UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Filed Pursuant to Section 13 OR 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 29, 1994
ORION PICTURES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-5979 13-1680528
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification
Number)
1888 Century Park East
Los Angeles, California 90067
(Address of principal executive offices)
Registrant's telephone number, including area code: (310) 282-0550
Page 1 of 20 pages
Exhibit Index begins on Page 6
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Item 5. Other Events
On March 29, 1994, Orion Pictures Corporation
("Orion") announced that it had reached an agreement on the
terms of a Stipulation and Order Settling Litigations and
Disputes (the "Settlement Agreement") and certain related
agreements with Showtime Networks Inc. ("Showtime") to
settle the litigations between the parties arising out of
their 1986 exclusive pay television output agreement (the
"Old Agreement"). The Settlement Agreement, which is
attached hereto as Exhibit 99.1, and the related agreements
have been approved by United States Bankruptcy Judge
Burton R. Lifland (the "Bankruptcy Court"), who presided
over Orion's bankruptcy proceeding and retains jurisdiction
over certain matters, and have become effective as of
March 29, 1994 (the "Effective Date").
As previously disclosed in Orion's public filings,
Orion and Showtime are currently involved in two litigations
arising out of the Old Agreement: (i) Orion Pictures
Corporation v. Showtime Networks Inc., f/k/a Showtime/The
Movie Channel, which is awaiting action in the United States
Supreme Court on Orion's petition for a writ of certiorari,
arising out of Orion's alleged failure to comply with a "key
man" provision set forth in the Old Agreement (the "Key Man
Dispute") and (ii) Showtime Networks Inc. v. Orion Pictures
Corporation, currently pending in the United States
Bankruptcy Court for the Central District of California,
based upon Showtime's allegation that a number of the films
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for which Showtime made payments under the Old Agreement did
not qualify for such payments (the "Qualification Dispute").
As a result of the Key Man Dispute, Showtime has
refused to license 16 films which could otherwise qualify
for licensing under the Old Agreement and Orion has claimed
that the license fees payable by Showtime for such 16 films
is expected to aggregate approximately $77 million.
As a result of the Qualification Dispute, Showtime
has not made certain payments to Orion under the Old
Agreement and has claimed that it should be entitled to
offset approximately $29 million in fees already paid
against any future license fees due Orion.
Pursuant to the Settlement Agreement, Orion and
Showtime will, promptly following the Effective Date, dismiss
with prejudice the Key Man Dispute and the Qualification
Dispute from all courts where such litigations are currently
pending. The parties have also amended the existing Old
Agreement to reflect the settlements reached by the parties
and have entered into a new exclusive output agreement to
cover certain qualifying new product produced or acquired by
Orion and certain of its affiliates and certain existing
product in Orion's film library (the "New Agreement").
As contemplated by the amendment to the Old
Agreement (the "Amendment") and the New Agreement, Showtime
will pay Orion, subject to all of the terms and conditions
of the Amendment and the New Agreement and after giving
effect to the settlement of the Qualification Dispute, the
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aggregate amount of approximately $56,000,000 (the
"Settlement Amount"), which amount represents:
(i) final payments for films previously exhibited
by Showtime;
(ii) adjusted payments for the 16 films that were
the subject of the Key Man Dispute (provided that the yet
unreleased films of such 16 films qualify under the terms of
the Old Agreement, as amended); and
(iii) under the New Agreement, license fees for
library product.
The Settlement Amount will be payable, subject to
all of the terms and conditions of the Amendment and the New
Agreement, as follows: approximately $16,600,000 was paid
on the Effective Date out of an escrow account previously
established in connection with the Key Man Dispute, plus
approximately $19,800,000 will be payable by July, 1994 and
substantially all of the remaining amounts will be payable
by June, 1997, with all remaining of such payments to be
made by Showtime by June, 2000. Under and subject to the
terms of the New Agreement, Showtime will also pay
additional license fees for qualifying new films produced or
acquired by Orion. In addition, the parties have executed
releases which release all claims against one another
arising under the Old Agreement prior to March 10, 1994,
including any claims resulting from the Key Man Dispute and
the Qualification Dispute.
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The Settlement Amount being paid by Showtime
represents a compromise between the parties in order to
avoid the expense, uncertainty and additional delay caused
by further litigation and does not reflect the entire
contractual amount that otherwise would have been payable by
Showtime pursuant to the terms of the Old Agreement for the
16 films that were the subject of the Key Man Dispute under
the terms of the Old Agreement. Orion is currently
analyzing what effect the payments by Showtime under the
Amendment and New Agreement will have on its consolidated
financial position and results of operations. However,
Orion currently believes that the amount of the settlement
will have an adverse effect on its consolidated financial
position and results of operations for the year ended
February 28, 1994 and is likely to have an adverse effect on
the ability of Orion to meet certain of its obligations
under the agreements Orion entered into with its creditors
in connection with its 1992 Joint Consolidated Plan of
Reorganization.
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Item 7. Financial Statements and Exhibits
(a) The following is an exhibit to this Report and is
filed herewith:
Exhibit 99.1 Settlement Agreement dated
March 10, 1994, between Showtime
Networks Inc. and Orion Pictures
Corporation.
6
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SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
ORION PICTURES CORPORATION
(Registrant)
By: /s/ John W. Hester
John W. Hester
Executive Vice President
and General Counsel
Dated: March 29, 1994
7
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- -------------------------------------x
In re : Chapter 11
:
: Case No. 91-B-15635 (BRL)
ORION PICTURES CORPORATION, : (Jointly Administered)
et al., :
:
Debtors. :
:
- -------------------------------------x
STIPULATION AND ORDER SETTLING LITIGATIONS
AND DISPUTES BETWEEN REORGANIZED DEBTORS
AND SHOWTIME NETWORKS INC.
__________________________________________
This Stipulation and Order Settling Litigations
and Disputes Between Reorganized Debtors and Showtime
Networks Inc. (the "Stipulation and Order") is dated and
entered into as of the 10th day of March, 1994 between and
among Orion Pictures Corporation ("Orion"), American
International Pictures, Inc. (DE), Mintaka Films B.V.
(Netherlands), Musicway, Inc. (CA), Orion Home Entertainment
Corporation (DE), Orion Music Publishing, Inc. (CA), Orion
Pictures Company Limited (England), Orion Pictures Company
(Japan) Ltd., Orion Pictures Corporation (England) Ltd.,
Orion Pictures Corporation (H.K.) Ltd. (Hong Kong), Orion
Pictures Distribution Corporation (DE), Orion Productions,
Inc. (DE), and Orion TV Productions Inc. (NY) (collectively,
the "Reorganized Debtors"), and Showtime Networks Inc.
("Showtime," and collectively with the Reorganized Debtors,
the "Parties") with respect to the following:
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2
W I T N E S S E T H
A. WHEREAS, Orion and Showtime entered into an
"Exclusive Output Agreement" dated as of August 1, 1986 (as
amended from time to time thereafter, the "Agreement")
requiring Showtime, inter alia, to license from Orion, for
agreed-upon fees, certain films that commenced principal
photography during the five-year period from August 1, 1986
to July 31, 1991 (the "Term");
B. WHEREAS, during 1991, Showtime apprised Orion of
Showtime's belief that as a result of, inter alia, certain
management changes announced by Orion on April 2, 1991,
Orion had failed to comply with a "Key Man" clause contained
in the Agreement and, therefore, that Showtime was no longer
obligated to license for exhibition the sixteen remaining
pictures which Orion sought to qualify for licensing under
the Agreement;
C. WHEREAS, on December 11, 1991, each of the
Reorganized Debtors filed a voluntary petition for
reorganization under Chapter 11 of Title 11 of the United
States Code (the "Bankruptcy Code") with the United States
Bankruptcy Court for the Southern District of New York (Hon.
Burton R. Lifland, presiding) (the "Bankruptcy Court");
D. WHEREAS, on March 20, 1992, Orion filed a motion
to assume the Agreement (the "Motion to Assume") with the
Bankruptcy Court in which Orion asserted, inter alia, that
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3
it had complied with the Agreement and its "Key Man"
provision;
E. WHEREAS, on the same date Orion also commenced a
related adversary proceeding (No. 92-8737A) against Showtime
in the Bankruptcy Court (the "Adversary Proceeding"),
seeking inter alia, money damages and a declaratory judgment
that Orion had complied with the Agreement and its "Key Man"
provision and that Orion could assume the Agreement;
F. WHEREAS, on March 31, 1992, Showtime filed a
motion with the United Stated District Court for the
Southern District of New York (the "District Court") seeking
withdrawal of the reference of the Adversary Proceeding (the
"Motion to Withdraw"), alleging, inter alia, that the
proceeding was a non-core proceeding as to which Showtime
was entitled to a jury trial;
G. WHEREAS, on April 13, 1992, the District Court
(Keenan, J.) denied Showtime's Motion to Withdraw the
reference of the Adversary Proceeding and removed the
Adversary Proceeding from its active docket;
H. WHEREAS, the Bankruptcy Court conducted a hearing
on Orion's Motion to Assume and the Adversary Proceeding on
May 14 and 15, 1992;
I. WHEREAS, on June 3, 1992, the Bankruptcy Court
entered orders which, inter alia, granted Orion's Motion to
Assume and dismissed the Adversary Proceeding "as moot";
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4
J. WHEREAS, Showtime subsequently appealed the order
denying Showtime's Motion to Withdraw and the Bankruptcy
Court's June 3, 1992 orders granting Orion's Motion to
Assume and dismissing the Adversary Proceeding "as moot" to
the District Court (Martin, J.);
K. WHEREAS, on October 20, 1992, the Bankruptcy Court
entered an order (the "Confirmation Order") confirming
Debtors' Modified Third Amended Joint Consolidated Plan of
Reorganization (the "Plan"), which Plan became effective on
November 5, 1992;
L. WHEREAS, on December 17, 1992, the District Court
entered judgment affirming the order denying Showtime's
Motion to Withdraw and the Bankruptcy Court's orders
granting the Motion to Assume and dismissing the Adversary
Proceeding "as moot";
M. WHEREAS, Showtime appealed the District Court's
December 17, 1992 judgment to the United States Court of
Appeals for the Second Circuit (the "Second Circuit");
N. WHEREAS, on April 30, 1993, Showtime commenced an
action (the "California Action") against Orion and "Does 1
through 10, inclusive" in the Superior Court of the State of
California for the County of Los Angeles (No. BC080150)
seeking a declaratory judgment that, inter alia, Showtime
had the right to offset up to $29,350,893 against any future
payments to Orion on the ground that Orion had certified
that certain films "qualified" as "Exclusive Pay Pictures"
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5
(within the meaning of the Agreement) when the films did
not, according to Showtime, so qualify;
O. WHEREAS, Orion removed the California Action to
the United States Bankruptcy Court for the Central District
of California (the "California Bankruptcy Court") (Docket
No. on Removal, No. AD 93-02679GM) and has moved to transfer
the venue of the California Action to the Bankruptcy Court
in New York, and Showtime has moved for remand of the
California Action to the Superior Court of the State of
California for the County of Los Angeles;
P. WHEREAS, on July 29, 1993, Orion commenced an
adversary proceeding against Showtime (No. 93-9167A) in the
Bankruptcy Court in New York (the "Injunction Action")
seeking, inter alia, a permanent injunction enjoining
Showtime from prosecuting the claim asserted in the
California Action on the grounds that the claim is barred by
the discharge, release and injunction provisions of the Plan
and the Bankruptcy Court's Confirmation Order, as well as
principles of waiver, estoppel, laches and res judicata;
Q. WHEREAS, on September 8, 1993, the United States
Bankruptcy Court for the Southern District of New York
entered an order in the Injunction Action providing that,
inter alia, pending issuance of a Final Order resolving the
claims Orion asserts in the Injunction Action, Showtime and
its representatives, agents, employees and attorneys are
preliminarily enjoined and restrained from prosecuting or
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6
continuing to prosecute the claims, causes of action or
requests for relief asserted in the California Action in
that action or in any other action, proceeding or forum;
R. WHEREAS, on September 17, 1993, the Second Circuit
(i) vacated the Bankruptcy Court's orders that had granted
Orion's Motion to Assume and that had dismissed the
Adversary Proceeding" as moot," (ii) vacated the order that
had denied Showtime's Motion to Withdraw, (iii) remanded the
Motion to Assume to the Bankruptcy Court for further
proceedings, and (iv) remanded the Adversary Proceeding and
the Motion to Withdraw to the District Court for further
proceedings;
S. WHEREAS, on January 31, 1994, Orion filed a
Petition for Writ of Certiorari with the Supreme Court of
the United States seeking review of the September 17, 1993
decision of the Second Circuit, and, on February 16, 1994,
Showtime's time to file its opposition to Orion's Petition
for Writ of Certiorari was extended up to and including
March 30, 1994;
T. WHEREAS, the Reorganized Debtors and Showtime wish
to avoid the expense, inconvenience and diversion of
resources attendant to the continued prosecution and defense
of the litigations described above;
U. WHEREAS, the Reorganized Debtors and Showtime
believe it to be in their respective best interests to
settle litigations and disputes between them arising under
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7
the Agreement, as provided herein, including but not limited
to the California Action, the Injunction Action, the Motion
to Assume, the Adversary Proceeding, the Motion to Withdraw,
and any appeals or proceedings relating thereto as set forth
more fully below;
NOW THEREFORE, in consideration of the mutual
promises contained herein, and other good and valuable
consideration, receipt of which is hereby acknowledged, the
Parties hereby stipulate and agree subject to the approval
of the Bankruptcy Court (which the Parties will use their
best efforts to obtain), as follows:
1. As used herein, the phrase "Effective Date"
shall mean the business day next following the date on which
this Stipulation and Order shall become final and not
subject to appeal or further review.
2. Upon the occurrence of the Effective Date:
(A) Orion and Showtime forthwith shall
dismiss the California Action with prejudice by filing a
Stipulation of Dismissal in the form annexed hereto as
Exhibit A, and each party to said action shall bear its own
costs, disbursements and attorneys' fees;
(B) Orion and Showtime forthwith shall
dismiss the Adversary Proceeding with prejudice by filing a
Stipulation of Dismissal in the form annexed hereto as
Exhibit B, and each party to said action shall bear its own
costs, disbursements and attorneys' fees;
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8
(C) Orion and Showtime forthwith shall
dismiss with prejudice Orion's Petition for a Writ of
Certiorari before the Supreme Court of the United States, by
filing a Stipulation of Dismissal in the form annexed hereto
as Exhibit C, and each party to said action shall bear its
own costs, disbursements and attorneys' fees; and
(D) Orion and Showtime forthwith shall
dismiss the Injunction Action with prejudice by filing a
Stipulation of Dismissal in the form annexed hereto as
Exhibit D, and each party to said action shall bear its own
costs, disbursements and attorneys' fees.
3. Upon the occurrence of the Effective Date,
the following agreements (collectively, the "Related
Agreements"), each made as of March 10, 1994 and heretofore
executed by Orion and/or the Reorganized Debtors and/or
Showtime, shall become effective: (i) the Amendment
Agreement, amending the Agreement (annexed hereto as Exhibit
E), (ii) the Exclusive Output Agreement (annexed hereto as
Exhibit F), and (iii) the Parties' Releases (annexed hereto
as Exhibit G).
4. The Bankruptcy Court, by approving this
Stipulation and Order, hereby finds and orders that this
Stipulation and Order, and the agreements and undertakings
set forth herein, and the Amendment Agreement, the Exclusive
Output Agreement and the Parties' Releases, constitute a
reasonable and proper settlement of the disputes among the
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9
Parties and the litigations described herein, and,
consistent with the standards governing approval of
compromises as set forth in Fed. R. Bankr. P. 9019(a), as
applied in cases such as Anaconda-Ericsson Inc. v. Hessen
(In re Teltronics Services, Inc.), 762 F.2d 185, 189 (2d
Cir. 1985) and Cosoff v. Rodman (In re W.T. Grant Co.), 699
F.2d 599, 608 (2d Cir. 1983), the Parties agree, and the
Bankruptcy Court by approving this Stipulation and Order,
hereby finds and orders, that the matters set forth herein
are fair and equitable, are in the best interests of the
estates and exceed "the lowest point in the range of
reasonableness." Id.
5. The Bankruptcy Court, by approving this
Stipulation and Order, hereby finds and orders that, based
on the agreement of the Parties, as regards the Agreement,
as amended by the Amendment Agreement, all requirements for
assumption under the Plan, the Confirmation Order and the
Bankruptcy Code, including Section 365, have been satisfied
and the Agreement, as amended by the Amendment Agreement,
shall be deemed assumed within the meaning of the Bankruptcy
Code, the Plan and the Confirmation Order.
6. The Bankruptcy Court shall retain
jurisdiction to enforce, modify or amend this Stipulation
and Order and to hear all disputes between the Parties
solely with respect to this Stipulation and Order solely for
so long as Orion's bankruptcy cases remain open, provided,
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10
however, that nothing herein shall be deemed to confer upon
the Bankruptcy Court jurisdiction to address disputes with
respect to the Related Agreements or to affect adversely
whatever jurisdiction the Bankruptcy Court may have, if any,
to address disputes with respect to the Related Agreements.
7. No waiver of this Stipulation and Order or of
any promises, obligations or conditions herein shall be
valid unless in writing, signed by the party against whom
said waiver is to be enforced and any party hereto that
would be adversely affected by said waiver. Each of the
respective Reorganized Debtors represents and warrants that
John Hester is an officer of said Reorganized Debtor and, as
such, is the duly authorized representative with full and
complete power and authority to sign and thereby enter into
the Release executed on behalf of the Reorganized Debtors.
8. Each of the Parties represents that it enters
into this Stipulation and Order voluntarily and without
coercion or duress, that it has been fully advised and
represented by counsel in connection with this matter, and
that it has full and complete power, authority and
authorization to execute and effect this Stipulation and
Order, to take or cause to be taken all acts contemplated
hereunder and to bind such party and, as provided herein,
its parents, subsidiaries, affiliates, predecessors,
successors and assigns, to the terms hereof.
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11
9. Neither the execution of this Stipulation and
Order nor anything contained herein shall be construed as or
deemed an admission of wrongdoing or liability by any of the
Reorganized Debtors to Showtime or by Showtime to any of the
Reorganized Debtors.
10. Based upon: (i) the Bankruptcy Court's
familiarity with the facts underlying this matter; (ii) the
hearing on the Motion to Assume and the Adversary
Proceeding; (iii) the hearing conducted in the Injunction
Action on Orion's motion for a preliminary injunction;
(iv) other related matters and disputes with which the
Bankruptcy Court is familiar; and (v) the order to show
cause and motion seeking this Court's approval of this
Stipulation and Order and proof of service on interested
parties on March 11, 1994 as required by this Court's order
to show cause dated March 11, 1994, the Bankruptcy Court, by
approving this Stipulation and Order, finds that due and
sufficient notice of this Stipulation and Order has been
given.
11. This Stipulation and Order and the Related
Agreements are subject to: (i) approval by the Bankruptcy
Court; and (ii) the occurrence of the Effective Date on or
before March 28, 1994. In the event this Stipulation and
Order is not approved by the Bankruptcy Court or the
Effective Date does not occur on or before March 28, 1994,
the Stipulation and Order and the Related Agreements each
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12
shall be deemed null and void, of no force and effect, of no
probative value and the Parties represent, warrant and
covenant that neither the Stipulation and Order nor the
Related Agreements will be used or referred to for any
purpose whatsoever.
12. Neither the Reorganized Debtors nor Showtime
shall disclose to any third party (other than their
respective employees, directors, and officers, in their
capacity as such, on a need-to-know basis), any information
with respect to the terms and provisions of this Stipulation
and Order or the Releases or financial terms and provisions
of the other Related Agreements except: (i) to the extent
necessary to obtain Bankruptcy Court approval of this
Stipulation and Order; (ii) to the extent necessary to
comply with the valid order of a court of competent
jurisdiction, in which event(s) the party making such
disclosure shall so notify the other as promptly as
practicable (if possible, prior to making such disclosure)
and shall seek confidential treatment of such information;
(iii) to the extent a party, in good faith, deems it
necessary, at any time on or after the date hereof, to
disclose such information to comply with S.E.C. or similar
disclosure requirements, or otherwise pursuant to applicable
law, in which event the disclosing party shall seek
confidential treatment of such information, if available;
(iv) to its parent and affiliated companies, their banks
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13
(and their respective advisors and attorneys), prospective
financiers and investors (and such persons' investment
bankers, attorneys, accountants and necessary experts),
auditors, investment bankers, attorneys and similar
professionals, provided that such companies, banks,
advisors, financiers, investors, investment bankers,
experts, accountants, auditors, attorneys and similar
professionals agree to be bound by the provisions of this
paragraph 12; and (v) in order to enforce its rights
pursuant to this Stipulation and Order. The Parties will
issue a joint press release or other similar statement (the
form, content and timing of which shall be mutually
satisfactory to the Parties) announcing the settlement of
their disputes and litigations and the entering into of the
Related Agreements, and all subsequent press releases or
other similar statements relating to any of the foregoing
shall be consistent with such initial joint press release in
all respects (such as tone, characterization, etc.), unless
otherwise mutually agreed to by the Reorganized Debtors and
Showtime. In the event that an account of this Stipulation
and Order or any of the Related Agreements appears, or a
party receives notice that an account will appear, in the
media and that account does misstate, or is expected to
misstate, any term of this Stipulation and Order or any of
the Related Agreements, the Parties may, jointly or
separately, issue a denial as to the misstatement and/or
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14
affirmatively correct such misstatement. Except as
specifically provided in this paragraph, in response to
inquiries from any person not a party to this Stipulation
and Order concerning this Stipulation and Order or
concerning the settlement of the litigations, Showtime and
the Reorganized Debtors agree to respond that "the matter
has been resolved to the mutual satisfaction of all
concerned," without elaboration. Nothing in this paragraph
12 is intended to restrict the Parties' promotional,
advertising and publicity rights under the Related
Agreements.
13. Reorganized Debtors agree to use as Orion's
initial filing with the SEC the draft of the Form 8-K (the
"Form 8-K") circulated to Showtime on March 11, 1994;
provided, however, that Reorganized Debtors reserve the
rights: (i) to prepare and disclose the information to
complete the portion of the Form 8-K that appears in
brackets; (ii) to make non-substantive (e.g. grammatical)
changes to the Form 8-K; and (iii) to make changes necessary
to comply with S.E.C. disclosure obligations, although in
such an event, Reorganized Debtors agree to advise Showtime
of the proposed changes in advance and to consider in good
faith any comments that Showtime may have regarding the
proposed changes.
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15
Dated: New York, New York
March 11, 1994
WILLKIE FARR & GALLAGHER
Attorneys for
Orion Pictures Corporation, et al.,
Reorganized Debtors
By: /s/ Francis J. Menton, Jr.
Francis J. Menton, Jr. (FM-3499)
One Citicorp Center
153 East 53rd Street
New York, New York 10022
(212) 821-8000
SHEARMAN & STERLING
Attorneys for
Showtime Networks Inc.
By: /s/ R. Paul Wickes
R. Paul Wickes (RW-2550)
One Citicorp Center
153 East 53rd Street
New York, New York 10022
(212) 848-4000
SO ORDERED THIS 17th DAY OF MARCH, 1994:
/s/ Hon. Burton R. Lifland
_________________________________________
Chief United States Bankruptcy Judge
