observance by the Tenant of all the covenants and
provisions contained in this Lease and as security for any claim by the
Landlord at any time against the Tenant in relation to any matter in
connection with the Premises whether the Lease is subsisting or not, and
if the Tenant shall commit a breach of any of the provisions of this
Lease, the Landlord shall be entitled but not obliged to apply the
Deposit or any part thereof in or towards payment of moneys outstanding
or making good any breach by the Tenant or to deduct from the Deposit
such amount as would reasonably compensate the Landlord for the loss or
expense to the Landlord occasioned by such breach but without prejudice
to any other right or remedy which the Landlord may be entitled to. No
part of the Deposit shall be set off by the Tenant against any Rent,
Service Charge or other sums owing to the Landlord.
<PAGE>
-4-
5.3 Subject to any proper deductions to be made by the Landlord pursuant to
the provisions of this Lease, the Deposit shall be repaid to the Tenant
without interest within one (1) month from the expiration or sooned
termination of the Term.
6. MODE OF PAYMENT
---------------
The Tenant shall pay the Rent, Service Charge and all other sums payable
to the Landlord under this Lease, including the Deposit, in such manner
as may be notified in writing by the Landlord from time to time.
7. PERMITTED USE OF THE PREMISES
-----------------------------
The Tenant will use the Premises solely for the Permitted Use. The
Tenant shall obtain and comply with all applicable licenses, permits and
approvals to enable the Tenant to carry on its business in the Premises
in accordance with the Permitted Use.
8. TENANT'S COVENANTS
------------------
The Tenant hereby covenants with the Landlord that it will perform and
observe:
(a) the Tenant's obligations and undertakings as set out in Part A of
Schedule 3; and
(b) the Rules and Regulations.
9. LANDLORD'S COVENANTS
--------------------
The Landlord hereby covenants with the Tenant that it will perform and
observe the Landlord's obligations and undertakings as set out in
Schedule 4.
10. LANDLORD NOT LIABLE
-------------------
Notwithstanding anything herein contained the Landlord shall not be
liable to the Tenant or to any of the Tenant's Occupiers for, nor shall
the Tenant have any claim against the Landlord, in respect of:
(a) any damage, injury or loss or any consequential loss (including loss
of business, loss of profit, product liability, indirect and special
damage) arising from or resulting from any interruption in or
failure of any of the Services by reason of repair or maintenance
work or damage or destruction or mechanical or other defect or
breakdown or short circuit of electrical wiring, explosion, falling
plaster, escape of water, or the leakage or defect of the Conducting
Media in, or the structure of, the Premises, the Building or any
part thereof or by reason of any circumstances beyond the Landlord's
control (including but not limited to fire, flood, act of God, riot,
civil commotion, curfew, emergency, labour disputes or shortage of
manpower, fuel, materials, electricity or water);
(b) any damage, injury or loss or any consequential loss (including loss
of business, loss of profit, product liability, indirect and special
damage) arising from or resulting from short circuit of electrical
wiring, explosion, falling plaster, escape of water, or the leakage
or defect of the Conducting Media in, or the structure of, the
Premises, the Building or any part thereof;
(c) any loss of life, injury or damage to or loss of any property or any
consequential loss (including loss of business, loss of profit,
product liability, indirect and special damage) arising from or due
to any accident or circumstances
<PAGE>
-5-
whatsoever occurring at the Premises, the Building or any part
thereof;
(d) any act, omission, default, misconduct or negligence of any porter,
attendant or other servant or employee or agent of the Landlord in
or about the performance or purported performance of any duty
relating to the provision of Services or any of them or any other
duties whatsoever to the performed under this Lease;
(e) any damage, injury or loss or any consequential loss arising from or
caused by other tenants or any independent contractor or any
persons, or from any occurrence at any other premises, within the
Premises, the Building or any part thereof;
(f) any diminution or obstruction of light, air or view by any building
or structures that may be erected within or adjacent to the Building
or any part thereof; and
(g) any damage, injury or loss or any consequential loss arising from or
by reason of lack of security or safekeeping of the Premises,
Building or any part thereof or any contents therein.
11. TERMINATION
------------
11.1 Proviso for re-entry: If and whenever during the Term:
--------------------
(a) all or any part of the Rent or Service Charge shall be unpaid for
fourteen (14) days after becoming due (whether or not any formal
demand has been made); or
(b) the Tenant shall at any time fail or neglect to perform or observe
any of its obligations, covenants or undertakings in this Lease
other than a failure under Sub-Clause (a) above, and such default
if capable of being remedied is not remedied to the reasonable
satisfaction of the Landlord within fourteen (14) days after the
Landlord has given notice thereof to the Tenant; or
(c) the Tenant becomes insolvent, or (in the Landlord's reasonable
opinion) is unable to pay its debts, or stops or suspends, or
threatens to stop or suspend, payment of all or a material part of
its debts, or proposes or makes a general assignment or an
arrangement or composition with or for the benefit of its creditors
or a moratorium is agreed or declared in respect of or affecting
all or a material part of its indebtedness; or any step or petition
is taken by any person including the Tenant or its members for the
winding up or dissolution or bankruptcy of the Tenant or for the
Tenant to be placed under the judicial management of a judicial
manager; or a receiver and/or manager is appointed in respect of
any properties or assets of the Tenant or distress or execution is
levied or enforced upon or sued against any part of the properties
or assets of the Tenant, or if events or circumstances analogous to
any of the foregoing events occurs in relation to the Tenant under
the laws of any jurisdiction;
then the Landlord or any person authorised by the Landlord may at any
time thereafter re-enter upon the Premises or any part thereof in the
name of the whole, whereupon this Lease shall forthwith absolutely cease
and determine, but without prejudice to the right of action, and any
other right and remedy, of the Landlord in respect of any antecedent
breach by the Tenant of this Lease (including the breach giving rise to
the re-entry).
<PAGE>
-6-
11.2 Landlord's rights to rectify breach etc
---------------------------------------
11.2.1 The Landlord may, in the event of any default described in Clause
11.1 (b) above, at its absolute discretion and option either in addition
to or in lieu of termination under Clauses 11.1 above, be entitled but
shall not at any time or in any way be obliged to do the following:
(a) to perform the said obligation, covenant or undertaking on behalf
of the Tenant and/or to engage architects, contractors, workmen
and/or agents and/or enter and remain at the whole or any of the
part of the Premises, with or without such architects, contractors,
workmen and agents for such purpose; and
(b) to demand payment of all reasonable costs and expenses paid or
incurred by the Landlord resulting from the Tenant's default
and/or pursuant to Sub-Clause (a) above and any sum so demanded
shall be payable by the Tenant to the Landlord within fourteen
(14) days of the demand. A certificate from the Landlord as to
the amount of cost and expenses incurred shall in the absence of
manifest error be final, conclusive and binding on the Tenant.
11.2.2 Anything done by the Landlord pursuant to the provisions of this Clause
shall be without prejudice to any other right remedy and power of the
Landlord in this Lease and shall not constitute a waiver of release of
the Tenant from its obligations, covenants and undertakings.
12. DESTRUCTION
-----------
12.1 Subject to Clause 12.2, if the Premises or any part thereof shall at
any time be damaged or destroyed so as to render the Premises unfit for
occupation and use (except where such damage or destruction has been
caused by, or payment of any insurance policy monies withheld in whole
or in part in consequence of any act, omission, negligence or default
of the Tenant or the Tenant's Occupiers) the Rent and Service Charge
reserved by this Lease or a fair and just proportion thereof according
to the nature and extent of the damage sustained shall be suspended
until the Premises shall again be rendered fit for occupation and use.
Any dispute concerning this clause shall be determined by a single
arbitrator in accordance with the Arbitration Act (Cap. 10).
12.2 Notwithstanding the provisions of Clause 12.1:
(a) after the occurrence of such damage or destruction the Landlord
may at any time and at its absolute discretion terminate this
Lease by serving one (1) month's written notice on the Tenant; or
(b) if the Premises shall continue to be unfit for occupation for a
period of more than one hundred and twenty (120) days, either the
Landlord or the Tenant shall be at liberty by giving one (1)
month's written notice to the other to terminate this Lease, and
upon a notice under either Sub-Clause (a) or (b) above being
given, this Lease shall terminate and the Tenant shall (if still
in occupation) vacate the Premises upon the expiry of such notice
without compensation from the Landlord, but without prejudice
however to any right or remedy that either party may have against
the other for any antecedent breach of this Lease.
13. HOLDING OVER
------------
If, without any express written agreement between the Landlord and the
Tenant, the Tenant fails to deliver vacant possession of, or continues
to occupy, the Premises after the expiration or earlier determination
of the Term, the Tenant shall be deemed to be holding over and, without
prejudice to any right or remedy of the
<PAGE>
-7-
Landlord, shall pay to the Landlord for every day of such holding over
double the amount of Rent or the prevailing market rent (whichever is
higher) and double the amount of the Service Charge and there shall be
no renewal of this Lease by operation of law or pursuant to the
provisions of this Lease. During the period of any such holding over all
provisions of this Lease shall be and remain in effect. The provisions
herein shall not be construed as the Landlord's consent for the Tenant
to hold over after the expiration or earlier determination of the Term.
14. OPTION TO RENEW
---------------
The Tenant shall be entitled to two (2) options to renew the lease
hereunder on and subject to the terms and conditions below:-
(a) Each renewal period shall be called a Renewed Term. The first
option to renew will be for a Renewed Term of three (3) years
("First Renewed Term") commencing on the day after the expiry of
the Term, and the second option to renew will be for a Renewed Term
of two (2) years less one day ("Second Renewed Term") commencing on
the second day after the expiry of the First Renewed Term.
(b) The Tenant shall have given written notice ("Tenant's Renewal
Notice") to the Landlord of its intention to exercise its option
to renew. The Tenant's Renewal Notice shall be given, in the case
of the first option to renew, not later than three (3) months prior
to the expiration of the Term and, in the case of the second option
to renew, not later than three (3) months prior to the expiration
of the First Renewed Term.
(c) The revised Rent payable during the First Renewed Term shall be
calculated by the formula of
URA downtown core office rental
index for fourth quarter 1996
$3.30 per sq ft X ---------------------------------------
URA downtown core office rental
Index for fourth quarter 1994
and the revised Rent payable during the Second Renewed Term shall
be calculated based on the formula of
URA downtown core office rental
index for fourth quarter 1999
$3.30 per sq ft X ---------------------------------------
URA downtown core office rental
index for fourth quarter 1994
provided that if, within fourteen (14) days of receipt of the
Landlord's final offer of the revised Rent, the Tenant shall not
have confirmed in writting its acceptance of the Landlord's offer,
the option hereby granted shall be deemed to have lapsed and of no
effect.
(d) In the event that the particular category of URA office rental
index or by whatevername referred or called, is no longer in
production or publication by URA, then its equivalent core or
category will be used. In the further event, that this latter
core or category is no longer in production or publication, then
the equivalent office rental index from M/s Richard Ellis (Pte)
Ltd will be applicable, failing which the equivalent office rent
index from M/s Knight Frank Cheong Hock Chye Bailliue shall be
applicable.
<PAGE>
-8-
(e) At the time of service of the Tenant's Renewal Notice and also at
the time of expiry of the Term or the First Renewed Term (as the
case may be) there shall not be any existing breach or
non-observance of any covenants and conditions on the part of the
Tenant to be observed or performed under the lease then in force in
respect to the Premises.
(f) Each renewal shall be in respect of the whole of the Premises and
not part or parts thereof unless otherwise agreed by the Landlord
in writing.
(g) The new lease agreement for each Renewed Term shall be prepared by
the Landlord at the Tenant's expense and shall contain similar
covenants and provisions as herein contained and shall take into
account the following:
(i) the revised Rent and revised Service Charge as agreed in
accordance with the foregoing provisions; and
(ii) in the case of the lease for the First Renewed Term, there
shall be provision for only one option to renew and, in the
case of the lease for the Second Renewed Term, there shall be
no provision for any further renewal of the lease.
(h) The Tenant shall execute and return to the Landlord or the
Landlord's solicitors the engrossed new lease agreement (in
duplicate) for that Renewed Term together with any additional
Deposit, stamp fee and any other fees and expenses payable under
the new lease agreement not later than two (2) weeks after receipt
of the same from the Landlord's solicitors.
(i) The option or options, as the case may be, granted under this
Clause shall lapse and be of no effect in the event of the Tenant's
failure to comply with this Clause and the Landlord shall be free
of all obligations whatsoever to grant to the Tenant any further
term.
15. TRANSFER TO MANAGEMENT CORPORATION
----------------------------------
In the event that the Building is subdivided and a Management
Corporation is appointed pursuant thereto, then after the transfer of
the management and operation of the Building to the Management
Corporation, the (i) provision of the Services shall cease to be the
obligation of the Landlord and (ii) the Management Corporation shall be
entitled to exercise and enforce the rights and powers of the Landlord,
and to enjoy the benefit of the obligations, covenants and undertakings
to be performed and observed by the Tenant, under this Lease which in
any way relate to the Building and/or the management and operation of
the same. All references to the Landlord shall refer to the Landlord
and/or the Management Corporation, as the context may require.
18. MISCELLANEOUS
-------------
16.1 Notices: All communications required to be made under this lease shall
-------
be made in writing and shall be sent to the receiving party at the
facsimile number or address and marked for the attention of the person
(if any), from time to time designated by that party to the other party
for the purpose of this Lease. The initial facsimile number, address
and person (if any) so designated by each party are:
LANDLORD TENANT
-------- ------
Facsimile No: 447 4552 Facsimile No: 220 5197
Attention: Ms Tok Hwee Eng Attention: Mr Dennis Ang Bak Hwee
<PAGE>
-9-
Any party may change its facsimile number and/or address and/or person
designated for the purposes hereof by written notice to the other. Any
communication from one party to the other party shall be deemed to be
received:
(a) if delivered by hand, on the date of receipt;
(b) if sent by facsimile, at the time of confirmation of transmission,
such communication to be followed by post to the address
designated; and
(c) if sent in Singapore to an address in Singapore by prepaid
registered mail, on the date two (2) days after posting;
whichever shall first occur and regardless whether such notice is
returned undelivered.
16.2 Landlord's consent: In any case where the Landlord's consent or
------------------
approval is required, such consent or approval shall be obtained in
writing before the act or event to which it applies is carried out or
occurs. Such consent or approval may be withheld or given at the
Landlord's absolute discretion or given subject to such terms and
conditions as the Landlord acting reasonably deems fit.
16.3 Costs and expenses: The Tenant agrees to pay the Landlord on a full
------------------
indemnity basis:
(a) all the Landlord's legal costs and fees, the stamp duty and all
reasonable disbursements incurred in connection with the
preparation and completion of this Lease (in duplicate);
(b) all the Landlord's reasonable costs and expenses (including the
reasonable costs of the Landlord's solicitors, architect, engineer
or surveyor where applicable) incurred in preserving or enforcing
any of the Landlord's rights under this Lease and incurred in
connection with every application made by the Tenant for any
consent or approval required under this Lease whether or not such
consent or approval shall be granted or given.
16.4 No waiver: Knowledge or acquiescence by the Landlord of any breach by
---------
the Tenant shall not operate or be deemed to operate as a waiver of any
of the Landlord's rights in respect of such breach. Any consent or
waiver of the Landlord shall be effective only if given in writing and
shall not be construed as a consent to or waiver of any other breach of
the same or any other covenant, condition or obligation and shall not
prejudice in any way the rights, powers and remedies of the Landlord.
16.5 Title: The Landlord shall not be required to deduce its title to the
-----
Premises nor to reply to any requisitions on the title.
16.6 No lodging of caveat, registration or subdivision: The Tenant shall
-------------------------------------------------
not, at any time before, during or after the Term, register this Lease
nor lodge a caveat in respect of this Lease (or in respect of any option
to renew pursuant to this Lease) at the Registry of Land Titles and
Deeds, Singapore, nor shall the Tenant be entitled to require the
Landlord to subdivide the Building or any part thereof or to do any act
or thing which could result in the Landlord being required to subdivide
the Building or any part thereof.
16.7 No representations: The Landlord shall not be bound by any statements,
------------------
representations or promises with respect to the Building, or in respect
of the Premises, except as expressly set forth in this Lease. The
agreement between the Landlord and the Tenant is set forth herein and
shall in no way be modified by any
<PAGE>
-10-
statements, representations or promises made prior to the signing of
this Lease. The Landlord does not expressly or impliedly warrant that
the Premises are or will remain suitable or adequate for all or any of
the purposes of the Tenant and all warranties (if any) as to suitability
and adequacy of the Premises implied by law are hereby expressly
negatived.
16.8 Severance: The illegality, invalidity or unenforceability of any
---------
provision of this Lease under the law of any jurisdiction shall not
affect its legality validity or enforceability under the law of any
other jurisdiction not the legality, validity of enforceability of any
other provision.
16.9 Governing law and submission to jurisdiction: This Lease shall be
--------------------------------------------
construed and governed by the laws of Singapore and the Tenant hereby
irrevocably submit to the exclusive jurisdiction of the courts of
Singapore with the Landlord reserving to itself the right to proceed
under this Lease in the courts of any other country claiming or having
jurisdiction in respect thereof. The service of any writ of summons or
any legal process or arbitration notice in respect of any legal or
arbitration or other action or proceedings under or in connection with
this Lease may be affected on the Tenant by serving a copy of the writ
of summons and statements of claim or other originating or legal process
on the Tenant's registered address, (or such other agent and address in
Singapore as may be notified in writing by the Tenant to the Landlord).
The Tenant hereby agrees that such service shall be deemed good and
valid service and to have been served personally on the Tenant in
accordance with the requirements of law.
<PAGE>
-11-
SCHEDULE 1
----------
RIGHTS GRANTED TO TENANT
------------------------
TOGETHER WITH (but to the exclusion of all other liberties, easements, rights or
advantages) the rights during Operating Hours for the Tenant and others duly
authorised by the Tenants:
1. of ingress to and egress from the Premises in over and along all the
usual entrances, landings, lifts, lobbies and corridors leading thereto
and otherwise to use the Common Area for all proper purposes in
connection with the use and enjoyment of the Premises;
2. to use such toilet facilities in the Building as shall be designated
from time to time in writing by the Landlord; and
3. to enjoy the benefit of the air-conditioning systems installed in the
Building (subject to the obligation of the Tenant to connect the same to
the air-conditioning distributing ducts installed or to be installed by
the Tenant in the Premises),
in common with the Landlord and all others so authorised by the Landlord or
other occupiers of the Building and all other persons entitled thereto, and all
such rights being only so far as is necessary for the use and enjoyment of the
Premises for the Permitted Use and as the Landlord can lawfully grant.
<PAGE>
-12-
SCHEDULE 2
----------
RIGHTS RESERVED BY THE LANDLORD
-------------------------------
1. Easements
---------
The Landlord excepts and reserves unto itself the following:
(a) the right to the free and uninterrupted passage and running of
water, gas, sewage, electricity, air-conditioning services,
telephone and other services or supplies from and to other parts of
the Building in and through the Conducting Media and ancillary
apparatus which now are or may at any time during the Term be in,
on, under or over the Premises;
(b) the right to erect scaffolding and/or protective barricades for any
purpose with or related to the Building or to do any act or thing
necessary for the safety and preservation of the Premises or the
Building or any part thereof notwithstanding that the exercise of
such rights may temporarily restrict the access to or use and
enjoyment of the Premises;
(c) the rights to light, air, support, protection, shelter and all
other easements and rights now or after the date of this Lease
belonging to or enjoyed by other parts of the Building;
(d) the rights of ingress to and egress from the Premises which the
Tenant is obliged to grant the Landlord, or for the Landlord to
exercise any of the Landlord's rights, under this Lease;
(e) the rights of ingress to and egress from the Premises, with or
without tools and equipment, for the access to the cable racks in
the Premises to effect or carry out any maintenance, repairs,
alterations or additions or installation or other works which the
Landlord may consider necessary or desirable; and
(f) the right to shutdown with a minimum notice of seven (7) days to be
given by the Landlord to the Tenant, except in the event of
emergency, all or any of the mechanical and/or electrical plants in
the Building for the purposes of upgrading, maintenance, repair,
alterations or additions or other works which the Landlord may
consider necessary or desirable.
2. Power for Landlord to deal with adjoining property, Common Area and
------------------------------------------------------------------
Building
--------
2.1 The Landlord shall have the right at any time and from time to time, at
its absolute discretion, and without the same constituting an actual or
constructive eviction of Tenant, and without incurring any liability
whatsoever to the Tenant therefor:
(a) to improve, renovate or alter in any way whatsoever and prescribe,
control and change the use, construction, size, configuration of or
access to or any other aspect of any part or parts of the Building
and Common Area (other than the Premises); and
(b) to deal as it may think fit with other property belonging to the
Landlord adjoining or nearby, and to alter or erect new structures
within or adjoining the Building, in such manner as the Landlord
shall think fit, whether or not such buildings shall affect or
diminish the light or air which may now or at any time be enjoyed
by the Tenant in respect of the Building,
provided that reasonable means of access to and egress from the Premises
are afforded without prejudice however to the rights of the Landlord
under any other
<PAGE>
-13-
provision of this Lease.
2.2 Nothing contained in this Lease shall confer on the Tenant any right to
enforce any covenant or agreement relating to any part of the Common
Area and any other premises or any other parts of the Building leased or
licensed by the Landlord to others or limit or affect the right of the
Landlord to deal with the same, and impose and vary any terms and
conditions in respect thereof, in any manner as the Landlord may think
fit.
3. Access to and Main Doors of the Building
----------------------------------------
3.1 The Landlord may its absolute discretion designate, and shall have full
control over, any other means of access to the Building (in addition to
the main doors).
3.2 The Landlord may in the case of any emergency, or if required by any
competent authority, or other circumstances rendering such action
advisable in the Landlord's opinion, prevent access to the whole or part
of the Building for so long and in such manner as the Landlord deems
necessary.
3.3 Notwithstanding anything herein contained, the Landlord shall have the
right at all times to refuse access to the Building or part thereof or
otherwise control such access in respect of any person whose presence
might in the reasonable opinion of the Landlord be prejudicial to the
safety, character, reputation and interests of the Building or part
thereof or its tenants and occupiers thereof and their respective
employees, agents and invitees.
4. Name and Address of Building: The Landlord shall have the right at all
----------------------------
times without obtaining any consent from the Tenant, to change the name
or number by which the Building or any part thereof (including but not
limited to the Premises) is known.
5. Rules and Regulations: The Landlord and/or its managing agent as the
---------------------
case may be, shall have the absolute right at any time and from time to
time to suspend, or amend in any way the Rules and Regulations.
6. Operating Hours: The Landlord may at any time and from time to time
---------------
prescribe or change the Operating Hours if the Landlord in its
discretion considers such change to be in the best interests of the
Building.
7. Landlord's right to interest for late payments: Without prejudice to
----------------------------------------------
the other provisions of this Lease, if any sum payable by the Tenant to
the Landlord under the provisions of this Lease is not paid within
fourteen (14) days after its due date or after demand (if so payable),
the Tenant shall pay to the Landlord interest on such overdue sum (as
well after as before any judgment) at the rate of twelve per cent (12%)
per annum calculated on the basis of actual days elapsed and a 360-day
year, from the date on which such sum falls due for payment to the date
when sum is received in cash by the Landlord or where payment is made by
cheque, to the date when the cheque is cleared, and until such payment,
such interest shall be recoverable by the Landlord as if it were rent
payable hereunder.
8. Removal of property after expiry or earlier determination of tenancy
--------------------------------------------------------------------
8.1 If, after the expiry or earlier determination of this Lease, any
property of the Tenant shall remain at the Premises and the Tenant shall
fail to remove the same within fourteen (14) days after the Landlord
serves a notice on the Tenant to do so then the Landlord may, as the
agent of the Tenant, dispose of, as the Landlord thinks fit, or sell
such property. If the Landlord is unable to lease, or otherwise deal
with, the Premises for any period of time due to the Tenant's failure
to remove its property,
<PAGE>
-14-
the Tenant shall be deemed to be holding over during such period and the
additional Rent and Service Charge for such period of holding over
pursuant to Clause 13 shall be paid by the Tenant within fourteen (14)
days of demand by the Landlord. The Landlord shall apply the proceeds of
sale of the Tenant's property, if any, after deducting the costs and
expenses of removal, storage and sale reasonabily and property incurred
by the Landlord, towards discharging any sum due from the Tenant to the
Landlord under the provisions of this Lease, including the amount
payable pursuant to Clause 13, and shall pay the balance thereof, if
any, to the order of the Tenant.
8.2 The Tenant shall indemnify the Landlord against any and all liability
incurred by the Landlord to any third party whose property shall have
been sold by the Landlord in the bona fide belief (which shall be
presumed unless the contrary be proved) that such property belonged to
the Tenant and was liable to be dealt with as such pursuant to this
Clause.
9. Landlord's right to assign
--------------------------
9.1 The Landlord shall be entitled to assign all its rights and interest in,
under or arising out of this Lease.
9.2 Where the Landlord assigns its rights and interest in, under or arising
out of this Lease (including the transfer of the Deposit), the Tenant
shall be deemed to have consented to such assignment and shall accept
any assignee of the Landlord as its new landlord and shall release the
Landlord from all its obligations under the provisions of this Lease and
in particular the obligation of the Landlord to refund the Deposit and
any other sums pursuant to the terms of this Lease. Where required by
the Landlord, the Tenant shall enter into and execute as a party thereto
any agreement or deed entered into or to be entered into by the Landlord
and its assignee, such agreement or deed to be prepared by and at the
expense of the assignee, provided that no such agreement or deed shall
increase the Tenant's obligations hereunder or deprive the Tenant of any
rights hereunder.
<PAGE>
-15-
SCHEDULE 3
----------
PART A
------
TENANT'S COVENANTS
------------------
The Tenant covenants with the Landlord as follows:
1. Rent and Service Charge: The Tenant shall pay the Rent and the Service
-----------------------
Charge at the times and in the manner specified in Clause 4.
2. Utilities and Telecommunication Services
----------------------------------------
2.1 The Tenant shall arrange for its licensed electrical contractors to
apply to the Public Utilities Board ("PUB") and/or appropriate authority
for the installation and testing of the PUB sub-meter and shall apply
directly to the Singapore Telecommunications Ltd ("ST") or other
appropriate authority for the installation of any telex, telephone and
other telecommunications facilities. The Tenant shall pay all charges
including any taxes now or in the future imposed in respect of the
installation and supply of any equipment or appliance or telephone lines
and services and water, gas, electricity and any other services supplied
and metered separately to the Premises which shall be consumed or
supplied on or to the Premises, to PUB, ST or other appropriate
authority.
2.2 In the event that the PUB and/or other appropriate authority
disapproves the installation of a PUB sub-meter, the Tenant shall at its
own cost install a private meter which will be read by the Landlord for
the supply of utilities consumed by the Tenant and the Tenant shall pay
to the Landlord the actual cost of the supply thereof.
2.3 In the event of such water, gas, electricity and other services not
being supplied and metered separately to the Premises, the Tenant shall
pay to the Landlord a proportionate part of the cost of the supply
thereof, such proportionate part to be calculated by the Landlord and
notified to the Tenant by a statement from the Landlord in writing, such
statement to be final, conclusive and binding on the Tenant as to the
amount thereof.
3. Property tax and goods and services tax
---------------------------------------
3.1 Property tax imposed or levied by the relevant government authority on
the Premises, or on the Building (or any part thereof) and as may be
apportioned by the Landlord or attributable to the Premises, in respect
of the duration covered by the Term shall be paid as follows:
(a) the Landlord shall pay property tax levied on or attributable to
the Premises but such payment by the Landlord in respect of the
Premises shall not exceed property tax calculated (i) on the basis
of the annual Rent payable under this Lease and (ii) the property
tax rate applicable on the first assessment of property tax;
(b) in the event that any additional property tax is payable on account
of (i) any increase in the annual value for the Premises which is
in excees of the annual value calculated as aforesaid by reference
to the annual Rent; and/or (ii) an increase in the property tax
rate above the rate applicable on first assessment, such additional
property tax shall be borne and paid by the Tenant to the Landlord
on demand.
<PAGE>
-16-
3.2 Objection to any assessment of annual value or imposition of property
tax on the Premises in respect of the duration covered by the Term may
be made only by the Landlord in its sole discretion.
3.3 The Tenant shall also pay and indemnify the Landlord against goods and
services tax ("GST") or any tax of a similar nature that may be
substituted for or in addition to it and chargeable in respect of Rent,
Service Charge, Deposit and all sums paid or payable by the Tenant in
connection with this Lease. The Tenant shall, unless the Landlord
otherwise consents in writing, effect payment of GST together with
payment of Rent, Service Charge, Deposit and sums paid or payable by
the Tenant in accordance with this Lease or otherwise in such manner and
within such period to comply with or to enable the Landlord to comply
with any applicable laws or directives, and shall indemnify the Landlord
against any penalties, costs and expenses incurred by the Landlord as a
result of any breach by the Tenant of this provision.
3.4 The obligations of the Tenant under the provisions of this paragraph 3
shall continue to apply notwithstanding the expiry or earlier
determination of the Term and regardless of whether any of the aforesaid
taxes shall be assessed and/or payable to the relevant government
authority before, during or after the Term.
4. Insurance
---------
4.1 The Tenant shall, at its own cost and expense, at all times during the
Term take out and keep in force in the joint names of the Landlord and
the Tenant for their respective rights and interest (i) a comprehensive
public liability insurance policy in an amount not less than Singapore
Dollars Five Million Only (S$5,000,000.00), or in such higher amounts as
the Landlord may from time to time reasonably prescribe, in respect of
any one occurrance; (ii) insuramce against all risks and damage to all
plate glass, fixtures, fittings, and installation at the Premises and
all parts thereof which the Tenant is obliged under this Lease to keep
in repair for such amount as the Landlord may approve, such approval not
to be unreasonably withheld or delayed; and (iii) such other insurance
for such risks and for such amounts as the Landlord may reasonably
require.
4.2 All policies of insurace required to be affected by the Tenant shall be
taken out with an insurance company approved by the Landlord and copies
of such policies of insurance shall be produced and lodged with the
Landlord such approval not to be unreasonably withheld or delayed by the
Tenant without demand within thirty (30) days of the commencement of the
Term and thirty (30) days of the renewal of such policies. On written
demand at any time by the Landlord, the Tenant shall produce forthwith
to the Landlord any policy of insurance which the Tenant is required to
effect hereunder and the receipt for the last premium payable in respect
of such policy.
4.3 The Tenant shall not do anything whereby any policy of insurance on or
including the Premises taken out by the Landlord may become void or
voidable or whereby the rate of premium thereon may be increased.
5. Repair: At all times the Tenant shall repair and keep the Premises and
------
the Landlord's fixtures, fittings and installation (including but not
limited to all flooring, plaster and other surface material on the walls
and ceilings and the painting and varnishing of the windows and any
glass and the Conducting Media within and serving the Premises) in good
and tenantable repair and condition, fair wear and tear excepted, and to
make good, repair, replace and reinstate any damage or breakage however
caused of occurring in any part of the Premises and to the Landlord's
fixtures, fittings and installations.
<PAGE>
-17-
6. Alterations
-----------
6.1 The Tenant shall not affect any works, extensions, alterations or
additions whatsoever to or affecting the interior or the exterior of the
Premises without the prior written consent of the Landlord, such
approval not to be unreasonably withheld or delayed. For the purpose of
seeking the Landlord's consent hereunder, the Tenant shall submit to the
Landlord all plans, specifications and details of proposed materials to
be used for any proposed alterations and additions ("Proposed Plans").
6.2 The Landlord shall be entitled to engage its architect, engineer or
other consultant(s) for the purpose of considering the Proposed Plans
and for the purpose of supervising all works carried out by the Tenant,
the fees and expenses of such architect, engineer and consultant(s)
reasonably incurred in connection therewith shall be borne by the Tenant
and forthwith paid by the Tenant to the Landlord on written demand. If
the Tenant fails to make payment within fourteen (14) days from the date
of demand, the Landlord may effect payment of the same and all expenses
so incurred by the Landlord together with interest at the same
stipulated in paragraph 7 of Schedule 2, calculated from the date of
expenditure until the date they are paid by the Tenant to the Landlord,
shall be recoverable from the Tenant as if they were rent in arrears.
6.3 All alterations and additions to the Premises shall only be carried out:
(a) in the case of any mechanical and electrical engineering works, by
a specialist contractor appointed by the Tenant and approved by the
Landlord; and
(b) in all other cases, by a contractor appointed by the Tenant and
approved by the Landlord, such approval not to be unreasonably
withheld or delayed.
6.4 No contractor, architect, engineer or other consultant, approved or
or appointed by the Landlord for any purpose related to the Premises
shall in any way be deemed to be the agent or employee of the Landlord,
and the Landlord shall not in any way be liable nor responsible for any
act, omission, default, misconduct or negligence of such contractor,
architect, engineer, or consultant.
6.5 The Tenant shall apply for and obtain at its own cost and expenses all
planning and other licenses, permits and consents necessary or required
under law or the Rules and Regulations for its alterations and additions
and shall carry out and complete all alterations and additions to the
Premises in accordance with the Proposed Plans as approved by the
Landlord, in a good and workmanlike manner and in compliance with the
reasonable requirements of the Landlord's architect.
6.6 The Landlord agrees that the Tenant may install and maintain a card
entry system at its own cost and expense to the Premises.
7. Notices
-------
7.1 The Tenant shall immediately give written notice to the Landlord of any
damage to or at the Premises and of other accidents or damage caused to
any Conducting Media, or any fittings or fixtures or installations
serving or within the Premises provided by the Landlord or of any
circumstances which are likely to be hazardous to or jeopardise the
safety of any person or property.
7.2 The Tenant shall immediately give written notice to the Landlord of any
notice received by the Tenant from any government or public or statutory
authority relating to or affecting the Premises of the Tenant's business
thereon.
<PAGE>
-18-
8. to permit the Landlord to inspect: The Tenant shall permit the Landlord
---------------------------------
and its servants or agents at all reasonable times and by prior
appointment to enter into, inspect and view the Premises and examine
their condition and also to take a schedule of fixtures, fittings and
installations at the Premises. Upon notice by the Landlord, the Tenant
shall repair and make good in proper and workmanlike manner all damage
or defects which the Tenant is liable for under this Lease within such
reasonable period as may be stipulated by the Landlord and to the
reasonable satisfaction of the Landlord. In case of default by the
Tenant the Landlord may, but is not obliged to exercise its rights and
powers under Clause 11.2.
9. to grant the Landlord right of access to the Premises
-----------------------------------------------------
9.1 Subject and without prejudice to paragraph 9.3, the Tenant shall permit
the Landlord, and the agents, workmen and others employed by the
Landlord or by any government or statutory authority or by the other
tenants or occupiers of the Building, with or without tools and
equipment, at all reasonable times, after giving to the Tenant prior
notice to enter upon the Premises:
(a) to effect or carry out any installation, maintenance, repairs,
alterations or additions or other works which the Landlord may
consider necessary or desirable in respect of any Conducting Media,
the Services or any part of the Premises of Buidling or the water,
electrical, air-conditioning and other facilities and services of
the Premises or Building; or
(b) for the purpose of exercising any of the powers and authorities of
the Landlord under this Lease; or
(c) to comply with any obligation of repair, maintenance or management
affecting the Premises or the Building; or
(d) to exhibit the Premises to prospective buyers or within ninety (90)
days of the expiration of the Term or Renewed Terms as applicable,
to tenants or any other party the Landlord authorises for the
purpose of any sale, lease or tenancy, or the valuation, of the
Premises, and during the period of ninety (90) days prior to the
expiration or earlier determination of the Term of this Lease,
unless the Tenant shall have duly exercised its option (if any) to
renew the Lease herein, the Landlord may post any "To Let" or "To
Lease" sign upon the Premises; or
(e) to ascertain the Tenant's compliance with the current security
measures on fire and safety regulations as prescribed from time to
time by the Landlord or the fire or other competent authority.
9.2 The Tenant's obligations under this Lease shall not be affected by any
of the works specified in this paragraph 9 and the Landlord shall not be
liable for any inconvenience, disturbance, loss of business or any other
nuisance arising from such works.
9.3 The Tenant shall permit the Landlord, and his respective agents and/or
workmen free access into the Premises at all times in any case that the
Landlord reasonably considers an emergency.
9.4 The Landlord shall be allowed to take any tools, equipment and materials
into and upon the Premises as may be required without the same
constituting an eviction of the Tenant in whole or in part.
<PAGE>
-19-
10. Yield up in repair at the end of the Term
-----------------------------------------
10.1 On the expiry or earlier determination of the Term (unless renewed
pursuant to the exercise of the option to renew, if any) the Tenant
shall at its cost and expense:
(a) quietly and peaceably yield up the Premises with the fixtures,
fittings and installations (other than that belonging to the
Tenant), unless required by the Landlord to be removed, in good
and substantial and tenantable repair and condition (fair wear and
tear excepted) together with all locks, fastenings and keys to
the Premises complete (irrespective of whether the same have been
supplied by the Landlord) and, if so required by the Landlord,
shall remove all letterings, marks, signs, internal partitions,
fixtures, fittings, equipment, furniture and installations, as
are specified by the Landlord, from the Premises and reinstate
the Premises and/or the Building and/or the Common Area, in
particular but not limited to the all air-conditioning
installations, sprinkler systems and other electrical
installations, ceiling, floors, walls, doors and windows, to
their original state and condition, fair wear and tear excepted;
and
(b) make good to the reasonable satisfaction of the Landlord all
damage to the Premises and the Building resulting from the
removal of the Tenant's belongings, reinstatement or redecoration
of the Premises.
10.2 If on the expiry or earlier determination of the Term, the Tenant has
failed to comply with the above provisions, the Landlord may effect
the same at the Tenant's cost and expense. The Tenant shall be deemed
to be holding over for the period during which the works are affected
by the Landlord. All costs and expenses reasonably incurred by the
Landlord, together with the additional Rent and Service Charge pursuant
to Clause 13 for the period of holding over by the Tenant, shall be
paid by the Tenant within fourteen (14) days of demand by the Landlord.
11. Loading And Electrical Installation
-----------------------------------
11. The Tenant shall not bring into the Building any machinery, equipment,
goods or object which, in the absolute opinion of the Landlord, will
or is likely to cause any structural or any other strain or damage to
any part of the Building. Without limiting the foregoing, the Tenant
shall not load or permit or suffer to be loaded on any part of the
floors of the Building or the Premises to a weight greater than
5 KN/m2 (or such other weight as may be prescribed by the Landlord as
being applicable to the Premises) without the prior written consent
of the Landlord and in any case shall comply with the directions and
requirements of the Landlord, such consent not to be unreasonably
withheld or delayed in respect of the load distribution and
positioning of all heavy equipment and articles in the Premises. The
Tenant shall make good and indemnify the Landlord in respect of any
damage to the Premises and Building caused by the bringing in of any
safe, items of machinery, plant, equipment or goods.
11.2 The Tenant shall not use any equipment or device which will cause an
overload on the electrical supply to the Premises, such supply as may
be prescribed by the Landlord or otherwise agreed in writing between
the Landlord and the Tenant or in any way overload any Conducting Media
in or serving the Premises or any part of the Building.
12. Rules and Regulations: The Tenant shall itself and shall procure the
---------------------
Tenant's Occupiers to observe and perform or cause to be observed and
performed the Rules and Regulations.
<PAGE>
-20-
13. Advertisements and signs
------------------------
13.1 The Tenant shall not place or display on the exterior of the Premises
or on the windows or inside the Premises so as to be visible from the
exterior of the Premises any name, writing, notice, sign, illuminated
sign, display of lights, placard, poster, sticker or advertisement
other than the name of the Tenant on the entrance doors of the Premises
in a style and manner approved by the Landlord, such approval not to be
unreasonably withheld.
13.2 If any name, writing, notice, sign, placard, poster, sticker or
advertisement shall be placed or displayed in breach of these
provisions, the Tenant shall on being directed to do so by the Landlord
remove such name, writing, notice, sign, placard, poster, sticker or
advertisement within a reasonable period and, in the event of failing
to do so, the Landlord may carry out such removal and the Tenant shall
pay to the Landlord on demand of the reasonable expenses of so doing.
13.3 The Landlord shall be entitled to determine the hours of illumination
of any signs or objects in accordance with the such hours as from time
to time reasonably prescribed by the Landlord.
14. Compliance with statutes etc: Except where such liability may be
----------------------------
expressed within the Landlord's covenants contained in this Lease, the
Tenant shall comply in all respects with the provisions of all statutes
and regulations for the time being in force and requirements of any
competent authority relating to the occupation and use by the Tenant of
the Premises and the conduct of the Tenant's business and anything done
in or upon the Premises by the Tenant and shall indemnify the Landlord
against all actions, proceedings, claims or demands which may be
brought or made by reason of such statutes, regulations or requirements
or any default in compliance with them.
15. Indemnity by Tenant: Tenant shall occupy, use and keep the Premises
-------------------
at the Tenant's sole risk and responsibility and shall indemnify and
keep indemnified the Landlord from and against:
(a) all claims, demands, write, summonses, actions, suits,
proceedings, judgements, orders, decrees, damages, costs, losses
and expenses of any nature whatsoever which the Landlord may
suffer or incur in connection with loss of life, personal injury
and/or damage to properly arising from or out of any occurrences
in, upon or at the Premises or the use of the Premises or any part
thereof by the Tenant or by any of the Tenant's Occupiers; and
(b) all loss and damage to the Premises and any other premises or any
other part of the Building and to all property therein and all
loss of life and personal injury caused directly or indirectly
by the Tenant or the Tenant's Occupiers and in particular but
without limiting the generality of the foregoing caused directly
or indirectly by the use or misuse, or waste or abuse, of water,
gas or electricity of faulty fittings or fixtures.
16. Assignment and subletting
-------------------------
16.1 Except as provided in paragraph 16.2 below, the Tenant shall not
transfer, assign, sublet, license, part with or share possession or
occupation of, or grant to third parties any rights over, the whole
or any part of the Premises without the prior written consent of the
Landlord, such consent not to be unreasonably withheld or delayed.
Provided always that the usage of the Premises by such third parties
is similar to the Permitted Use.
<PAGE>
-21-
16.2 The Landlord herby agrees that the Tenant may without the consent of
the Landlord assign or sub-let the Premises to any affiliate,
subsidiary or parent company or any entity resulting through a merger
of acquisition, save that prior written notice is given to the
Landlord of such assignment or sub-letting.
16.3. A consent granted by the Landlord under paragraph 16.1 shall not
constitute a waiver of the requirement for the Landlord's consent to
any subsequent transfer, assignment, subletting, licensing, grant of
possession, mortgage or encumbrance of this Lease or the Premises or
any part thereof.
17. Name of Tenant: The Tenant shall not without the prior written
--------------
consent of the Landlord use the name of the Landlord or the Building,
or any derivative name sounding similar thereto, as part of its trade
or business name or as a trade mark or service mark or for any
purpose.
<PAGE>
-22-
PART B
------
RULES AND REGULATIONS
---------------------
The Tenant covenants with the Landlord to observe and comply with the
following Rules and Regulations, as the same may be suspended, deleted,
expanded or otherwise amended and updated in any way from time to time:
1. Obnoxious or inflammable substances: The Tenant shall not erect nor
-----------------------------------
install any machinery or object which causes noise, fumes or vibration
which can be heard, smelt or felt outside the Premises and shall not
store in the Premises any patrol or other inflammable, explosive or
combustible substance.
2. Illegal or immoral purposes: The Tenant shall not use the Premises
---------------------------
for any noxious, noisy or offensive trade or business nor for gambling
nor betting nor any illegal or immoral act or purpose.
3. Sales, auction, exhibition or public meeting and Music: The Tenant
------------------------------------------------------
shall not hold any sales by auction nor any exhibition, public meeting
or public entertainment at the Premises. The Tenant shall not permit
any music to be played or performed in the Premises so that it can be
heard outside the Premises.
4. Pests and Livestock: The Tenant shall keep the Premises free of
-------------------
pests, rodents, vermin and shall not permit livestock of any kind to
be kept at the Premises and shall, if necessary, employ at the
Tenant's cost and expense, pest exterminators to treat and/or prevent
any such infestation.
5. Incense: The Tenant shall not burn any incense or joss sticks or
-------
permit any unusual or offensive odours to be produced upon or to
permeate from the Premises.
6. Residential Purpose and Cooking: The Tenant shall not allow any
-------------------------------
person to sleep in nor to cook at the Premises nor to use the
Premises for residential purposes.
7. Cleanliness: The Tenant shall keep the Premises and every part
-----------
thereof clean and hygienic and all pipes, drains, basins, sinks and
water-closets in the Premises clean and unblocked. The Tenant shall
employ the Landlord's contractor engaged for cleaning the Building to
carry out the cleaning work in and about the Premises provided that
such employment shall be at the sole expense, risk and responsibility
of the Tenant.
8. Infectious diseases: In the event of the Tenant becoming aware of or
-------------------
suspects any infectious illness set out in the Infectious Diseases
Act, Cap 137, occurring at the Premises the Tenant shall give notice
thereof to the Landlord and the proper authorities and at its cost
and expense shall fumigate and disinfect the Premises and shall comply
with the reasonable and lawful requirements in respect of the same.
9. Annoyance or nuisance: The Tenant shall not do anything which may be
---------------------
or may become a nuisance, annoyance, disturbance, an inconvenience or
may cause damage to the Landlord or any owners, tenants, licensees and
occupiers of, or any person lawfully in the Building.
10. Aerials, masts and antenna: The Tenant shall not erect display affix
--------------------------
or exhibit on or to any part of the Premises visible to the Common
Area any light, flag, notice, pole mast, wire radio or television
aerial or antenna or any loudspeaker or similar devices at the
Premises without the prior written consent of Landlord, such consent
not to be unreasonably withheld or delayed and provided always that
the Tenant shall at its own cost obtain all necessary approvals from
the competent authorities. Any consent given may at any time be
withdrawn as the Landlord may determine having regard to interferences
or possible interferences with the Landlord's telecommunication system
and to the interest of the Building as a whole and/or the
<PAGE>
-23-
interest of other tenant's occupiers and persons lawfully therein and
the removal of such aerials masts and antenna will be at the costs and
expense of the Tenant.
11. Fire and Alarm systems
----------------------
11.1 The reasonable Tenant shall permit the duly authorised agents or
employees of Landlord at any reasonable time by prior appointment to
service and maintain any fire or alarm systems of the Premises or the
Building
11.2 The Tenant shall not install nor maintain any fire or security system at
the Premises without the prior written approval of the Landlord or which
may interfere with any fire or alarm system installed or maintained by
the Landlord for the Premises or Building.
11.3 In the event that the relevant competent authorities require the Tenant
to install a sprinkler system, the Tenant shall apply for and obtain at
its own cost and expense all licences, approval and consents for the
installation and use of a dry sprinkler systems.
11.4 The Tenant shall install and maintain the sprinkler system (whether wet
or dry sprinkler system) at their own cost and expense. Provided always
that the Tenant shall waterproof the floor of the Premises with
reasonable drainage system to the satisfaction of the Landlord against
flooding or likewise to the adjoining floors or neighbours in the
Building.
12. Loading And Electrical And Other Installations
----------------------------------------------
12.1 The Tenant shall not load nor use the floors, walls, ceiling or
structure of the Premises except in compliance with such loading limits
prescribed by and other reasonable directions of the Landlord.
12.2 Before any machinery safe or furniture is moved into or out of the
Premises due notice must be given to the Landlord by the Tenant and the
moving of the same must be done under the supervision of a person
nominated by the Landlord and at a reasonable time approved by the
Landlord or its managing agent and at no other time.
12.3 The Tenant shall not overload the Conducting Media in or serving the
Premises and/or the Building. Without limiting the foregoing, the
Tenant shall not without the prior written consent of the Landlord, such
consent not to be unreasonably withheld or delayed install or use any
air-conditioning or cooling devices or any other electrical devices or
equipment in the Premises except those which are provided in the
Building or are shown on the plans approved by the Landlord. The Tenant
shall not do nor omit to do anything which obstructs or interferes with
or which imposes an additional loading on any ventilation, air-
conditioning or other plant or machinery serving or electrical supply to
the Premises and Building.
13. Avoidance of Landlord's Insurance Policies: The Tenant shall not do
------------------------------------------
anything whereby any policy of insurance on the Building, including or
in any way relating to the Premises, taken out by the Landlord may
become void or voidable or whereby the rate of premium thereon or on the
remainder of the Building may be increased. The Tenant shall within
fourteen (14) days of demand reimburse the Landlord of all sums paid by
way of incresed premiums and all expenses incurred by the Landlord as a
result of a breach of non-observance by the Tenant of this covenant. The
Landlord will on request of Tenant provide relevant details of the
policy to enable Tenant to comply with the provisions of this paragraph.
The Tenant shall provide one or more efficient fire extinguishers of a
type approved by the Landlord and to take such other precautions against
fire as may be deemed necessary by the Landlord or its insurers.
<PAGE>
-24-
14. Vendors: The Tenant shall not without the prior written consent of the
-------
Landlord permit the vendors of food or drink or the servants or agents
of such vendors to bring to the Premises or the Building food or drink
for consumption by the occupiers or others in the Premises save and
except in the case of the contractor who has been given the right by the
Landlord to provide a food and drink service for the occupiers of the
Building.
15. Building Exterior, Windows And Security
---------------------------------------
15.1 The Tenant shall ensure that the decor and design of the exterior of the
Premises and the interior of the Premises which is visible from the
outside (including all blinds, shades, awnings, window ventilators and
other fittings and fixtures) shall conform to the reasonable
requirements and standards of the Landlord as to design quality and
appearance. The Tenant shall not make any changes to such external and
internal parts without the prior written consent of the Landlord, such
consent not to be unreasonably withheld or delayed and shall remove any
object or fitting or fixture which in the absolute opinion of the
Landlord is incongruous with or may detract from the general appearance
of the Building.
15.2 The Tenant shall keed the windows of the Premises closed at all times
and shall take such steps as may be necessary to prevent air leakages
and excessive infiltration of air from outside the Building into the
Premises and shall not do any act or thing whereby the working of the
air circulating plant in the Building shall be affected.
15.3 The Tenant shall ensure that all doors of the Premises are safely and
properly locked and secured when the Premises are not occupied and shall
use its best endeavours to protect and keep the Premises and any
property contained therein from theft or robbery. The Landlord reserves
the right by its agent caretaker employees servants and workmen to enter
and fasten the same if left insecurely fastened. The Landlord will
provide keys for locks on doors or other openings of the Premises and
the Tenant will return to the Landlord on the determination of the
tenancy all such keys and shall not permit the same at any time to come
into the possession or control of any person other than the Tenant its
servants or agents and others duly authorised by the Tenant.
16. Obstruction
-----------
16.1 The Tenant shall not cover nor obstruct nor permit to be covered or
obstructed in any manner (other than in compliance with paragraph (15))
the windows, sky-lights or ventilating shafts or air inlets or outlets
which reflect or admit light or enable air to flow into or out of the
Premises or any part of the Building.
16.2 The Tenant shall not in any way obstruct nor permit the obstruction of
any Common Area and in particular shall nor permit any bicycles, motor
cycles or scooters, trolleys and other vehicles for transportation to be
parked nor permit the stocking or storage or littering of any goods or
garbage in any Common Area (other than at the proper lots and areas
designated by the Landlord for the parking of vehicles, the loading and
unloading of goods and the storage or disposal of garbage).
17. Use of conveniences: The Tenant shall not throw nor place nor permit
-------------------
to be thrown or placed in the lift shafts, water-closets or other
conveniences in the Building any rubbish or waste or any other
materials, and the Tenant shall on demand pay to the Landlord the
reasonable costs of repairing any damage or renewal of such rubbish or
waste or other materials to such lift shafts, water-closets or other
conveniences arising therefrom.
<PAGE>
-25-
18. Use of lift
-----------
18.1 The Tenant shall ensure that only small and light article such as
brief-cases, attache cases and handbags are placed into or transported
by the passenger lift.
18.2 The Tenant shall not have use of the hoist lift in the Building for
access to and/or from the Premises.
19. Carparks, Temporary parking and Loading bays
--------------------------------------------
19.1 The Tenant shall use the carparks in the Building lawfully and in
compliance with all rules and regulations prescribed in respect of the
same by the Landlord. Subject to the aforesaid, the Landlord will allot
one (1) season carpark lots ("the carpark lots") to the Tenant and the
Tenant shall pay carpark charges (including all taxes) as may be levied
or revised from time to time by the Landlord for the use of the
carparks, and such sums shall be payable as additional rent. PROVIDED
HOWEVER THAT if, at any time during the Term or a Renewed Term, the
Landlord may in its absolute discretion vary the number of the carpark
lots or withdraw the carpark lots or any of them if the Landlord ceases
to have the right or authority to allot such season carpark lots or if
such all allotment shall be in breach of any government or statutory or
Rules and Regulations or any contractual obligation of the Landlord or
if the Landlord requires the carpark lots for any purposes whatsoever.
19.2 The Tenant shall not load nor unload any objects (including but not
limited to furniture, merchandise, machinery and equipment) except at
the loading and unloading bays or areas designated by the Landlord and
so as not to cause congestion nor inconvenience to any other user and at
all times shall comply with the reasonable directions of the Landlord's
employees or agents in respect of the use of the same.
20. Soliciting: The Tenant shall not solicit business, display or
----------
distribute advertising material in the carparks or any Common Area or
use the same for business or commercial purposes except in such manner
and under such conditions as may be approved from time to time by the
Landlord.
21. Landlord's Housekeeping Rules
-----------------------------
21.1 The Tenant shall itself and shall procure the Tenant's Occupiers to
observe and perform or cause to be observed and performed the Landlord's
Housekeeping Rules annexed hereto as Annexure B or such other rules and
regulations as the Landlord may make or amend or change from time to
time.
21.2 The Tenant shall participate in the Housekeeping Committee established
under the Housekeeping Rules by providing that one (1) representative of
the Tenant shall sit on the Housekeeping Committee.
22. Fire Drills
-----------
The Tenant shall itself and shall procure the Tenant's Occupiers to
participate in any fire drills conducted by the Landlord or any other
competent authorities.
<PAGE>
-26-
SCHEDULE 4
----------
LANDLORD'S COVENANTS
--------------------
The Landlord hereby covenants with the Tenant as follows:
1. Quiet enjoyment: That the Tenant paying the Rent and Service Charge and
---------------
performing the Tenant's covenants reserved by and contained in this
Lease may lawfully and peaceably hold and enjoy the Promises throughout
the Term without any interruption by the Landlord or by any person
lawfully claiming through, under or in trust for the Landlord.
2. Property tax: To pay the property tax rate assessment impositions
------------
levied or charged upon the Premises and the Building except such as are
herein stated to be paid by the Tenant.
3. Management of the Building: Subject always to the provisions of Clause
--------------------------
10 to provide the following services (collectively called the
"Services");.
(a) to keep the roof, foundations, load bearing walls and beams and
all external walls of the Building and the Common Area, and the
Conducting Media in or serving the Common Area, in good and
tenantable condition and repair (fair wear and tear excepted);
(b) to insure and keep insured the Building (excluding fittings and
fixtures installed by the Tenant and any other parts of the
Premises which the Tenant is obliged in this Lease to insure)
against damaged by fire and such other risks as the Landlord may
deem fit; and
(c) to provide:-
(i) air-conditioning services during the Operating Hours Provided
Always that air-conditioning services may at the request of the
Tenant be extended by the Landlord (but without any obligation so
to do) beyond the Operating Hours and in such an event the Tenant
shall bear and pay to the Landlord on demand the costs expenses
for such extension;
(ii) passenger lift service during the operating hours;
(iii) electricity for the lighting of the passages, corridors,
staircases, escalators, lifts, and water closets of the Common
Area and water for the water closets during the Operating Hours;
and
(iv) security of the Building in such manner to be decided by the
Landlord for twenty (24 ) hours of each day (but not so as to
render the Landlord liable for any loss or damage sustained by the
Tenants or the Tenant's occupier through the neglect, default,
failure, negligence or misconduct of the security guard(s) and/or
security system as the case may be) and such additional security
facilities as may be required having regard to the Tenant's
Permitted Use of the Premises, such additional security facilities
shall be borne by the Tenant.
<PAGE>
-27-
ANNEXURE A
----------
PLAN OF THE PREMISES
--------------------
[FLOORPLAN]
SIXTH STOREY PLAN
CITY SOUTH EXCHANGE
-------------------
<PAGE>
-28-
ANNEXURE B
----------
LANDLORD'S HOUSEKEEPING RULES
-----------------------------
The Tenant and/or the Tenant's Occupiers, as the case may be, shall adhere,
abide and comply with the following:-
1. To carry out a joint fire safety inspection with the Landlord
immediately after the Tenant's occupation of the Premises.
2. To allow the Housekeeping Committee members of the Landlord to inspect
the Premises within office hours on reasonable notice being given to the
Tenant and to comply with all recommendations made.
3 Display the Identification Card prominently at all times when in the
Premises/Building.
4. Ensure that visitors of the Tenant are at all times accompanied by the
Tenant where such visitors are on or remain in the Premises/Building.
5. Ensure that visitors of the Tenants are met by the Tenant at the
Security Guard post.
6. Not to smoke within the exchange areas or such other areas of the
Building designated as "No Smoking" areas or where "No Smoking" sign is
displayed.
7. Not to bring in personal electrical or electronic appliances, equipment
or apparatus.
8. Not to gamble in any form whatsover whilst in the Premises at all times.
9. Ensure that only persons authorized by the Tenant be allowed to enter or
remain in the Premises/Building.
10. Not to remain in the Premises after normal office hours without
authorization from the Landlord.
11. Ensure that all vehicles (including bicycles) must be parked at
designated parking lots or at areas designated for parking.
12. Ensure that all contractors keep the Station Manager or Principal
Housekeeper of the Landlord informed by prior written notice at all
times of any work which such contractors would be carrying and/or are
being carried out.
13. Ensure that all Hot Works of the Tenant be carried out under the
supervision of a qualified competent supervisor in the relevant trade
when such Hot Works are being carried out or in progress.
14. Ensure that all workers of the Tenant be confined or restricted to only
their designated work place whilst on the Premises.
15. Not to sleep on or bring food to eat at the Premises.
16. Ensure that all rubbish be cleared promptly and on a daily basis.
17. Not to touch, handle or in any way deal with the Landlord's
telecommunication equipment and cables found on the Premises or Building
whether in operation or otherwise.
<PAGE>
-29-
IN WITNESS WHEREOF the parties have executed into this Lease the day and year
first above written.
Landlord
- --------
Signed by for and on behalf of )
SINGAPORE TELECOMUNICATIONS )
LIMITED in the presence of:- )
Tenant
- ------
Signed by for and on behalf of )
FOUR MEDIA COMPANY ASIA PTE LTD ) /s/ Robert Walston
in the presence of:- )
/s/ Karen Zortman
<PAGE>
DATED THIS________________DAY OF_________________199___
Between
SINGAPORE TELECOMMUNICATIONS LIMITED
... Landlord
And
FOUR MEDIA COMPANY ASIA PTE LTD
... Tenant
..............................................
L E A S E
(STUDIO)
..............................................
HELEN YEO & PARTNERS
ADVOCATES & SOLICITORS
11 COLLYER QUAY
#12-01 THE ARCADE
SINGAPORE 0104
FCL/ALSY/CITYSOUTH
<PAGE>
C O N T E N T S
---------------
CLAUSE HEADING PAGE
- ------ ------- ----
1. INTERPRETATION
2. THE DEMISE
3. TERM OF THE LEASE
4. RENT AND SERVICE CHARGE
4.1 Rent
4.2 Service Charge
4.3 Payment
5. DEPOSIT
6. MODE OF PAYMENT
7. PERMITTED USE OF THE PREMISES
8. FITTING OUT AND RENOVATION
9. TENANT'S COVENANTS
10. LANDLORD'S COVENANTS
11. LANDLORD NOT LIABLE
12. TERMINATION
12.1 Proviso for re-entry
12.2 Landlord's rights to rectify breach etc
13. DESTRUCTION
14. HOLDING OVER
15. OPTION TO RENEW
16. TRANSFER TO MANAGEMENT CORPORATION
17. MISCELLANEOUS
17.1 Notices
17.2 Landlord's consent
17.3 Costs and expenses
17.4 No waiver
17.5 Title
17.6 No lodging of Caveat, Registration or Subdivision
17.7 No representations
17.8 Severance
17.9 Governing law and submission to jurisdiction
<PAGE>
ii.
CLAUSE HEADING PAGE
- ------ ------- ----
SCHEDULE 1
- RIGHTS GRANTED TO TENANT
SCHEDULE 2
- RIGHTS RESERVED BY THE LANDLORD
1. Easements
2. Power for Landlord to deal with adjoining
property and the Common Area
3. Access to and Main Doors of the Building
4. Name and Address of Building
5. Rules and Regulations
6. Landlord's rights to interest for late
payments
7. Removal of property after expiry or earlier
determination of tenancy
8. Landlord's right to assign
SCHEDULE 3
- COST OF SERVICES
SCHEDULE 4
- PART A
- TENANT'S COVENANTS
1. Rent and Service Charge
2. Utilities and Telecommunication Services
3. Property tax and goods and services tax
4. Insurance
5. Repair
6. Alterations
7. Notices
8. To permit the Landlord to inspect
9. To grant the Landlord right of access to
the Premises
10. Yield up in repair at the end of the Term
11. Loading And Electrical Installation
12. Rules and Regulations
13. Advertisements and signs
14. Compliance with statutes etc
15. Indemnity by Tenant
16. Assignment and subletting
17. Name of Tenant
<PAGE>
iii.
CLAUSE HEADING PAGE
- ------ ------- ----
- PART B
- RULES AND REGULATIONS OF THE BUILDING
1. Obnoxious or inflammable substances
2. Illegal or immoral purpose
3. Sales, auction, exhibition or public
meeting and Music
4. Pest And Livestock
5. Incense
6. Residential Purpose And Cooking
7. Cleanliness
8. Infectious diseases
9. Annoyance or nuisance
10. Aerials, masts and antenna
11. Fire And Alarm systems
12. Loading And Electrical And Other Installations
13. Avoidance of Landlord's insurance policies
14. Vendors
15. Building Exterior, Windows And Security
16. Obstruction
17. Use of convenience
18. Use of lift
19. Carparks, Temporary parking and Loading bays
20. Soliciting
21. Landlord's Housekeeping Rules
22. Fire Drills
SCHEDULE 5
- LANDLORD'S COVENANTS
1. Quiet enjoyment
2. Property tax
3. Management of the Building
ANNEXURE A
- PLAN OF THE PREMISES
ANNEXURE B
- LANDLORD'S HOUSEKEEPING RULES
<PAGE>
THIS LEASE is made the day of 1994 Between:-
(1) SINGAPORE TELECOMUNICATIONS LIMITED, a company incorporated in
Singapore and having its registered office at 31 Exeter Road, Comcentre,
Singapore 0923 (the "Landlord"); and
(2) FOUR MEDIA COMPANY ASIA PTE LTD, a company incorporated in Singapore and
having its registered office at 30 Choon Guan Street, Singapore.
WHEREBY IT IS AGREED as follows:-
1. INTERPRETATION
--------------
1.1 In this Lease the following words and expressions shall, unless the
context otherwise requires, have the following meanings:-
"Air-Conditioning Plant" means and shall include a chiller, two (2)
pumps, cooling tower, two (2) air-handling units of 32 tons each and
two (2) air-handling units of 50 tons each;
"Building" means the building situate at 30 Choon Guan Street and known
as City South Exchange;
"Common Area" means all parts of and all facilities and fixtures and
fittings in the Building used or intended for or capable of being used
or enjoyed in common by all the occupiers of the Building including,
without limitation, (i) all passageways, staircases, lifts and
escalators (if any); (ii) all refuse chutes, drains, sewers, pipes,
wires, cables, and ducts; and (iii) all driveways, carparks and open
spaces except for all toilet and shower facilities on the 4th storey of
the Building;
"Conducting Media" means drains, sewers, conduits, flues, gutters,
gullies, channels, ducts, shafts, watercourses, fire sprinklers, pipes,
cables, cable racks, wires and mains or any of them;
"Deposit" means the sum deposited by the Tenant with the Landlord
pursuant to Clause 5;
"Landlord" includes its successors, assigns and all persons entitled to
the reversion immediately expectant upon the determination of this
Lease;
"Lease" includes any instruments supplemental to this Lease and any
amendments or variations to this Lease agreed in writing between the
Landlord and Tenant;
"Management Corporation" means a management corporation of the Building
established under the Land Titles (Strata) Act, Chapter 158;
"month" means a calendar month;
"Operating Hours" means twenty-four (24) hours of each day seven (7)
days each week.
"Payment Date" means the date as defined in Clause 4.3;
"Permitted Use" means the use of the Premises as a studio and in
particular for and not restricted to the provision of services for
audio production, audio post production, video production, video post
production, graphics, compositing, network presentation and network
origination, standards conversion, duplication and other related
services that the Tenant may provide to the broadcast and entertainment
production industry, subject to the written approval of the competant
authorities and/or the Landlord, such approval not to be unreasonably
withheld;
<PAGE>
-2-
"Premises" means the premises on the 4th floor of the Building
containing a floor area of 17,513 square feet, which, for identification
only, is delineated in red in the plan annexed in this Lease as Annexure
A;
"Rent" means the rent referred to in clause 4.1;
"Rules and Regulations" means the rules and regulations of the Building
and any part thereof as prescribed by the Landlord, as set out in Part B
of Schedule 4 and which may be suspended, deleted, expanded or otherwise
amended or updated in any way from time to time;
"Services" means the services to be provided by the Landlord as defined
in paragraph 3 of Schedule 5;
"Tenant" includes, if the Tenant is an individual, his personal
representatives and permitted assigns, or if the Tenant is a company,
its successors in title and permitted assigns;
"Tenant's Occupiers" means the Tenant's servants, agents, independent
contractors, licensees, sub-tenants (if consented to by the Landlord),
invitees, customers and any person claiming rights to use, enjoy, visit
or be at the Premises expressly or by implication with the Tenant's
consent or authority;
"Term" means the term granted by this Lease pursuant to Clause 3; and
"year" means a calendar year.
1.2 In any case where the Tenant is placed under a restriction by reason of
the covenants and conditions contained in this Lease, the restriction
shall be deemed to include the obligation on the Tenant not to permit or
allow the infringement of the restriction by any of the Tenant's
Occupiers.
1.3 Where the context so admits, words in this Lease importing the singular
meaning shall include the plural meaning and vice versa, words for the
masculine gender shall include the feminine and neuter gender and vice
versa and words denoting natural persons shall include corporation and
firms and all such words shall be construed interchangeably in that
manner.
1.4 References in this Lease to any statutes or statutory instruments shall
include and refer to any statutes or statutory instrument amending,
consolidating or replacing them respectively from time to time and for
the time being in force.
2. THE DEMISE
----------
In consideration of the Rent and Service Charge and the covenants
reserved by and contained in this Lease, the Landlord HEREBY DEMISES to
the Tenant ALL the Premises TOGETHER WITH the rights set out in Schedule
1 but EXCEPTING AND RESERVING to the Landlord the rights as stated in
Schedule 2, TO HOLD the Premises unto the Tenant for the Term, YIELDING
AND PAYING to the Landlord during the Term, the Rent and Service Charge
in accordance with Clause 4.
3. TERM OF THE LEASE
-----------------
The Term of the Lease is two (2) years commencing from the 15th day of
December 1994 and expiring on the 14th day December 1996.
<PAGE>
-3-
4. RENT AND SERVICE CHARGE
-----------------------
4.1 Rent
----
The Rent shall be calculated at the monthly rate of $3.30 per square
foot of the floor area of the Premises. The monthly Rent is Dollars
Fifty-Seven Thousand, Seven Hundred and Ninety-Two and Cents Ninety
($57,792.90).
4.2 Service Charge
--------------
4.2.1 The Service Charge is defined in Schedule 3 ("Service Charge").
4.2.2 In the event of any increase in the costs expenses and outgoings of the
Landlord for providing the services described in Schedule 3, the
Landlord shall be entitled to increase the Service Charge by an amount
equal to so much of the extra costs, expenses and outgoings as is
attributable to the Premises. Any increase in the Service Charge shall
be payable from the date specified in the Landlord's notice. In the
event that the Tenant disagrees with such increase by written notice to
the Landlord, the audited account from the Landlord's appointed auditor
(the cost and expense of the auditor shall be borne by the Tenant) shall
be final, conclusive and binding on the Tenant, both as to the Tenant's
liability for such increase and the amount thereof.
4.2.3 For the avoidance of doubt, upon termination of this Lease for any
reason whatsoever, the Tenant shall have no claim for any refund of the
Service Charge paid by it.
4.3 Payment
-------
The Rent and Service Charge shall be payable in advance on the first day
of each month (each a "Payment Date"), without any deduction or
withholding whatsoever. On or before the date of commencement of the
Term, the Tenant shall pay to the Landlord the pro-rated Rent and
Service Charge calculated from the date of commencement of the Term up
to and including the day immediately preceding the next Payment Date,
and thereafter the Rent and Service Charge shall be paid on each
succeeding Payment Date.
5. DEPOSIT
-------
5.1 The Tenant shall, on or before the execution of this Lease, deposit with
the Landlord a sum equivalent to three (3) months Rent and Service
Charge by cash.
The Deposit shall be maintained throughout the Term at an amount
equivalent to the prevailing amount of three (3) months' Rent and
Service Charge. The Tenant shall, within fourteen (14) days of demand
by the Landlord, pay such sum to the Landlord as may be necessary to
ensure that the Deposit is maintained at such equivalent amount.
5.2 The Deposit shall be held by the Landlord as security for the due
performance and observance by the Tenant of all the covenants and
provisions contained in this Lease and as security for any claim by the
Landlord at any time against the Tenant in relation to any matter in
connection with the Premises whether the Lease is subsisting or not, and
if the Tenant shall Commit a breach of any of the provisions of this
Lease, the Landlord shall be entitled but not obliged to apply the
Deposit or any part thereof in or towards payment of moneys outstanding
or making good any breach by the Tenant or to deduct from the Deposit
such amount as would reasonably compensate the Landlord for the loss or
expense to the Landlord occasioned by such breach but without prejudice
to any other right or remedy which the Landlord may be entitled to. No
part of the Deposit shall be set off by the Tenant against any Rent,
Service Charge or other sums owing to the Landlord.
<PAGE>
-4-
5.3 Subject to any proper deductions to be made by the Landlord pursuant to
the provisions of this Lease, the Deposit shall be repaid to the Tenant
without interest within one (1) month from the expiration or sooner
termination of the Term.
6. MODE OF PAYMENT
---------------
The Tenant shall pay the Rent, Service Charge and all other sums payable
to the Landlord under this Lease, including the Deposit, in such manner
as may be notified in writing by the Landlord from time to time.
7. PERMITTED USE OF THE PREMISES
-----------------------------
The Tenant will use the Premises solely for the Permitted Use. The
Tenant shall obtain and comply with all applicable licences, permit and
approvals to enable the Tenant to carry on its business in the Premises
in accordance with the Permitted Use.
8. FITTING OUT AND RENOVATION
--------------------------
8.1 The Landlord shall grant to the Tenant a licence to the Premises prior
to the commencement of this Lease for the Tenant to carry out and
complete the Tenant's fitting-out works as hereinafter defined.
8.2 The Tenant shall at its own cost and expense carry out all fitting out
and renovation works relating to the Premises (including but not limited
to partitioning, ceilings, fittings, fixtures, carpentry, lighting,
flooring and waterproofing thereof, interior design and decor as may be
necessary to fit out the Premises completely for the Tenant's Permitted
Use ("Fitting-Out Works").
8.3 Prior to the commencement of the Fitting-Out Works, the Tenant shall at
its own cost and expense, submit to the Landlord for approval all plans,
layouts, designs, drawings and specifications in respect of the Fitting-
Out Works, such approval not to be unreasonably withheld or delayed.
8.4 The Tenant shall at its own cost and expense apply for and obtain all
permissions, consents, approvals, licences, certificates and permits
from any governmental and statutory or other competent authorities in
legally effectual form as may be necessary lawfully for the Tenant to
commence carry out and complete the Fitting-Out Works, to use the
Premises for the Permitted Use and to install the Tenant's fixtures,
fittings, equipment and other installations ("Requisite Consents"). The
Landlord shall cooperate with the Tenant in obtaining the Requisite
Consents.
8.5 Prior to the commencement of the Fitting-Out Works, the Tenant shall
effect and maintain at the Tenant's cost and expense, comprehensive
all risks insurance policies and public liability policies, covering the
period from the date of commencement of the Fitting-Out Works to the
date of completion of the same for insurable amounts acceptable to the
Landlord, with an insurance company approved by the Landlord, such
approval not to be unreasonably withheld or delayed, naming the Landlord
as a co-insured party. Copies of such policies shall be furnished to the
Landlord prior to the commencement of the Fitting-Out Works.
8.6 The Tenant shall permit the Landlord, its architects, engineers,
servants or agents at all reasonable times to enter into and inspect and
view the Premises to ascertain if the Fitting-Out Works are or have been
carried out in accordance with the
<PAGE>
-5-
provisions of this Clause, which the Landlord may but shall not be bound
to do. If any breach of the provisions of this Clause shall be found
upon such inspection, the Tenant shall upon notice by the Landlord take
all necessary steps for the rectification of such breach.
8.7 The Tenant shall keep the Landlord indemnified against:-
(a) the breach, non-observance or non-performance of any Requisite
Consents in relation to the Fitting-Out Works; and
(b) any claims, demands or proceedings brought by any governmental or
statutory or other competent authority or and adjoining owner,
tenant, occupier or member of the public arising out or incidental
to the execution of the Fitting-Out Works.
8.8 Any delay in or failure to proceed with carrying out or completing the
Fitting-Out Works or any delay in obtaining or failure to obtain any
Requisite Consents shall not be a ground for postponing the commencement
of the Term or payment of the Rent and Service Charge and other moneys
reserved by this Lease, or relieve in any way the Tenant from the
performance and observance of the obligations, covenants, conditions and
provisions on the Tenant's part to be performed and observed.
8.9 The Landlord shall use its best efforts to make the building facilities
available to the Tenant, its servants, agent, and contractors during the
period for the Fitting-Out Works.
9. TENANT'S COVENANTS
------------------
The Tenant hereby covenants with the Landlord that it will perform and
observe:-
(a) the Tenant's obligations and undertakings as set out in Part A of
Schedule 4; and
(b) the Rules and Regulations.
10. LANDLORD'S COVENANTS
--------------------
The Landlord hereby covenants with the Tenant that it will perform and
observe the Landlord's obligations and undertakings as set out in
Schedule 5.
11. LANDLORD NOT LIABLE
-------------------
Notwithstanding anything herein contained the Landlord shall not be
liable to the Tenant or to any of the Tenant's Occupiers for, nor shall
the Tenant have any claim against the Landlord, in respect of:-
(a) any damage, injury or loss or any consequential loss (including
loss of business, loss of profit, product liability, indirect and
special damage) arising from or resulting from any interruption in
or failure of any of the Services by reason of repair or
maintenance work or damage or destruction or mechanical or other
defect or breakdown or short circuit of electrical wiring,
explosion, falling plaster, escape of water, or the leakage or
defect of the Conducting Media in, or the structure of, the
Premises, the Building or any part thereof or by reason of any
circumstances beyond the Landlord's control (including but not
limited to fire, flood, act of God, riot, civil commotion, curfew,
emergency, labour disputes or shortage of manpower, fuel,
materials, electricity or water);
<PAGE>
-6-
(b) any damage, injury or loss or any consequential loss (including
loss of business, loss of profit, product liability, indirect and
special damage) arising from or resulting from short circuit of
electrical wiring, explosion, falling plaster, escape of water, or
the leakage or defect of the Conducting Media in, or the structure
of, the Premises, the Building or any part thereof;
(c) any loss of life, injury or damage to or loss of any property or
any consequential loss (including loss of business, loss of profit,
product liability, indirect and special damage) arising from or due
to any accident or circumstances whatsoever occurring at the
Premises, the Building or any part thereof;
(d) any act, omission, default, misconduct or negligence of any porter,
attendant or other servant or employee or agent of the Landlord in
or about the performance or purported performance of any duty
relating to the provision of Services or any of them or any other
duties whatsoever to be performed under this Lease;
(e) any damage, injury or loss or any consequential loss arising from
or caused by other tenants or any independent contractor or any
persons, or from any occurrence at any other premises, within the
Premises, the Building or any part thereof;
(f) any diminution or obstruction of light, air or view by any building
or structures that may be erected within or adjacent to the
Building or any part thereof; and
(g) any damage, injury or loss or any consequential loss arising from
or by reason of lack of security or safekeeping of the Premises,
Building or any part thereof or any contents therein.
12. TERMINATION
-----------
12.1 Proviso for re-entry: If and whenever during the Term:-
--------------------
(a) all or any part of the Rent or Service Charge shall be unpaid for
fourteen (14) days after becoming due (whether or not any formal
demand has been made); or
(b) the Tenant shall at any time fail or neglect to perform or observe
any of its obligations, covenants or undertakings in this Lease
other than a failure under Sub-Clause (a) above, and such default
if capable of being remedied is not remedied to the reasonable
satisfaction of the Landlord within fourteen (14) days after the
Landlord has given notice thereof to the Tenant; or
(c) the Tenant becomes insolvent, or (in the Landlord's reasonable
opinion) is unable to pay its debts, or stops or suspends, or
threatens to stop or suspend, payment of all or a material part of
its debts, or proposes or makes a general assignment or an
arrangement or composition with or for the benefit of its creditors
or a moratorium is agreed or declared in respect of or affecting
all or a material part of its indebtedness; or any step or petition
is taken by any person including the Tenant or its members for the
winding up or dissolution or bankruptcy of the Tenant or for the
Tenant to be placed under the judicial management of a judicial
manager; or a receiver and/or manager is appointed in respect of
any properties or assets of the Tenant or distress or execution is
levied or enforced upon or sued against any part of the properties
or assets of the Tenant, or if events or circumstances analogous to
any of the foregoing events occurs in relation to the Tenant under
the laws of any jurisdiction;
<PAGE>
-7-
then the Landlord or any person authorised by the Landlord may at any
time thereafter re-enter upon the Premises or any part thereof in the
name of the whole, whereupon this Lease shall forthwith absolutely
cease and determine, but without prejudice to the right of action, and
any other right and remedy, of the Landlord in respect of any antecedent
breach by the Tenant of this Lease (including the breach giving rise to
the re-entry).
12.2 Landlord's rights to rectify breach etc
---------------------------------------
12.2.1 The Landlord may, in the event of any default described in Clause
12.1(b) above, at its absolute discretion and option either in addition
to or in lieu of termination under Clause 12.1 above, be entitled but
shall not at any time or in any way be obliged to do the following:-
(a) to perform the said obligation, covenant or undertaking on behalf
of the Tenant and/or to engage architects, contractors, workmen
and/or agents and/or enter and remain at the whole or any of the
part of the Premises, with or without such architects, contractors,
workmen and agents for such purpose; and
(b) to demand payment of all reasonable costs and expenses paid or
incurred by the Landlord resulting from the Tenant's default and/or
pursuant to Sub-Clause (a) above and any sum so demanded shall be
payable by the Tenant to the Landlord within fourteen (14) days of
the demand. A certificate from the Landlord as to the amount of
cost and expenses incurred shall in the absence of manifest error
be final, conclusive and binding on the Tenant.
12.2.2 Anything done by the Landlord pursuant to the provisions of this Clause
shall be without prejudice to any other right, remedy and power of the
Landlord in this Lease and shall not constitute a waiver or release of
the Tenant from its obligations, covenants and undertakings.
13. DESTRUCTION
-----------
13.1 Subject to Clause 13.2, if the Premises or any part thereof shall at any
time be damaged or destroyed so as to render the Premises unfit for
occupation and use (except where such damage or destruction has been
caused by, or payment of any insurance policy monies withheld in whole
or in part in consequences of any act, omission, negligence or default
of the Tenant or the Tenant's Occupiers) the Rent and Service Charge
reserved by this Lease or a fair and just proportion thereof according
to the nature and extent of the damage sustained shall be suspended
until the Premises shall again be rendered fit for occupation and use.
13.2 Notwithstanding the provisions of Clause 13.1:-
(a) after the occurrence of such damage or destruction the Landlord
may at any time and at its absolute discretion terminate this
Lease by serving one (1) month's written notice on the Tenant; or
(b) if the Premises shall continue to be unfit for occupation for a
period of more than one hundred and twenty (120) days, either the
Landlord or the Tenant shall be at liberty by giving one (1)
month's written notice to the other to terminate this Lease, and
upon a notice under either Sub-
<PAGE>
-8-
Clause (a) or (b) above being given, this Lease shall terminate and
the Tenant shall (if still in occupation) vacate the Premises upon
the expiry of such notice without compensation from the Landlord,
but without prejudice however to any right or remedy that either
party may have against the other for any antecedent breach of this
Lease.
14. HOLDING OVER
------------
If, without any express written agreement between the Landlord and the
Tenant, the Tenant fails to deliver vacant possession of, or continues
to occupy, the Premises after the expiration or earlier determination of
the Term, the Tenant shall be deemed to be holding over and, without
prejudice to any right or remedy of the Landlord, shall pay to the
Landlord for every day of such holding over double the amount of Rent or
the prevailing market rent (whichever is higher) and double the amount
of the Service Charge and there shall be no renewal of this Lease by
operation of law or pursuant to the provisions of this Lease. During
the period of any such holding over all other provisions of this Lease
shall be and remain in affect. The provisions herein shall not be
construed as the Landlord's consent for the Tenant to hold over after
the expiration or ealier determination of the Term.
15. OPTION TO RENEW
---------------
The Tenant shall be entitled to two (2) options to renew the lease
hereunder on and subject to the terms and conditions below:-
(a) Each renewal period shall be called a Renewed Term. The first
option to renew will be for a Renewed Term of three (3) years
("First Renewed Term") commencing on the day after the expiry of
the Term, and the second option to renew will be for a Renewed
Term of two (2) years less one day ("Second Renewed Term")
commencing on the second day after the expiry of the First Renewed
Term.
(b) The Tenant shall have given written notice ("Tenant's Renewal
Notice") to the Landlord of its intention to exercise its option to
renew. The Tenant's Renewal Notice shall be given, in the case of
the first option to renew, not later than three (3) months prior to
the expiration of the Term and, in the case of the second option to
renew, not later than three (3) months prior to the expiration of
the First Renewed Term.
(c) The revised Rent payable during the First Renewed Term shall be
calculated by the formula of
URA downtown core office rental
index for fourth quarter 1996
$3.30 per sq ft X ---------------------------------
URA downtown core office rental
index for fourth quarter 1994
and the revised Rent payable during the Second Renewed Term shall
be calculated based on the formula of
URA downtown core office rental
index for fourth quarter 1999
$3.30 per sq ft X ---------------------------------
URA downtown core office rental
index for fourth quarter 1994
<PAGE>
-9-
provided that if, within fourteen (14) days of receipt of the
Landlord's final offer of the revised Rent, the Tenant shall not
have confirmed in writing its acceptance of the Landlord's offer,
the option hereby granted shall be deemed to have lapsed and of
no effect.
(d) In the event that the particular category of URA office rental
index or by whatevername referred or called, is no longer in
production or publication by URA, then its equivalent core or
category will be used. In the further event, that this latter
core or category is no longer in production or publication, then
the equivalent office rental index from M/s Richard Ellis (Pte)
Ltd will be applicable, failing which the equivalent office rent
index from M/s Knight Frank Cheong Hock Chye and Baillieu shall
be applicable.
(e) At the time of service of the Tenant's Renewal Notice and also at
the time of expiry of the Term or the First Renewed Term (as the
case may be) there shall not be any existing breach or
non-observance of any covenants and conditions on the part of the
Tenant to be observed or performed under the lease then in force in
respect of the Premises.
(f) Each renewal shall be in respect of the whole of the Premises and
not part or parts thereof unless otherwise agreed by the Landlord
in writing.
(g) The new lease agreement for each Renewed Term shall be prepared by
the Landlord at the Tenant's expense and shall contain similar
covenants and provisions as herein contained and shall take into
account the following:-
(i) the revised Rent and revised Service Charge as agreed in
accordance with the foregoing provisions; and
(ii) in the case of the lease for the First Renewed Term, there shall
be provision for only one option to renew and, in the case of
the lease for the Second Renewed Term, there shall be no
provision for any further renewal of the lease.
(h) The Tenant shall execute and return to the Landlord or the
Landlord's solicitors the engrossed new lease agreement (in
duplicate) for that Renewed Term together with any additional
Deposit, stamp fee and any other fees and expenses payable under
the new lease agreement not later than two (2) weeks after receipt
of the same from the Landlord's solicitors.
(i) The option or options, as the case may be, granted under this
Clause shall lapse and be of no effect in the event of the Tenant's
failure to comply with this clause and the Landlord shall be free
of all obligations whatsoever to grant to the Tenant any further
term.
16. TRANSFER TO MANAGEMENT CORPORATION
----------------------------------
In the event that the Building is subdivided and a Management
Corporation is apppointed pursuant thereto, then after the transfer of
the management and operation of the Building to the Management
Corporation, (i) the provision of the Services shall cease to be the
obligation of the Landlord and (ii) the Management Corporation shall be
entitled to exercise and enforce the rights and powers of the Landlord,
and to enjoy the benefit of the obligations, covenants and undertakings
to be performed
<PAGE>
-10-
and observed by the Tenant, under this Lease which in any way relate to
the Building and/or the management and operation of the same. All
references to the Landlord shall refer to the Landlord and/or the
Management Corporation, as the context may require.
17. MISCELLANEOUS
-------------
17.1 Notices: All communications required to be made under this Lease shall
-------
be made in writing and shall be sent to the receiving party at the
facsimile number or address and marked for the attention of the person
(if any), from time to time designated by that party to the other party
for the purpose of this Lease. The initial facsimile number, address
and person (if any) so designated by each party are:-
LANDLORD TENANT
-------- ------
Facsimile No: 447 4552 Facsimile No: 220 5197
Attention: Ms Tok Hwee Eng Attention: Mr Dennis Ang Bak Hwee
Any party may change its facsimile number and/or address and/or person
designated for the purposes hereof by written notice to the other. Any
communication from one party to the other party shall be deemed to be
received:-
(a) if delivered by hand, on the date of receipt;
(b) if sent by facsimile, at the time of confirmation of transmission
such communication to be followed by post to the address
designated; and
(c) if sent in Singapore to an address in Singapore by prepaid
registered mail, on the date two (2) days after posting;
whichever shall first occur and regardless whether such notice is
returned undelivered.
17.2 Landlord's consent: In any case where the Landlord's consent or
------------------
approval is required, such consent or approval shall be obtained in
writing before the act or event to which it applies is carried out or
occurs. Such consent or approval may be withheld or given at the
Landlord's absolute discretion or given subject to such terms and
conditions as the Landlord acting reasonably deems fit.
17.3 Costs and expenses: The Tenant agrees to pay the Landlord on a full
------------------
indemnity basis:-
(a) all the Landlord's legal costs and fees, the stamp duty and all
reasonable disbursements incurred in connection with the
preparation and completion of this Lease (in duplicate);
(b) all the Landlord's reasonable costs and expenses (including the
reasonable costs of the Landlord's solicitors, architect, engineer
or surveyor where applicable) incurred in preserving or enforcing
any of the Landlord's rights under this Lease and incurred in
connection with every application made by the Tenant for any
consent or approval required under this Lease whether or not such
consent or approval shall be granted or given.
<PAGE>
-11-
17.4 No waiver: Knowledge or acquiescence by the Landlord of any breach by
---------
the Tenant shall not operate or be deemed to operate as a waiver of any
of the Landlord's rights in respect of such breach. Any consent or
waiver of the Landlord shall be effective only if given in writing and
shall not be construed as a consent to or waiver of any other breach of
the same or any other covenant, condition or obligation and shall not
prejudice in any way the rights, powers and remedies of the Landlord.
17.5 Title: The Landlord shall not be required to deduce its title to the
-----
Premises nor to reply to any requisitions on the title.
17.6 No Lodging of Caveat, Registration or Subdivision: The Tenant shall
-------------------------------------------------
not, at any time before, during or after the Term, register this Lease
nor lodge a caveat in respect of this Lease (or in respect of any
option to renew pursuant to this Lease) at the Registry of Land Titles
and Deeds, Singapore, nor shall the Tenant be entitled to require the
Landlord to subdivide the Building or any part thereof or to do any act
or thing which could result in the Landlord being required to subdivide
the Building or any part thereof.
17.7. No representations: The Landlord shall not be bound by any statements,
-----------------
representations or promises with respect to the Building, or in respect
of the Premises, except as expressly set forth in this Lease. The
agreement between the Landlord and the Tenant is set forth herein and
shall in no way be modified by any statements, representations or
promises made prior to the signing of this Lease. The Landlord does not
expressly or impliedly warrant that the Premises are or will remain
suitable or adequate for all or any of the purposes of the Tenant and
all warranties (if any) as to suitability and adequacy of the Premises
implied by law are hereby expressly negatived.
17.8 Severance: The illegality, invalidity or unenforceability of any
---------
provision of this Lease under the law of any jurisdiction shall not
affect its legality validity or enforceability under the law of any
other jurisdiction nor the legality, validity or enforceability of any
other provision.
17.9 Governing law and submission to jurisdiction: This Lease shall be
--------------------------------------------
construed and governed by the laws of Singapore and the Tenant hereby
irrevocably submit to the exclusive jurisdiction of the courts of
Singapore with the Landlord reserving to itself the right to proceed
under this Lease in the courts of any other country claiming or having
jurisdiction in respect thereof. The service of any writ of summons or
any legal process or arbitration notice in respect of any legal or
arbitration or other action or proceedings under or in connection with
this Lease may be effected on the Tenant by serving a copy of the writ
of summons and statement of claim or other originating or legal process
on the Tenant's registered address (or such other agent and address in
Singapore as may be notified in writing by the Tenant to the Landlord).
The Tenant hereby agrees that such service shall be deemed good and
valid service and to have been served personally on the Tenant in
accordance with the requirements of law.
<PAGE>
-12-
SCHEDULE 1
----------
RIGHTS GRANTED TO TENANT
------------------------
TOGETHER WITH (but to the exclusion of all other liberties, easements, rights
or advantages) the rights during Operating Hours for the Tenant and others duly
authorized by the Tenant:
1. of ingress to and egress from the Premises in over and along all the
usual entrances, landings, lifts, lobbies and corridors leading thereto
and otherwise to use the Common Area for all proper purposes in
connection with the use and enjoyment of the Premises;
2. to use such toilet facilities in the Building as shall be designated
from time to time in writing by the Landlord; and
3. to enjoy the benefit of the air-conditioning system installed in the
Building (subject to the obligation of the Tenant to connect the same
to the air-conditioning distributing ducts installed or to be installed
by the Tenant in the Premises),
in common with the Landlord and all others so authorised by the Landlord or
other occupiers of the Building and all other persons entitled thereto, and all
such rights being only so far as is necessary for the use and enjoyment of the
Premises for the Permitted Use and as the Landlord can lawfully grant.
<PAGE>
-13-
SCHEDULE 2
----------
RIGHTS RESERVED BY THE LANDLORD
-------------------------------
1. Easements
---------
The Landlord excepts and reserves unto itself the following:-
(a) the right to the free and uninterrupted passage and running of
water, gas, sewage, electricity, air-conditioning services,
telephone and other services or supplies from and to other parts
of the Building in and through the Conducting Media and ancillary
apparatus which now are or may at any time during the Term be in,
on, under or over the Premises;
(b) the right to erect scaffolding and/or protective barricades for
any purpose with or related to the Building or to do any act or
thing necessary for the safety and preservation of the Premises or
the Building or any part thereof notwithstanding that the exercise
of such rights may temporarily restrict the access to or use and
enjoyment of the Premises;
(c) the rights to light, air, support, protection, shelter and all
other easements and rights now or after the date of this Lease
belonging to or enjoyed by other parts of the Building;
(d) the rights of ingress to and egress from the Premises which the
Tenant is obliged to grant the Landlord, or for the Landlord to
exercise any of the Landlord's rights, under this Lease;
(e) the rights of ingress to and egress from the Premises, with or
without tools and equipment, for the access to the cable racks in
the Premises to effect or carry out any maintenance, repairs,
alterations or additions or installation or other works which the
Landlord may consider necessary or desirable; and
(f) the right to shutdown with a minimum notice of seven (7) days to
be given by the Landlord to the Tenant, except in the event of
emergency, all or any of the mechanical and/or electrical plants
in the Building for the purposes of upgrading, maintenance, repair,
alterations or additions or other works which the landlord may
consider necessary or desirable.
2. Power for Landlord to deal with adjoining property, Common Area and
-------------------------------------------------------------------
Building
--------
2.1 The Landlord shall have the right at any time and from time to time, at
its absolute discretion, and without the same constituting an actual or
constructive eviction of the Tenant, and without incurring any liability
whatsoever to the Tenant therefor:-
(a) to improve, renovate or alter in any way whatsoever and prescribe,
control and change the use, construction, size, configuration of or
access to or any other aspect of any part or parts of the Building
and Common Area (other than the Premises); and
(b) to deal as it may think fit with other property belonging to the
Landlord adjoining or nearby, and to alter or erect new structures
within or adjoining the Building, in such
<PAGE>
-14-
manner as the Landlord shall think fit, whether or not such
buildings shall effect or diminish the light or air which may now
or at any time be enjoyed by the Tenant in respect of the Building,
provided that reasonable means of access to and egress from the Premises
are afforded without prejudice however to the rights of the Landlord
under any other provision of this Lease.
2.2. Nothing contained in this Lease shall confer on the Tenant any right to
enforce any covenant or agreement relating to any part of the Common
Area and any other premises or any other parts of the Building leased
or licensed by the Landlord to others or limit or affect the right of
the Landlord to deal with the same, and impose and vary any terms and
conditions in respect thereof, in any manner as the Landlord may think
fit.
3. Access to and Main Doors of the Building
----------------------------------------
3.1 The Landlord may at its absolute discretion designate, and shall have
full control over, any other means of access to the Building (in
addition to the main doors).
3.2 The Landlord may in the case of any emergency, or if required by any
competent authority, or oher circumstances rendering such action
advisable in the Landlord's opinion, prevent access to the whole or
part of the Building for so long and in such manner as the Landlord
deems necessary.
3.3 Nothwithstanding anything herein contained, the Landlord shall have the
right at all times to refuse access to the Building or part thereof or
otherwise control such access in respect of any person whose presence
might in the reasonable opinion of the Landlord be prejudicial to the
safety, character, reputation and interests of the Building or part
thereof or its tenants and occupiers thereof and their respective
employees, agents and invitees.
4. Name and Address of Building: The Landlord shall have the right at
-----------------------------
all times without obtaining any consent from the Tenant, to change
the name or number by which the Building or any part thereof (including
but not limited to the Premises) is known.
5. Rules and Regulations: The Landlord and/or its managing agent as the
---------------------
case may be, shall have the absolute right at any time and from time to
time to suspend, or amend in any way the Rules and Regulations.
6. Landlord's right to interest for late payments: Without prejudice to
----------------------------------------------
the other provisions of this Lease, if any sum payable by the Tenant to
the Landlord under the provisions of this Lease is not paid within
fourteen (14) days after its due date or after demand (if so payable),
the Tenant shall pay to the Landlord interest on such overdue sum (as
well after as before any judgment) at the rate of twelve per cent (12%)
per annum calculated on the basis of actual days elapsed and a 360-day
year, from the date on which such sum falls due for payment to the date
when sum is received in cash by the Landlord or where payment is made
by cheque, to the date when the cheque is cleared, and until such
payment, such interest shall be recoverable by the Landlord as if it
were rent payable hereunder.
7. Removal of property after expiry or earlier determination of tenancy
--------------------------------------------------------------------
7.1 If, after the expiry or earlier determination of this Lease, any
property of the Tenant shall remain at the Premises and the Tenant
shall fail to remove the same within fourteen (14) days after the
Landlord serves a notice on the Tenant to do so then
<PAGE>
-15-
the Landlord may, as the agent of the Tenant, dispose of, as the
Landlord thinks fit, or sell such property. If the Landlord is unable to
lease, or otherwise deal with, the Premises for any period of time due
to the Tenant's failure to remove its property, the Tenant shall be
deemed to be holding over during such period and the additional Rent and
Service Charge for such period of holding over pursuant to Clause 14
shall be paid by the Tenant within fourteen (14) days of demand by the
Landlord. The Landlord shall apply the proceeds of sale of the Tenant's
property, if any, after deducting the costs and expenses of removal,
storage and sale reasonably and properly incurred by the Landlord,
towards discharging any sum due from the Tenant to the Landlord under
the provisions of this Lease, including the amount payable pursuant to
Clause 14, and shall pay the balance thereof, if any, to the order of
the Tenant.
7.2 The Tenant shall indemnify the Landlord against any and all liability
incurred by the Landlord to any third party whose property shall have
been sold by the Landlord in the bona fide belief (which shall be
presumed unless the contrary be proved) that such property belonged to
to the Tenant and was liable to be dealt with as such pursuant to this
Clause.
8. Landlord's right to assign
--------------------------
8.1 The Landlord shall be entitled to assign all its rights and interest in,
under or arising out of this Lease.
8.2 Where the Landlord assigns its rights and interest in, under or arising
out of this Lease (including the transfer of the Deposit), the Tenant
shall be deemed to have consented to such assignment and shall accept
any assignee of the Landlord as its new landlord and shall release the
Landlord from all its obligations under the provisions of this Lease
and in particular the obligation of the Landlord to refund the Deposit
and any other sums pursuant to the terms of this Lease. Where required
by the Landlord, the Tenant shall enter into and execute as a party
thereto any agreement or deed entered into or to be entered into by the
Landlord and its assignee, such agreement or deed to be prepared by and
at the expense of the assignee provided that no such agreement or deed
shall increase the Tenant's obligations hereunder or deprive the Tenant
of any rights hereunder.
<PAGE>
-16-
SCHEDULE 3
----------
COSTS OF SERVICES
-----------------
"Service Charge" shall mean the total sum comprising of the costs of
services hereunder:-
(a) a monthly service charge of $0.40 per square foot. The initial
monthly service charge payable by the Tenant in respect of the
Premises calculated on the floor area shall be $7,005.20. Payment
of such service charge is for outgoings costs and expenses
incurred or chargeable for the provision of, including but without
limitation to, security guards and/or security system, cleaning of
Common Area and lifts and the maintenance thereof;
(b) for the provision of air-conditioning to the Premises to the
requirement of the Tenant,
(i) Service and maintenance of the Air-Conditioning Plant at
$6,545.00 per month;
(ii) Depreciation of the Air-Conditioning Plant at $6,875.00 per
month; and
(iii) Administrative charge at $2,500.00 per month;
(c) for the provision of a backup generator,
(i) Service and maintenance of the backup generator and
underground storage tank at $266.00 per month;
(ii) Depreciation of the backup generator at $1,806.00 per
month;
(iii) Administrative charge at $195.00 per month;
(iv) Cost of rental of the space for the backup generator at
$1,218.00 per month; and
(d) for the provision of electricity and chilled water supply to the
four (4) air-handling units.
(i) cost of the supply of electricity based on the reading
taken from the kilowatt hour meter and calculated in
accordance with the PUB Tariff;
(ii) cost of the supply of chilled water in accordance with the
reading from the BTU meter, based on 1.6 (being the "BTU
Conversion Factor"); and
(iii) Administrative costs at $30.00 per month.
<PAGE>
-17-
SCHEDULE 4
----------
PART A
------
TENANT'S COVENANTS
------------------
The Tenant covenants with the Landlord as follows:-
1. Rent and Service Charge: The Tenant shall pay the Rent and the Service
-----------------------
Charge at the times and in the manner specified in Clause 4.
2. Utilities and Telecommunication Services
----------------------------------------
2.1 The Tenant shall arrange for its licensed electrical contractors to
apply to the Public Utilities Board ("PUB") and/or other appropriate
authority for the installation and testing of PUB sub-meter and shall
apply directly to the Singapore Telecommunications Ltd ("ST") or other
appropriate authority for the installation of any telex, telephone and
other telecommunication facilities. The Tenant shall pay all charges
including any taxes now or in the future imposed in respect of the
installation and supply of any equipment or appliances or telephone
lines and services and water, gas, electricity and any other services
supplied to the Premises which shall be consumed or supplied on or to
the Premises, to PUB, ST or other appropriate authority.
2.2 In the event that the PUB and/or other appropriate authority
disapproves the installation of a PUB sub-meter, the Tenant shall at
its own cost install a private meter which will be read by the Landlord
for the supply of utilities consumed by the Tenant and the Tenant shall
pay to the Landlord the actual cost of the supply thereof.
2.3 In the event of such water, gas, electricity and other services not
being supplied and metered separately to the Premises, the Tenant shall
pay to the Landlord a proportionate part of the cost of the supply
thereof, such proportionate part to be calculated by the Landlord and
notified to the Tenant by a statement in writing, such statement to be
final, conclusive and binding on the Tenant as to the amount thereof.
2.4 The Tenant shall arrange for its licensed electrical contractors to
install two (2) BTU meters to the four (4) air-handling units.
3. Property tax and goods and services tax
---------------------------------------
3.1 Property tax imposed or levied by the relevant government authority on
the Premises, or on the Building (or any part thereof) and as may be
apportioned by the Landlord or attributable to the Premises, in respect
of the duration covered by the Term shall be paid as follows:-
(a) the Landlord shall pay property tax levied on or attributable to
the Premises but such payment by the Landlord in respect of the
Premises shall not exceed property tax calculated (i) on the basis
of the annual Rent payable under this Lease and (ii) the property
tax rate applicable on the first assessment of property tax;
<PAGE>
-18-
(b) in the event that any additional property tax is payable on
account of (i) any increase in the annual value for the Premises
which is in excess of the annual value calculated as aforesaid by
reference to the annual Rent; and/or (ii) an increase in the
property tax rate above the rate applicable on first assessment,
such additional property tax shall be borne and paid by the Tenant
to the Landlord on demand.
3.2 Objection to any assessment of annual value or imposition of property
tax on the Premises in respect of the duration covered by the Term may
be made only by the Landlord in its sole discretion.
3.3 The Tenant shall also pay and indemnify the Landlord against goods and
services tax ("GST") or any tax of a similar nature that may be
substituted for or in addition to it and chargeable in respect of Rent,
Service Charge, Deposit and all sums paid or payable by the Tenant in
connection with this Lease. The Tenant shall, unless the Landlord
otherwise consents in writing, effect payment of GST together with
payment of Rent, Service Charge, Deposit and all sums paid or payable
by the Tenant in accordance with this Lease or otherwise in such manner
and within such period to comply with or to enable the Landlord to
comply with any applicable laws or directives, and shall indemnify the
Landlord against any penalties, costs and expenses incurred by the
Landlord as a result of any breach by the Tenant of this provision.
3.4 The obligations of the Tenant under the provisions of this paragraph 3
shall continue to apply notwithstanding the expiry or earlier
determination of the Term and regardless of whether any of the
aforesaid taxes shall be assessed and/or payable to the relevant
government authority before, during or after the Term.
4. Insurance
---------
4.1 The Tenant shall, at its own cost and expense, at all times during the
Term take out and keep in force in the joint names of the Landlord and
the Tenant for their respective rights and interest (i) a comprehensive
public liability insurance policy in an amount not less than Singapore
Dollars Five million only (S$5,000,000), or in such higher amounts as
the Landlord may from time to time reasonably prescribe, in respect of
any one occurrence; (ii) insurance against all risks and damage to all
plate glass, fixtures, fittings and installations at the Premises and
all parts thereof which the Tenant is obliged under this Lease to keep
in repair for such amount as the Landlord may approve, such approval
not to be unreasonably withheld or delayed; and (iii) such other
insurance for such risks and for such amounts as the Landlord may
reasonably require.
4.2 All policies of insurance required to be effected by the Tenant shall
be taken out with an insurance company approved by the Landlord, such
approval not to be unreasonably withheld or delayed and copies of such
policies of insurance shall be produced and lodged with the Landlord by
the Tenant without demand within thirty (30) days of the commencement
of the Term and within thirty (30) days of the renewal of such
policies. On written demand at any time by the Landlord, the Tenant
shall produce forthwith to the Landlord any policy of insurance which
the Tenant is required to effect hereunder and the receipt for the last
premium payable in respect of such policy.
4.3 The Tenant shall not do anything whereby any policy of insurance on or
including the Premises taken out by the Landlord may become void or
voidable or whereby the rate of premium thereon may be increased.
<PAGE>
-19-
5. Repair: At all times the Tenant shall repair and keep the Premises,
------
all toilet and shower facilities on the 4th storey of the Building and
the Landlord's fixtures, fittings and installations (including but not
limited to all flooring, plaster and other surface material on the walls
and ceilings and the painting and varnishing of the windows and any
glass and the Conducting Media within and serving the Premises) in good
and tenantable repair and condition, fair wear and tear excepted, and to
make good, repair, replace and reinstate any damage or breakage
howsoever caused or occuring in any part of the Premises, the toilet and
shower facilities and to the Landlord's fixtures, fittings and
installations.
6. Alterations
-----------
6.1 The Tenant shall not effect any works, extensions, alterations or
additions whatsoever to or affecting the interior or the exterior of the
Premises without the prior written consent of the Landlord, such
approval not to be unreasonably withheld or delayed. For the purpose of
seeking the Landlord's consent hereunder, the Tenant shall submit to the
Landlord all plans, specifications and details of proposed materials to
be used for any proposed alterations and additions ("Proposed Plans").
6.2 The Landlord shall be entitled to engage its architect, engineer or
other consultant(s) for the purpose of considering the Proposed Plans
and for the purpose of supervising all works carried out by the Tenant,
the fees and expenses of such architect, engineer and consultant(s)
reasonably incurred in connection therewith shall be borne by the
Tenant and forthwith paid by the Tenant to the Landlord on written
demand. If the Tenant fails to make payment within fourteen (14) days
from the date of demand, the Landlord may effect payment of the same and
all expenses so incurred by the Landlord together with interest at the
rate stipulated in paragraph 6 of Schedule 2, calculated from the date
of expenditure until the date they are paid by the Tenant to the
Landlord, shall be recoverable from the Tenant as if they were rent in
arrears.
6.3 All alterations and additions to the Premises shall only be carried
out :-
(a) in the case of any mechanical and electrical engineering works, by
a specialist contractor appointed by the Tenant and approved by the
Landlord; and
(b) in all other cases, by a contractor appointed by the Tenant and
approved by the Landlord, such approval not to be unreasonably
withheld or delayed.
6.4 No contractor, architect, engineer or other consultant, approved or
appointed by the Landlord for any purpose related to the Premises shall
in any way be deemed to be the agent or employee of the Landlord, and
the Landlord shall not in any way be liable nor responsible for any act,
omission, default, misconduct or negligence of such contractor,
architect, engineer or consultant.
6.5 The Tenant shall apply for and obtain at its own cost and expenses all
planning and other licences, permits and consents necessary or required
under law or the Rules and Regulations for its alterations and additions
and shall carry out and complete all alterations and additions to the
Premises in accordance with the Proposed Plans as approved by the
Landlord, in a good and workmanlike manner and in compliance with the
reasonable requirements of the Landlord's architect.
<PAGE>
-20-
6.6 Subject to all the subparagraphs above, the Landlord agrees to allow the
Tenant the right to renovate and upgrade the following Common Area at
the Tenant's cost and expense, subject to the written consent by the
Landlord to the materials and design and all necessary approvals by the
relevant competent authorities, such consent not to be unreasonably
withheld:-
(i) Entrance Lobby of the Building;
(ii) Passenger Lift of the Building; and
(iii) Toilet on the 4th storey of the Building.
6.7 The Landlord agrees that the Tenant may install and maintain a card
entry system at its own cost and expense to the Premises.
7. Notices
-------
7.1 The Tenant shall immediately give written notice to the Landlord of any
damage to or at the Premises and of other accidents or damage caused to
any Conducting Media, or any fittings or fixtures or installations
serving or within the Premises provided by the Landlord or of any
circumstances which are likely to be hazardous to or jeopardise the
safety of any person or property.
7.2 The Tenant shall immediately give written notice to the Landlord of any
notice received by the Tenant from any government or public or statutory
authority relating to or affecting the Premises or the Tenant's business
thereon.
8. To permit the Landlord to inspect: The Tenant shall permit the Landlord
---------------------------------
and its servants or agents at all reasonable times and by prior
appointment to enter into, inspect and view the Premises and examine
their condition and also to take a schedule of fixtures, fittings and
installations at the Premises. Upon notice by the Landlord, the Tenant
shall repair and make good in proper and workmanlike manner all damage
or defects which the Tenant is liable for under this Lease within such
reasonable period as may be stipulated by the Landlord and to the
reasonable satisfaction of the Landlord. In case of default by the
Tenant the Landlord may, but is not obliged to exercise its rights and
powers under Clause 12.2.
9. To grant the Landlord right of access to the Premises
------------------------------------------------------
9.1 Subject and without prejudice to paragraph 9.3, the Tenant shall permit
the Landlord, and the agents, workmen and others employed by the
Landlord or by any government or statutory authority or by the other
tenants or occupiers of the Building, with or without tools and
equipment at all reasonable times, after giving to the Tenant prior
notice to enter upon the Premises:-
(a) to effect or carry out any installation, maintenance, repairs,
alterations or additions or other works which the Landlord may
consider necessary or desirable in respect of any Conducting Media,
the Services or any part of the Premises or Building or the water,
electrical, air-conditioning and other facilities and services of
the Premises or Building; or
(b) for the purpose of exercising any of the powers and authorities of
the Landlord under this Lease; or
(c) to comply with any obligation of repair, maintenance or management
affecting the Premises or the Building; or
(d) to exhibit the Premises to prospective buyers or within ninety
(90) days of the expiration of the Term or Renewed Terms as
applicable, to tenants or any other party the Landlord authorises
for the purpose of any sale, lease or tenancy, or the valuation, of
the Premises, and during the
<PAGE>
-21-
period of ninety (90) days prior to the expiration or earlier
determination of the Term of this Lease, unless the Tenant shall have
duly exercised its option (if any) to renew the Lease herein, the
Landlord may post any "To Let" or "To Lease" sign upon the Premises; or
(e) to ascertain the Tenant's compliance with the current security
measures on fire and safety regulations as prescribed from time to
time by the Landlord or the fire or other competent authority.
9.2 The Tenant's obligations under this Lease shall not be affected by any
of the works specified in this paragraph 9 and the Landlord shall not be
liable for any inconvenience, disturbance, loss of business or any other
nuisance arising from such works.
9.3 The Tenant shall permit the Landlord, and his respective agents and/or
workmen free access into the Premises at all times in any case that the
Landlord reasonably considers an emergency.
9.4 The Landlord shall be allowed to take any tools, equipment and materials
into and upon the Premises as may be required without the same
constituting an eviction of the Tenant in whole or in part.
10. Yield up in repair at the end of the Term
-----------------------------------------
10.1 On the expiry or earlier determination of the Term (unless renewed
pursuant to the exercise of the option to renew, if any) the Tenant
shall at its cost and expense;-
(a) quietly and peaceably yield up the Premises with the fixtures,
fittings and installations (other than that belonging to the
Tenant), unless required by the Landlord to be removed, in good and
substantial and tenantable repair and condition (fair wear and tear
excepted) together with all locks, fastenings and keys to the
Premises complete (irrespective of whether the same have been
supplied by the Landlord) and, if so required by the Landlord,
shall remove all letterings, marks, signs, internal partitions,
fixtures, fittings, equipment, furniture and installations, as are
specified by the Landlord, from the Premises and reinstate the
Premises and/or the Building and/or the Common Area, in particular
but not limited to the all air-conditioning installations,
sprinkler systems and other electrical installations, ceiling,
floors, walls, doors and windows, entrance lobby, lifts, toilets
and showers (where applicable) to their original condition, fair
wear and tear excepted; and
(b) make good to the reasonable satisfaction of the Landlord all damage
to the Premises and the Building resulting from the removal of the
Tenant's belongings, reinstatement or redecoration of the Premises.
10.2 If on the expiry or earlier determination of the Term, the Tenant has
failed to comply with the above provisions, the Landlord may effect the
same at the Tenant's cost and expense. The Tenant shall be deemed to be
holding over for the period during which the works are effected by the
Landlord. All costs and expenses reasonably incurred by the Landlord,
together with the additional Rent and Service Charge pursuant to Clause
14 for the period of holding over by the Tenant, shall be paid by the
Tenant within fourteen (14) days of demand by the Landlord.
<PAGE>
-22-
11. Loading and Electrical Installation
-----------------------------------
11.1 The Tenant shall not bring into the Building any machinery, equipment,
goods or object which, in the absolute opinion of the Landlord, will or
is likely to cause any structural or any other strain or damage to any
part of the Building. Without limiting the foregoing, the Tenant shall
not load or permit or suffer to be loaded on any part of the floors of
the Building or the Premises to a weight greater than 5 KN/m2 (or such
other weight as may be prescribed by the Landlord as being applicable to
the Premises) without the prior written consent of the Landlord and in
any case shall comply with the directions and requirements of the
Landlord, such consent not to be unreasonably withheld or delayed in
respect of the load distribution and positioning of all heavy equipment
and articles in the Premises. The Tenant shall make good and indemnify
the Landlord in respect of any damage to the Premises and Building
caused by the bringing in of any safe, items of machinery, plant,
equipment or goods.
11.2 The Tenant shall not use any equipment or device which will cause an
overload on the electrical supply to the Premises, such supply as may be
prescribed by the Landlord or otherwise agreed in writing between the
Landlord and the Tenant or in any way overload any Conducting Media in
or serving the Premises or any part of the Building.
12. Rules and Regulations: The Tenant shall itself and shall procure the
---------------------
Tenant's Occupiers to observe and perform or cause to be observed and
performed the Rules and Regulations.
13. Advertisements and signs
------------------------
13.1 The Tenant shall not place or display on the exterior of the Premises or
on the windows or inside the Premises so as to be visible from the
exterior of the Premises any name, writing, notice, sign, illuminated
sign, display of lights, placard, poster, sticker or advertisement other
than:-
(a) the name of the Tenant on the entrance doors of the Premises in a
style and manner approved by the Landlord;
(b) the name of the Tenant displayed in the indicator board in the
entrance lobby in the Building; and
(c) the name of the Tenant by way of a sign/signboard at a designated
place on the exterior of the Building in a style and manner
approved by the Landlord.
13.2 If any name, writing, notice, sign, placard, poster, sticker or
advertisement shall be placed or displayed in breach of these
provisions, the Tenant shall on being directed to do so by the Landlord
remove such name, writing, notice, sign, placard, poster, sticker or
advertisement within a reasonable period and, in the event of failing
to do so, the Landlord may carry out such removal and the Tenant shall
pay to the Landlord on demand of the reasonable expenses of so doing.
13.3 The Landlord shall be entitled to determine the hours of illumination of
any signs or objects in accordance with the such hours as from time to
time reasonably prescribed by the Landlord.
14. Compliance with statutes etc: Except where such liability may be
----------------------------
expressed within the Landlord's covenants contained in this Lease, the
Tenant shall comply in all respects with the provisions of all statutes
and regulations for the time being in force and requirements of any
competent authority relating to the occupation and use by the Tenant of
the Premises and the conduct of the Tenant's business and anything done
in or upon the Premises by the Tenant and shall indemnify the Landlord
against all actions, proceedings, claims or demands which may be brought
or made by reason of such statutes, regulations or requirements or any
default in compliance with them.
<PAGE>
-23-
15. Indemnity by Tenant: The Tenant shall occupy, use and keep the Premises
-------------------
at the Tenant's sole risk and responsibility and shall indemnify and
keep indemnified the Landlord from and against:-
(a) all claims, demands, write, summonses, actions, suits, proceedings,
judgements, orders, decrees, damages, costs, losses and expenses of
any nature whatsoever which the Landlord may suffer or incur in
connection with loss of life, personal injury and/or damage to
property arising from or out of any occurences in, upon or at the
Premises or the use of the Premises or any part thereof by the
Tenant or by any of the Tenant's Occupiers, and
(b) all loss and damage to the Premises and any other premises or any
other part of the Building and to all property therein and all loss
of life and personal injury caused directly or indirectly by the
Tenant or the Tenant's Occupiers and in particular but without
limiting the generality of the foregoing caused directly or
indirectly by the use or misuse, or waste or abuse, of water, gas
or electricity or faulty fittings or fixtures.
16. Assignment and subletting
-------------------------
16.1 Except as provided in paragraph 16.2 below, the Tenant shall not
transfer, assign, sublet, license, part with or share possession or
occupation of, or grant to third parties any rights over, the whole or
any part of the Premises without the prior written consent of the
Landlord, such consent not to be unreasonably withheld or delayed.
Provided always that the usage of the Premises by such third parties is
similar to the Permitted Use.
16.2 The Landlord hereby agrees that the Tenant may without the consent of
the Landlord assign or sub-let the Premises to any affiliate, subsidiary
or parent company or any entity resulting through a merger or
acquisition, save that prior written notice is given to the Landlord of
such assignment or sub-letting.
16.3 A consent granted by the Landlord under paragraph 16.1 shall not
constitute a waiver of the requirement for the Landlord's consent to any
subsequent transfer, assignment, subletting, licensing, grant of
possession, mortgage or encumbrance of this Lease or the Premises or any
part thereof.
17. Name of Tenant: The Tenant shall not without the prior written consent
---------------
of the Landlord use the name of the Landlord or the Building, or any
derivative name sounding similar thereto, as part of its trade or
business name or as a trade mark or service mark or for any purpose.
<PAGE>
-24-
PART B
------
RULES AND REGULATIONS
---------------------
The Tenant covenants with the Landlord to observe and comply with the following
Rules and Regulations, as the same may be suspended, deleted, expanded or
otherwise amended and updated in any way from time to time:-
1. Obnoxious or inflammable substances: The Tenant shall not erect nor
-----------------------------------
install any machinery or object which causes noise, fumes or vibration
which can be heard, smelt or felt outside the Premises and shall not
store in the Premises any petrol or other inflammable, explosive or
combustible substance.
2. Illegal or immoral purpose: The Tenant shall not use the Premises for
--------------------------
any noxious, noisy or offensive trade or business nor for gambling nor
betting nor any illegal or immoral act or purpose.
3. Sales, auction, exhibition or public meeting and Music: The Tenant
------------------------------------------------------
shall not hold any sales by auction nor any exhibition, public meeting
or public entertainment at the Premises. The Tenant shall not permit
any music to be played or performed in the Premises so that it can be
heard outside the Premises.
4. Pests And Livestock: The Tenant shall keep the Premises free of pests,
-------------------
rodents, vermin and shall not permit livestock of any kind to be kept at
the Premises and shall, if necessary, employ at the Tenant's cost and
expense, pest exterminators to treat and/or prevent any such
infestation.
5. Incense: The Tenant shall not burn any incense or joss sticks or permit
-------
any unusual or offensive odours to be produced upon or to permeate from
the Premises.
6. Residential Purpose And Cooking: The Tenant shall not allow any person
-------------------------------
to sleep in nor to cook at the Premises nor to use the Premises for
residential purposes.
7. Cleanliness: The Tenant shall keep the Premises and every part thereof
-----------
including all toilet and shower facilities on the 4th storey of the
Building clean and hygienic and all pipes, drains, basins, sinks and
water-closets in the Premises and such toilets and showers clean and
unblocked. The Tenant shall employ the landlord's contractor engaged
for cleaning the Building to carry out the cleaning work in and about
the Premises provided that such employment shall be at the sole expense,
risk and responsibility of the Tenant.
8. Infectious diseases: In the event of the Tenant becoming aware of or
-------------------
suspects any infectious illness set out in the Infectious Diseases Act,
Cap 137, occurring at the Premises the Tenant shall give notice thereof
to the Landlord and the proper authorities and at its cost and expense
shall fumigate and disinfect the Premises and shall comply with the
reasonable and lawful requirements in respect of the same.
9. Annoyance or nuisance: The Tenant shall not do anything which may be or
----------------------
may become a nuisance, annoyance, disturbance, an inconvenience or may
cause damage to the Landlord or any owners, tenants, licensees and
occupiers of, or any person lawfully in the Building.
10. Aerials, masts and antenna
--------------------------
10.1 The Tenant shall not erect install display affix or exhibit on or to any
part of the Premises visible to the Common Area or any part of the
Building including roof, any light, flag, notice, pole mast, wire radio
or television or satellite aerial or antenna or any loudspeaker or
similar devices at the Premises without the prior written consent of
Landlord such consent not to
<PAGE>
-25-
be unreasonably withheld or delayed and provided always that the Tenant
shall at its own cost obtain all necessary approvals from the competent
authorities including a structural report from the engineer appointed by
the Tenant and approved by the Landlord certifying that such aerials,
masts and antenna is capable of being erected on such Common Area or
parts of the Building which report shall upon demand be produced
forthwith to the Landlord.
10.2 In the event that a satellite antenna is erected or installed at the
cost and expense of the Tenant, the Tenant agrees to pay a nominal
charge of $50.00 per antenna per month, such charge to be reviewed by
the Landlord yearly.
10.3 Any consent given may at any time be withdrawn as the Landlord may
determine having regard to:-
(a) any interferences to the telecommunications systems(s) and services
and licensed broadcasting apparatus and licensed broadcasting
services of the Landlord and/or other tenants, licensees or
occupiers of the neighbouring premises in, near and/or adjacent to
the Building; or
(b) the interest of the Building as a whole; or
(c) the interest of other tenants, occupiers and persons lawfully in
and upon the Building;
then the Tenant shall remove such aerials masts and antenna and all
costs and expenses incurred in such removal shall be borne by the
Tenant. If the Tenant shall fail to remove the same within seven (7)
days after the Landlord serves a notice on the Tenant to do so, then the
Landlord may remove such aerial mast and antenna and all costs and
expenses incurred by the Landlord shall be paid by the Tenant to the
Landlord forthwith.
11. Fire and Alarm Systems
----------------------
11.1 The Tenant shall permit the duly authorised agents or employees of
Landlord at any reasonable time by prior appointment to service and
maintain any fire or alarm systems of the Premises or the Building
11.2 The Tenant shall not install nor maintain any fire or security system at
the Premises without the prior written approval of the Landlord or which
may interfere with any fire or alarm system installed or maintained by
the Landlord for the Premises or Building.
11.3 In the event that the relevant competent authorities require the Tenant
to install a sprinkler system, the Tenant shall apply for and obtain at
its own cost and expense all licenses, permits, approvals and consents
for the installation and use of a dry sprinkler system.
11.4 The Tenant shall install and maintain the sprinkler system (whether wet
or dry sprinkler system) at their own cost and expense. Provided always
that the Tenant shall waterproof the floor of the Premises with
reasonable drainage system to the satisfaction of the Landlord against
flooding or likewise to the adjoining floors or neighbours in the
Building.
12. Loading And Electrical And Other Installations
----------------------------------------------
12.1 The Tenant shall not load nor use the floors, walls, ceiling or
structure of the Premises except in compliance with such loading limits
prescribed by any other reasonable directions of the Landlord.
<PAGE>
-26-
12.2 Before any machinery safe or furniture is moved into or out of the
Premises due notice must be given to the Landlord by the Tenant and the
moving of the same must be done under the supervision of a person
nominated by the Landlord and at a reasonable time approved by the
Landlord or its managing agent and at no other time.
12.3 The Tenant shall not overload at Conducting Media in or serving the
Premises and/or the Building. Without limiting the foregoing, the
Tenant shall not without the prior written consent of the Landlord,
such consent not to be unreasonably withheld or delayed install or use
any air-conditioning or cooling devices or any other electrical
devices or equipment in the Premises except those which are provided
in the Building or are shown on the plans approved by the Landlord.
The Tenant shall not do nor omit to do anything which obstructs or
interferes with or which imposes an additional loading on any
ventilation, air-conditioning or other plant or machinery serving
or electrical supply to the Premises and Building.
13. Avoidance of Landlord's insurance policies: The Tenant shall not
------------------------------------------
do anything whereby any policy of insurance on the Building, including
or in any way relating to the Premises, taken out by the Landlord may
become void or voidable or whereby the rate of premium thereon or on
the remainder of the Building may be increased. The Tenant shall
within fourteen (14) days of demand reimburse the Landlord of all sums
paid by way of increased premiums and all expenses incurred by the
Landlord as a result of a breach of non-observance by the Tenant of
this covenant. The Landlord will on request of Tenant provide
relevant details of the policy to enable to Tenant to comply with the
provisions of this paragraph. The Tenant shall provide one or more
efficient fire extinguishers of a type approved by the Landlord and to
take such other precautions against fire as may be deemed necessary
by the Landlord or its insurers.
14. Vendors: The Tenant shall not without the prior written consent of
-------
the Landlord permit the vendors of food or drink or the servants or
agents of such vendors to bring to the Premises or the Building food
or drink for consumption by the occupiers or others in the Premises
save and except in the case of the contractor who has been given the
right by the Landlord to provide a food and drink service for the
occupiers of the Building.
15. Building Exterior, Windows And Security
---------------------------------------
15.1 The Tenant shall ensure that the decor and design of the exterior of
the Premises and the interior of the Premises which is visible from the
outside (including all blinds, shades, awnings, window ventilators and
other fittings and fixtures) shall conform to the reasonable
requirements and standards of the Landlord as to design quality and
appearance. The Tenant shall not make any changes to such external and
internal parts without the prior written consent of the Landlord, such
consent not to be unreasonably withheld or delayed and shall remove any
object or fitting or fixture which in the absolute opinion of the
Landlord is incongruous with or may detract from the general appearance
of the Building.
15.2 The Tenant shall keep the windows of the Premises closed at all times
and shall take such steps as may be necessary to prevent air leakages
and excessive infiltration of air from outside the Building into the
Premises and shall not do any act or thing whereby the working of the
air circulating plant in the Building shall be effected.
15.3 The Tenant shall ensure that all doors of the Premises are safely and
properly locked and secured when the Premises are not occupied and shall
use its best endeavours to protect and keep the Premises and any
property contained therein from theft or robbery. The Landlord reserves
the right by its agent caretaker
<PAGE>
-27-
employees servants and workmen to enter and fasten the same if left
insecurely fastened. The Landlord will provide keys for locks on doors
or other openings of the Premises and the Tenant will return to the
Landlord on the determination of the tenancy all such keys and shall not
permit the same at any time to come into the possession or control of
any person other than the Tenant its servants or agents and others duly
authorised by the Tenant.
16. Obstruction
-----------
16.1 The tenant shall not cover nor obstruct nor permit to be covered or
obstructed in any manner (other than in compliance with paragraph (15))
the windows, sky-lights or ventilating shafts or air inlets or outlets
which reflect or admit light or enable air to flow into or out of the
Premises or any part of the Building.
16.2 The Tenant shall not in any way obstruct nor permit the obstruction of
any Common Area and in particular shall not permit any bicycles, motor
cycles or scooters, trolleys and other vehicles for transportation to be
parked nor permit the stocking or storage or littering of any goods or
garbage in any Common Area (other than at the proper lots and areas
designated by the Landlord for the parking of vehicles, the loading and
unloading of goods and the storage or disposal of garbage).
17. Use of conveniences: The Tenant shall not throw nor place nor permit to
-------------------
be thrown or placed in the lift shafts, water-closets or other
conveniences in the Building any rubbish or waste or any other
materials, and the Tenant shall on demand pay to the Landlord the
reasonable costs of repairing any damage or renewal of such rubbish or
waste or other materials to such lift shafts, water-closets or other
conveniences arising therefrom.
18. Use of lift
-----------
18.1 The Tenant shall ensure that only small and light articles such as
brief-cases, attache cases and handbags are placed into or transported
by the passenger lift and that only the hoist lift prescribed by the
Landlord is used to transport any bulky or heavy object including but
not limited to furniture, merchandise, machinery and equipment.
18.2 The Tenant shall not permit nor allow the contractors, workmen or
cleaners (with or without equipment and tools) engaged by the Tenant to
use the passenger lift of the Building and shall ensure that they use
only the hoist lift prescribed by the Landlord.
19. Carparks, Temporary parking and Loading bays
--------------------------------------------
19.1 The Tenant shall use the carparks in the Building lawfully and in
compliance with all rules and regulations prescribed in respect of
the same by the Landlord. Subject to the aforesaid, the Landlord will
allot ten (10) season carpark lots ("the carpark lots") to the Tenant
and the Tenant shall pay carpark charges (including all taxes) as may be
levied or revised from time to time by the Landlord for the use of the
carpark lots, and such sums shall be payable as additional rent.
PROVIDED HOWEVER THAT at any time during the Term or a Renewed Term, the
Landlord may in its absolute discretion vary the number of carpark lots
or withdraw the carpark lots or any of them if the Landlord ceases to
have the right or authority to allot such season carpark lots or if such
allotment shall be in breach of any governmental or statutory or Rules
and Regulations, or any contractual obligation of the Landlord or if the
Landlord requires the carpark lots for any purposes whatsoever.
<PAGE>
-28-
19.2 The Tenant shall not load nor unload any objects (including but not
limited to furniture, merchandise, machinery and equipment) except at
the loading and unloading bays or areas designated by the Landlord and
so as not to cause congestion nor inconvenience to any other user and at
all times shall comply with the reasonable directions of the Landlord's
employees or agents in respect of the use of the same.
20. Soliciting: The Tenant shall not solicit business, display or distibute
-----------
advertising material in the carparks or any Common Area or use the same
for business or commercial purposes except in such manner and under such
conditions as may be approved from time to time by the Landlord.
21. Landlord's Housekeeping Rules
-----------------------------
21.1 The Tenant shall itself and shall procure the Tenant's occupiers to
observe and perform or cause to be observed and performed the Landlord's
Housekeeping Rules annexed hereto as Annexure B or such other rules and
regulations as the Landlord may make or amend or change from time to
time.
21.2 The Tenant shall participate in the Housekeeping Committee established
under the Housekeeping Rules by providing that one (1) representative of
the Tenant shall sit in the Housekeeping Committee.
22. Fire Drills: The Tenant shall itself and shall procure the Tenant's
-----------
occupiers to participate in any fire drills conducted by the Landlord
or any other competent authorities.
<PAGE>
-29-
SCHEDULE 5
----------
LANDLORD'S COVENANTS
--------------------
The Landlord hereby covenants with the Tenant as follows:-
1. Quiet enjoyment: That the Tenant paying the Rent and Service Charge
---------------
and performing the Tenant's covenants reserved by and contained in
this Lease may lawfully and peaceably hold and enjoy the Premises
throughout the Term without any interruption by the Landlord or by any
person lawfully claiming through, under or in trust for the Landlord.
2. Property tax: To pay the property tax rate assessment impositions
------------
levied or charged upon the Premises and the Building except such as are
herein stated to be paid by the Tenant.
3. Management of the Building: Subject always to the provisions of Clause
--------------------------
11 to provide the following services (collectively called the
"Services"):-
(a) to keep the roof, foundations, load bearing walls and beams and
all external walls of the Building and the Common Area, and the
Conducting Media in or serving the Common Area, in good and
tenantable condition and repair (fair wear and tear excepted);
(b) to insure and keep insured the Building (excluding fittings and
fixtures installed by the Tenant and any other parts of the
Premises which the Tenant is obliged in this Lease to insure)
against damage by fire and such other risks as the Landlord may
deem fit; and
(c) to provide:-
(i) an Air-Conditioning Plant;
(ii) central air-conditioning twenty-four (24) hours of each day,
seven (7) days a week at 50% relative humidity;
(iii) a backup generator capable of providing power supply for eight
(8) hours Provided always that the Tenant shall bear and pay to
the Landlord on demand cost and expense reasonably incurred by
the Landlord in operating the backup generator including but not
limited to costs of fuel and labour. The backup generator shall
supply power to the Premises at 200 AMP, 400/230V, 3-phase/1-
phase, 50 Hertz four (4%) per cent, 4-wire system (either TN-S
or TT system);
(iv) air-conditioning supply from the backup generator (when in
operation) of 50 tons;
(v) electricity for the lighting of the passages, corridors,
staircases, lifts and water-closets of the Common Area and water
for the water closets;
(vi) a hoist lift to and from the ground floor loading dock and the
Premises twenty-four (24) hours of each day;
(vii) passenger lift service during the Operating Hours;
<PAGE>
-30-
(viii) security of the Building in such manner to be decided by the
Landlord for twenty (24) hours of each day (but not so as to
render the Landlord liable for any loss or damage sustained by
the Tenant or the Tenant's Occupier through the neglect,
default, failure, negligence or misconduct of the security
guard(s) and/or security system as the case may be) and such
additional security facilities as may be required having regard
to the Tenant's Permitted Use of the Premises, such additional
security facilities shall be borne by the Tenant.
<PAGE>
-31-
ANNEXURE A
[FLOOR PLAN]
CITY SOUTH EXCHANGE
4TH STOREY PLAN
<PAGE>
-32-
ANNEXURE B
----------
LANDLORD'S HOUSEKEEPING RULES
-----------------------------
The Tenant and/or the Tenants' Occupiers, as the case may be, shall adhere,
abide and comply with the following:-
1. To carry out a joint fire safety inspection with the Landlord
immediately after the Tenant's occupation of the Premises.
2. To allow the Housekeeping Committee members of the Landlord to inspect
the Premises within office hours on reasonable notice being given to the
Tenant and to comply with all recommendations made.
3. Display the Identification Card prominently at all times when in the
Premises/Building.
4. Ensure that visitors of the Tenant are at all times accompanied by the
Tenant where such visitors are on or remain in the Premises/Building.
5. Ensure that visitors of the Tenant are met by the Tenant at the Security
Guard post.
6. Not to smoke within the exchange areas or such other areas of the
Building designated as "No Smoking" areas or where "No Smoking" sign is
displayed.
7. Not to bring in personal electrical or electronic appliances, equipment
or apparatus.
8. Not to gamble in any form whatsoever whilst in the Premises at all
times.
9. Ensure that only persons authorized by the Tenant be allowed to enter or
remain in the Premises/Building.
10. Not to remain in the Premises after normal office hours without
authorization from the Landlord.
11. Ensure that all vehicles (including bicycles) must be parked at
designated parking lots or at areas designated for parking.
12. Ensure that all contractors keep the Station Manager or Principal
Housekeeper of the Landlord informed by prior written notice at all
times of any work which such contractors would be carrying and/or are
being carried out.
13. Ensure that all Hot Works of the Tenant be carried out under the
supervision of a qualified competent supervisor in the relevant trade
when such Hot Works are being carried out or in progress.
14. Ensure that all workers of the Tenant be confined or restricted to only
their designated work place whilst on the Premises.
15. Not to sleep on or bring food to eat at the Premises.
16. Ensure that all rubbish be cleared promptly and on a daily basis.
17. Not to touch, handle or in any way deal with the Landlord's
telecommunication equipment and cables found on the Premises or Building
whether in operation or otherwise.
<PAGE>
-33-
IN WITNESS WHEREOF the parties have executed this Lease the day and year
first above written.
Signed by )
for and on behalf of ) /s/ B.G. Lee Hsien Yang
SINGAPORE TELECOMMUNICATIONS ) Executive Vice President
LIMITED in the presence of:- ) (Local Services)
Signed by )
for and on behalf of )
FOUR MEDIA COMPANY ASIA PTE LTD ) /s/ Robert Walston
in the presence of:- )
/s/ Karen Zortman [Notary Stamp of Karen Zortman]
<PAGE>
-33-
[COMPANY LETTERHEAD]
Date:
FOUR MEDIA COMPANY ASIA PTE LTD
Dear Sir:
LEASE AT 4TH STOREY AND PART OF 6TH STOREY OF CITY SOUTH EXCHANGE
We refer to the Lease Agreement dated 1994 between ourselves
and yourselves for the lease of the above premises.
With reference to Clause 7 of the Lease, we acknowledge that you are
providing to MTV Asia LDC the services as described in the definition of
"Permitted Use" in Clause 1.1 of the Lease. This acknowledgement does
not in any way whatsoever agree, confirm or imply any obligations
(contractual or otherwise) between ourselves and MTV Asia LDC.
In respect of Schedule 2 Paragraph 3.3, we wish to confirm that in
exercise of our right under this paragraph, access will be denied to any
performer engaged by MTV or your other clients because of appearance,
reputation, content and style of performance, until and unless it is
properly verified that the identity of the performer is from MTV or your
other clients.
Yours faithfully
SINGAPORE TELECOMMUNICATION'S LIMITED
------------------------------------------------------------------------
We, Four Media Company Asia Pte Ltd, confirm our agreement to the
aforesaid acknowledgement and confirmation by Singapore
Telecommuncations Limited in respect of the Lease Agreement
dated 1994.
Yours faithfully
<PAGE>
EXHIBIT 10.21
OFFICE BUILDING LEASE
By and Between
FORD MOTOR CREDIT COMPANY,
as Landlord
and
FOUR MEDIA COMPANY,
as Tenant
For Premises Located At:
First, Second, Third and Basement Floors of
2901 West Alameda Avenue, Burbank, California
Dated as of August 1, 1994
<PAGE>
OFFICE BUILDING LEASE
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Article I Description of Property; Term; Use;
Parking............................................. 1
Section 1.1 Description of Leased Premises...................... 1
Section 1.2 Term................................................ 2
Section 1.3 Use of premises..................................... 2
Section 1.4 Parking rights...................................... 3
Article II Rent................................................ 4
Section 2.1 Base Rent........................................... 4
Section 2.2 Tenant's Proportionate Share of Increased
Operating Expenses.................................. 4
Section 2.3 Late Charges and Taxes.............................. 6
Section 2.4 Modified Full-Service Rent; Direct Payment of
Utilities........................................... 6
Section 2.5 Payment Without Notice or Demand.................... 7
Section 2.6 Place of Payment.................................... 7
Article III Definitions......................................... 7
Section 3.1 Definitions......................................... 7
Section 3.2 Audit Right......................................... 11
Article IV Acceptance of Premises; Tenant Improvement
Reimbursement; Interconnection; Roof Access......... 11
Section 4.1 Acceptance of Premises.............................. 11
Section 4.2 [Intentionally Deleted]............................. 12
Section 4.3 Interconnection..................................... 12
Section 4.4 Roof Access......................................... 13
Section 4.5 Estoppel Certificate................................ 14
Article V Insurance........................................... 14
Section 5.1 Tenant's Insurance.................................. 14
Section 5.2 Mutual Waiver of Subrogation........................ 16
Article VI Damage or Destruction............................... 17
Section 6.1 Destruction of Premises............................. 17
Section 6.2 Destruction of Building............................. 18
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
Article VII Maintenance and Repair.............................. 19
Section 7.1 Tenant's Obligations................................ 19
Section 7.2 Landlord's Obligations for Common Area
and for Building.................................... 20
Section 7.3 Floor Loads; Noise and Vibration.................... 20
Article VIII Alterations by Tenant............................... 21
Article IX Landlord's and Tenant's Property.................... 22
Section 9.1 Landlord's Property................................. 22
Section 9.2 Tenant's Property................................... 22
Article X Compliance with Law................................. 23
Section 10.1 Obligations of Tenant............................... 23
Section 10.2 Right to Contest.................................... 23
Section 10.3 Rules and Regulations............................... 23
Section 10.4 Hazardous Material.................................. 23
Article XI No Encumbrance by Tenant............................ 24
Section 11.1 No Liens............................................ 24
Section 11.2 Mechanics', Materialmen's and Laborers' Liens....... 24
Article XII Right of Landlord to Perform Tenant's
Covenants........................................... 25
Section 12.1 Payment or Performance.............................. 25
Section 12.2 Reimbursement....................................... 26
Article XIII Availability of Public Utilities and
Other Services...................................... 26
Section 13.1 Heat, Ventilation and Air Conditioning.............. 26
Section 13.2 Electricity and Telephone........................... 26
Section 13.3 Elevator; Water..................................... 27
Section 13.4 Janitorial.......................................... 27
Section 13.5 Right to Stop Service............................... 27
Article XIV Assignment and Subletting........................... 28
Section 14.1 Conditions to Assignment and Subletting............. 28
Section 14.2 [Intentionally Deleted]............................. 28
Section 14.3 Landlord's Consent.................................. 28
Section 14.4 [Intentionally Deleted]............................. 29
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
Section 14.5 Assignment Without Consent.......................... 29
Section 14.6 Corporate or Partnership Transfers.................. 29
Section 14.7 Prohibition Against Pledge or Encumbrance........... 29
Article XV Subordination and Attornment........................ 30
Section 15.1 Subordination....................................... 30
Section 15.2 Notice to Superior Lessor and Mortgagee............. 30
Section 15.3 Attornment.......................................... 31
Article XVI Non-Liability and Indemnification................... 31
Section 16.1 Non-Liability of Landlord........................... 31
Section 16.2 Indemnification by Tenant........................... 32
Section 16.3 Independent Obligations; Force Majeure.............. 33
Article XVII Default by Tenant; Landlord's Remedies.............. 34
Section 17.1 Events of Default.................................. 34
Section 17.2 Remedies Upon Default.............................. 35
Section 17.3 Damages Upon Termination........................... 36
Section 17.4 Holdover........................................... 37
Section 17.5 Remedies Cumulative................................ 37
Article XVIII Attorneys' Fees.................................... 37
Article XIX Eminent Domain..................................... 38
Section 19.1 Taking............................................. 38
Section 19.2 Award.............................................. 38
Section 19.3 Temporary Taking................................... 38
Section 19.4 Partial Taking..................................... 39
Article XX Quiet Enjoyment.................................... 39
Article XXI Landlord's Right of Access......................... 39
Section 21.1 Access for Maintenance and Repair.................. 39
Section 21.2 Access for Inspection and Showing.................. 40
Section 21.3 Landlord's Alterations and Improvements............ 40
Article XXII Signs; Obstruction................................. 41
Section 22.1 Monument Sign...................................... 41
Section 22.2 Signs.............................................. 41
Section 22.3 Obstruction........................................ 42
Article XXIII Option To Extend Term.............................. 42
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C> <C>
Article XXIV Miscellaneous...................................... 44
Section 24.1 Notices............................................ 44
Section 24.2 Financial Statements............................... 45
Section 24.3 Estoppel Certificates.............................. 46
Section 24.4 No Recordation..................................... 46
Section 24.5 No Brokers......................................... 46
Section 24.6 No Recourse........................................ 46
Section 24.7 Entire Agreement, etc.............................. 47
Section 24.8 Indemnity.......................................... 47
Section 24.9 Governing Law...................................... 47
Section 24.10 Confidentiality.................................... 48
Section 24.11 Non-Competition.................................... 49
Section 24.12 Agreement Regarding Parking Rights and Right of
Lease Assumption................................... 50
Section 24.13 Documentary Transfer Tax........................... 50
Section 24.14 Mutual Waiver of Trial by Jury..................... 50
Exhibit "A"......................................................... 52
Exhibit "B"......................................................... 53
Exhibit "C"......................................................... 54
Exhibit "D"......................................................... 55
Exhibit "E"......................................................... 56
Exhibit "F"......................................................... 57
</TABLE>
iv
<PAGE>
OFFICE BUILDING LEASE
---------------------
THIS LEASE AGREEMENT (hereinafter referred to as the "Lease") is made and
entered into as of this 1st day of August, 1994, by and between Ford Motor
Credit Company, a Delaware corporation (hereinafter referred to as "Landlord"),
and Four Media Company, a Delaware corporation (hereinafter referred to as
"Tenant").
W I T N E S S E T H:
- - - - - - - - - -
THAT for and in consideration of the rents, covenants and agreements
hereafter promised and agreed to be paid and performed by Tenant, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Landlord does hereby lease, demise and let to Tenant, and Tenant
does hereby lease of and from Landlord, the real property hereinafter described,
subject to the following terms and conditions, to have and to hold the said
lands, tenements and hereditaments with all of the rights, privileges and
appurtenances thereunto belonging or pertaining unto Tenant for the term herein
specified, unless this Lease shall be sooner terminated in a manner hereinafter
provided.
ARTICLE I
---------
Description of Property; Term; Use; Parking
-------------------------------------------
Section 1.1. Description of Leased Premises. Landlord hereby leases to
------------ ------------------------------
Tenant and Tenant hereby leases from Landlord those certain premises consisting
of approximately 52,874 rentable square feet known as Suite 100 (hereinafter
called the "Premises") as shown on the plans attached hereto as Exhibit "A",
initialled by the parties, and made a part of this Lease, on the entire first
floor (15,320 rentable square feet), the entire second floor (15,214 rentable
square feet), the entire third floor (15,324 rentable square feet) and the
entire basement floor (7,016 rentable square feet) of the building known as 2901
West Alameda, located at 2901 West Alameda Avenue, Burbank, California
(hereinafter called the "Building") located on the land legally described in
Exhibit "B" attached hereto (the "Land"), together with the right to use in
common with Tenant's invitees, customers and employees and in common with other
tenants of the Building, their invitees, customers and employees, the lobby
areas, stairways, elevators, hallways, lavatories and all other common
facilities contained in the Building, and such parking as is provided in Section
1.4. All of the Land together with the Building and all improvements used in
connection with the operation of the Building (including without limitation the
parking facility) shall be referred to herein as the "Property." For all
purposes hereunder, Landlord and Tenant accept that the Premises contain 52,874
rentable square feet. (All
<PAGE>
rentable square foot measurements in this Lease are based on BOMA standard
measurements for useable square footage plus a building load factor of eight
percent (8%).)
Section 1.2. Term. This Lease shall be for a term (the "Term") of five
------------ ----
(5) years, commencing September 1, 1994 (the "Commencement Date") and
terminating on August 31, 1999 (the "Expiration Date") , unless sooner
terminated or unless extended as provided herein.
Section 1.3. Use of Premises.
------------ ---------------
(a) Tenant shall use the Premises only for post-production,
transmission, distribution, film, tape, video and audio services, microwave
relay, general office use, and for purposes related thereto, and for no other
purpose. Tenant will not use or permit the use of the Premises or any part
thereof for any unlawful purpose and shall not do or permit any act or thing
which would materially impair the value or usefulness of the Premises or any
part thereof, or which would constitute waste or which would be a nuisance or
annoyance or which results in damage to Landlord or Landlord's other tenants, or
which would invalidate any policies of insurance or increase the premiums
thereof, now or hereafter written on the Building and/or the Premises. In the
event Tenant uses the Premises for purposes not expressly permitted herein,
Landlord may terminate this Lease, following five (5) days written notice to
Tenant and an opportunity to cure, or, without notice to Tenant, restrain said
improper use by injunction.
(b) Landlord agrees that in connection with and incidental to Tenant's
permitted use of the Premises, and provided that Tenant obtains, at its sole
cost and expense, any special amendments to the certificate of occupancy for the
Premises and the Building and any other permits or licenses required by any
governmental authority having jurisdiction thereof, if any, Tenant may use
portions of the Premises (i) for an employee lunchroom or lounge for the
exclusive use of the officers, employees and business guests of Tenant (but not
for use as a public restaurant nor by other tenants of the Building), provided
that the only equipment to be used therein shall be a microwave oven,
refrigerator, hot plates, coffee machines, sink, disposal and dishwasher, and
provided further that Tenant shall maintain these lunchrooms in a clean,
sanitary and non-odorous condition (including without limitation the
installation of such ventilation equipment as may be required by applicable
law); and (ii) for the installation, maintenance and operation of electronic
data processing equipment, computer processing facilities and business machines,
provided that such equipment is contained within the Premises and does not cause
vibrations, noise, electrical interference or other disturbance to other tenants
of the Building or the elevators or other equipment in the Building. Landlord
acknowledges that the nature of Tenant's business may cause some noise and
vibrations; Tenant shall not cause any noises or vibrations beyond the scope of
this typical use. With respect to
2
<PAGE>
any use permitted, such use shall not violate any laws or requirements of public
authorities, interfere with or cause physical discomfort to any of the other
tenants or occupants of the Building, interfere with the operation of the
Building or the maintenance of same, violate any of Tenant's other obligations
under this Lease, or violate any of the Rules and Regulations referenced in
Section 10.3.
(c) Tenant hereby represents, warrants and agrees that Tenant's
business is not and shall not be photographic, multilith or multigraph
reproductions or offset printing. Anything contained herein to the contrary
notwithstanding, Tenant shall not use the Premises or any part thereof, or
permit the Premises or any part thereof to be used, (i) for the business of
photographic, multilith or multigraph reproductions or offset printing, (ii)
except as expressly provided hereinabove in this Section 1.3, as a restaurant or
bar for the sale of confectionery, soda, beverages, sandwiches, ice cream or
baked goods or for the preparation, dispensing or consumption of food or
beverages in any manner whatsoever, (iii) as a news or cigar stand, or (iv) as a
labor union office or school (except for the training of employees of Tenant).
Notwithstanding anything to the contrary in this paragraph, Tenant shall be
permitted to use standard office xeroxing and photocopying equipment.
Section 1.4. Parking Rights. Throughout the Term, Tenant shall be
------------ ---------------
entitled (but shall not be obligated) to rent parking spaces at the Property at
a ratio of 3.25 spaces per 1,000 rentable square feet of space in the Premises,
for a total of 172 parking spaces. Tenant shall pay a monthly fee for each
unreserved space at the rates determined by Landlord from time to time. Further,
Tenant shall pay a monthly fee for each reserved space at the rates determined
by Landlord from time to time; provided, however, that Tenant may designate only
ten percent (10%) of its total parking space allocation as reserved spaces.
Effective as of the Commencement Date, the parking spaces specified on
Exhibit "C" attached hereto shall be leased to Tenant. In the future, if Tenant
desires to rent any additional unreserved parking spaces (over and above those
to which Tenant is entitled under the foregoing paragraph), Tenant shall so
notify Landlord at least thirty (30) days in advance and Landlord shall allocate
such requested parking spaces to Tenant, on a first come-first served basis, to
--
the extent such extra parking spaces are available at the Property (subject to
- --- ------
the following paragraph); provided, however, that at any time upon thirty (30)
days' notice, Landlord may terminate Tenant's rights to some or all of such
extra parking spaces if they are needed by other tenants of the Building, so
long as Tenant continues to have the use of not less than 3.25 parking spaces
per 1,000 rentable square feet of space in the Premises.
In the event, after the Commencement Date, Tenant rents parking spaces at
the Property at a ratio of less than 3.25 per 1,000, Landlord shall be entitled
---------
to rent such "unused" parking
3
<PAGE>
spaces to others. If Tenant desires to rent any or all of such "unused" parking
spaces again, Tenant shall so notify Landlord at least thirty (30) days in
advance and Landlord shall make arrangements for these spaces to be available to
Tenant within thirty (30) days. If the desired spaces have not been rented out
to others, Landlord shall make the spaces available to Tenant on an expedited
basis.
Tenant shall cooperate with Landlord and other tenants in the use of the
parking facilities. Notwithstanding the foregoing, Landlord reserves the right,
in its absolute discretion, to allocate unreserved parking spaces at the
Building parking facility among Tenant and other tenants (subject to the parking
ratio referenced above), or to assign or reserve parking spaces at the Building
parking facility. The Building parking facility referenced in this Section 1.4
is the one located on the Property.
ARTICLE II
RENT
----
Section 2.1 Base Rent. Tenant covenants and agrees to pay "Base Rent"
----------- ---------
for the Premises to Landlord, in advance upon the first day of each and every
month of the Term, without notice, demand, deduction, diminution or setoff, in
accordance with the following schedule:
(a) From September 1, 1994 through May 31, 1995: $111,035.40, based on
a Base Rent rate of $2.10 per rentable square foot per month;
(b) From June 1, 1995 through November 30, 1997: $122,138.94, based on
a Base Rent rate of $2.31 per rentable square foot per month; and
(c) From December 1, 1997 through August 31, 1999: $134,352.83, based
on a Base Rent rate of $2.541 per rentable square foot per month.
If the Term terminates on other than the last day of a calendar month, then
Base Rent shall be prorated, based on the actual number of days in such calendar
month, and the prorated installment shall be paid on the first day of the
calendar month next preceding the date of termination.
Section 2.2. Tenant's Proportionate Share Of Increased Operating
------------ ---------------------------------------------------
Expenses. Tenant covenants and agrees to pay Tenant's Proportionate Share of
- --------
increases in Operating Expenses in excess of those incurred in the Base Year as
such terms are more particularly defined in Section 3.1, all in accordance with
the following provisions:
4
<PAGE>
(a) Commencing January 1, 1995 and continuing through the remainder of
the Term, Tenant shall pay to Landlord Tenant's Proportionate Share of the total
dollar increase, if any, in Operating Expenses attributable to each Computation
Year over Base Expenses (hereinafter referred to as "Tenant's Proportionate
Share of Increased Operating Expenses").
(b) During the last month of the calendar year in which the
Commencement Date falls, and during the last month of each Computation Year
during the Term (or as soon thereafter as practicable), Landlord shall give to
Tenant notice of Landlord's reasonable estimate of the amount payable by Tenant
under Section 2.2(a) for the following Computation Year. On or before the first
day of each month during the following Computation Year, Tenant shall pay to
Landlord one-twelfth (1/12th) of such estimated amount, provided that if
Landlord fails to give such notice in the last month of the prior Computation
Year, then Tenant shall continue to pay on the basis of the prior year's
estimate until the first day of that calendar month which falls at least thirty
(30) days after the date such notice is given by Landlord; from the first day of
such calendar month, Tenant's payments shall be adjusted so that the estimated
amount for that Computation Year will be fully paid by the end of that
Computation Year. If at any time or times Landlord reasonably determines that
the amount payable under Section 2.2(a) for the current Computation Year will
vary from its estimate given to Tenant, Landlord, by thirty (30) days prior
written notice to Tenant, may reasonably revise its estimate for such
Computation Year, and subsequent payments by Tenant for such Computation Year
shall be based upon such revised estimate.
(c) Following the end of each Computation Year, Landlord shall deliver
to Tenant a statement of amounts payable under Section 2.2(a) above for such
Computation Year prepared by an independent certified public accountant
designated by Landlord. Such statement shall accurately reflect the total
Operating Expenses and Tenant's Proportionate Share thereof. If such statement
shows an amount owing by Tenant that is less than the payments for such
Computation Year previously made by Tenant, and if no event of default (as
defined below) is outstanding beyond any applicable cure periods at the time
such statement is delivered, Landlord shall credit such amount to the next
payment(s) of Rent falling due under this Lease, or, if such statement is
prepared after the Expiration Date, Landlord shall refund such amount to Tenant
within thirty (30) days of such determination. If such statement shows an amount
owing by Tenant that is more than the estimated payments for such Computation
Year previously made by Tenant, Tenant shall pay the deficiency to Landlord
within thirty (30) days after delivery of such statement. The respective
obligations of Landlord and Tenant under this Section 2.2(c) shall survive the
Expiration Date, and, if the Expiration Date is a day other than the last day of
a Computation Year, the adjustment in Tenant's Proportionate Share pursuant to
this Section 2.2(c) for the Computation Year in which the Expiration Date occurs
shall be
5
<PAGE>
prorated in the proportion that the number of days in such Computation Year
preceding the Expiration Date bears to 365.
(d) With respect to calendar year 1994, the parties acknowledge that
Tenant shall be solely liable for Tenant's Proportionate Share of Increased
Operating Expenses for the entire calendar year. The parties further acknowledge
------
that neither Tenant nor Tenant's predecessor in the Premises has been making
monthly payments with respect to Operating Expenses for calendar year 1994. The
reconciliation of all such amounts shall occur in the first quarter of 1995;
Landlord shall submit to Tenant a statement of amounts due showing the total
Operating Expenses and Tenant's Proportionate Share thereof for 1994, along with
a statement of Base Year Operating Expenses. If Tenant's Proportionate Share of
Increased Operating Expenses for 1994 does not exceed $10,000.00, Tenant shall
reimburse Landlord for the entire stated amount within thirty (30) days of
Tenant's receipt of all such reconciliation information. If Tenant's
Proportionate Share of Increased Operating Expenses for 1994 shall exceed
$10,000.00, Tenant shall repay such sum to Landlord in four (4) equal
installments along with the next four (4) payments of Gross Rent due hereunder.
(e) In the event the Building is less than ninety-five percent (95%)
occupied during any year of the Term including the Base Year, an adjustment
shall be made in computing Operating Expenses for such year so that Operating
Expenses shall be computed as though the Building had been ninety-five percent
(95%) occupied during such year.
(f) Landlord shall have the same remedies for a default in the payment
of Tenant's Proportionate Share of Increased Operating Expenses as for a default
in the payment of Base Rent.
Section 2.3. Late Charges and Taxes. In the event any monthly payment
----------- ----------------------
of Gross Rent is not paid within ten (10) days of the date it is due, Tenant
agrees to pay a late charge of five percent (5%) of the amount of the Gross Rent
payment due; provided, however, that for the first two (2) times that Tenant's
payment of Gross Rent is not paid within ten (10) days of the date it is due,
Landlord shall provide Tenant with written notice of such missed payment and
three (3) days to cure same before imposing the late charge stated hereinabove.
Tenant shall also pay to Landlord at the time that Gross Rent is delivered, all
sales, use and excise taxes imposed or levied against the Gross Rent (excluding
any income or franchise taxes of Landlord) or any other payment lawfully
required to be made by Tenant by any governmental authority having jurisdiction
thereover, but only when such payment becomes due and payable. Any and all of
such late charges and taxes shall constitute Additional Rent due and payable
hereunder, as defined in Article III.
Section 2.4. Modified Full-Service Rent; Direct Payment of Utilities.
------------ -------------------------------------------------------
Tenant's payment of Rent, as required hereunder, is a full-service rent, subject
to the following requirement: Tenant
6
<PAGE>
shall be solely responsible for the payment of all utility expenses incurred by
---
or from the Premises throughout the Term. Accordingly, the Leased Premises shall
be separately metered for all such utilities at Tenant's sole cost and expense,
subject to Landlord's supervision of the installation of such meters.
Section 2.5. Payment Without Notice or Demand. Except as otherwise
----------- --------------------------------
expressly provided in this Lease, all Rent shall be paid to Landlord without
notice or demand, and without counterclaim, offset, deduction, abatement,
suspension, deferment, diminution or reduction, by reason of, and the
obligations of Tenant under this Lease shall not be affected by, any
circumstance or occurrence whatsoever.
Section 2.6. Place of Payment. All payments of Rent shall be made and
----------- ----------------
paid by Tenant to Landlord c/o CB Commercial Real Estate Group, Inc., Management
Services, 533 South Fremont Avenue, Los Angeles, California 90071-1798, or at
such other place as Landlord may, from time to time, designate in writing, and
such Rent shall come due and be paid in each instance on the date it is due. All
Rent shall be payable in the current legal tender of the United States, as the
same is then by law constituted, and may, at Tenant's option, and upon Tenant's
request, be paid by wire transfer to an account designated in advance by
Landlord. Any extension, indulgence or waiver granted or permitted by Landlord
in the time, manner or mode of payment of Rent, upon any occasion, shall not be
construed as a continuing extension or waiver, and shall not preclude Landlord
from demanding strict compliance herewith.
ARTICLE III
-----------
Definitions
-----------
SECTION 3.1. Definitions. For the purposes of this Article and other
----------- -----------
Sections of this Lease:
(a) The term "Additional Rent" shall mean any monies in addition to
Gross Rent that may be due and payable by Tenant under the terms of this Lease,
including, without limitation, late charges, sales tax, any other use or excise
tax imposed or levied against Gross Rent (excluding any income or franchise
taxes of Landlord), or any other payment required to be made by Tenant by any
governmental authority having jurisdiction thereover.
(b) The term "Base Expenses" shall mean the amount of Operating
Expenses for the Base Year.
(c) The term "Base Year" shall mean calendar year 1993.
(d) The term "Common Area" shall mean all real or personal property
owned by Landlord for the common (nonexclusive) use of Landlord and the tenants
of the Building, and their
7
<PAGE>
employees, guests and invitees including, but not limited to, sidewalks,
landscaping areas, delivery areas, parking areas, entrance ways, lobby areas,
elevators, stairways, hallways shared by more than one tenant and all lavatories
shared by more than one tenant.
(e) The term "Computation Year" shall mean each consecutive twelve
(12) month period commencing January 1 of each year during the Term following
the Base Year.
(f) The term "Gross Rent" shall mean the total of Base Rent and
Tenant's Proportionate Share of Increased Operating Expenses.
(g) The term "Operating Expenses" shall mean all expenses paid or
incurred by Landlord or on Landlord's behalf in respect of the repair,
maintenance and operation of the Property or the Building and the curbs,
sidewalks and plazas adjoining the same, including, without limitation, the
following: (i) salaries, wages, medical, surgical, union and general welfare
benefits (including, without limitation, group life insurance) and pension
payments of employees of Landlord or of the management company employed by
Landlord who are engaged in the repair, operation and maintenance of the
Property or the Building; (ii) payroll taxes, workmen's compensation, uniforms
and related expenses for such employees; (iii) the cost of all charges for gas,
electricity, heat, ventilation, air conditioning, water, sewer, garbage
collection, and other utilities furnished to the Building (including, without
limitation, the Common Area), and to the Property, together with any taxes on
such utilities, but excluding any utilities separately metered to Tenant or any
other tenant of the Building; (iv) the cost of painting; (v) the cost of all
charges for rental interruption, business interruption, casualty and liability
insurance with regard to the Property or the Building and maintenance or
operation thereof, as well as the costs of commercially reasonable insurance
deductibles; (vi) the cost of rental supplies (including, without limitation,
cleaning supplies), tools, materials and equipment, and sales and other taxes
thereon; (vii) depreciation of hand tools and other movable equipment used in
repair, maintenance or operation of the Building in accordance with generally
accepted accounting principles consistently applied; (viii) the cost of all
charges for window and other cleaning and janitorial and security services; (ix)
amounts charged to Landlord by contractors for services, materials and supplies
furnished in connection with the operation, maintenance or repair of any part of
the Building or the heating, air conditioning, ventilating, plumbing,
electrical, elevator, and other systems of the Building; (x) repairs and
replacements made by Landlord at its expense; (xi) alterations and improvements
to the Building or the Property made by reason of laws and requirements of any
public authorities or the requirements of insurance companies, including any
changes to the Building required by the Americans with Disabilities Act (ADA);
(xii) management fees (which shall encompass all of such manager's and all of
Landlord's overhead expenses); (xiii) the cost
8
<PAGE>
of any capital improvements to the Building or of any machinery or equipment
installed in the Building which is made or becomes operational, as the case may
be, after the Commencement Date, and which has the effect of reducing the
expenses which otherwise would be included in the Operating Expenses, to the
extent of the lesser of: (A) such cost, amortized over the useful life of the
improvement, machinery or equipment or (B) the amount of such reduction in the
Operating Expenses, all in accordance with generally accepted accounting
principles consistently applied; (xiv) reasonable legal, accounting and other
professional fees incurred in connection with the operation, maintenance and
management of the Property or the Building (to the extent not already included
in subsection (g) (xii) above); (xv) refurbishing, recarpeting or redecorating
any portion of the Property or the Building, except for the leased premises of
other tenants; (xvi) maintenance of the Building monument sign; (xvii) 24
hour/day, 365 days/year manned security for the Building and the Property;
(xviii) Taxes; and (xix) all other charges properly allocable to the repair,
operation and maintenance of the Building or the Property in accordance with
generally accepted accounting principles. In all instances, "Operating Expenses"
passed through hereunder shall be offset by any refunds to Landlord or
reimbursements of expenses already paid by Landlord.
Notwithstanding anything to the contrary set forth above, "Operating
Expenses" shall not include the following: (1) costs related to the business
affairs of Landlord, e.g. preparation of Landlord's income tax returns; (2)
Landlord's general and administrative overhead; (3) costs reimbursed by other
tenants; (4) costs for services, utilities and other benefits provided to other
tenants or occupants but which are not provided to Tenant; (5) ground lease
rental, if applicable; (6) any expenses for repairs or maintenance which are
reimbursed through warranties or service contracts; (7) fines, penalties and
late payment charges, except to the extent such costs are attributable to
Tenant's acts or omissions; (8) the cost of sculptures, paintings and other
objects of art, to the extent they exceed government-mandated levels; (9) costs
incurred by Landlord for the repair of damage to the Building to the extent that
Landlord is reimbursed therefor by insurance proceeds; (10) leasing commissions,
space preparation costs (including repairs and alterations), attorneys' fees,
permit fees, inspection charges and other costs and expenses incurred in
connection with negotiations or disputes with, or the preparation of new
premises for, present or prospective tenants or other occupants of the Building;
(11) the cost of any capital improvements which do not meet the requirements set
forth in subsection (g) (xiii) above; (12) legal fees and costs incurred by
Landlord necessitated by or resulting from (but only to the extent necessitated
by or resulting from) any default [i] by Landlord under this Lease or any other
lease of any portion of the Building or [ii] by any other tenant of the
Building; (13) any costs representing an amount paid to any person or
corporation related to Landlord (or any partner thereof) which is in excess of
the fair market value of such services if said services had been rendered by
9
<PAGE>
an unrelated third party; (14) interest, principal, points and fees on any debt
instrument encumbering all or any portion of the Building or the Property,
except financing costs relating to items subject to depreciation or amortization
under subsection (g) (xiii) above; (15) advertising and promotional expenses for
the Building; (16) legal fees and costs arising from any claims, disputes or
potential disputes in connection with litigation or arbitration pertaining to
Landlord, the Building or the Property, which is otherwise unrelated to Tenant
or Tenant's use or occupancy of the Premises and the Property; and (17) costs
necessitated by or resulting from (but only to the extent necessitated by or
resulting from) the gross negligence or willful misconduct of Landlord, its
agent and employees.
(h) The term "Rent" shall mean all or some of Base Rent, Tenant's
Proportionate Share of Increased Operating Expenses and Additional Rent.
(i) The term "Taxes" shall mean: (1) the aggregate amount for which
the Building and the Property are assessed by the county in which same are
located or any city or municipal body having jurisdiction for the purpose of
imposition of real estate taxes; and (2) any expenses reasonably incurred by
Landlord in contesting such taxes or assessments, or the assessed value of the
Building or the Property, which expenses shall be allocated to the calendar year
to which such expenses relate. Any special or other assessment or levy which is
imposed upon the Property or the Building shall be added to the amount so
determined and shall be deemed to be included within the term "Taxes" for the
purpose hereof. Any such special or other assessment may be paid by Landlord in
one lump sum or in accordance with any permitted amortization schedule;
provided, however, that if Landlord is entitled to amortize the amount due but
elects not to, Tenant shall only be liable in each Computation Year for that
amount which is achieved by multiplying (x) the amount of Tenant's Proportionate
Share of the total assessment by (y) a fraction whose numerator is 1 and whose
denominator is the number of years over which the assessment may lawfully be
amortized. If at any time during the Term of this Lease, the methods of taxation
prevailing on the date hereof shall be altered, such additional or substitute
tax, assessment, levy, imposition or charge shall be deemed to be included
within the term "Taxes" for the purposes hereof. Under no circumstances shall
the term "Taxes" be deemed to include any taxes which relate to the income of
Landlord.
Notwithstanding anything to the contrary set forth above, Tenant shall
not be required to pay that portion of any increase in Taxes which result from a
reassessment due to the sale, transfer or other change in ownership of the
Building or the Property, which sale, transfer or other change of ownership
occurs during the Term of this Lease, excluding any option period.
---------
(j) The term "Tenant's Proportionate Share" shall mean 49.35%, which
is computed by a fraction, the numerator of which is
10
<PAGE>
the rentable square feet of the Premises (52,874), and the denominator of which
is all of the rentable square feet in the Building (107,147).
Section 3.2. Audit Right. Upon not less than seven (7) business days'
------------ -----------
prior written notice to Landlord and during regular business hours of Landlord,
but not more often than once during any calendar year, Tenant and its authorized
representatives (who, if not Tenant employees, must be employees of an
independent certified public accounting firm) shall have the right to audit, at
Tenant's sole cost and expense, Landlord's books and records relating to any
determination of Rent (including Operating Expenses) within six (6) months after
Tenant's receipt thereof. Any dispute between the parties hereto with respect to
such statement shall be resolved by binding arbitration conducted in Los Angeles
County, California, in accordance with the then existing rules of the American
Arbitration Association, with the arbitrator(s) to be an independent certified
public accountant in good standing; judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof.
Notwithstanding the foregoing, there shall not be deemed to be such a dispute
unless Tenant notifies Landlord thereof within six (6) months after Tenant's
receipt of such statement. Notwithstanding the foregoing, if, as a result of
another tenant's audit, conducted by an independent certified public accounting
firm, the disputed issue has already been resolved, Tenant shall accept the
results of that audit.
If there is a dispute and it is resolved through arbitration or otherwise,
upon resolution thereof, Landlord shall, at its option, promptly return to
Tenant any amount agreed or determined to have been overpaid to Landlord or
apply such amount to the payment(s) of Rent next coming due hereunder, and
Tenant shall promptly pay to Landlord any amount agreed or determined to be due.
All costs incurred by the arbitrator(s) shall be paid by the party or parties as
determined by the arbitrator(s). Notwithstanding any contrary provision herein,
if total Operating Expenses are determined to have been overstated in such
statement by more than five percent (5%), Landlord shall promptly reimburse to
Tenant any reasonable audit fees paid by Tenant to its independent certified
public accountant in connection with seeking the return of the overpayment in
question; otherwise, Tenant shall promptly reimburse to Landlord any reasonable
audit fees paid by Landlord to its independent certified public accountant in
connection with the foregoing audit by Tenant or its representatives.
ARTICLE IV
----------
Acceptance of Premises; Tenant Improvement Reimbursement;
---------------------------------------------------------
Interconnection; Roof Access
----------------------------
Section 4.1. Acceptance of Premises. Tenant accepts the Premises in
------------ ----------------------
their "AS IS" condition, subject to all applicable laws, ordinances, rules,
regulations and requirements. Tenant
11
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acknowledges that: (a) it has been advised by Landlord to satisfy itself with
respect to the condition of the Premises (including, without limitation, the
HVAC, electrical, plumbing and other mechanical installations, fire sprinkler
systems, security and environmental aspects) and the present and future
suitability of the Premises for Tenant's intended use; (b) Tenant has made such
inspection and investigation as it deems necessary with reference to such
matters and assumes all responsibility therefor as the same relate to Tenant's
occupancy of the Premises and the Term of this Lease; and (c) neither Landlord
nor any of Landlord's agents has made any oral or written representations or
warranties with respect to the condition, suitability or fitness of the Premises
other than as may be specifically set forth in this Lease, and Landlord shall
not be liable for any latent or patent defect therein. Tenant further
acknowledges that neither Landlord nor any of Landlord's agents has agreed to
undertake any alterations or additions or perform any maintenance or repair of
the Leased Premises.
Section 4.2 [INTENTIONALLY DELETED.]
-----------
Section 4.3. Interconnection. Tenant is hereby granted the non-exclusive
------------ ---------------
right (in conjunction with Landlord and other tenants of the Building) to access
and use space in the Building's communications conduits. Tenant shall notify
Landlord at least 72 hours in advance of the installation of any wires or cables
in such conduits or the addition to, deletion of, or material servicing of any
installed wires or cables, and Landlord shall have the right but not the
obligation to monitor Tenant's work in this regard. Tenant's access to such
conduits shall be limited to (a) access from the floors on which the Premises
are located and (b) access from the Building roof, subject to the provisions of
Section 4.4 below.
Tenant may use such wires or cables for any lawful purpose connected with a
permitted use of the Premises, so long as there is no resulting adverse effect
on, or interference with, the Building's physical plant, operations or any of
its mechanical systems.
All costs of installing and maintaining any and all fiber optic cables,
coax cables and other wire communication paths located within or in conjunction
with the Building's communications conduits shall be borne by Tenant. Any damage
to the Building caused by Tenant's installation, maintenance or removal of such
cables shall immediately be repaired by Tenant at its sole expense. Further,
Tenant shall be solely liable for any damage or injury caused to any other
tenant of the Building or the operations of such tenant as a result of Tenant's
installation, maintenance or removal of such cables. All reasonable costs
incurred by Landlord as a direct result of such installation, maintenance and/or
removal shall be reimbursed to Landlord by Tenant upon receipt of demand
therefor, along with reasonable supportive documentation evidencing such costs.
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Section 4.4. Roof Access. Tenant is hereby granted the non-exclusive
------------ -----------
right (in conjunction with Landlord and other tenants of the Building) to access
and use the Building roof for the purpose of installing and maintaining
communications antennae (and related equipment), and for no other purpose. All
antennae and related equipment belonging to Tenant and installed on the Building
roof as of the date of this Lease are hereby approved by Landlord; provided,
however, that if a structural engineer determines that the presence of any such
antennae or equipment materially adversely impacts the structural integrity of
the Building, Landlord can require the removal or relocation of such antennae or
equipment at Tenant's expense. Tenant's access to the roof shall be limited to
business hours on business days, except in an emergency or upon reasonable
advance notice to Landlord, and such access shall be for the sole purpose of
installing, maintaining and/or repairing the antennae situated thereon and the
equipment related thereto. Tenant shall have the right to use the equipment room
presently situated on the roof at no additional rental, provided that if it is
reasonably necessary for another tenant (or tenants) of the Building to use the
equipment room in order to install and/or maintain its antenna(e) and/or related
equipment on the roof, Tenant shall permit such tenant (or tenants) reasonable
shared access to the equipment room. Tenant shall provide Landlord with a copy
of all keys and/or security codes to the equipment room, and Landlord shall be
entitled to enter the equipment room at any time as is reasonably necessary.
If Tenant determines that it needs to install an additional antenna on the
roof of the Building, Tenant shall so notify Landlord in writing, with an
explanation of the basis for the need and the specifications of the antenna
Tenant proposes to install. If Landlord determines in its reasonable discretion
that adequate space is available on the roof to meet Tenant's needs (on a first
come-first served basis), and no other tenant of the Building will be adversely
impacted by such installation, then Landlord shall grant Tenant the right to
install such antenna. All costs of installing and maintaining all such antennae
shall be borne by Tenant. Any damage to the Building caused by Tenant's
installation, maintenance or removal of such antennae shall be immediately
repaired by Tenant at its sole expense. Further, Tenant shall be solely liable
for any damage or injury caused to any other tenant of the Building or the
operations of such tenant as a result of Tenant's installation, maintenance or
removal of such antennae. All reasonable costs incurred by Landlord as a direct
result of such installation, maintenance and/or removal shall be reimbursed to
Landlord by Tenant upon receipt of demand therefor, along with reasonable
supportive documentation evidencing such costs.
Notwithstanding anything to the contrary set forth above, if (i) another
tenant of the Building desires to install an antenna on the roof of the Building
and (ii) there is inadequate space to install such antenna and (iii) Tenant is
not then utilizing one or more of its then-existing antennae and (iv) Tenant,
upon reasonable
13
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notice from Landlord, cannot reasonably justify the need for maintaining such
unused antennae on the roof, then Landlord shall be entitled, at its expense, to
remove the unused (and unjustified) antennae so as to accommodate the other
tenant's antenna (and related equipment).
Section 4.5. Estoppel Certificate. Immediately following the Commencement
------------ --------------------
Date, Tenant shall execute an estoppel certificate in favor of Landlord in the
form attached hereto as Exhibit "D".
ARTICLE V
---------
Insurance
---------
Section 5.1. Tenant's Insurance.
------------ ------------------
(a) Tenant will carry and maintain, at its sole cost and expense, the
following types of insurance, in the amounts specified and in the form
hereinafter provided:
(i) Public Liability and Property Damage. Tenant shall, at all
------------------------------------
times during the Term of this Lease, maintain Commercial General Liability
(CGL) insurance, including coverage against bodily injury and property
damage in or about the Building and the Premises with limits of liability
of not less than Two Million Dollars ($2,000,000) per occurrence. Landlord
shall be named as an additional insured on all such policies maintained by
Tenant.
(ii) Tenant's Property. Tenant shall maintain, at all times
-----------------
during the Term of this Lease, fire and extended coverage insurance
covering all of Tenant's Property from time to time in or upon the
Premises, and any Alterations made therein by Tenant. All such insurance
shall be in an amount not less than one hundred percent (100%) of their
full replacement cost as determined from time to time during the Term,
providing protection against perils included within the standard California
form of fire and extended coverage insurance policy, together with
insurance against sprinkler damage, vandalism and malicious mischief. Any
policy proceeds from such insurance shall be held in trust by Tenant's
insurance company for the repair, reconstruction and restoration or
replacement of the property damaged or destroyed unless this Lease shall be
terminated under the terms hereof. Landlord shall be named as an additional
insured and loss payee as its interest may appear under such policy.
(iii) Worker's Compensation. Worker's compensation insurance as
---------------------
required by law.
(iv) Other Insurance. Such other insurance coverage as may be
---------------
required by applicable law.
14
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(b) All policies of insurance required in Section 5.1(a) shall be
issued in form reasonably acceptable to Landlord by insurance companies
qualified to do business in California with a general policy holder's rating of
not less than A and a financial rating of not less than XI as rated in the most
recently published edition of Best's Insurance Reports. Each and every such
policy:
(i) shall be issued in the name of Tenant and any other
parties in interest from time to time designated in writing by notice from
Landlord to Tenant;
(ii) shall be for the mutual and joint benefit and protection
of Landlord and Tenant and any such other parties in interest;
(iii) shall (or a certificate thereof shall) be delivered to
each of Landlord and any such other parties in interest within ten (10)
days prior to the Commencement Date and thereafter within thirty (30) days
prior to the expiration of each policy, and, as often as any such policy
shall expire or terminate, renewal or additional policies shall be procured
and maintained in like manner and to like extent;
(iv) shall contain a provision that the insurer will give to
Landlord and such other parties in interest at least thirty (30) days'
notice in writing in advance of any cancellation, termination or lapse, or
the effective date of any reduction in the amounts of insurance;
(v) shall be written as a primary policy which does not
contribute to and is not in excess of coverage which Landlord may carry;
(vi) shall contain a provision that Landlord and any such other
parties in interest, although named as an additional insured, shall
nevertheless be entitled to recover under said policies for any loss
occasioned to it, or its servants, agents and employees by reason of the
negligence of Tenant;
(vii) shall be issued in compliance with Section 5.2 below; and
(viii) shall not have a deductible greater than $5,000.
(c) Any insurance provided for in Section 5.1(a) may be maintained by
means of a policy or policies of blanket insurance, covering additional items or
locations or insureds, provided, however, that: (i) Landlord and any other
parties in interest from time to time designated by Landlord to Tenant shall be
named as an additional insured thereunder as its interest may appear; (ii) the
coverage afforded Landlord and any such other parties in interest will not be
reduced or diminished by reason of the use of such
15
<PAGE>
blanket policy of insurance; and (iii) the requirements set forth in this
Article V are otherwise satisfied.
(d) Tenant agrees to permit Landlord at all reasonable times to
inspect the policies of insurance of Tenant with respect to the Premises for
which policies or copies thereof are not delivered to Landlord.
(e) At Landlord's request, from time to time, Tenant's insured
property shall be subject to review or appraisal at Tenant's expense by someone
reasonably acceptable to both Tenant and Landlord for the purpose of determining
one hundred percent (100%) replacement cost, so that insurance coverage can be
maintained as required hereunder; provided, however, that such review or
appraisal cannot be requested by Landlord more frequently than once every three
(3) years.
(f) In the event that Tenant fails to provide evidence of insurance
required to be provided by Tenant hereunder, prior to commencement of the Term,
and thereafter during the Term, within fifteen (15) days prior to the expiration
date of any such coverage, Landlord shall be authorized (but not required) to
procure such coverage after ten (10) days' notice to Tenant (except that no
notice shall be required if the insurance is about to lapse or has lapsed) in
the amounts stated with all costs thereof to be chargeable to Tenant and payable
pursuant to Article XII hereof upon submission of written invoice therefor.
(g) If either party fails to carry any insurance required of it under
this Lease, such failure shall automatically be deemed to be a covenant and
requirement by such party to self-insure to the full extent of such required
coverage, with full waiver of subrogation.
(h) These insurance requirements are subject to change in the event
any mortgagee of Landlord requires different insurance coverages or limits of
liability. In such event, the requirements of such mortgagee shall control.
Section 5.2. Mutual Waiver of Subrogation. Each party shall procure an
------------ ----------------------------
appropriate clause in, or endorsement on, each of its policies for fire or
extended coverage insurance covering the Premises or the Building or personal
property, fixtures or equipment and improvements located thereon or therein,
pursuant to which the insurance company waives any subrogation rights or
consents to a waiver of right of recovery against the other party, and each
party hereby agrees to waive any subrogation rights and further agrees that it
will not make any claim against or seek to recover from the other party for any
loss or damage to its property or the property of others to the extent covered
by such fire or extended coverage insurance.
16
<PAGE>
ARTICLE VI
----------
Damage or Destruction
---------------------
Section 6.1. Destruction of Premises. If, during the Term hereof, the
----------- -----------------------
Premises are damaged by reason of fire or other casualty, Tenant shall give
immediate notice to Landlord. If the Premises shall at any time be damaged or
destroyed by fire or other casualty, Landlord shall promptly repair or rebuild
the same at Landlord's expense in order to restore the Premises to a condition
of at least equal value to that existing immediately prior to such occurrence
and as nearly similar to it in character as shall be practicable and reasonable.
However, if the damage or destruction is caused by the gross negligence or
willful misconduct of Tenant, its contractors, agents, employees or invitees,
Tenant shall promptly reimburse Landlord for all costs incurred by Landlord in
restoring the Premises, upon submission of reasonable supporting documentation
evidencing Landlord's expenses.
Rent payable hereunder shall abate following such event of damage or
destruction until restoration is substantially completed, in the proportion that
the rentable square footage of the area of the Premises rendered unusable bears
to the entire rentable square footage of the Premises; provided, however, that
Rent shall not abate hereunder if the damage or destruction is caused by the
gross negligence or willful misconduct of Tenant, its contractors, agents,
employees or invitees.
Notwithstanding the foregoing, if the Premises shall be so damaged by fire
or otherwise that the cost of restoration shall exceed fifty percent (50%) of
the replacement value thereof, exclusive of foundations, immediately prior to
such damage, Landlord may, within thirty (30) days of such damage, give notice
to Tenant of its election to terminate this Lease and, subject to the further
provisions of this Article, this Lease shall cease and come to an end on the
date of the expiration of ten (10) days from the delivery of such notice with
the same force and effect as if such date were the date hereinbefore fixed for
the expiration of this Lease, and the Rent shall be apportioned and paid to the
time of such termination (subject to the Rent abatement provisions set forth in
the immediately preceding paragraph). In such event, the entire insurance
proceeds in respect of the Premises (except for any insurance proceeds
specifically pertaining to Tenant's personal property) shall be and remain the
outright property of Landlord.
Notwithstanding anything to the contrary contained above in this Section
6.1, if all or any part of the Premises or the Building is damaged or destroyed,
and if Landlord is unable, within thirty (30) days following such damage or
destruction, to provide Tenant with a good faith, reasonable assurance that
Tenant can be given reasonable use of, and access to, a substantially-repaired
and restored Premises ("Access") within one hundred twenty (120) days after the
date of the damage or destruction, Tenant may terminate this Lease upon ten
(10) days' written notice to
17
<PAGE>
Landlord, given at any time within the earlier of sixty (60) days following such
damage or destruction or thirty (30) days following Landlord's notice to Tenant
that Landlord is unable to deliver the above-described assurance to Tenant. In
the event that this Lease is not cancelled and Landlord fails to provide Tenant
with Access within such one hundred twenty (120) day period, extended by any
delays caused by Tenant, Tenant may cancel this Lease upon five (5) days'
written notice to Landlord (which notice shall include a statement detailing the
failure to achieve "Access"). In the event that Landlord is able to provide
Tenant with Access within such five (5) day notice period, Tenant's right to
cancel this Lease shall cease, and this Lease shall continue pursuant to all the
terms and conditions set forth herein.
Section 6.2. Destruction of Building If, during the Term hereof, the
------------ -----------------------
Building is substantially damaged or destroyed by fire or other casualty, then
Landlord may terminate this Lease by giving Tenant notice to such effect within
thirty (30) days after the date of the casualty. The Term of this Lease shall
terminate and expire upon the thirtieth (30th) day after said notice is given,
and Tenant shall vacate the Premises and surrender the same to Landlord on or
before said date. In the alternative, Landlord shall have the right within
thirty (30) days after the occurrence of such casualty to notify Tenant that
Landlord shall repair the damaged portion of the Building or rebuild the
Building, as the case may be. In such event, Rent shall abate to the extent and
during the period for which the Premises are rendered untenable for Tenant's
purposes as a result of such casualty. Notwithstanding the foregoing, if the
damage or destruction is caused by the gross negligence or willful misconduct of
Tenant, its contractors, agents, employees or invitees, (i) Rent shall not abate
hereunder and (ii) Tenant shall promptly reimburse Landlord for all costs
incurred by Landlord in restoring the Building, upon submission of reasonable
supportive documentation evidencing Landlord's expenses. In the event such
damage or destruction takes place during the last two (2) years of the Term,
Landlord shall have the right to terminate this Lease by giving notice to Tenant
as aforesaid, notwithstanding the fact that Landlord may rebuild the Building or
repair the damage thereto. The Building shall be deemed substantially damaged or
destroyed if the cost of repair and restoration is equal to thirty percent (30%)
or more of the then replacement cost of the Building.
Notwithstanding anything to the contrary contained above in this Section
6.2, if the Building is substantially damaged or destroyed, and if Landlord is
unable, within thirty (30) days following such damage or destruction, to provide
Tenant with a good faith, reasonable assurance that Tenant can be given Access
within one hundred eighty (180) days after the date of the damage or
destruction, Tenant may terminate this Lease upon ten (10) days' written notice
to Landlord, given at any time within the earlier of sixty (60) days following
such damage or destruction or thirty (30) days following Landlord's notice to
Tenant that Landlord is unable to deliver the above-described assurance to
Tenant. In the event
18
<PAGE>
that this Lease is not cancelled and Landlord fails to provide Tenant with
Access within such one hundred eighty (180) day period, extended by any delays
caused by Tenant, Tenant may cancel this Lease upon five (5) days' written
notice to Landlord, which notice shall include a statement detailing the failure
to achieve "Access". In the event that Landlord is able to provide Tenant with
Access within such five (5) day notice period, Tenant's right to cancel this
Lease shall cease, and this Lease shall continue pursuant to all the terms and
conditions set forth herein.
In the event of any conflict between the provisions of Sections 6.1 and
6.2, the provisions of Section 6.2 shall supersede.
With respect to both Sections 6.1 and 6.2, Landlord agrees to use every
reasonable effort to expedite its property damage evaluation process so that
notification to Tenant hereunder can be provided within a period shorter than
the referenced thirty (30) day period.
ARTICLE VII
-----------
Maintenance and Repair
----------------------
Section 7.1. Tenant's Obligations. Throughout the Term, Tenant shall
------------ --------------------
not commit, suffer or permit any damage or waste to the Common Area, and, at its
expense, but subject to any obligations of Landlord expressly set forth herein,
Tenant will care for, maintain and repair the Premises, the fixtures and
appurtenances therein and Tenant's Property, subject to ordinary wear and tear.
Tenant shall be responsible for all repairs, interior and exterior, structural
and non-structural, ordinary and extraordinary, in and to the Premises and the
Building and the facilities and systems thereof, the need for which arises out
of: (a) the performance or existence of Alterations; (b) the installation, use
or operation of Tenant's Property in the Premises; (c) the moving of Tenant's
Property in or out of the Building to the extent such movement causes damage; or
(d) the act, misuse or neglect of Tenant or any of its subtenants or its or
their employees, agents, contractors or invitees. In addition, Tenant, at its
expense, shall promptly replace all scratched, damaged and broken doors and
glass in and about the Premises, subject to ordinary wear and tear, and shall
be responsible for (i) all repairs, maintenance and replacement of wall and
floor coverings in the Premises, (ii) the repair and maintenance of all sanitary
and electrical fixtures therein, and (iii) all maintenance and repairs ordinary
or extraordinary, which may be necessary (in Landlord's discretion) in and
within the Premises in order to keep same in the condition existing as of the
Commencement Date of this Lease, ordinary wear and tear excepted. Tenant shall
promptly make, at Tenant's expense, all repairs in or to the Premises for which
Tenant is responsible. Any repairs required to be made by Tenant to the
mechanical, electrical, sanitary, heating, ventilating, air conditioning, or
other systems of the Building
19
<PAGE>
shall be performed only by contractor(s) designated by Landlord. All such
repairs shall be performed at such times and in such manner as shall cause the
least interference with the operation of the central systems of the Building and
the use of the Building by other occupants. All such repairs shall be subject to
the supervision and control by Landlord, for which Landlord may charge Tenant a
reasonable fee. Any other repairs in or to the Building and the facilities and
systems thereof for which Tenant is responsible shall be performed by Landlord
at Tenant's expense.
Section 7.2. Landlord's Obligations for Common Area and for Building.
------------ -------------------------------------------------------
Landlord shall keep and maintain the Common Area of the Building and the
Building (except as otherwise set forth in Section 7.1 above) and its systems
and facilities serving the Premises in good working order, condition and repair,
and shall make all repairs, structural and otherwise, interior and exterior, as
and when needed in or about the Common Area and the Building, except for those
repairs for which Tenant is responsible pursuant to any of the provisions of
this Lease. Landlord shall have no liability to Tenant, nor shall Tenant's
covenants and obligations hereunder be reduced or abated in any manner
whatsoever, by reason of any inconvenience, annoyance, interruption or injury to
business arising from Landlord's making any repairs or changes which Landlord is
required or permitted by this Lease, or required by law, to make in or to any
portion of the Building or the Premises, or in or to the fixtures, equipment or
appurtenances of the Building or the Premises; provided, however, that Landlord
shall not make any changes or repairs that materially interfere with the
operation of Tenant's business unless such changes or repairs are required by
law.
Landlord and Tenant hereby acknowledge that in an emergency situation, if
Landlord does not respond promptly to a request by Tenant for emergency repairs,
Tenant shall be entitled to make such emergency repairs and invoice Landlord for
the reasonable costs thereof (supported by detailed documentation). Tenant's
invoices shall be payable by Landlord within thirty (30) days of Landlord's
receipt of the invoices. For purposes of this paragraph, the term "emergency"
shall mean those situations which, in Tenant's good faith judgment, represent a
threat to the life, health, safety or property of Tenant or Tenant's employees
of such significance that immediate steps are necessary to remove the threat.
Section 7.3. Floor Loads; Noise and Vibration. Tenant shall not place a
------------ --------------------------------
load upon any floor of the Premises which exceeds the load per square foot which
such floor was designed to carry or which is allowed by law. Business machines
and mechanical equipment belonging to Tenant which cause noise or vibrations
that may be transmitted to the structure of the Building or to the Premises to
such a degree as to be objectionable to Landlord or other tenants shall, at
Tenant's expense, be placed and maintained by Tenant in settings of cork, rubber
or spring-type vibration eliminators, or shall be addressed through such other
method(s) as
20
<PAGE>
are reasonably acceptable to Landlord, in each case in a manner sufficient to
eliminate such noise or vibration.
ARTICLE VIII
------------
Alterations by Tenant
---------------------
Tenant shall have the right, at any time and from time to time during the
Term of this Lease to make, at its sole cost and expense, and without any right
to receive reimbursement from Landlord in respect thereof, any alterations or
improvements to the Premises or any part thereof, excluding structural changes
(the "Alterations"), subject, however, to the following conditions:
(a) All such Alterations shall be performed at Tenant's sole cost and
expense using contractors reasonably approved in advance by Landlord.
(b) No Alterations shall be undertaken until (i) Landlord shall have
approved Tenant's plans and specifications in writing, which approval shall not
be unreasonably withheld; (ii) all contractors have satisfied all reasonable
insurance requirements established by Landlord; and (iii) Tenant shall have
procured all permits, licenses and other authorizations, if any, required for
the lawful and proper undertaking thereof. All Alterations shall be constructed
in compliance with applicable law. Landlord agrees to join in the application
for such permission or authorization whenever such action is necessary, at
Tenant's expense.
(c) All Alterations when completed shall be of such a nature as not to
reduce or otherwise adversely affect the value of the Premises, nor to diminish
the general utility thereof or change the general character thereof or of the
Building.
(d) Landlord shall withhold approval of the Alterations if same shall,
in Landlord's reasonable discretion, adversely affect (i) other tenants in the
Building; or (ii) the Operating Expenses, unless Tenant agrees in writing to pay
such additional Operating Expenses incurred, on demand.
(e) Tenant shall cooperate with Building management with respect to
the Alterations being constructed. If Tenant's Alterations or the process of
constructing same shall unreasonably disturb Landlord or other tenants of the
Building, Landlord shall have the right in its sole discretion to (i) halt the
construction until the problem is satisfactorily resolved or (ii) require
appropriate changes to the construction process or procedures.
(f) Tenant shall give Landlord not less than ten (10) days' advance
written notice of the commencement of any Alterations so that Landlord may post
and record notices of non-responsibility as allowed by applicable law.
21
<PAGE>
Provided Tenant otherwise complies in all respects with the terms set forth
above in this Article VIII, with the attached rules and regulations, and with
any other applicable provision of this Lease, Landlord hereby approves in
concept the following Alterations and consents in concept to Tenant's
construction thereof: (i) the relocation of the technical operations center and
the build-out of additional office space on the Basement Floor; (ii) the
renovation and build-out of existing and additional office space on the First
Floor; and (iii) the removal of a portion of the existing vault and the
installation of a technical/editing facility and additional offices on the Third
Floor.
ARTICLE IX
----------
Landlord's and Tenant's Property
--------------------------------
Section 9.1. Landlord's Property. All fixtures, improvements and
------------ -------------------
appurtenances attached to or built into the Premises on the Commencement Date or
during the Term, whether or not by or at the expense of Tenant, shall be and
remain a part of the Premises, shall be deemed the property of Landlord and
shall not be removed by Tenant except as set forth herein. Further, any personal
property in the Premises on the Commencement Date, unless installed and paid for
by Tenant, shall be and shall remain Landlord's property and shall not be
removed by Tenant.
Section 9.2. Tenant's Property. All movable partitions, business and
------------ -----------------
trade fixtures, machinery and equipment, communications equipment and office
equipment, whether or not attached to or built into the Premises, which are
installed in the Premises by or for the account of Tenant without expense to
Landlord and which can be removed without structural damage to the Building, and
all furniture, furnishings and other articles of movable personal property owned
by Tenant and located in the Premises (hereinafter collectively referred to as
"Tenant's Property") shall be and shall remain the property of Tenant and may be
removed by Tenant at any time during the Term of this Lease. Tenant's Property
shall be deemed to include Tenant's machinery which is bolted or otherwise
affixed to the floor or the ceiling of the Premises, and any wiring related
thereto. In the event Tenant's Property is so removed, Tenant shall repair or
pay the cost of repairing any damage to the Premises or to the Building
resulting from the installation or removal thereof. Any equipment or other
property for which Landlord shall have granted any allowance or credit to Tenant
shall not be deemed to have been installed by or for the account of Tenant
without expense to Landlord, shall not be considered Tenant's Property and shall
be deemed the property of Landlord. On or before the Expiration Date, or the
date of any earlier termination hereof, or within five (5) days after such
earlier termination date, Tenant, at its expense, shall remove from the Premises
all of Tenant's Property (except such items thereof as Landlord shall have
expressly permitted to remain, which property shall become the property of
Landlord).
22
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Tenant shall pay prior to delinquency any and all taxes or fees levied upon or
with respect to Tenant's Property or any of it.
ARTICLE X
---------
Compliance with Law
-------------------
Section 10.1 Obligations of Tenant. Tenant shall, during the Term of
------------ ---------------------
this Lease, at its sole cost and expense, comply with all valid laws,
ordinances, regulations, orders and requirements of any governmental authority,
including any tenant requirements with regard to the Americans with Disabilities
Act (ADA), which may be applicable to the Premises or the use, manner of use or
occupancy thereof, whether or not the same shall interfere with the use or
occupancy of the Premises arising from: (a) Tenant's use of the Premises; (b)
the manner or conduct of Tenant's business or operation of its installations,
equipment or other property therein; (c) any cause or condition created by or at
the instance of Tenant; or (d) breach of any of Tenant's obligations hereunder,
whether or not such compliance requires work which is structural or non-
structural, ordinary or extraordinary, foreseen or unforeseen; and Tenant shall
pay all the costs, expenses, fines, penalties and damages which may be imposed
upon Landlord by reason or arising out of Tenant's failure to fully and promptly
comply with and observe the provisions of this Section. Tenant shall give prompt
notice to Landlord of any notice it receives of the violation of any law or
requirement of any public authority with respect to the Premises or the use or
occupation thereof. Tenant shall not be deemed to be responsible for structural
changes to the Building which changes are required (by law, ordinance,
regulation or the like) of all similarly situated office buildings.
Section 10.2. Right to Contest. Tenant shall have the right, by
------------ ----------------
appropriate legal proceedings in the name of Tenant or Landlord or both, but at
Tenant's sole cost and expense, to contest the validity of any law, ordinance,
order, regulation or requirement. If compliance therewith may legally be held in
abeyance, Tenant may postpone compliance until final determination under any
such proceedings.
Section 10.3 Rules and Regulations. Tenant shall also comply with
------------ ---------------------
all rules and regulations attached hereto as Exhibit "E" and any reasonable
subsequent amendments made by Landlord thereto. Landlord shall not be liable to
Tenant for the failure by other tenants of the Building to comply with the rules
and regulations. Landlord shall not enforce the rules and regulations in such a
way as to materially interfere with the conduct of Tenant's business at the
Premises, as permitted under Section 1.3 of this Lease.
Section 10.4. Hazardous Material. Except as to such materials as are
-------------- ------------------
necessary for Tenant's operations in the Premises (and only to the extent
necessary), Tenant shall not, without the prior written consent of Landlord,
cause or permit, knowingly or
23
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unknowingly, any "Hazardous Material" (hereinafter defined) to be brought or
remain upon, kept, used or disposed of at the Premises. Under no circumstances
may Tenant manufacture, discharge, leak, treat or emit any Hazardous Material in
or about the Premises. As used in this Lease, "Hazardous Material(s)" shall mean
any hazardous, toxic or radio-active substance, material, matter or waste which
is or becomes regulated by any federal, state or local law, ordinance, order,
rule, regulation, code or any other governmental restriction or requirement, and
shall include asbestos, petroleum products and the terms "Hazardous Substance"
and "Hazardous Waste" as defined in the Comprehensive Environmental Response
Compensation and Liability Act ("CERCLA"), as amended, 42 U.S.C. 9601 et seq.
and the Resource Conservation and Recovery Act ("RCRA"), as amended, 42 U.S.C.
6901 et seq. As to such permitted materials described above, and in the event
Landlord should consent in writing to Tenant bringing, using, storing or
treating any other Hazardous Material in or upon the Premises, Tenant shall
strictly obey and adhere to any and all federal, state and local laws,
ordinances, orders, rules, regulations, codes and any other governmental
restrictions or requirements, including, but not limited to, CERCLA and RCRA,
which in any way regulate, govern or impact Tenant's possession, use, storage or
disposal of said Hazardous Materials. Tenant's indemnities under this Lease
shall include, without limitation, any loss or damage to Landlord resulting from
Tenant's breach of any of its duties and obligations as set forth in this
Section 10.4. This shall include, without limitation, costs incurred in
connection with any investigation, remedial action or removal work. Tenant
further agrees that it shall not make or permit the emission of any dust,
sweepings, dirt, fumes or odors in violation of any federal, state or local law,
ordinance, order, rule, regulation, code or any other governmental restriction
or requirement.
On or before January 1, 1995, and not less than annually thereafter,
Tenant shall provide Landlord with a list of all Hazardous Materials maintained
or used at the Premises (excluding standard office supplies in limited
quantities), the approximate quantities of each, and copies of any documents
reasonably related thereto, including without limitation any permits required
under applicable law for the use, storage or disposal of such Hazardous
Materials.
ARTICLE XI
----------
No Encumbrance by Tenant
------------------------
Section 11.1. No Liens. Tenant agrees that it will not create, permit
------------- --------
or suffer the imposition of any lien, charge or encumbrance upon the Premises or
any part thereof except liens, charges and encumbrances created by Landlord.
Section 11.2. Mechanics', Materialmen's and Laborers' Liens. Tenant agrees
------------- ---------------------------------------------
that it will make full and prompt payment of all sums
24
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necessary to pay for the cost of repairs, alterations, improvements, changes or
other work done by Tenant to the Premises, including without limitation any
Alterations, and further agrees to indemnify, defend and hold Landlord harmless
from and against any and all such costs and liabilities incurred by Tenant, and
against any and all mechanics', materialmen's or laborers' liens arising out of
or from such work or the cost thereof which may be asserted, claimed or charged
against the Premises or the Building or the Property. Notwithstanding anything
to the contrary in this Lease, the interest of Landlord in the Premises shall
not be subject to liens for improvements made by or for Tenant, whether or not
the same shall be made or done in accordance with any agreement between Landlord
and Tenant, and it is specifically understood and agreed that in no event shall
Landlord or the interest of Landlord in the Premises be liable for or subjected
to any mechanics', materialmen's or laborers' liens for improvements or work
made by or for Tenant. (Notwithstanding the foregoing, Tenant shall not be
liable for any mechanics' or other liens which arise solely due to the improper
withholding by Landlord of funds owed to mechanics at, or suppliers of, the
Building, or in connection with other work performed for or on behalf of
Landlord which is not connected to Tenant or to the Premises.) All persons
dealing with Tenant are hereby placed upon notice of this provision. In the
event any notice or claim of lien shall be asserted of record against the
interest of Landlord in the Premises or the Building or the Property on account
of or growing out of any improvement or work done by or for Tenant, or any
person claiming by, through or under Tenant, for improvements or work the cost
of which is the responsibility of Tenant, Tenant agrees to have such notice of
claim of lien cancelled and discharged of record as a claim against the interest
of Landlord in the Premises or the Building or the Property (either by payment
or bond as permitted by law) within fifteen (15) days after notice to Tenant by
Landlord. In the event Tenant shall fail to do so, Tenant shall be considered in
default under this Lease; and without otherwise limiting Landlord's default
remedies hereunder, Landlord may, but shall not be obligated to, pay or bond
off such lien and charge all expenses thereof to Tenant, which Tenant shall be
required to pay immediately upon demand therefor. Other than the fifteen (15)
day cure period referenced above in this Section 11.2, there shall be no cure
periods applicable to Tenant's covenants under this Section 11.2.
ARTICLE XII
-----------
Right of Landlord to Perform Tenant's Covenants
-----------------------------------------------
Section 12.1. Payment or Performance. Landlord shall have the right at
------------- ----------------------
any time following the expiration of any applicable cure period (or without
notice in case of emergency or in case any fine, penalty, interest or cost may
otherwise be imposed or incurred) to make any payment or perform any act
required of Tenant under any provision in this Lease, and in exercising such
right, to incur necessary and incidental costs and expenses, including
25
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reasonable counsel fees. Landlord shall use reasonable efforts to notify Tenant
after any such payment is made or any such act is performed hereunder. Nothing
herein shall imply any obligation on the part of Landlord to make any payment or
perform any act required of Tenant, and the exercise of the right to do so shall
not constitute a release of any obligation or a waiver of any default.
Section 12.2. Reimbursement. All payments made and all costs and expenses
------------ -------------
incurred in connection with any exercise of the right set forth in Section 12.1
shall be reimbursed by Tenant to Landlord within ten (10) days after receipt of
a bill setting forth the amounts so expended together with interest at the
maximum rate allowed by applicable law from the respective dates of the making
of such payments or the incurring of such costs and expenses. Any payment so
made by Landlord shall be treated as Additional Rent owed by Tenant.
ARTICLE XIII
------------
Availability of Public Utilities and Other Services
---------------------------------------------------
Section 13.1. Heat, Ventilation and Air Conditioning. Except as otherwise
------------ --------------------------------------
provided herein, Landlord shall maintain the heating, ventilating and air
conditioning systems serving the Premises and shall furnish, subject to Section
2.4 above, heat, ventilating and air conditioning in the Premises as may be
reasonably required for reasonably comfortable occupancy of the Premises during
business hours of business days. "Business Hours" shall mean from 8:00 a.m. to
6:00 p.m. Mondays through Fridays, and 8:00 a.m. to 1:00 p.m. on Saturdays.
"Business Days" shall mean all days except Saturdays (after 1:00 pm.), Sundays
and days observed by the federal government or the State of California as legal
holidays. If Tenant shall require such services at any other time, Landlord
shall , subject to Section 2.4 above, furnish the same if adequate notice is
provided, as hereinafter set forth: (i) to obtain such extra services for a
Monday, Tuesday, Wednesday, Thursday or Friday Business Day evening, Tenant must
notify Landlord at least two (2) hours before the end of such Business Day; (ii)
to obtain such extra services on a Saturday, Sunday or holiday, Tenant must
notify Landlord at least four (4) hours before the end of the previous Business
Day (excluding Saturday).
Section 13.2. Electricity and Telephone. Tenant's use of electrical
------------ -------------------------
energy in the Premises does not currently and shall not, at any time in the
future, exceed the capacity of any of the electrical conductors and equipment in
or otherwise serving the Premises. In order to insure that such capacity is not
exceeded and to avert possible adverse effects upon the Building's electric
service, Tenant shall not, without Landlord's prior written consent in each
instance, connect appliances or equipment to the Building, to the electric
distribution system or the telephone system of the Building, or make any
alteration or addition to the electric
26
<PAGE>
distribution system of the Premises existing as of the Commencement Date. In the
event Tenant should require electrical capacity in excess of its current usage
which would exceed the capacity of the electrical conductors and equipment
serving the Building, then it shall be Tenant's sole responsibility to pay any
expenses incurred by Landlord to increase such electrical capacity.
Section 13.3. Elevator; Water. The use of any elevators within the
------------ ---------------
Building shall be subject to such reasonable rules and regulations as may be
promulgated by Landlord. Provided that Landlord, the cleaning contractor and
their respective agents and employees shall have access to the Premises at all
reasonable times and shall have the right to use, without charge therefor, all
light, power and water in the Premises reasonably required to clean the
Premises, Landlord Shall furnish adequate hot and cold water to the Building for
drinking, lavatory and cleaning purposes.
Section 13.4. Janitorial. Landlord shall cause the Premises, including
------------ ----------
the exterior and interior of the windows thereof, to be cleaned in a manner
standard to comparable buildings located in the Burbank Media District
Redevelopment Area. Landlord shall not be required to clean any portions of the
Premises used for the preparation, serving or consumption of food or beverages,
training rooms, data processing or reproducing operations, computer rooms or
private lavatories or toilets. Tenant shall pay to Landlord on demand the cost
incurred by Landlord for: (a) extra cleaning work in the Premises required
because of (i) misuse or neglect on the part of Tenant or subtenants or its or
their employees or visitors, (ii) the use of portions of the Premises for
special purposes requiring greater or more difficult cleaning work than office
areas, (iii) interior glass partitions or unusual quantity of interior glass
surfaces and (iv) non-building standard materials or finishes installed by
Tenant or at its request; (b) removal from the Premises and the Building of any
refuse and rubbish of Tenant in excess of that ordinarily accumulated in
business office occupancy or at times other than Landlord's standard cleaning
times; and (c) the use of the Premises by Tenant other than during Business
Hours on Business Days.
Section 13.5. Right to Stop Service. Landlord reserves the right,
------------ ---------------------
without any liability to Tenant and without affecting Tenant's covenants and
obligations hereunder, to stop service of the heating, air conditioning,
electric, sanitary, elevator or other Building systems serving the Premises, or
to stop any other services required of Landlord under this Lease, whenever and
for so long as may be necessary, by reason of accidents, emergencies, blackouts,
strikes or the making of repairs or changes which Landlord is required by this
Lease or by law to make or in good faith deems necessary, by reason of
difficulty in securing proper supplies of fuel, steam, water, electricity, labor
or supplies, or by reason of any other cause beyond Landlord's reasonable
control. In the event such stoppage of service under this Section 13.5 continues
for more than one business day, Tenant's Base Rent shall
27
<PAGE>
abate thereafter (proportionately, if less than the entire Premises is affected)
until such time as such service(s) is restored.
Notwithstanding the foregoing, in the event as a result of such stoppage of
service Tenant is prevented from conducting, and does not conduct, its business
in any portion of the Premises for a period in excess of ten (10) consecutive
---
business days due to the fact that the remainder of the Premises is insufficient
to allow Tenant to effectively conduct its business therein, then, even though
the stoppage of service is only partial, for so long as Tenant does not conduct
it business in such remaining portion, Tenant's Base Rent shall abate for such
remaining portion effective as of the tenth (10th) consecutive business day
referenced above. Upon reoccupation of the Premises by Tenant thereafter, the
Base Rent allocable to such reoccupied portion of the Premises shall be payable
by Tenant from the date such reoccupation occurs.
Notwithstanding anything to the contrary set forth above, if the stoppage
of service continues for thirty-five (35) consecutive days, Tenant shall be
entitled to terminate this Lease upon notice to Landlord given anytime within
ten (10) days of the expiration of said thirty-five (35) day period.
ARTICLE XIV
-----------
Assignment and Subletting
-------------------------
Section 14.1. Conditions to Assignment and Subletting. If Tenant shall
------------ ---------------------------------------
desire to assign this Lease or sublet all or any portion of the Premises, it
shall first submit in writing to Landlord:
(a) the name and address of the proposed assignee or sublessee;
(b) the terms and conditions of the proposed assignment or subletting;
(c) the nature and character of the business of the proposed assignee
or sublessee; and
(d) banking, financial and other credit information relating to the
proposed assignee or sublessee reasonably sufficient to enable Landlord to
determine the proposed assignee's or sublessee's financial capability.
Section 14.2. [INTENTIONALLY DELETED.]
------------
Section 14.3. Landlord's Consent. If the nature and character of
------------- ------------------
the business of the proposed sublessee or assignee, and the proposed use and
occupancy of the Premises, or any applicable portion thereof, by the proposed
assignee or sublessee, is in keeping and compatible with the dignity and
character of the
28
<PAGE>
Building, and if any Alterations to be made to the Premises are performed in
accordance with Article VIII hereof, and if the financial capability of the
proposed sublessee or assignee is commensurate with the obligations to be
undertaken by the proposed sublessee or assignee as reasonably determined by
Landlord, then Landlord agrees not to unreasonably withhold its consent to any
such proposed assignment or subletting, provided it shall be on the terms
communicated to and approved by Landlord. Notwithstanding Landlord's consent to
an assignment or subletting, Tenant shall remain fully liable on this Lease and
shall not be released from performing any of the terms, covenants and conditions
of this Lease. In addition to the foregoing requirements, any assignment or
subletting hereunder shall be conditioned upon the assignee or sublessee fully
assuming and agreeing to be bound by all of the terms, covenants and conditions
of this Lease. Further, any rent or other consideration realized by Tenant under
any such assignment or subletting in excess of the Gross Rent payable hereunder,
after deducting normal and reasonable expenses incurred in subleasing the
Premises or assigning this Lease, shall be shared equally between Landlord and
Tenant.
Section 14.4. [INTENTIONALLY DELETED.]
------------
Section 14.5. Assignment Without Consent. Notwithstanding anything to the
------------- --------------------------
contrary set forth above in this Article XIV, Tenant shall have the right,
without the consent of Landlord, to arrange for editorial space subleases which
are in each instance (i) less than 800 square feet in size and (ii) less than
six (6) months in duration; provided that Tenant shall remain fully liable on
this Lease and shall not be released thereby from performing any of the terms,
covenants and conditions of this Lease.
Section 14.6. Corporate or Partnership Transfers. Any transfer or
------------ ----------------------------------
assignment, whether made in one (i) transaction or in a series of transactions,
which results in a transfer or assignment of fifty percent (50%) or more of the
voting interests or control of the present partners or shareholders of Tenant,
shall constitute an assignment of this Lease for purposes hereof, subject to the
requirements and conditions of this Article XIV.
Section 14.7. Prohibition Against Pledge or Encumbrance. Notwithstanding
------------ -----------------------------------------
the foregoing provisions of this Article XIV or any other provision of this
Lease, under no circumstances may Tenant mortgage, pledge, encumber or
involuntarily assign (whether by operation of law, legal process or otherwise)
this Lease, the Premises, or Tenant's leasehold estate. Any violation of the
preceding sentence or any assignment or subletting not in strict conformance
with the provisions of this Article shall constitute a breach of this Lease
which shall entitle Landlord to terminate this Lease and exercise all of the
remedies provided to Landlord if such breach has not been cured to Landlord's
satisfaction within five (5) business days of Tenant's receipt of Landlord's
notice identifying same.
29
<PAGE>
ARTICLE XV
----------
Subordination and Attornment
----------------------------
Section 15.1. Subordination. This Lease, and all rights of Tenant
------------ -------------
hereunder, are and shall be subject and subordinate to all ground leases and
master leases of the Property or the Building now or hereafter existing and to
all mortgages (including modifications and renewals thereof) which may now or
hereafter affect the Property or the Building or any of such leases so long as
Tenant is provided with a reasonably acceptable non-disturbance agreement. This
Section 15.1 shall be self-operative and no further instrument of subordination
shall be required. In confirmation of such subordination, Tenant shall promptly
execute, acknowledge and deliver any instrument that Landlord, any lessor under
any such lease(s) or any holder of such mortgage(s) may reasonably request to
evidence such subordination; provided, however, that Tenant is concurrently
provided with a reasonably acceptable non-disturbance agreement. If Tenant fails
to execute, acknowledge or deliver any such instrument within ten (10) days
after request therefor in compliance with this Section 15.1, Tenant hereby
irrevocably constitutes and appoints Landlord as Tenant's attorney-in-fact,
coupled with an interest, to execute and deliver any such instruments for and on
behalf of Tenant. Any lease to which this Lease is subject and subordinate is
hereinafter referred to as a "Superior Lease" and the lessor of a Superior Lease
is hereinafter referred to as a "Superior Lessor"; and any mortgage to which
this Lease is subject and subordinate is hereinafter referred to as a "Superior
Mortgage" and the holder of a Superior Mortgage is hereinafter referred to as a
"Superior Mortgagee."
For the purposes of this Lease, a reasonably acceptable non-disturbance
agreement shall be one which states substantially as follows: that in the event
any mortgage or deed of trust to which this Lease is or is to become subordinate
is foreclosed or a deed in lieu of foreclosure is given to the mortgagee or
beneficiary or in the event any ground lease to which this Lease is or is to
become subordinated is terminated, then, in each case, this Lease shall not be
terminated, cut off or foreclosed, nor shall the rights and possession of Tenant
hereunder be disturbed, so long as Tenant shall not be in default in the payment
of Rent and any other sums due hereunder or otherwise be in default under any of
the terms of this Lease.
Landlord hereby confirms to Tenant that as of the date of this Lease, there
is no deed of trust or mortgage encumbering this property .
Section 15.2. Notice to Superior Lessor and Mortgagee. If any act or
------------ ---------------------------------------
omission of Landlord would give Tenant the right, immediately or after the lapse
of a period of time, to cancel this Lease or to claim a partial or total
eviction, Tenant shall not exercise such right until: (a) Tenant has given
written notice to Landlord specifying with particularity such act or omission
and the
30
<PAGE>
corrective action required and giving Landlord a period of thirty (30) days
(except that if such act or omission cannot be cured in thirty (30) days, such
additional time as shall be necessary for Landlord, in the exercise of
reasonable diligence, to cure same) to cure such act or omission; and (b) if
Landlord has failed to cure at the expiration of said thirty (30) day or longer
period if necessary, Tenant shall give written notice of such act or omission to
each Superior Mortgagee and Superior Lessor whose name and address shall
previously have been furnished to Tenant giving the Superior Mortgagee or
Superior Lessor a reasonable period of not less than thirty (30) days for
remedying such act or omission, and such Superior Mortgagee or Superior Lessor
shall have failed to remedy same; provided that if such act or omission cannot
be cured in thirty (30) days, Superior Mortgagee or Superior Lessor shall have
such additional time as shall reasonably be necessary under the circumstances,
provided that such Superior Mortgagee or Superior Lessor shall, with due
diligence, give Tenant notice of its intention to, and commence and continue to,
remedy such act or omission.
Section 15.3. Attornment. If any Superior Lessor or Superior Mortgagee
------------ ----------
shall succeed to the rights of Landlord hereunder, whether through possession
or foreclosure action or delivery of a new lease or deed, and shall assume all
obligations of Landlord hereunder thereafter arising, then, at the request of
such party (hereinafter referred to as "Successor Landlord"), Tenant shall
attorn to and recognize each Successor Landlord as Tenant's landlord under this
Lease and shall promptly execute and deliver any instrument such Successor
Landlord may reasonably request to confirm such attornment. Upon such
attornment, this Lease shall continue in full force and effect as a direct lease
between Successor Landlord and Tenant on all the terms, conditions, and
covenants as set forth in this Lease except that the Successor Landlord shall
not: (a) be liable for any previous act or omission of Landlord under this
Lease; (b) be subject to any offset which theretofore shall have accrued to
Tenant against Landlord; (c) be bound by any modification of this Lease made
during the time Successor Landlord's Superior Lease was in effect or Successor
Landlord's Superior Mortgage was of record, unless such modification shall have
been previously approved in writing by such Successor Landlord; or (d) be bound
by any prepayment of Rent more than one month in advance. Further, upon such
attornment, Landlord shall be released from any obligation thereafter arising
hereunder.
ARTICLE XVI
-----------
Non-liability and Indemnification
---------------------------------
Section 16.1. Non-liability of Landlord. Neither Landlord nor any
------------ -------------------------
beneficiary, partner, officer, agent, servant or employee of Landlord, nor any
Superior Lessor nor any Superior Mortgagee, shall be liable to Tenant for any
loss, injury or damage to Tenant or to any other person, or to its or their
property; provided,
31
<PAGE>
however, that if such injury, damage or loss is caused by the gross negligence
or willful misconduct of Landlord (or Successor Landlord, as the case may be),
its agents, employees or contractors, then Landlord (or Successor Landlord, as
the case may be) shall be liable therefor. Further, neither Landlord, any
Superior Lessor or Superior Mortgagee, nor any partner, director, officer,
agent, servant or employee of Landlord (or any Successor Landlord) shall be
liable: (a) for any such damage caused by other tenants or persons in, upon or
about the Building, or caused by operations in construction of any private,
public or quasi-public work; or (b) for consequential damages arising out of any
loss of use of the Premises or any equipment or facilities therein by Tenant or
any person claiming through or under Tenant, unless caused by the gross
negligence or willful misconduct of Landlord (or Successor Landlord, as the case
may be), its agents, employees or contractors. Neither Landlord nor any
Successor Landlord shall be liable for any damage to Tenant's Property or
injuries caused by water from bursting or leaking pipes, waste water about the
Property, or otherwise, unless caused by the gross negligence or willful
misconduct of Landlord (or Successor Landlord, as the case may be), its agents,
employees or contractors; or from an intentional or negligent act of any co-
tenant or occupant of the property surrounding the Property, or any other
person; or by fire, hurricane or other acts of God; or by riots, criminals or
vandals; or from any other cause; all such risks hereby fully assumed by Tenant.
Neither Landlord nor any Successor Landlord shall be required to furnish any
services or facilities to, or to make any repairs to or replacements or
alterations of, the Premises where such services, facilities, repairs,
replacements or alterations are necessitated by the negligence or misconduct of
Tenant, its agents and employees.
Section 16.2. Indemnification by Tenant. Tenant shall indemnify and
------------ -------------------------
hold Landlord and all Superior Lessors and Superior Mortgagees and their
respective partners, directors, officers, agents, employees and beneficiaries
harmless from and against any and all claims from or in connection with: (a) the
conduct or management of the Premises or any business therein, or any work or
thing whatsoever done, or any condition created in or about the Premises during
the Term of this Lease, or during the period of time prior to the Commencement
Date during which Tenant was the occupant of the Premises, unless caused by the
gross negligence or willful misconduct of Landlord (or Successor Landlord, as
the case may be), its agents, employees or contractors; (b) any act, omission or
negligence of Tenant or any of its subtenants or licensees or its or their
partners, directors, officers, agents, employees, invitees or contractors; (c)
any accident, injury or damage whatsoever occurring in, at or upon the Premises,
unless caused by the gross negligence or willful misconduct of Landlord (or
Successor Landlord, as the case may be), its agents, employees or contractors;
and (d) any breach or default by Tenant in the full and prompt payment and
performance of Tenant's obligations under this Lease; together with all costs,
expenses and liabilities incurred in or in connection with each such claim or
action or
32
<PAGE>
proceeding brought thereon including, without limitation, all reasonable
attorneys' fees and expenses. In case any action or proceeding is brought
against Landlord or Superior Lessor or Superior Mortgagee or its or their
partners, directors, officers, agents or employees by reason of any such claim,
Tenant, upon notice from Landlord or such Superior Lessor or Superior Mortgagee,
shall resist and defend such action or proceeding at its sole cost and expense
by counsel designated by Landlord or such Superior Lessor or Superior Mortgagee
at its or their sole option.
Section 16.3. Independent Obligations; Force Majeure. Except with respect
------------- --------------------------------------
to the abatement of rent provisions and the Lease termination provisions
expressly set forth elsewhere in this Lease, the obligations of Tenant hereunder
shall be in no way affected, impaired or excused, nor shall Landlord have any
liability whatsoever to Tenant, because: (a) Landlord is unable to fulfill, or
is delayed in fulfilling any of its obligations under this Lease by reason of
strike, other labor trouble, governmental preemption of priorities or other
controls in connection with a national or other public emergency or shortages of
fuel, supplies, labor or materials, Acts of God or any other cause, whether
similar or dissimilar, beyond Landlord's reasonable control; provided that under
no circumstances may such delay be excused for more than sixty (60) days;
provided, further, that if Landlord's inability to fulfill its obligations under
this Lease shall continue for more than sixty (60) days, and Tenant's operations
are materially impaired by such delay, Tenant shall be entitled to terminate
this Lease upon notice to Landlord given anytime within ten (10) days of the
expiration of said sixty (60) day period; or (b) of any failure or defect in the
supply, quantity or character of electricity or water furnished to the Premises,
by reason of any requirement, act or omission of the public utility or others
serving the Building with electric energy, steam, oil, gas or water, or for any
other reason whether similar of dissimilar, beyond Landlord's reasonable
control. Tenant shall not hold Landlord liable for any latent defect in the
Premises, the Building or the Property, nor shall Landlord be liable for injury
or damage to person or property caused by fire or theft, or resulting from the
operation of elevators, heating or air conditioning or lighting apparatus, or
from falling plaster, or from steam, gas, electricity, rain, dampness or water
which may leak or flow from or through any part of the Building, or from the
pipes, appliances or plumbing work of the same, unless such injury or damage is
caused by the gross negligence or willful misconduct of Landlord, its agents,
employees or contractors. Nothing in the foregoing sentence shall be deemed to
excuse Landlord from its obligation to repair any latent defect which poses any
danger to the Building or the Premises.
33
<PAGE>
ARTICLE XVII
------------
Default by Tenant; Landlord's Remedies
--------------------------------------
Section 17.1. Events of Default. Tenant shall be in default under this
------------- -----------------
Lease if any one or more of the following events shall occur:
(a) Tenant shall fail to pay any installment of Gross Rent or any
portion thereof or any Additional Rent as and when the same shall become due and
payable, and such default shall continue for a period of five (5) days after the
same is due; provided, however, that on the first two (2) occasions during the
Term when Tenant shall fail to make such payment, Landlord shall give Tenant
written notice of such failure and three (3) days to cure before such failure to
pay shall constitute an event of default hereunder;
(b) Tenant shall default in the performance of or compliance with any
of the other terms or provisions of this Lease, and such default shall continue
for a period of thirty (30) days after the giving of written notice thereof from
Landlord to Tenant, or, in the case of any such default which cannot, with due
diligence, be cured within thirty (30) days, Tenant shall fail, after the giving
of such notice, to proceed promptly and with due diligence within such thirty
(30) day period to commence curing the default and prosecute same to completion
prior to forty-five (45) days after the delivery of notice (it being intended
that as to a default not susceptible of being cured with due diligence within
thirty (30) days, the time within which such default may be cured shall be
extended for such period not to exceed forty-five (45) days as may be necessary
to permit the same to be cured with due diligence);
(c) Tenant shall assign, transfer, mortgage or encumber this Lease or
sublet the Premises in a manner not permitted by Article XIV;
(d) Tenant shall abandon the Premises;
(e) Tenant shall consent to the appointment of a receiver, trustee or
liquidator of all or a substantial part of Tenant's assets, or be adjudicated
bankrupt or insolvent, or file a voluntary petition in bankruptcy, or admit in
writing inability to pay debts as they become due, or make a general assignment
for the benefit of creditors, or file a petition or answer seeking
reorganization or arrangement with creditors or to take advantage of any
insolvency law, or file any answer admitting the material allegations of a
petition filed against Tenant in any bankruptcy, reorganization or insolvency
proceedings, or any action shall be taken by Tenant for the purpose of effecting
any of the foregoing, or any order, judgment or decree shall be entered upon an
application of a creditor of Tenant by a court of competent jurisdiction
approving a petition seeking appointment of a receiver or trustee of all or a
substantial part of Tenant's assets and such
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order, judgment or decree shall continue and stay in effect for any period of
sixty (60) consecutive days.
Section 17.2 Remedies Upon Default.
------------ ----------------------
(a) Termination. If an event of default occurs, Landlord shall
-----------
have the right with or without notice or demand, except to the extent notice or
demand is required by applicable law, immediately (after expiration of any
applicable grace period specified herein) to terminate this Lease, and at any
time thereafter to recover possession of the Premises or any part thereof and
expel and remove therefrom Tenant and any other person occupying the same, by
any lawful means, and again repossess and enjoy the Premises without prejudice
to any of the remedies that Landlord may have under this Lease, or at law or
equity by reason of Tenant's default or of such termination. Upon any such
termination, Tenant shall immediately quit and peacefully surrender the Premises
to Landlord.
(b) Continuation After Default. Even though Tenant has breached this
--------------------------
Lease and/or abandoned the Premises, this Lease shall continue in effect for so
long as Landlord does not terminate Tenant's right to possession under Section
17.2(a) above, and Landlord may enforce all of its rights and remedies under
this Lease, including (but without limitation) the right to recover Rent as it
becomes due, and Landlord, without terminating this Lease, may exercise all of
the rights and remedies of a landlord under Section 1951.4 of the Civil Code of
the State of California or any successor code section. Acts of maintenance,
preservation or efforts to lease the Premises or any portion thereof or the
appointment of a receiver upon application of Landlord to protect Landlord's
interest under this Lease shall not constitute an election to terminate Tenant's
right to possession.
To the extent permitted by applicable law, Landlord may, but shall not
be obligated to, relet the Premises or any part thereof, in the name of Landlord
or otherwise, for such term or terms and on such conditions as Landlord in its
discretion may determine, and may collect and receive the rents therefor. If
Landlord does relet the Premises, Landlord shall credit Tenant with the net
rents received by Landlord from such reletting, such net rents to be determined
by first deducting from the gross rents; as and when received by Landlord, the
expenses incurred or paid by Landlord in re-entering the Premises and in
securing possession thereof, as well as the expenses of reletting, including,
without limitation, the alteration and preparation of the Premises for new
tenants, brokers' commissions, attorneys' fees and all other expenses properly
chargeable against the Premises and the rental therefrom. It is hereby
understood that any such reletting may be for a period shorter or longer than
the remaining Term of this Lease but in no event shall Tenant be entitled to
receive any excess of such net rents over the sum payable by Tenant to Landlord
hereunder, nor shall Tenant be entitled in any suit for the collection of
damages pursuant hereto to a credit in respect of any
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net rents from a reletting, except to the extent that such rents are actually
received by Landlord. Landlord shall in no way be responsible or liable for any
failure to relet the Premises or any part thereof or for any failure to collect
any rents due upon any such reletting.
Section 17.3. Damages Upon Termination. Should Landlord terminate this
------------- ------------------------
Lease pursuant to the provisions of Section 17.2(a) above, Landlord shall have
all the rights and remedies of a landlord provided by Section 1951.2 of the
Civil Code of the State of California or any successor code section. Upon such
termination, in addition to any other rights and remedies to which Landlord may
be entitled under applicable law, Landlord shall be entitled to recover from
Tenant: (i) the worth at the time of award of the unpaid Rent which had been
earned at the time of termination; (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 Rent loss that Tenant proves
could have been reasonably avoided; (iii) the worth at the time of award of the
amount by which the unpaid Rent for the balance of the Term after the time of
award exceeds the amount of such Rent loss that Tenant proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Landlord
for all the detriment proximately caused by Tenant's failure to perform its
obligation under this Lease or which, in the ordinary course of things, would be
likely to result therefrom, including, without limitation, the expenses incurred
or paid by Landlord in repossessing and reletting the Premises (if not
previously paid out of the proceeds of any reletting of the Premises),
including, without limitation, the alteration and preparation of the Premises
for the new tenants, brokers' commissions and attorneys' fees. The "worth at the
time of award" of the amounts referred to in clauses (i) and (ii) above shall be
computed with interest at the maximum rate allowed by applicable law. The "worth
at the time of award" of the amount referred to in clause (iii) above shall be
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of the award plus one percent (1%).
For purposes of computing unpaid Rent which would have accrued and become
payable under this Lease pursuant to the provisions of this Section 17.3, unpaid
Rent shall consist of the sum of:
(1) the total Base Rent for the balance of the Term, plus
(2) a computation of Tenant's Proportionate Share of Increased
Operating Expenses for the balance of the Term, the assumed amount for the
calendar year of the default and each future calendar year in the Term to be
equal to Tenant's Proportionate Share of Increased Operating Expenses for the
calendar year prior to the year in which default occurs compounded at a per
annum rate equal to the mean average rate of inflation for the preceding five
(5) calendar years as determined by the United States Department of
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Labor, Bureau of Labor Statistics Consumer Price Index (All Urban Consumers, all
items, 1982-84 = 100) for the Los Angeles - Anaheim - Riverside, California
Area. If such Index is discontinued or revised, the average rate of inflation
shall be determined by reference to the index designated as the successor or
substitute index by the government of the United States.
Section 17.4 Holdover. If Tenant remains in possession of the Premises
------------ --------
or any part thereof after the expiration or sooner termination of the Term or
any extension thereof without Landlord's consent, Tenant shall become a tenant
at sufferance and shall pay Landlord a rent computed at 150% of the Rent paid by
Tenant in the last month prior to the expiration or termination of the Lease,
which shall be payable on a per diem basis. Notwithstanding that Landlord may
allow Tenant to continue in possession after the expiration or sooner
termination of this Lease, neither that nor the provisions of this Section 17.4
shall constitute a waiver of any of Landlord's rights under this Section or this
Lease. Further, notwithstanding the payment of Rent by Tenant and acceptance
thereof by Landlord as provided herein, Tenant shall be in continuing breach of
this Lease at any time or during any period in which Tenant is a holdover
tenant.
If Tenant remains in possession of the Premises or any part thereof after
the expiration or sooner termination of the Term or any extension thereof with
----
Landlord's express consent, Tenant shall become a month-to-month tenant under
this Lease and shall pay Landlord a rent computed at 125% of the Rent paid by
Tenant in the last month prior to the expiration or termination of the Lease.
Such month-to-month tenancy shall be terminable by either party on thirty (30)
days' written notice to the other party.
Section 17.5 Remedies Cumulative All rights, privileges and remedies of
------------ -------------------
Landlord hereunder or at law or in equity shall be cumulative and not
alternative to the extent permitted by applicable law.
ARTICLE XVIII
-------------
Attorneys' Fees
---------------
In the event either party places the enforcement of this Lease, or any part
thereof, or the collection of any Rent due or to become due hereunder, or
recovery of the possession of the Premises in the hands of an attorney, or files
suit upon the same, the prevailing party shall recover its reasonable attorneys'
fees and court costs, including those which may be incurred on appeal.
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ARTICLE XIX
-----------
Eminent Domain
--------------
Section 19.1. Taking. If the whole of the Building or the Premises or if
------------- ------
any part of the Building or the Property which materially affects Tenant's use
and occupancy of the Premises shall be taken by condemnation or in any other
manner for any public or quasi-public use or purpose, this Lease and the Term
and estate hereby granted shall terminate as of the date of vesting of title in
the condemning authority, and Rent shall be prorated and adjusted as of such
date. Landlord shall promptly provide Tenant with notice of any such proposed
taking upon receipt of definitive information with respect thereto.
Section 19.2 Award. Landlord shall be entitled to receive the entire
------------ -----
award or payment in connection with any taking, without deduction therefrom, and
Tenant hereby waives any right it may have to claim payment for the unexpired
Term of this Lease. After Landlord's award has been finalized, Tenant shall have
the right to pursue its own award or payment in connection with such taking, so
long as Landlord's award is not in any way diminished thereby.
Section 19.3. Temporary Taking. If the temporary use or occupancy of
------------- ----------------
all or any part of the Premises shall be taken by condemnation or in any other
manner for any public or quasi-public use or purpose during the Term of this
Lease, Tenant shall be entitled, except as hereinafter set forth, to receive
that portion of the award or payment for such taking which represents
compensation for the use and occupancy of the Premises, for the taking of
Tenant's Property and for moving expenses, and Landlord shall be entitled to
receive the balance of the award, including, but not limited to, that portion
which represents reimbursement for the cost of restoration of the Premises. This
Lease shall be and remain unaffected by such temporary taking and Tenant shall
continue to be responsible for all of its obligations hereunder insofar as such
obligations are not affected by such taking and shall continue to pay in full
the Rent when it comes due. If the period of temporary use or occupancy shall
extend beyond the expiration date of this Lease, that part of the award which
represents compensation for the use and occupancy of the Premises (or a part
thereof) shall be divided between Landlord and Tenant so that Tenant shall
receive so much thereof as represents the period up to and including such
expiration date and Landlord shall receive so much as represents the period
after such expiration date. All monies paid as, or as part of, an award for
temporary use and occupancy for a period beyond the date to which the Rent has
been paid by Tenant shall be received, held and applied by Landlord as a trust
fund for payment of the Rent coming due hereunder. Notwithstanding the
foregoing, if the temporary taking described in this Section 19.3 should last
for more than sixty (60) days, Tenant, upon notice to Landlord, shall have the
option of terminating this Lease as to the portion of the Premises so taken or,
if the remainder of the Premises would be wholly inadequate for
38
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the conduct of Tenant's business in the Building, the Lease as to the entire
Premises.
Section 19.4 Partial Taking. In the event of any taking of less than the
------------ --------------
whole of the Building or the Property which does not result in termination of
this Lease, or in the event of a taking for a temporary use or occupancy of all
or any part of the Premises which does not result in a termination of this
Lease: (a) Landlord shall proceed with reasonable diligence to repair, at its
expense, the remaining parts of the Building and the Premises (other than those
parts of the Premises which are Tenant's Property) to substantially their former
condition to the extent that the same is feasible (subject to reasonable changes
which Landlord shall deem desirable) and so as to constitute a complete and
tenantable Building and Premises; and (b) Rent payable hereunder (and Tenant's
Proportionate Share) shall be reduced in the proportion that the rentable square
footage of the area taken bears to the entire rentable square footage of the
Premises. Notwithstanding the foregoing, if the partial taking consists of a
taking of greater than twenty-five percent (25%) of the Premises, Tenant, upon
notice to Landlord, shall have the option of terminating this Lease.
ARTICLE XX
----------
Quiet Enjoyment
---------------
Landlord agrees that Tenant, upon paying all Rent and all other charges
herein provided for and observing and keeping the covenants, agreements, terms
and conditions of this Lease and the reasonable rules and regulations of
Landlord of which Tenant has been informed on its part to be performed, shall
lawfully and quietly hold, occupy and enjoy the Premises during the Term of this
Lease, subject to its terms, without hindrance or molestation by Landlord or any
party claiming by, under or through Landlord.
ARTICLE XXI
-----------
Landlord's Right of Access
--------------------------
Section 21.1. Access for Maintenance and Repair. All of the Building,
------------- ---------------------------------
including, without limitation, exterior Building walls, core corridor walls and
doors and any core corridor entrance, any terraces or roofs adjacent to the
Premises, and any space in or adjacent to the Premises used for shafts, stacks,
pipes, conduits, fan rooms, ducts, electric or other utilities, sinks or other
Building facilities, and the use thereof, as well as access thereto throughout
the Premises for the purposes of operation, maintenance, decoration and repair,
are reserved to Landlord, subject to Tenant's rights under Article IV above.
Landlord reserves the right, and Tenant shall permit Landlord, to install,
erect, use and maintain pipes, ducts and conduits in and through the Premises.
Landlord shall be allowed to take all materials into and upon the
39
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Premises that may be required in connection therewith in such manner as not to
unreasonably interfere with Tenant in the conduct of Tenant's business, without
any liability to Tenant (except for Landlord's gross negligence or willful
misconduct) and without any reduction of Tenant's covenants and obligations
hereunder. Landlord and its agents shall have the right to enter upon the
Premises for the purpose of making any repairs therein or thereto which shall be
considered necessary or desirable by Landlord, in such manner as not to
unreasonably interfere with Tenant in the conduct of Tenant's business on the
Premises and with advance notice to Tenant except where entry by Landlord is for
the purpose of conducting routine janitorial services or routine maintenance;
and in addition, Landlord and its agents shall have the right to enter the
Premises at any time in cases of emergency. If the Premises are damaged by fire,
windstorm or by other casualty which causes the Premises to be exposed to the
elements, and Landlord exercises its option to make emergency repairs, such act
or acts shall not be deemed to excuse Tenant from its obligation to keep the
Premises in repair and Tenant shall, upon demand of Landlord, immediately
reimburse Landlord for the cost and expense of such emergency repairs to the
extent Landlord has repaired any of Tenant's Property.
Section 21.2 Access for Inspection and Showing. Upon reasonable
------------ ---------------------------------
advance notice to Tenant, Landlord and its agents shall have the right to enter
or pass through the Premises at any reasonable time or times to examine the
Premises and to show them to actual and prospective Superior Lessors, Superior
Mortgagees, or prospective purchasers, mortgagors or lessors of the Building or
the Property, and to post notices of non-responsibility, for lease signs and/or
for sale signs, when and as appropriate. During the period of nine (9) months
prior to the expiration date of this Lease, and at any time following an uncured
event of default hereunder, Landlord and its agents may exhibit the Premises to
prospective tenants.
Section 21.3. Landlord's Alterations and Improvements. If at any time any
------------- ---------------------------------------
windows of the Premises are temporarily darkened or obstructed by reason of any
repairs, improvements, maintenance or cleaning in or about the Building, or if
any part of the Building is temporarily or permanently closed or inoperable
(excluding the Premises), the same shall be without liability to Landlord and
without any reduction or diminution of Tenant's obligations under this Lease so
long as Tenant continues to have reasonable access to the Premises and can
utilize the Premises for their intended purposes. Landlord reserves the right,
at any time, without incurring any liability to Tenant therefor and without
affecting or reducing any of Tenant's covenants and obligations hereunder, but
in such manner as not to unreasonably interfere with Tenant in the conduct of
Tenant's business, to make such changes, alterations, additions and improvements
in or to the Building and the fixtures and equipment thereof, as well as in or
to the street entrances, doors, lobbies, halls, passages elevators and stairways
thereof, and other public parts of the Building, as Landlord shall deem
40
<PAGE>
necessary or desirable, so long as (i) Tenant shall continue to have reasonable
access to the Premises and can utilize the Premises for their intended purposes
and (ii) Landlord does not alter the entranceways to the Premises in such a way
as to have a material negative impact on Tenant's access to or use of the
Premises.
ARTICLE XXII
------------
Signs; Obstruction
------------------
Section 22.1. Monument Sign. Landlord has installed a monument sign in
------------- -------------
front of the Building. Tenant, at Tenant's sole cost and expense, shall be
entitled to design, create and install on said monument sign a sign identifying
Tenant as a tenant in the Building. Such identification sign shall be subject to
the prior written approval of Landlord as to content, design and size; provided,
however that Tenant's identification sign shall be installed in the first
position on the monument sign.
Landlord may also install on the monument sign the name and/or logo of any
other tenant of the Building whose lease covers at least one floor of the
Building; provided that no other tenant identification sign may be larger than
Tenant's identification sign unless so permitted in writing by Tenant. If a
tenant whose lease covers less than one floor desires to add its name and/or
logo to the monument sign, Landlord shall first obtain Tenant's consent thereto,
which consent shall not be unreasonably withheld or delayed.
Landlord shall be entitled to permit other tenants of the Building to
install appropriate identification signs of reasonable size and design on or
about the top of the Building as long as such installation is in compliance with
all applicable city codes, rules and regulations.
Section 22.2. Signs. Subject to Section 22.1 above, Tenant shall not
------------- -----
place or suffer to be placed or maintained upon any exterior door, roof, wall or
window of the Premises any sign, awning, canopy or advertising matter or other
thing of any kind, and will not place or maintain any decoration, lettering or
advertising matter on the glass of any window or door of the Premises or the
Building and will not place or maintain any freestanding standard within or upon
the Common Area of the Premises or immediately adjacent thereto, without first
obtaining Landlord's express prior written consent, which consent in each
instance may be withheld in Landlord's sole discretion. Tenant further agrees to
maintain such sign, lettering, or other thing as may be approved by Landlord in
good condition and repair at all times and to remove the same at the end of the
term of this Lease as and if requested by Landlord. Upon removal thereof, Tenant
agrees to repair any damage to the Premises caused by such installation or
removal.
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Notwithstanding the foregoing, Tenant shall be permitted, at its sole cost
and expense, to install Building-standard signage on the exterior doors of the
Premises on the basement, first, second and third floors. Further, Landlord
shall provide at no expense to Tenant a standard directory listing for Tenant in
the building directory on the ground floor of the Building. At Tenant's request,
Landlord shall also provide at no expense to Tenant an additional directory
listing or listings identifying the location of Tenant's corporate headquarters
and/or main reception desk even if either or both of these locations is in the
building adjacent to the Building. Landlord reserves the right to exclude any
other names from such building directory.
Section 22.3. Obstruction. Tenant shall neither obstruct the sidewalks or
------------ -----------
parking lots in front of the Building or the Premises or the area around the
Building or the Premises in any manner whatsoever.
ARTICLE XXIII
-------------
Option To Extend Term
---------------------
(a) Option; Notice. If Tenant is not in default beyond any applicable
--------------
cure periods under this Lease at the time of exercise, Tenant may extend the
original Term of this Lease for one (1) additional period of five (5) years, on
the same terms and conditions set forth herein (other than this Article XXIII),
except that the Base Rent shall be as provided below. Tenant may exercise its
option to extend by giving written notice to Landlord during the period
commencing June 1, 1998 through December 1, 1998; provided, however, that if as
of December 1, 1998 Tenant is in default hereunder beyond any applicable cure
period, such exercise of this option at Landlord's sole discretion shall be null
and void and this Lease shall terminate effective as of the Expiration Date set
forth in Section 1.2 hereof. The option granted in this Article XXIII shall
apply to all, but not less than all, of the space then leased by Tenant.
(b) Base Rent. The Base Rent for the option period shall be
---------
determined as follows:
(1) Mutual Agreement. At any time after receipt by Landlord of the
option notice, but in all events not later than December 15, 1998, Landlord and
Tenant shall commence efforts to set the Fair Market Rental, as defined below,
for the option period. Landlord and Tenant shall have thirty (30) days in which
to agree on the Fair Market Rental for the option period, which thirty (30) day
period shall commence upon the earlier of (i) December 15, 1998 or (ii) thirty
(30) days after Landlord gives a written notice to Tenant of Landlord's desire
to meet to establish the Fair Market Rental. If Landlord and Tenant are unable
to agree on the Fair Market Rental for the option period during such thirty
42
<PAGE>
(30) day period, the provisions of subsection (2) below shall apply.
(2) Appraisal. Within ten (10) days after the expiration of the
thirty (30) day period described in subsection (1) above, each party, at its
cost and by giving notice to the other party, shall appoint an M.A.I. real
estate appraiser, with at least five (5) years full-time commercial appraisal
experience in the area in which the Premises are located, to appraise and set
the Fair Market Rental of the Premises. If a party does not appoint an appraiser
within ten (10) days, the single appraiser appointed shall be the sole appraiser
and shall set the Fair Market Rental. The cost of the sole appraiser shall be
borne equally by the parties. If two appraisers are appointed, they shall select
a third appraiser meeting the qualifications stated in this subsection (2)
within five (5) days after being selected by the parties. If they are unable to
agree on the third appraiser within the time allowed, either of the parties to
this Lease, by giving ten (10) days notice to the other party, can file a
petition with the American Arbitration Association in Los Angeles County,
California, solely for the purpose of selecting a third appraiser who meets the
qualifications stated above. The third appraiser shall be selected within twenty
(20) days. Each of the parties shall bear one-half (1/2) of the cost of
appointing the third appraiser, including costs of appointing the third
appraiser through the American Arbitration Association, and of paying the third
appraiser's fee. The third appraiser, however selected , shall be a person who
has not previously acted in any capacity for either party. Within thirty (30)
days after the selection of the third appraiser, the majority of the appraisers
shall set the Fair Market Rental for the Premises. If the majority of the
appraisers are unable to set the Fair Market Rental within the thirty (30) day
period, the three appraisals shall be added together and the total divided by
three and the resulting quotient shall be the Fair Market Rental; provided,
however, that any appraisal which differs from the median appraisal by more than
ten percent (10%) of the median appraisal shall be disregarded. If only one
appraisal is disregarded, the remaining two appraisals shall be added together
and their total divided by two; the resulting quotient shall be the Fair Market
Rental. If two appraisals are disregarded, the middle appraisal shall be the
Fair Market Rental.
(c) Definition of Fair Market Rental. The Fair Market Rental shall
--------------------------------
mean the fair market rental value for tenants in comparable space in similarly
situated office buildings (including, without limitation, building age and
condition) located in the tri-city area of Burbank, Glendale and Pasadena,
California. Fair Market Rental shall be determined assuming that neither
Landlord nor a prospective tenant is under any compulsion to rent. In
determining the Fair Market Rental, the appraisers shall take into account:
Tenant's Base Year; the amount to be paid by Tenant as Tenant's Proportionate
Share of Increased Operating Expenses; the location of the Building; the
location of the Premises within the Building; the size of the Premises; whether
the Lease is full
43
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service or triple net; whether parking privileges are included within the Rent;
the creditworthiness of Tenant; and free rent, tenant improvement allowances and
other similar tenant concessions, if any, then being granted to tenants in the
marketplace (including within the Building). Tenant's Base Year shall be
adjusted to the first year of the option period. The fair market rental value
may be set at a fixed rate for the entire option period or may include one or
more increases during the option period as determined by the appraisers.
(d) Confirmation of Terms. After the Fair Market Rental has been
---------------------
set, the appraisers shall immediately notify the parties. The Fair Market Rental
so determined shall be deemed to be the Base Rent for the option period, subject
to any increase(s) established by the appraisers. The parties shall immediately
execute a confirmation of the Lease stating the new Base Year and the Base Rent
for the option period, which option period shall then be deemed part of the
"Term" hereof, for all purposes hereunder.
(e) Continuation of Base Rent Payments. If for any reason the Fair
----------------------------------
Market Rental is not determined prior to commencement of the option period, then
Tenant shall continue to pay the Base Rent applicable to the Premises
immediately prior to the option period, until the Fair Market Rental is
established. Once established, Tenant shall pay to Landlord within ten (10)
business days, or Landlord shall credit Tenant, as applicable, the difference
between the Base Rent already paid and the new Base Rent as determined pursuant
to this Article XXIII.
(f) Limits on Exercise of Option. Notwithstanding anything to the
----------------------------
contrary set forth in this Lease, the option to extend the Term shall not be
available to any assignee of Four Media Company who becomes the "Tenant"
hereunder.
ARTICLE XXIV
------------
Miscellaneous
-------------
Section 24.1. Notices. Any notices under this Lease shall be given in
------------- -------
writing by hand-delivery, by recognized overnight courier service, or by mailing
the same by certified mail, return receipt requested, first-class postage
prepaid, from a post office station
44
<PAGE>
or letter box in the continental United States, to Landlord or Tenant, as the
case may be, addressed as follows:
As to Landlord: Ford Motor Credit Company
c/o USL Capital Corporation
Attention: President, Real Estate Financing
733 Front Street
San Francisco, California 94111
With a Copy to: Griffinger, Freed, Heinemann, Cook & Foreman
Attention: Jonathan A. Funk, Esq.
One Market Plaza
Steuart Street Tower, 24th Floor
San Francisco, California 94105-1415
As to Tenant: Four Media Company
Attention: Chief Financial Officer
2901 West Alameda Avenue, Suite 100
Burbank, California 91505
With a Copy to: Greenberg, Glusker, Fields, Claman & Machtinger
Attention: Dennis B. Ellman, Esq.
1900 Avenue of the Stars, Suite 2000
Los Angeles, California 90067
or to such address as either party may from time to time direct by notice in
writing. Except as herein otherwise provided, any hand-delivered or couriered
notice shall be deemed given upon delivery, and any mailed notice shall be
deemed to be given forty-eight (48) hours after deposit in the United States
mail. The failure by Tenant to give proper and timely notice to Landlord shall
preclude Tenant from all rights to which the notice relates.
Section 24.2. Financial Statements. At any time that Landlord proposes
------------- --------------------
to sell the Property or any interest therein, or to refinance any loan (or
portion thereof) secured by a lien on the Property or any portion thereof,
Tenant shall, upon ten (10) days' notice, provide Landlord with (i) a copy of
Tenant's most current and two (2) prior years' audited financial statements,
including, but not limited to, balance sheets and profit and loss statements;
(ii) a list of Tenant's banking references; and (iii) a short narrative
description of tenant's business and a list of significant clients. Landlord
shall keep confidential all such statements and information and shall share such
statements and information only with such bona fide prospective purchasers,
lenders, joint venturers or ground lessors as is reasonably necessary, each of
whom shall be expected to maintain such information in confidence as well, and
each of whom shall execute a reasonable confidentiality agreement prior to
receipt of such information.
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Section 24.3. Estoppel Certificates. Each party agrees, at any time and
------------- ---------------------
from time to time, within ten (10) days of receipt of written request by the
other party, to execute and deliver to the other a statement certifying that
this Lease is unmodified and in full force and effect (or if there have been
modifications, that the same is in full force and effect as modified and stating
the modifications), certifying the dates to which Gross Rent and any Additional
Rent have been paid, stating whether or not the other party is in default in the
performance of any of its obligations under this Lease, and, if so, specifying
each such default and stating whether or not any event has occurred which with
the giving of notice or passage of time, or both, would constitute such a
default, and, if so, specifying each such event. Any such statement delivered
pursuant hereto shall be deemed a representation and warranty to be relied upon
by the party requesting the certificate and by others with whom such party may
be dealing, regardless of independent investigation. Tenant also shall include
in any such statements such other information concerning this Lease as Landlord
may reasonably request.
Section 24.4. No Recordation. This Lease shall not be recorded by
------------- --------------
Tenant in the Public Records of the County in which the Property is located or
in any other place. Any attempted recordation by Tenant shall render this Lease
null and void and entitle Landlord to the remedies provided for Tenant's
default. However, at the request of Landlord, Tenant shall promptly execute,
acknowledge and deliver to Landlord a memorandum of lease in respect of this
Lease and a memorandum of modification of lease in respect of any modification
of this Lease, sufficient for recording. Such memorandum shall not be deemed to
change or otherwise affect any of the obligations or provisions of this Lease.
Section 24.5. No Brokers. Landlord and Tenant represent and warrant that
------------- ----------
they have not had any dealings with any real estate broker or agent in
connection with (i) the negotiation of this Lease or (ii) the granting or
exercise of the option to extend provided for herein. Tenant and Landlord agree
to indemnify, defend and hold the other party harmless from and against all
claims, demands, causes of action, liabilities and expenses (including
reasonable attorneys' fees) arising from any breach of this warranty.
Section 24.6. No Recourse. Notwithstanding anything to the contrary in
------------- -----------
this Lease, Tenant shall look solely to the interest of Landlord in the Building
for satisfaction of any remedy it may have hereunder or in connection herewith
and shall not look to any other assets of Landlord or of any other person, firm
or corporation. If Landlord shall be a corporation, there shall be absolutely no
personal liability on the part of any present or future stockholder, or any
officer or director of such corporation, or any of its successors or assigns
with respect to any obligation hereunder or in connection herewith. If Landlord
shall be a trust, there shall be absolutely no personal liability on the part of
any
46
<PAGE>
present or future trustee or beneficiary of such trust. Such exculpation of
liability shall be absolute and without any exception whatsoever.
Landlord represents to Tenant, as of the date of this Lease, that Landlord
has not less than $5,000,000.00 in equity in the Building.
Section 24.7. Entire Agreement, etc. This Lease and the writings
------------- ---------------------
referred to herein constitute the entire understanding between the parties and
shall bind the parties, their successors and assigns. Any and all leases and
lease amendments previously executed between Landlord (and its predecessors-in-
interest) and Tenant (and its predecessors-in-interest) with respect to the
Premises or any portion thereof and any other writings concerning the Premises
are superseded in their entirety by this Lease and shall be of no further force
or effect, including without limitation the proposal letters drafted by the
parties dated April 5, 1994, May 31, 1994 and August 8, 1994 respectively.
No representations, except as herein expressly set forth, have been made by
any party to the other, and this Lease cannot be amended, modified or cancelled,
except by a writing, signed by Landlord and Tenant during the Term of this
Lease. No payment by Tenant or receipt by Landlord of a lesser amount than the
monthly installments of Rent stipulated in this Lease shall be deemed to be
other than a payment on account, nor shall any endorsement or statement of any
check or letter accompanying a check for payment of Rent be deemed in accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such Rent or to pursue any other
remedy provided in this Lease. The table of contents, headings and captions
contained in this Lease are inserted for convenience only and shall not be
deemed part of or be used in construing this Lease.
Section 24.8. Indemnity. Tenant hereby agrees to indemnify, defend and
------------- ---------
hold Landlord and its agents harmless from and against any liability, losses,
cost, damages or expenses (including reasonable attorneys' fees and costs)
arising out of or in any way related to any claims made by or on behalf of Swiss
Group Properties Corp., a Nevada corporation, successor in interest to Olen
Properties Corp. ("SGP"), or any affiliate or representative thereof with
respect to any alleged rights to lease all or any portion of the Premises or the
Property; provided, however, that the foregoing indemnity shall not be construed
to apply to any claims made by or on behalf of SGP, or any affiliate or
representative thereof, arising out of or resulting from any acts, negotiations,
representations, covenants or agreements made by Landlord to or with SGP or any
affiliate or representative thereof, including without limitation the agreement
described in Section 24.12 hereinbelow or any predecessor agreement thereto.
47
<PAGE>
Section 24.9. Governing Law. This Lease shall be governed by and
------------- -------------
construed in accordance with the laws of the State of California. If any
provision of this Lease or the application thereof to any person or circumstance
shall, for any reason and to any extent be invalid or unenforceable, the
remainder of this Lease and the application of that provision to other persons
or circumstances shall not be affected but rather shall be enforced to the
extent permitted by law. This Lease shall be construed without regard to any
presumption or other rule requiring construction against the party causing this
Lease to be drafted. Each covenant, agreement, obligation or other provision of
this Lease on Tenant's and/or Landlord's part to be performed shall be deemed
and construed as a separate and independent covenant of Tenant and/or Landlord,
as the case may be, not dependant on any other provision of this Lease or on any
other covenant or obligation set forth herein. All terms and words used in this
Lease, regardless of the number or gender in which they are used, shall be
deemed to include any other number and any other gender as the context may
required.
Section 24.10. Confidentiality.
-------------- ---------------
(a) Without the prior written consent of Tenant, which Tenant may
withhold in its sole discretion, neither Landlord, nor Landlord's leasing
agent/broker, nor any officer, employee or agent of either of them, may disclose
or divulge orally or in writing to any unrelated third party any material term
or condition of this Lease, except as is necessary for the management, operation
or maintenance of the Building or the Premises or to enforce Landlord's rights
under this Lease; provided, however, that Landlord may disclose such Lease-
related information, to the extent necessary, to (i) prospective purchasers or
ground lessors of the Building and (ii) current and prospective lenders, joint
venturers, appraisers or mortgagees; and provided further, that Landlord may
divulge any of the foregoing information to the extent such information is
specifically required to be disclosed by (iii) subpoena or court officer, or
(iv) the California Secretary of State, the California Franchise Tax Board, the
United States Internal Revenue Service or any other governmental authority or
agency.
In addition, Landlord, its officers, employees and agents, may, during the
Lease term, have access to and acquire knowledge from materials or other
information provided by or concerning Tenant, which knowledge may constitute
trade secrets, future business plans, financial information or other
confidential information which is not accessible or known to the general public.
Any such knowledge or information shall not be used, published or divulged by
Landlord, Landlord's leasing agent/broker or persons hired by Landlord to any
other person, firm or corporation without first having obtained the written
permission of Tenant, which permission Tenant may withhold in its sole
discretion.
(b) Without the prior written consent of Landlord, which Landlord may
withhold in its sole discretion, neither Tenant, nor
48
<PAGE>
Tenant's leasing agent/broker, nor any officer, employee or agent of either of
them, may disclose or divulge orally or in writing to any unrelated third party
any material term or condition of this Lease, except as is necessary for the
management, operation or maintenance of the Premises or to enforce Tenant's
rights under this Lease; provided, however, that Tenant may disclose such Lease-
related information, to the extent necessary, to (i) current and prospective
lenders or mortgagees of Tenant; and provided further, that Tenant may divulge
any of the foregoing information to the extent such information is specifically
required to be disclosed by (ii) subpoena or court officer, or (iii) the
California Secretary of State, the California Franchise Tax Board, the United
States Internal Revenue Service or any other governmental authority or agency.
In addition, Tenant, its officers, employees and agents, may, during the
Lease term, have access to and acquire knowledge from materials or other
information provided by or concerning Landlord, which knowledge may constitute
trade secrets, future business plans, financial information or other
confidential information which is not accessible or known to the general public.
Any such knowledge or information shall not be used, published or divulged by
Tenant, Tenant's leasing agent/broker or persons hired by Tenant, to any other
person, firm or corporation without first having obtained the written permission
of Landlord, which permission Landlord may withhold in its sole discretion.
(c) Landlord and Tenant agree that neither party will issue a press
release or place an announcement of this Lease in any newspaper, trade magazine,
corporate newsletter or other media publication without first obtaining the
written consent of the other party, which consent may be withhold in such
party's sole discretion.
Section 24.11. Non-Competition. Without Tenant's prior written consent,
-------------- ---------------
which shall not be unreasonably withheld or delayed, Landlord shall not lease
office space in the Building to any prospective tenant (excluding all tenants
currently occupying space in the Building and any affiliates of such tenants),
whose sole or primary business would be for the independent operation of any one
(or more) of the following types of businesses:
(a) Satellite transmission (origination).
(b) Videotape editing.
(c) Telecine transfer.
(d) Videotape duplication.
(e) Sound mixing and effects editing.
(f) Tape to film transfer.
49
<PAGE>
(g) Standards conversion.
(h) Videodisc duplication.
Landlord shall send a letter to Tenant by certified mail indicating
Landlord's intention to lease space to a prospective tenant whose business falls
within the parameters identified above. If no reasonable written objection is
received by Landlord from Tenant within five (5) business days of Tenant's
receipt of Landlord's letter, Tenant's approval of such proposed lease shall be
deemed to have been granted for all purposes hereunder.
In the event Landlord and Tenant cannot agree as to the reasonableness of
Tenant's objection in a particular situation, both Landlord and Tenant agree to
submit the matter to binding arbitration conducted in Los Angeles County,
California, in accordance with the then existing rules of the American
Arbitration Association; judgment upon the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof.
Section 24.12. Agreement Regarding Parking Rights and Right of Lease
-------------- -----------------------------------------------------
Assumption. The parties acknowledge that concurrently herewith, Landlord,
- ----------
Tenant and SGP have entered into an Agreement Regarding Parking Rights and Right
of Lease Assumption, which confers certain limited rights of assumption on SGP
in the event of an uncured default hereunder by Tenant, and which provides
certain parking rights to the parties. A copy of such Agreement is attached
hereto as Exhibit "F".
Section 24.13. Documentary Transfer Tax. Although Landlord and Tenant do
-------------- ------------------------
not believe that any documentary transfer will be due and payable as a result of
execution of this Lease, the parties acknowledge that the Los Angeles County Tax
Assessor's Office may seek to impose such a tax. In such event, Tenant shall
cooperate with Landlord in any challenge(s) to any such imposition that Landlord
may elect to pursue, but in the event the tax is imposed (and not rescinded),
the amount of the tax shall be paid entirely by Landlord.
Section 24.14. Mutual Waiver of Trial by Jury. LANDLORD AND TENANT EACH
------------- ------------------------------
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO
A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS LEASE AND TENANT'S USE OR OCCUPANCY OF THE
PREMISES AND
50
<PAGE>
ANY DOCUMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF EITHER PARTY.
IN WITNESS WHEREOF, the parties have executed this Lease as of the day and
year first hereinabove written.
"LANDLORD"
FORD MOTOR CREDIT COMPANY,
a Delaware corporation
By: /s/ Carol S. Anderson
------------------------------
Its Authorized Agent
"TENANT"
FOUR MEDIA COMPANY,
a Delaware corporation
By: /s/ John Sabin
------------------------------
Its: Sr. Vice President
-----------------------------
51
<PAGE>
EXHIBIT 10.27
PURCHASE AND SALE AGREEMENT
---------------------------
AND ESCROW INSTRUCTIONS
-----------------------
THIS PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS (this
"Agreement") is made and entered into as of the 29th day of July, 1996 between
CP PRIVATE PARTNERS, L.P.I., a Delaware Limited Partnership ("Seller"), and FOUR
MEDIA COMPANY, a Delaware corporation ("Buyer"), with reference to the
--------
following:
A. Seller is the owner of the Property (as hereinafter defined).
B. Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller the Property on the terms and subject to the conditions contained in
this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. REFERENCES.
----------
All references to Paragraph numbers refer to Paragraphs of this
Agreement, and all references to Exhibits refer to Exhibits attached to this
Agreement and all such Exhibits are incorporated herein by reference. The words
"herein," "hereof," "hereinafter" and words of similar import refer to this
Agreement as a whole and not to any particular Paragraph hereof.
2. PURCHASE AND SALE.
-----------------
Subject to the terms and conditions of this Agreement, Seller
agrees to sell, assign and transfer to Buyer, and Buyer agrees to purchase from
Seller, for the purchase price set forth in Paragraph 3, the following
-
(collectively, the "Property"):
(a) That certain real property located in the City of Burbank,
County of Los Angeles, State of California, which is more particularly described
on Exhibit A (the "Land"), together with an approximately ninety thousand
---------
(90,000) square foot building located thereon (the "Building"), and all
associated parking areas, and all other improvements located thereon (the
Building and such other improvements are referred to herein collectively as the
"Improvements");
(b) All of Seller's interest in and to all rights, privileges,
easements and appurtenances benefiting the Land and/or the Improvements,
including, without limitation, all mineral and water rights and all easements,
rights-of-way and other appurtenances used or connected with the beneficial use
or enjoyment of the Land and/or the Improvements (the Land, the Improvements and
all such rights, privileges, easements and appurtenances are referred to herein
collectively as the "Real Property");
(c) All of Seller's interest in and to all personal property,
equipment, supplies and fixtures owned by Seller and used in the operation of
the Real Property and located on the Real Property (collectively, the "Personal
Property");
(d) All of Seller's interest in any intangible property used in
connection with the foregoing, including, without limitation, all contract
rights, warranties,
<PAGE>
guaranties, licenses, permits, entitlements, governmental approvals and
certificates of occupancy which benefit the Real Property and/or the Personal
Property (the "Intangible Personal Property"); and
(e) All of Seller's interest in all leases affecting the Real
Property identified in Exhibit D attached hereto (the "Leases").
---------
3. PURCHASE PRICE; DEPOSIT AND PAYMENT TERMS.
------------------------------------------
(a) Purchase Price. The purchase price for the Property shall be
--------------
Eleven Million Two Hundred Fifty Thousand Dollars ($11,250,000.00) (the
"Purchase Price").
(b) Payment of Purchase Price. The Purchase Price shall be payable
-------------------------
as follows:
(i) Concurrently with the execution of this Agreement by
Buyer, and as a condition precedent to the effectiveness hereof, Buyer shall
deliver to Escrow Holder cash or current funds, the sum of One Hundred Twenty-
Five Thousand Dollars ($125,000) (the "Deposit"). Immediately upon Escrow
Holder's receipt of the Deposit (the "Opening of Escrow"), Escrow Holder shall
invest the same in a federally insured interest-bearing account acceptable to
Seller and Buyer, with all interest accruing thereon credited to the Purchase
Price. Upon the expiration of the Contingency Period (as defined in Paragraph
4), the Deposit and all interest accrued thereon shall become nonrefundable to
- -
Buyer except as provided in Paragraph 3(c), and shall be applied to the Purchase
----
Price at the Close of Escrow (as defined in Paragraph 6), unless Buyer shall
-
have previously terminated this Agreement pursuant to the terms hereof. All
references herein to the Deposit shall include all interest thereon.
(ii) On or before the Closing Date (as defined in Paragraph
6), Buyer shall deposit in cash or current funds with Escrow Holder an amount
- -
equal to the Purchase Price less the Deposit plus Buyer's share of the escrow
and title charges and prorations pursuant to Paragraph 7(b) and 9. Such funds
--- -
shall be deposited by Buyer with Escrow Holder in time to allow both the Closing
to occur and the funds to be received by Seller on the Closing Date.
(iii) On the Close of Escrow, the Purchase Price shall be
delivered to Seller. Any amounts deposited into Escrow by Buyer in excess of the
amounts necessary to close the Escrow in accordance with this Agreement shall be
delivered by Escrow Holder as directed by Buyer pursuant to Buyer's separate
instructions.
(c) Disposition of Deposit Upon Failure to Close. If the Close of
--------------------------------------------
Escrow fails to occur due to Buyer's default under this Agreement (all of the
conditions to Buyer's obligation to close having been satisfied or waived), then
the disposition of the Deposit shall be governed by Paragraph 12; if the Close
--
of Escrow fails to occur due to Seller's default under this Agreement (all of
the conditions to Seller's obligation to close having been satisfied or waived),
then at Buyer's option the Deposit shall promptly be refunded to Buyer; and if
the Close of Escrow fails to occur due to the failure of any of the conditions
set forth in Paragraphs 4 or 5 other than as a result of Buyer's or Seller's
- -
default under this Agreement, then the disposition of the Deposit shall be
governed by Paragraph 7(c).
----
2
<PAGE>
4. CONDITIONS TO BUYER'S OBLIGATIONS.
---------------------------------
The Close of Escrow and Buyer's obligation to consummate the
transaction contemplated by this Agreement are subject to the satisfaction, in
Buyer's sole and absolute discretion, of the following conditions for Buyer's
benefit (or Buyer's waiver thereof, it being agreed that Buyer may waive any or
all of such conditions) on or prior to the dates designated below for the
satisfaction of such conditions. If Buyer terminates this Agreement pursuant to
the terms of this Paragraph 4, or Buyer disapproves any of the matters set forth
-
in this Paragraph 4, or one or more of the following conditions to Buyer's
-
obligations to acquire the Property has not been satisfied or waived on or
before the Closing Date, Buyer will have no further obligation to purchase the
Property, and upon Buyer's payment of one-half of Escrow Holder's fees and
satisfaction of its other obligations hereunder which expressly survive the
termination of this Agreement, the Deposit shall be returned to Buyer, and the
Escrow shall be terminated and neither party shall have any further obligations
or liability hereunder except for obligations or liability which expressly
survive the termination of this Agreement.
(a) Contingency Matters. Buyer shall have until 5:00 p.m. on the
-------------------
date which is forty-five (45) days following the Opening of Escrow (such period
of time to be referred to herein as the "Contingency Period") to satisfy itself,
in Buyer's sole and absolute discretion, as to all aspects of the Property and
its condition and suitability for Buyer's intended use thereof, including,
without limitation, the status of title to the Property and the matters shown on
the Preliminary Title Report (as hereinafter defined), matters shown on a survey
of the Property (if Buyer so elects, at its cost, to obtain a survey of the
Property), the zoning for the Property, the physical condition of the Property
and the availability of all permits, licenses, variances and the like necessary
for Buyer's intended use of the Property and Buyer's ability to obtain financing
for its acquisition of the Property. During the term of the Escrow, Buyer, its
agents, contractors and subcontractors shall have the right to enter upon the
Property, at reasonable times during ordinary business hours following not less
than twenty-four (24) hours prior notice to Seller, to make such inspections,
surveys and tests as are commercially reasonable and appropriate considering the
nature and intended use of the Property such as soils tests, hazardous waste
analysis, geological and/or engineering studies and land use or related studies;
provided, however, that if Buyer proposes to perform any soil, geological or
environmental tests or studies which involve drilling, boring or other similar
intrusive or invasive action on or under the Property, then Buyer shall obtain
Seller's written consent prior to performing any such tests or studies, which
consent Seller may withhold in Seller's sole, absolute and subjective
discretion. Buyer shall use care and consideration in connection with any of its
inspections or tests and Seller shall have the right to be present during any
inspection of the Property by Buyer or its agents or to control the performance
of such tests or studies at Seller's election. Buyer shall restore the Property
to its original condition after any and all tests and/or inspections.
(b) Deliveries to Escrow Holder. Seller shall have delivered the
---------------------------
following documents to Escrow Holder, duly executed and acknowledged (where
necessary) by Seller, prior to the Closing Date:
(i) Grant Deed. A grant deed (the "Grant Deed") in the form
----------
of Exhibit B conveying fee title in the Land and Improvements to Buyer.
---------
3
<PAGE>
(ii) Bill of Sale. A bill of sale (the "Bill of Sale") in
------------
the form of Exhibit C conveying the Personal Property to Buyer.
---------
(iii) Assignment and Assumption of Leases. An assignment and
-----------------------------------
assumption of the Leases (the "Assignment of Leases") in the form of Exhibit D.
---------
(iv) FIRPTA Affidavit. An affidavit of Seller in the form of
----------------
Exhibit E.
- ---------
(v) Tenant Letters. Letters signed by Seller and addressed to
--------------
each tenant ("Tenant") of the Property, stating that the Property has been sold
to Buyer and that after the Closing Date all rents should be paid to Buyer at
such address as may be designated by Buyer.
(vi) Other Documents. Such other documents executed by Seller
---------------
as may be reasonably required in order to consummate the transaction
contemplated herein.
(c) Deliveries to Buyer. Seller shall have delivered the following
-------------------
documents or items to Buyer on or before the Closing Date or such other date
specified below:
(i) Original Agreements. Originals of all Leases, and all
-------------------
plans, permits and licenses relating to the Property in Seller's possession, to
the extent originals are within Seller's possession or control, otherwise copies
of same.
(ii) Keys. Keys to all entrance doors, rooms, cabinets and
----
closets within the Project and to any Personal Property.
(d) Performance by Seller. Seller shall have performed and
---------------------
complied in all material respects with its obligations, covenants and agreements
under this Agreement and all of Seller's representations and warranties
contained in Paragraph 10 shall be true and correct as of the Closing Date.
--
(e) Title Policy. The Title Company (as hereinafter defined)
------------
shall be prepared to issue the Title Policy (as hereinafter defined).
(e) Estoppel Certificates. Buyer shall have received the Estoppel
---------------------
Certificates (as hereinafter defined) in accordance with the provisions of
Paragraph 16(b).
-----
All of the foregoing conditions are created for the sole benefit of Buyer,
provided that Buyer may at any time or times on or before the Closing Date, at
its election, waive any of said conditions and consummate this transaction, but
any such waiver shall be effective only if contained in a writing signed by
Buyer and delivered to Seller and Escrow Holder.
5. CONDITIONS TO SELLER'S OBLIGATIONS.
----------------------------------
The Close of Escrow, and Seller's obligation to complete the
transactions contemplated by this Agreement, are subject to satisfaction of all
of the following conditions:
4
<PAGE>
(a) The deposit by Buyer with Escrow Holder of all funds required
under Paragraph 3 within the time periods required thereby.
-
(b) Buyer shall have performed and complied in all material
respects with its obligations, covenants and agreements under this Agreement and
all of Buyer's representations and warranties contained in Paragraph 11 shall be
--
true and correct as of the Closing Date.
(c) Buyer shall have delivered the Bill of Sale and Assignment of
Leases to Escrow Holder and such other documents as may be reasonably required
in order to consummate the transaction contemplated herein, duly executed by
Buyer, prior to the Closing Date.
All of the foregoing conditions are created for the sole benefit of Seller,
provided that Seller may at any time or times on or before the Closing Date, at
its election, waive any of said conditions and consummate this transaction, but
any such waiver shall be effective only if contained in a writing signed by
Seller and delivered to Buyer and Escrow Holder.
6. CLOSE OF ESCROW; POSSESSION.
---------------------------
(a) "Close of Escrow" shall mean and refer to the act of recording
the Grant Deed in the Official Records of Los Angeles County, California (the
"Official Records"). Subject to the provisions of Paragraph 12, the Escrow and
--
Buyer's rights to purchase the Property will terminate automatically if the
Escrow has not closed on or before 5:00 p.m. on October 31, 1996 (the "Closing
Date").
(b) Possession of the Property, subject only to the Permitted
Exceptions (as defined in Paragraph 8), shall be delivered to Buyer on the
-
Closing Date.
7. ESCROW.
-------
The escrow (the "Escrow") for the consummation of this transaction
shall be established with Commerce Escrow ("Escrow Holder") at the address
indicated in Paragraph 17(i) by the deposit of an original signed copy of this
----
Agreement with Escrow Holder contemporaneously with the execution hereof. This
Agreement shall constitute both an agreement between Buyer and Seller and escrow
instructions for Escrow Holder. If Escrow Holder requires separate or additional
escrow instructions which it deems necessary for its protection, Seller and
Buyer hereby agree promptly upon request by Escrow Holder to execute and deliver
to Escrow Holder such separate or additional escrow instructions (the
"Additional Instructions"). In the event of any conflict or inconsistency
between this Agreement and the Additional Instructions, this Agreement shall
prevail and govern, and the Additional Instructions shall so provide. The
Additional Instructions shall not modify or amend the provisions of this
Agreement unless otherwise agreed to in writing by Seller and Buyer.
(a) Actions of Escrow Holder. On the Closing Date, provided that
------------------------
the conditions set forth in Paragraphs 4 and 5 have been satisfied or waived,
- -
Escrow Holder shall take the following actions in the order indicated below:
(i) Record the Grant Deed in the Official Records;
5
<PAGE>
(ii) Deliver to Buyer those items referred to in Paragraph
4(c) and a conformed copy of the recorded Grant Deed;
- ----
(iii) Deliver to Seller, in cash or current funds, all sums
due Seller pursuant to Paragraph 3, less the closing costs and prorations
-
payable by Seller pursuant to this Agreement and shown on the closing statement
approved by Seller, and Buyer's signed counterpart of the Assignment of Leases
and the Bill of Sale;
(iv) Cause the Title Company to issue the Title Policy (as
defined in Paragraph 8) in accordance with the provisions of Paragraph 8; and
- -
(v) Deliver to Seller and Buyer a closing statement which has
been certified by Escrow Holder to be true and correct.
(b) Escrow and Title Charges.
------------------------
(i) Upon the Close of Escrow, escrow and title charges shall
be allocated between Seller and Buyer as follows:
(A) Seller shall pay: (1) the premium for the CLTA
standard coverage portion of the Title Policy, (2) all documentary transfer
taxes due on the transfer of the Real Property, (3) the cost of recording the
Grant Deed, and (4) one-half (1/2) of any escrow fees or similar charges of
Escrow Holder.
(B) Buyer shall pay (1) one-half (1/2) of any escrow fees
or similar charges of Escrow Holder, and (2) the premium for the ALTA extended
coverage portion of the Title Policy, the premium for any lender's title policy
and the costs of any endorsements requested by Buyer or its lender and the costs
of any survey necessary for the Title Policy.
(C) Except to the extent otherwise specifically provided
herein, all other expenses incurred by Seller and Buyer with respect to the
negotiation, documentation and closing of this transaction, including, without
limitation, Buyer's and Seller's attorneys' fees, shall be borne and paid by the
party incurring same.
(ii) If the Close of Escrow does not occur by reason of
Buyer's or Seller's default under this Agreement, then all escrow and title
charges (including cancellation fees) shall be borne by the party in default.
(c) Procedures Upon Failure of Condition. Except as otherwise
------------------------------------
expressly provided herein, if any of the conditions set forth in Paragraphs 4 or
-
5 is not timely satisfied or waived for a reason other than the default of Buyer
- -
or Seller in the performance of their respective obligations under this
Agreement:
(i) This Agreement, the Escrow and the respective rights and
obligations of Seller and Buyer hereunder shall terminate, other than the
indemnity obligations of Buyer set forth in Paragraph 17(s) which shall survive
-----
such termination;
6
<PAGE>
(ii) The Deposit shall be promptly returned to Buyer, and
Escrow Holder shall return to Seller and Buyer all documents deposited by them
respectively, which are then held by Escrow Holder; and
(iii) Any escrow cancellation and title charges shall be
borne equally by Seller and Buyer.
8. TITLE.
-----
Title shall be evidenced by the commitment of North American Title
Company (the "Title Company") to issue to Buyer its ALTA extended Owner's Form
Policy of Title Insurance (the "Title Policy") in the amount of the Purchase
Price, showing fee title to the Real Property vested in Buyer subject only to
the following exceptions (collectively, the "Permitted Exceptions"):
(a) a lien to secure payment of real estate taxes and
assessments, not delinquent;
(b) the lien of supplemental taxes assessed pursuant to Chapter
3.5 commencing with Section 75 of the California Revenue and Taxation Code;
(c) subject to Buyer's rights under Paragraph 4, all matters
-
apparent from an inspection of the Property or shown by a survey of the Property
(or if Buyer elects not to obtain a survey, of the Property, a general exception
for matters that would be revealed by such a survey);
(d) the rights of the tenants under the Leases and any subleases;
(e) subject to Buyer's rights under Paragraph 4, all exceptions
-
disclosed by the Preliminary Title Report ("Preliminary Title Report") issued by
the Title Company and the ALTA "standard" exceptions unless the Title Company
elects to remove the same;
(f) all applicable laws, ordinances, rules and governmental
regulations (including, without limitation, those relating to building, zoning
and land use) affecting the development, use, occupancy or enjoyment of the
Property; and
(g) any title matters or exceptions created by Buyer's acts or
omissions.
Seller's sole obligation with respect to the issuance of the Title Policy
shall be (a) to pay, or cause to be paid at or before Closing, any delinquent
real estate taxes and assessments relating to the Property and any monetary
liens (other than real estate taxes and assessments) placed against the Property
by Seller or as to which Seller obtained its interest in the Property subject
thereto; (b) to pay for the portion of the costs of the Title Policy provided in
Paragraph 7(b); (c) to deliver to the Title Company a statement setting forth
----
the Leases and evidence reasonably satisfactory to the Title Company of Seller's
authority to consummate the transactions contemplated by this Agreement; and (d)
to
7
<PAGE>
remove any title matters placed against the Property by Seller after the end of
the Contingency Period (unless Buyer agrees otherwise).
9. PRORATIONS.
----------
(a) Rents delinquent as of the Closing Date will not be prorated,
but will be paid to Seller by Buyer promptly upon collection by Buyer. The first
monies received by Buyer from each tenant after the Closing Date shall be
applied first to current rent due (unless specifically otherwise designated by
the tenant) and thereafter shall be applied to rent in arrears. Buyer shall use
its best efforts to collect delinquent rent for the account of Seller but need
not incur any legal fees or commence any legal action in connection with
delinquent rent.
(b) Final proration of percentage rents and similar apportionable
items which are dependent for their calculation upon economic performance over a
specified interval of time shall be accomplished as follows: the parties shall
await the expiration of any specified interval of time to make any required
computations or measure any economic performance and then prorate the item by
allocating to Seller the product of the rents or other similar apportionable
item for the entire interval multiplied by a fraction, the numerator of which is
the number of days within the specified interval which occur before the Closing
Date and the denominator of which is the number of days in the specified
interval. Buyer shall pay to Seller, promptly upon receipt by Buyer, Seller's
prorated share of such percentage rents.
(c) Operating expenses which are payable (or reimbursable) by any
present tenant of the Property or any portion thereof shall not be prorated
hereunder (except to the extent that Seller is due a credit for having already
paid such expense). Buyer shall send customary statements for reimbursement of
operating expenses and taxes to tenants under the Leases, and Seller shall
consult with Buyer on a timely basis with respect to appropriate calculations
and amounts due therefor. Buyer shall pay to Seller, promptly upon receipt by
Buyer, Seller's prorated share of such operating expenses, determined in the
same manner as percentage rents.
(d) Buyer shall receive a credit at Closing for the amount of all
cash security deposits then held by Seller under the Leases and any letters of
credit, or other noncash security, held by Seller in lieu of cash security
deposits shall be delivered to Buyer at Closing through the Escrow.
(e) All nondelinquent rents, other revenues and all expenses of
the Property not treated in Paragraphs 9(a), (b), (c) or (d) shall be prorated
---- --- --- ---
and apportioned as of 12:01 a.m. on the Closing Date, so that Seller shall bear
all expenses with respect to the Property and shall have the benefit of all
income with respect to the Property for the period preceding 12:01 a.m. on the
Closing Date, and Buyer shall bear such expenses and benefit from such income
thereafter. Any revenue or expense amount subject to this Paragraph 9(d) which
---
cannot be ascertained with certainty as of the Closing Date shall be prorated on
the basis of the parties' reasonable estimates of such amount and shall be the
subject of a final proration thirty (30) days after the Closing Date or as soon
thereafter as the precise amounts can be ascertained. A statement setting forth
such agreed prorations shall be delivered to Escrow Holder, provided that Escrow
Holder shall not be required to calculate any prorations. Seller shall pay or
credit Buyer with all unearned advances in
8
<PAGE>
connection with the Property or its operations. Expenses to be prorated shall
include any applicable real and personal property taxes, special or other
assessments, water rates, sewer charges, disposal and garbage charges, gas,
electricity and other utility charges, license and permit fees and other
expenses customarily prorated which are not payable by any present tenant of the
Property or any portion thereof.
(f) Seller reserves all claims and causes of action against
tenants and others owing delinquent payments as of the Closing Date. If Buyer is
holding or has been credited with a security or other similar deposit as to any
tenant who owes money to Seller, then, upon expiration of that tenant's Lease,
Buyer shall apply the security deposit to the payment of any sum due Seller to
the extent the security deposit is not otherwise applied to payment of sums due
Buyer. Seller may commence and prosecute litigation against any tenant for rents
in arrears, but shall not seek termination of any lease. Through the first
anniversary date of the Closing Date, Seller and Buyer shall each cooperate with
each other diligently and promptly to correct any errors in computations or
estimates under this Paragraph 9 and shall promptly pay to the party entitled
-
thereto any refund, credit or other payment necessary to comply with the
provisions of this Paragraph 9 as of and after the Closing Date. However,
-
following the first anniversary of the Closing Date, neither party shall be
obligated to make any corrections under this Paragraph 9. This Paragraph 9 shall
- -
survive the Closing Date. Either party owing the other party a sum of money
based on adjustments made to prorations after the Closing Date shall promptly
pay that sum to the other party, together with interest thereon at the rate of
10% per annum to the date of payment if payment is not made within ten (10) days
after mutual agreement as to the amount due.
10. SELLER'S REPRESENTATIONS AND WARRANTIES.
---------------------------------------
(a) Seller's Representations and Warranties. In consideration of
---------------------------------------
Buyer entering into this Agreement and as an inducement to Buyer to purchase the
Property from Seller, Seller makes the following representations and warranties,
each of which is material and is being relied upon by Seller:
(i) Authority. Seller has the legal right, power and authority
---------
to enter into this Agreement and to consummate the transactions contemplated
hereby, and the execution, delivery and performance of this Agreement have been
duly authorized and no other action by Seller is requisite to the valid and
binding execution, delivery and performance of this Agreement, except as
otherwise expressly set forth herein.
(ii) Delivered Materials. To Seller's Knowledge, the
-------------------
Documents (as hereinafter defined) delivered to Buyer by Seller are not false or
misleading in any material respect. Except for the Leases and all documents and
agreements which have been recorded against the Property, the Documents include
all contracts and other agreements which have been entered into by Seller, which
are effective as of the date hereof and which would be binding on Buyer after
the Closing Date.
(iii) Leases. Seller has not entered into any leases,
------
occupancy licenses or other occupancy agreements affecting any portion of the
Property on the date hereof, except for the Leases.
9
<PAGE>
(iv) Litigation. Seller has not commenced any pending actions,
----------
suits, proceedings or investigations before any court or other governmental
authority with respect to the Property or any current tenant of the Property and
to Seller's Knowledge, as of the date hereof, there are no pending actions,
suits, proceedings or investigations to which Seller is a party before any court
or other governmental authority with respect to the Property or any current
tenant of the Property.
(v) Notices. To Seller's Knowledge, except for notices
-------
delivered to Buyer as part of the Documents, Seller has not received from any
governmental authority any written notice within the twenty-four (24) months
prior to the date of this Agreement (i) of any violation of any zoning,
building, environmental, fire or health code or any other statute, ordinance,
rule or regulation applicable (or alleged to be applicable) to the Property, or
any part thereof, or (ii) of any plan to modify the existing zoning or widen,
modify or realign any street or highway or any eminent domain proceeding that
would affect the Property, or any part thereof.
(b) Seller's Knowledge. As used in this Agreement, the words
------------------
"Seller's Knowledge" or words of similar import shall be deemed to mean, and
shall be limited to, the actual (as distinguished from implied, imputed or
constructive) knowledge of Robert Patterson without such person(s) having any
obligation to make an independent inquiry or investigation.
(c) Breach of Representations. Notwithstanding anything contained
-------------------------
in this Paragraph 10 or elsewhere in this Agreement to the contrary, Buyer
hereby expressly waives, relinquishes and releases any right or remedy available
to it at law, in equity or under this Agreement to make a claim against Seller
for damages that Buyer may incur, or to rescind this Agreement and the
transactions contemplated hereby, as the result of any of Seller's
representations or warranties being untrue, inaccurate or incorrect if Buyer
knew or is deemed to have known as provided herein that such representation or
warranty was untrue, inaccurate or incorrect at the time of the Closing and
Buyer nevertheless closes title hereunder. Buyer shall be "deemed to have known"
that a representation or warranty was untrue, inaccurate or incorrect at the
time of the Closing to the extent that the Documents furnished or made available
to or otherwise obtained by Buyer contains information which expressly is
inconsistent with such representation or warranty (or to the extent any of its
Property investigations reveals such inconsistencies).
(d) Survival. The representations and warranties of Seller set
--------
forth in this Agreement shall remain operative and shall survive the Closing and
the execution and delivery of the Deed for a period of one (i) year following
the Closing Date.
11. BUYER'S COVENANTS, REPRESENTATIONS AND WARRANTIES.
-------------------------------------------------
In consideration of Seller entering into this Agreement and as an
inducement to Seller to sell the Property to Buyer, Buyer makes the following
covenants, representations and warranties, each of which is material and is
being relied upon by Seller:
(a) Authority. Buyer has the legal right, power and authority to
---------
enter into this Agreement and to consummate the transactions contemplated
hereby, and the execution, delivery and performance of this Agreement have been
duly authorized and
10
<PAGE>
no other action by Buyer is requisite to the valid and binding execution,
delivery and performance of this Agreement, except as otherwise expressly set
forth herein.
(b) As-Is. On or before the end of the Contingency Period Buyer
-----
shall have examined and inspected the Property and know and be satisfied with
the physical condition, quality, quantity and state of repair of the Property in
all respects and shall have determined that the same is acceptable to Buyer "AS-
IS," and Buyer acknowledges that Buyer is acquiring the Property in such "AS-IS"
condition solely in reliance on its own inspections and examination, and its own
evaluation of the Property. Buyer agrees that, except for Seller's
representations and warranties as set forth in Paragraph 10(a), no other
-----
representations, statements or warranties have at any time been made by Seller,
or its agents, as to the physical condition, quality, quantity or state of
repair of the Property or related to the operation or prospects for the Property
in any respect which have not been expressed in this Agreement. Buyer
acknowledges and agrees that:
(i) Buyer has reviewed all instruments, records and documents
which Buyer deems appropriate or advisable to review in connection with this
transaction, including, but not by way of limitation, any and all architectural
drawings, plans, specifications, surveys, building and occupancy permits, and
any licenses, leases, contracts, warranties and guarantees relating to the
Property or the business conducted thereon available to Buyer, and Buyer has
determined that the same and the information and data contained therein and
evidenced thereby are satisfactory to Buyer;
(ii) Buyer has reviewed all applicable laws, ordinances, rules
and governmental regulations (including, but not limited to, those relating to
building, zoning and land use) affecting the development, use, occupancy or
enjoyment of the Property; and
(iii) Buyer has, at its own cost and expense, made its own
independent investigation respecting the Property and all other aspects of this
transaction, and is relying thereon and on the advice of its consultants in
entering into this Agreement and has determined that the same are satisfactory
to Buyer.
(c) Environmental Matters. Buyer acknowledges that Seller makes no
---------------------
representations or warranties regarding the presence of any toxic or hazardous
materials or substances of any nature in, on or under the Property. By
proceeding with this transaction following the expiration of the Contingency
Period, Buyer will be deemed to have made its own independent investigation of
the Property with regard to the presence of such materials and substances as
Buyer deems appropriate.
(c) Limitation on Seller's Liability. Buyer represents and
--------------------------------
covenants that Seller shall not have any liability, obligation or responsibility
of any kind with respect to the following:
(i) The content or accuracy of any report, study, opinion or
conclusion of any soils, toxic, environmental or other engineer or other person
or entity who has examined the Property or any aspect thereof;
11
<PAGE>
(ii) The content or accuracy of any information released to
Buyer by an engineer or planner in connection with the development of the
Property;
(iii) The availability of building or other permits or
approvals for the Property by any state or local governmental bodies with
jurisdiction over the Property;
(iv) Any of the items delivered to Buyer pursuant to Buyer's
review of the condition of the Property; and
(v) The content or accuracy of any other development or
construction cost, projection, financial or marketing analysis or other
information given to Buyer by Seller or reviewed by Buyer with respect to the
Property.
12. LIQUIDATED DAMAGES. IF BUYER DEFAULTS UNDER THIS AGREEMENT,
------------------
SELLER'S SOLE REMEDY FOR SUCH DEFAULT SHALL BE TO CANCEL THE
ESCROW AND RETAIN THE DEPOSIT AS LIQUIDATED DAMAGES AND SELLER SHALL
THEREUPON BE RELEASED FROM ITS OBLIGATIONS HEREUNDER. BUYER AND SELLER
AGREE THAT BASED UPON THE CIRCUMSTANCES NOW EXISTING, KNOWN AND
UNKNOWN, IT WOULD BE IMPRACTICAL OR EXTREMELY DIFFICULT TO ESTABLISH
SELLER'S DAMAGE BY REASON OF BUYER'S DEFAULT UNDER THIS AGREEMENT.
ACCORDINGLY, BUYER AND SELLER AGREE THAT IF BUYER DEFAULTS UNDER THIS
AGREEMENT, IT WOULD BE REASONABLE AT SUCH TIME TO AWARD SELLER
"LIQUIDATED DAMAGES" EQUAL TO THE AMOUNT REPRESENTED BY THE DEPOSIT.
THEREFORE, IF BUYER DEFAULTS UNDER THIS AGREEMENT, SELLER
SHALL ELECT EITHER TO WAIVE SUCH DEFAULT IN SELLER'S SOLE AND ABSOLUTE
DISCRETION WITH NO OBLIGATION TO DO SO OR SELLER SHALL INSTRUCT THE
ESCROW HOLDER TO CANCEL THE ESCROW WHEREUPON ESCROW HOLDER SHALL
IMMEDIATELY PAY OVER TO SELLER THE DEPOSIT AS "LIQUIDATED DAMAGES" AS
SELLER'S SOLE REMEDY FOR SUCH DEFAULT AND SELLER AND BUYER SHALL BE
RELIEVED FROM ALL OBLIGATIONS AND LIABILITIES HEREUNDER EXCEPT OBLIGATIONS
WHICH BY THEIR TERMS SURVIVE THE TERMINATION OF THIS AGREEMENT, AND,
PROMPTLY FOLLOWING ESCROW HOLDER'S RECEIPT OF SUCH INSTRUCTION, ESCROW
HOLDER SHALL CANCEL THE ESCROW.
NOTHING IN THIS PARAGRAPH 12 SHALL (i) PREVENT OR PRECLUDE ANY
--
RECOVERY OF ATTORNEYS' FEES OR OTHER COSTS INCURRED BY SELLER PURSUANT
TO PARAGRAPH 17(C) OR (ii) IMPAIR OR LIMIT THE EFFECTIVENESS, ENFORCEABILITY
----
OR SELLER'S RECOURSE WITH RESPECT TO THE INDEMNIFICATION OBLIGATIONS OF
BUYER CONTAINED IN THIS AGREEMENT. SELLER AND BUYER ACKNOWLEDGE THAT
THEY HAVE READ AND UNDERSTAND THE PROVISIONS OF THIS PARAGRAPH 12 AND
--
BY THEIR INITIALS IMMEDIATELY BELOW AGREE TO BE BOUND BY ITS TERMS.
/RP/ /RW/
_________________________ ________________________
Sellers' Initials Buyer's Initials
13. [Intentionally Omitted.]
12
<PAGE>
14. DAMAGE OR CONDEMNATION PRIOR TO CLOSING.
---------------------------------------
Seller shall promptly notify Buyer of any casualty to the Property or
any condemnation proceeding commenced prior to the Close of Escrow. If any such
damage or proceeding relates to or may result in the loss of any material
portion of the Property in excess of Two Hundred Fifty Thousand Dollars
($250,000), Seller or Buyer may, at their option, elect either to: (i) terminate
this Agreement, in which event the Deposit shall be returned to Buyer and
neither party shall have any further rights or obligations hereunder, or (ii)
continue the Agreement in effect, in which event upon the Close of Escrow, Buyer
shall be entitled to any compensation, awards, or other payments or relief
resulting from such casualty or condemnation proceeding relating to the Property
and a credit to the Purchase Price in an amount equal to the deductible under
Seller's insurance policy, if applicable. No other adjustments to the Purchase
Price shall be made in connection with any casualty or condemnation.
15. BROKER'S COMMISSIONS.
--------------------
Except for CB Commercial Real Estate and SJG Development Corp. whose
commission shall be payable by Seller, neither party hereto has had any contact
or dealing regarding the Property, or any communication in connection with the
subject matter of this transaction, through any licensed real estate broker or
other person who can claim a right to a commission or finder's fee as a
procuring cause of the sale contemplated herein. In the event that any other
broker or finder perfects a claim for a commission or finder's fee, the party
responsible for the contact or communication on which the broker or finder
perfected such claim shall indemnify, save harmless and defend the other party
from said claim and all costs and expenses (including reasonable attorneys'
fees) incurred by the other party in defending against the same.
16. SELLER'S AGREEMENTS.
-------------------
(a) Documents. Promptly after the execution and delivery of this
---------
Agreement by Buyer and Seller, Seller shall deliver or make available to Buyer
copies of the documents listed on Exhibit F attached hereto (the "Documents").
---------
(b) Tenant Estoppel Certificates. Promptly after execution and
----------------------------
delivery of this Agreement, Seller agrees to request an estoppel certificate (an
"Estoppel Certificate") in the form hereinafter required by each tenant under a
Lease, but in no event shall it be deemed to be an obligation of Seller under
this Agreement to obtain executed Estoppel Certificates. The Estoppel
Certificates shall be in the form attached hereto as Exhibit G. Notwithstanding
---------
the foregoing, if any tenant is required or permitted under its Lease to provide
less information or to otherwise make different statements in a certificate of
such nature than are set forth in Exhibit G and such tenant delivers an estoppel
certificate containing only the minimum statements, if any required under such
tenant's Lease to be made by such tenant in such a certificate, then such
estoppel certificate shall satisfy the requirement of this Agreement. In no
event shall Seller's failure to obtain any Estoppel Certificate constitute a
default by Seller under this Agreement.
(c) Operation of the Property. Between the date hereof and the
-------------------------
Closing Date Seller shall continue to operate and maintain the Property in the
manner currently operated and maintained by Seller. Seller shall not terminate
or amend any of the
13
<PAGE>
Leases without Buyer's prior written consent, which shall not be unreasonably
withheld or delayed. If Buyer fails to approve or reasonably disapprove any
request for consent within five (5) business days within written notice from
Seller, Buyer shall be conclusively deemed to have approved such request.
17. MISCELLANEOUS PROVISIONS.
------------------------
(a) Assignment; Binding on Successors and Assigns. Buyer shall not
---------------------------------------------
assign, transfer or convey its rights or obligations under this Agreement or
with respect to the Property without the prior written consent of Seller, which
consent Seller may withhold in its sole, absolute and subjective discretion. Any
attempted assignment without the prior written consent of Seller shall be void
and Buyer shall be deemed in default hereunder. Any permitted assignments shall
not relieve the assigning party from its liability under this Agreement. Subject
to the foregoing, this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective permitted successors, assigns,
heirs, trustees, administrators and other fiduciaries.
(b) Further Assurances. In addition to the acts and deeds recited
------------------
herein and contemplated to be performed, executed or delivered by Seller or
Buyer, Seller and Buyer hereby agree to perform, execute and deliver, or cause
to be performed, executed and delivered, on the Closing Date or thereafter any
and all such further acts, deeds and assurances as Buyer or Seller, as the case
may be, may reasonably require in order to consummate fully the transactions
contemplated hereunder.
(c) Attorneys' Fees. If any legal action or any arbitration or
---------------
other proceeding is brought or if an attorney is retained for the enforcement of
this Agreement or any portion thereof, or because of any alleged dispute,
breach, default or misrepresentation in connection with any of the provisions of
this Agreement, the prevailing party shall be entitled to recover from the other
reimbursement for the reasonable fees of attorneys and other costs (including
court costs and witness fees) incurred by it, in addition to any other relief to
which it may be entitled. The term "prevailing party" means the party obtaining
substantially the relief sought, whether by compromise, settlement or judgment.
(d) Survival of Representations, Warranties and Agreements. Each
------------------------------------------------------
of the indemnities, agreements, warranties and representations contained in this
Agreement shall survive the Close of Escrow and recordation of the Grant Deed.
(e) Entire Agreement, Amendments and Waivers. This Agreement
----------------------------------------
contains the entire agreement and understanding of the parties in respect to the
subject matter hereof, and the parties intend for the literal words of this
Agreement to govern and for all prior negotiations, drafts, and other extrinsic
communications, whether oral or written, to have no significance or evidentiary
effect. The parties further intend that neither this Agreement nor any of its
provisions may be changed, amended, discharged, waived or otherwise modified
orally except only by an instrument in writing duly executed by the party to be
bound thereby. The parties hereto fully understand and acknowledge the
importance of the foregoing sentence and are aware that the law may permit
subsequent oral modification of a contract notwithstanding contract language
which requires that any such modification be in writing; but Buyer and Seller
fully and expressly intend that the foregoing requirements as to a writing be
strictly adhered to and strictly interpreted and enforced by any court which may
be asked to decide the question.
14
<PAGE>
(f) Governing Jurisdiction. This Agreement shall be construed
----------------------
under and in accordance with the laws of the State of California.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts which together shall constitute the agreement of the parties.
(h) Headings. The paragraph headings herein contained are for
--------
of identification only, and shall not be considered in construing this
Agreement.
(i) Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing, and shall be personally delivered, sent
by overnight mail (Federal Express or the like) or sent by registered or
certified mail, postage prepaid, return receipt requested, telegraphed,
delivered or sent by facsimile or fax and shall be deemed received upon the
earlier of (i) if personally delivered, the date of delivery to the address of
the person to receive such notice, (ii) if sent by overnight mail, the business
day following its deposit in such overnight mail facility, (iii) if mailed, four
(4) business days after date of posting by the United States post office, or
(iv) if given by facsimile or fax, when sent. Any notice, request, demand,
direction or other communication sent by facsimile or fax must be confirmed
within forty-eight (48) hours by letter mailed or delivered in accordance with
the foregoing:
To Buyer: Four Media Company
2813 West Alameda Avenue
Burbank, California 91505
Attention: Mr. Robert T. Walston
Phone No. (818) 840-7000
Fax No. (818) 846-5197
With a copy to: Greenberg Glusker Fields Claman & Machtinger
1900 Avenue of the Stars, Suite 2100
Los Angeles, California 90067
Attention: Dennis Ellman, Esq.
Phone No. (310) 201-7417
Fax No. (310) 553-0687
To Seller: Cabot Partners
Two Center Plaza
Boston, Massachusetts 02108
Attention: Mr. Robert Patterson
Phone No. (617) 723-0900
Fax No. (617) 722-8237
With a copy to: Mayer, Brown & Platt
350 South Grand, Suite 2500
Los Angeles, California 90071
Attention: Lone Soares Griffen, Esq.
Phone No. (213) 229-5136
Fax No. (213) 625-0248
15
<PAGE>
To Escrow Holder: Commerce Escrow
1545 Wilshire Boulevard, Suite 600
Los Angeles, California 90017
Attention: Mr. Mark Minsky
Notice of change of address shall be given by written notice in the manner
detailed in this Paragraph. Rejection or other refusal to accept or the
inability to deliver because of changed address of which no notice was given
shall be deemed to constitute receipt of the notice, demand, request or
communication sent.
(k) Time of Essence. Seller and Buyer hereby acknowledge and agree
---------------
that time is strictly of the essence with respect to each and every term,
condition, obligation and provision hereof and failure to perform timely any of
the terms, conditions, obligations or provisions hereof by either party shall
constitute a material breach of, and non-curable (but waivable) default under
this Agreement by the parties so failing to perform.
(l) Partial Validity. If any term or provision of this Agreement
----------------
or the application thereof to any person or circumstance shall, to any extent,
be held invalid or unenforceable, the remainder of this Agreement, or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby, and each such term and provision of this Agreement shall be valid and
be enforced to the fullest extent permitted by law.
(m) Waivers. No waiver of any breach of any covenant or provision
-------
herein contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or of any other covenant or provision herein contained. No extension of
time for performance of any obligation or act shall be deemed an extension of
the time for performance of any other obligation or act.
(n) Confidentiality. The parties shall at all times keep this
---------------
transaction and any documents received from each other confidential, except to
the extent necessary (i) to comply with applicable law and regulations, or (ii)
to carry out the obligations set forth in this Agreement. Any such disclosure to
a third party shall indicate that the information is confidential and should be
so treated by the third party. Each party agrees that no press release or, to
the extent within the control of such party, other public disclosure shall be
made by such party or any of its agents concerning this transaction without the
prior written consent of the other party.
(o) No Third Party Beneficiaries. This Agreement is for the sole
----------------------------
and exclusive benefit of the parties hereto and their respective permitted
successors and assigns, and no third party is intended to, or shall have, any
rights hereunder.
(p) Days. All references to "days" in this Agreement shall be
----
construed to mean Calendar days unless otherwise expressly provided and all
references to "business days" shall be construed to mean days on which national
banks are open for business.
16
<PAGE>
(q) Waiver of CC Section 1662. Seller and Buyer each expressly
-------------------------
waive the provisions of California Civil Code Section 1662 and hereby agree that
the provisions of Paragraph 14 shall govern their obligations in the event of
--
damage or destruction to the Property or condemnation of all or part of the Real
Property.
(r) Joint Product of Parties. This Agreement is the result of
------------------------
arms-length negotiations between Seller and Buyer and their respective
attorneys. Accordingly, neither party shall be deemed to be the author of this
Agreement and this Agreement shall not be construed against either party.
(s) Indemnification. Buyer hereby indemnifies, protects, defends
---------------
(with counsel reasonably acceptable to Seller) and holds Seller and the Property
free and harmless from and against any and all costs, losses, liabilities,
damages, lawsuits, judgments, actions, proceedings, penalties, demands,
attorneys' fees, mechanic's liens, or expenses of any kind or nature whatsoever
(collectively, "Liabilities"), arising out of or resulting from (i) any entry or
activities upon the Property by Buyer, Buyer's agents, contractors or
subcontractors, or the contractors and subcontractors of such agents, or (ii)
from the enforcement of this agreement of indemnity or the assertion by Buyer of
any defense to its obligations hereunder. The indemnity obligations of Buyer set
forth in this Paragraph 17(s) shall survive any termination of this Agreement.
-----
The foregoing indemnity excludes Liability arising out of or in connection with
the mere discovery of any toxic or hazardous substances or materials on or about
the Property so long as Buyer or its agents, contractors or subcontractors have
not adversely affected or disturbed any such substances or materials.
17
<PAGE>
Executed the day and year first above written.
"SELLER"
CP PRIVATE PARTNERS, L.P.I.
By: Cabot Partners Limited Partnership
its General Partner
By: Cabot Realty Advisors Corp.
its General Partner
By: /s/ Robert Patterson
-----------------------------
Its: Exec. V. P.
------------------------
"BUYER"
FOUR MEDIA COMPANY,
a ______________ corporation
By: /s/ Robert Walston
-------------------------------------
Its: CEO
--------------------------------
By:
-------------------------------------
Its:
--------------------------------
AGREED TO THIS 6
DAY OF AUG, 1996,
AS TO PROVISIONS RELATING
TO ESCROW HOLDER:
COMMERCE ESCROW
By: /s/ Mark Minsky
----------------------------
Its: V. President
---------------------------
18
<PAGE>
LIST OF EXHIBITS
----------------
EXHIBIT A - Legal Description of Real Property
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EXHIBIT B - Form of Grant Deed
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EXHIBIT C - Form of Bill of Sale
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EXHIBIT D - Form of Assignment of Leases
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EXHIBIT E - Form of Non-Foreign Affidavit
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EXHIBIT F - Documents
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EXHIBIT G - Form of Tenant Estoppel
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19
<PAGE>
LEGAL DESCRIPTION OF REAL PROPERTY
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Parcel 2, in the City of Burbank, in the County of Los Angeles, State of
California, as shown on Parcel Map No. 1, Filed in Book 4, Page 8 of Parcel
Maps, in the Office of the County Recorder of said County.
EXHIBIT A
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<PAGE>
FORM OF GRANT DEED
------------------
Order No.
Escrow No.
Loan No.
WHEN RECORDED MAIL TO:
SPACE ABOVE THIS LINE FOR
RECORDER'S USE
MAIL TAX STATEMENTS TO: DOCUMENTARY TRANSFER
TAX $
...Computed on the consideration or
value of property conveyed; OR
...Computed on the consideration or
value less liens or encumbrances
remaining at time of sale.
______________________________________
Signature of Declarant or Agent
determining tax-Firm Name
- --------------------------------------------------------------------------------
GRANT DEED
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, CP
PRIVATE PARTNERS, L.P.I., a Delaware Limited Partnership hereby GRANTS to
________________________________________________________
the real property in the City of Burbank
County of Los Angeles, State of California, described as
Parcel 2, in the City of Burbank, in the County of Los Angeles, State of
California, as shown on Parcel Map No. 1, Filed in Book 4, Page 8 of Parcel
Maps, in the Office of the County Recorder of said County.
Dated _____________________________ CP PRIVATE PARTNERS, L.P.I.
By: Cabot Partners Limited Partnership
its General Partner
By: Cabot Realty Advisors Corp.
its General Partner
By: ___________________________________
Its:___________________________________
[ATTACH ACKNOWLEDGEMENTS]
EXHIBIT B
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<PAGE>
BILL OF SALE
BILL OF SALE AND GENERAL ASSIGNMENT AND ASSUMPTION dated March __, 1996,
between CP PRIVATE PARTNERS, L.P.I., a Delaware Limited Partnership
("Assignor"), and ______________________________ ("Assignee").
This Bill of Sale and General Assignment and Assumption is being executed
and delivered pursuant to that certain Purchase and Sale Agreement and Escrow
Instructions dated as of June __, 1996 (the "Purchase Agreement"), by and
between Assignor and Assignee. All capitalized terms used but not defined herein
shall have the meanings ascribed to them in the Purchase Agreement.
For Ten Dollars ($10.00) and other good and valuable consideration, the
adequacy and receipt of which are hereby acknowledged by Assignor, Assignor and
Assignee do hereby agree as follows with respect to the Property identified on
Exhibit A attached hereto:
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1. Sale and Assignment of Personal Property.
----------------------------------------
(a) Assignor hereby sells, transfers, assigns, delivers, sets over and
conveys to Assignee all of Assignor's right, title and interest, if any, in and
to all Personal Property.
(b) The Personal Property hereby sold, transferred, assigned, delivered,
set over and conveyed is being sold on an "as is, where is" basis. ASSIGNOR
MAKES NO WARRANTY, EXPRESS OR IMPLIED, AND HEREBY DISCLAIMS ALL SUCH WARRANTIES,
AS TO THE MERCHANTABILITY OR FITNESS FOR USE OF SUCH PERSONAL PROPERTY LOCATED
ON OR INCLUDED IN THE PROPERTY.
3. General Assignment and Assumption.
---------------------------------
(a) Assignor hereby sells, transfers, assigns, delivers, sets over and
conveys to Assignee all right, title and interest, if any, of Assignor in and to
the Intangible Personal Property.
(b) Assignee hereby assumes all obligations of Assignor in connection with
or arising out of the Intangible Personal Property accruing from and after the
date hereof.
4. Representations and Warranties. This Bill of Sale and General
------------------------------
Assignment and Assumption is made without recourse and without representation or
warranty of any kind whatsoever, express or implied, or by operation of law,
except to the extent and only for so long as any representation or warranty
specifically set forth in the Purchase Agreement survives the Closing.
5. Successors and Assigns. This Bill of Sale and General Assignment and
----------------------
Assumption shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
EXHIBIT C
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<PAGE>
6. Governing Law. This Bill of Sale and General Assignment and Assumption
-------------
shall be governed by and construed in accordance with the internal laws of the
State of California without regard to conflicts of law.
IN WITNESS WHEREOF, this Bill of Sale and General Assignment and Assumption has
been executed this ___ day of _____________, 1996.
"ASSIGNOR"
CP PRIVATE PARTNERS, L.P.I.
By: Cabot Partners Limited Partnership
its General Partner
By: Cabot Realty Advisors Corp.
its General Partner
By:__________________________________
Its:_________________________________
"ASSIGNEE"
_______________________________
By:__________________________________
Its:____________________________
By:__________________________________
Its:____________________________
EXHIBIT C
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<PAGE>
FORM OF ASSIGNMENT OF LEASES
----------------------------
ASSIGNMENT OF LEASES
--------------------
FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby
acknowledged, CP PRIVATE PARTNERS, L.P.I., a Delaware Limited Partnership
("Assignor") hereby (i) assigns to ___________________________________
("Assignee") all of the interest of the lessor under the leases described on
Exhibit A attached hereto (the "Leases"). The foregoing assignment is made
- ---------
without representation or warranty of any kind, express or implied or by
operation of law, except as expressly provided in that certain Purchase and Sale
Agreement and Escrow Instructions dated as of June __, 1996 between Assignor and
Assignee (the "Purchase Agreement").
Dated: as of ___________, 1996.
CP PRIVATE PARTNERS, L.P.I.
By: Cabot Partners Limited Partnership
its General Partner
By: Cabot Realty Advisors Corp.
its General Partner
By: _______________________________________
Its: ______________________________________
ACCEPTANCE OF ASSIGNMENT
------------------------
Assignee hereby (i) accepts the foregoing assignment, (ii) agrees to be
bound by all the terms, covenants and conditions of the Leases, (iii) assumes
and agrees to perform and observe all of the terms, covenants and conditions of
the Leases to be performed or observed by the lessor thereunder from and after
the date hereof; and (iv) acknowledges and agrees that the foregoing assignment
is made without representation or warranty of any kind, express or implied or
by operation of law, except as may be expressly provided in the Purchase
Agreement.
Dated: as of ___________, 1996.
_________________________________________
By: _____________________________________
Its: ____________________________________
EXHIBIT D
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<PAGE>
FORM OF NON-FOREIGN AFFIDAVIT
-----------------------------
TRANSFEROR'S CERTIFICATION OF NON-FOREIGN STATUS
------------------------------------------------
Section 1445 of the Internal Revenue Code of 1986, as amended (the
"U.S. Code") provides that a transferee of a U.S. real property interest must
withhold tax if the transferor is a foreign person. To inform
________________________________________________ (the "Transferee"), that
withholding of tax under Section 1445 of the U.S. Code will not be required upon
the transfer of a California real property interest to the Transferee by CP
PRIVATE PARTNERS, L.P.I., a Delaware Limited Partnership (the "Transferor"), the
undersigned hereby certifies the following on behalf of the Transferor:
1. The Transferor is not a foreign corporation, foreign partnership,
foreign trust or foreign estate (as those terms are defined in the U.S.
Code and the Income Tax Regulations promulgated thereunder) and is a
resident of or has a permanent place of business in the State of Delaware;
2. The Transferor's U.S. employer identification number is
__________; and
3. The Transferor's office address is: ____________________________.
The Transferor understands that this Certificate may be disclosed to
the Internal Revenue Service by the Transferee and that any false statement
contained herein could be punished by fine, imprisonment, or both.
Under penalty of perjury I declare that I have examined this
Certification and, to the best of my knowledge and belief, it is true, correct
and complete, and I further declare that I have authority to sign this document
on behalf of the Transferor.
DATED: ________, 1996.
CP PRIVATE PARTNERS, L.P.I.
By: Cabot Partners Limited Partnership
its General Partner
By: Cabot Realty Advisors Corp.
its General Partner
By:________________________________________
Its:_______________________________________
EXHIBIT E
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<PAGE>
DOCUMENTS
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The current title insurance policy;
Plans and specifications for the Property;
Any information in Seller's possession relating to environmental conditions in
respect to the Property;
The latest ALTA survey of the Property;
Copies of the latest building inspection reports and certificate of occupancy in
Seller's possession, where applicable;
Copies of all leases and contracts, if any, affecting the Property and any
amendments in Seller's possession (maintenance, security, property management,
etc., if any);
Copies of all recent tax bills of estimates; and
Operating statements for 1994, 1995, and 1996 including rent collections,
operating expense history and all capital expenditures.
EXHIBIT F
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<PAGE>
TENANT ESTOPPEL
---------------
TO: ______________________
______________________
______________________
The undersigned, the tenant ("Tenant") under a certain lease agreement, a
------
true copy of which, with all amendments thereto, is attached hereto as Exhibit A
---------
("Lease"), does hereby certify as follows:
-----
1. The Tenant is a _____________ [entity]. The landlord ("Landlord") is
--------
CP Private Partners, L.P.I.
2. The Lease is presently in effect and unmodified.
3. The Lease term commenced on ______________________.
4. Tenant has accepted possession of the leased premises under the Lease
and any improvements required by the terms of the Lease to be made by the
Landlord have been completed.
5. The Tenant is paying $_____________ [rental amount] per
[month/quarter/year] as rent to Landlord under the Lease. The estimated
additional rent payable pursuant to the Lease on account of real estate taxes,
insurance, common area maintenance expenses and operating expenses in the amount
of $_______________ has been paid through and including ____________, 19__.
6. No rent under the Lease has been paid more than thirty (30) days in
advance of its due date.
7. Tenant is not in default under the Lease, and, to Tenant's knowledge,
Landlord is not in default under the Lease and Tenant has no claim, charge,
defense or offset under the Lease. Tenant has not assigned, transferred, or
hypothecated its interest under the Lease.
8. Tenant has not made any payment to Landlord as a security deposit or
rental deposit except any payment expressly provided for in the Lease as
follows: ____________________________ [describe amount and nature of payment].
EXHIBIT G
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<PAGE>
The foregoing provisions may be relied on by and shall inure to the benefit
of the addressee set forth above and its successors, assigns, and mortgagees and
shall be binding upon the undersigned and its successors and assigns.
DATED: __________, 19__.
_________________________________________
By:______________________________________
Name:____________________________________
Title:___________________________________
EXHIBIT G
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<PAGE>
FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT
----------------------------------------------
AND ESCROW INSTRUCTIONS
-----------------------
This FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS
(this "Amendment") is entered into as of September 17, 1996, between CP PRIVATE
PARTNERS, L.P.I., a Delaware Limited Partnership ("Seller"), and FOUR MEDIA
CORPORATION, a Delaware corporation ("Buyer"), with reference to that certain
Purchase and Sale Agreement and Escrow Instructions dated July 29, 1996 between
Seller and Buyer concerning the property located in Burbank, California and
described in Exhibit A attached thereto (the "PURCHASE AGREEMENT"). All
---------
initially-capitalized terms used herein shall have the meanings given such terms
in the Purchase Agreement unless otherwise defined herein.
Buyer and Seller hereby amend the Purchase Agreement to provide as follows:
Provided that Buyer has not defaulted in any of its obligations under the
Purchase Agreement, Buyer shall have the option to extend the Closing Date to
November 29, 1996 by (a) delivering written notice to Seller and Escrow Holder
on or before October 30, 1996 of its election to so extend the Closing Date, and
(b) depositing on or before October 30, 1996 additional cash or current funds in
the sum of One Hundred Twenty-Five Thousand Dollars ($125,000) (the "Additional
Deposit") with Escrow Holder. The Additional Deposit shall be added to, and
constitute part of, the Deposit and the Additional Deposit and all interest
accrued thereon shall become nonrefundable to Buyer except as provided in
Paragraph 3(c) of the Purchase Agreement.
Except as otherwise set forth herein, the Purchase Agreement shall remain
unmodified and in full force and effect. This Amendment may be executed in two
(2) or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument, with the same
effect as if all parties had signed the same signature page.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
effective as of the day and year first above written.
"SELLER"
CP PRIVATE PARTNERS, L.P.I.
By: Cabot Partners Limited Partnership
its General Partner
By: Cabot Realty Advisors Corp.
its General Partner
By:________________________________
Its:_______________________________
"BUYER"
FOUR MEDIA COMPANY, a Delaware corporation
By:__________________________________________
Its:______________________________________
By:__________________________________________
Its:______________________________________
-2-
<PAGE>
EXHIBIT 21.0
LIST OF SUBSIDIARIES
Following the Reorganization described in the Registration Statement the
subsidiaries of Four Media Company, a Delaware corporation, will be as follows:
<TABLE>
<CAPTION>
NAME STATE OF INCORPORATION PERCENT OWNED
- ---------------------------- ---------------------- --------------------------
<S> <C> <C>
1. 4MC-Burbank, Inc. Delaware 100% by Four Media Company
2. Four Media Company Asia PTE. Ltd. Republic of Singapore 100% by Four Media Company
3. Digital Magic Company Delaware 100% by Four Media Company
4. Catalina Transmission Corp. Delaware 100% by 4MC-Burbank, Inc.
5. Meridian Sound Corp. Delaware 100% by 4MC-Burbank, Inc.
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our report dated September 25, 1996, on our audits of the financial statements
of 4MC-Burbank, Inc. and our report dated October 1, 1996, on our audit of the
financial statement of Four Media Company. We also consent to the reference to
our firm under the caption "Experts."
Coopers & Lybrand L.L.P.
Los Angeles, California
October 8, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEETS AND CONSOLIDATED INCOME STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> AUG-04-1996 JUL-30-1995
<PERIOD-START> JUL-31-1995 AUG-01-1994
<PERIOD-END> AUG-04-1996 JUL-30-1995
<CASH> 5,312 6,651
<SECURITIES> 0 0
<RECEIVABLES> 9,445 10,308
<ALLOWANCES> 823 563
<INVENTORY> 867 695
<CURRENT-ASSETS> 18,348 19,356
<PP&E> 76,382 58,502
<DEPRECIATION> 18,717 9,092
<TOTAL-ASSETS> 81,827 71,780
<CURRENT-LIABILITIES> 16,706 13,691
<BONDS> 0 0
0 0
0 0
<COMMON> 15,010 15,010
<OTHER-SE> 7,133 4,607
<TOTAL-LIABILITY-AND-EQUITY> 81,827 71,780
<SALES> 70,028 61,004
<TOTAL-REVENUES> 70,028 61,004
<CGS> 43,411 38,696
<TOTAL-COSTS> 43,411 38,696
<OTHER-EXPENSES> 21,281 17,159
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 3,906 2,917
<INCOME-PRETAX> 1,430 2,232
<INCOME-TAX> (994) (988)
<INCOME-CONTINUING> 2,424 3,220
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,424 3,220
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
