SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: MAY 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period
from _______________ to _______________
Commission File Number: 1-5979
ORION PICTURES CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-1680528
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification no.)
1888 CENTURY PARK EAST, LOS ANGELES, CALIFORNIA 90067
(Address of principal executive offices)
Registrant's telephone number, including area code:
(310) 282-0550
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
Number of shares of Common Stock outstanding as of July 17, 1995: 20,000,000
<PAGE>
Page 2
ORION PICTURES CORPORATION
INDEX TO
QUARTERLY REPORT ON FORM 10-Q
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Operations
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Cash Flows
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II - OTHER INFORMATION
<PAGE>
Page 3
PART I - FINANCIAL INFORMATION
ORION PICTURES CORPORATION
Condensed Consolidated Statements of Operations
(in thousands, except per-share amounts)
(unaudited)
Three Months Ended
May 31,
----------------------------
1995 1994
----------- -----------
Revenues $ 42,232 $ 83,757
Cost of rentals 38,901 82,091
----------- -----------
Gross profit (loss) 3,331 1,666
Other costs and expenses:
Selling, general and administrative 5,965 6,315
Interest, net 6,927 7,155
----------- -----------
Loss before provision for income taxes (9,561) (11,804)
Provision for income taxes 200 300
----------- -----------
Net loss $ (9,761) $ (12,104)
=========== ===========
Loss per common share: $ (.49) $ (.61)
=========== ===========
Average shares outstanding 20,000 20,000
=========== ===========
See accompanying Notes to Condensed Consolidated Financial Statements
<PAGE>
Page 4
ORION PICTURES CORPORATION
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
May 31, February 28,
1995 1995
----------- ------------
ASSETS:
Cash and cash equivalents $ 14,188 $ 26,190
Accounts receivable, net 69,630 59,710
Film inventories 223,975 249,674
Other assets 15,491 16,014
---------- ---------
$ 323,284 $ 351,588
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable $ 1,824 $ 1,107
Accrued expenses 30,788 32,455
Participations and residuals 44,893 45,927
Notes and subordinated debt (including $19,929
and $19,544 due to majority shareholder,
respectively) 198,150 212,079
Deferred revenues 65,857 68,487
Shareholders' equity:
Common stock 5,000 5,000
Paid-in surplus 265,811 265,811
Accumulated deficit (289,039) (279,278)
---------- ---------
Total shareholders' equity (18,228) (8,467)
---------- ----------
$ 323,284 $ 351,588
========== ==========
See accompanying Notes to Condensed Consolidated Financial Statements
<PAGE>
Page 5
ORION PICTURES CORPORATION
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended
May 31,
-----------------------------
1995 1994
------------- -------------
Operations:
Net loss $ (9,761) $ (12,104)
Adjustments to reconcile net loss
to cash provided by operations:
Amortization of film costs 26,828 66,637
Increase in accounts receivable (9,920) (8,282)
Decrease in accounts payable and
accrued expenses (203) (4,972)
Accrual of participations and
residuals 5,693 10,631
Payments of participations and
residuals (6,728) (10,176)
Decrease in deferred revenues (2,630) (17,179)
Other, net 3,700 4,490
---------- ----------
Cash provided by operations 6,979 29,045
Investment activities:
Investment in film inventories (1,129) (13,292)
Other (331) 1,001
---------- ----------
Cash used in investment activities (1,460) (12,291)
Financing activities:
Payments on notes and subordinated debt (17,521) (24,329)
----------- ----------
Cash used in financing activities (17,521) (24,329)
Net decrease in cash (12,002) (7,575)
Cash and cash equivalents at beginning
of period 26,190 37,114
----------- -----------
Cash and cash equivalents at end of period $ 14,188 $ 29,539
=========== ===========
See accompanying Notes to Condensed Consolidated Financial Statements
<PAGE>
Page 6
ORION PICTURES CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. INTRODUCTION
The accompanying interim condensed consolidated financial statements of Orion
Pictures Corporation and its subsidiaries (the "Company") have been prepared
without audit pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures made are
adequate to make the information presented not misleading. These financial
statements should be read in conjunction with the consolidated financial
statements and related footnotes included in the Company's Annual Report on
Form 10-K, as amended, for the fiscal year ended February 28, 1995 (the "1995
Form 10-K"). In the opinion of management, all adjustments, consisting only of
normal recurring adjustments necessary to present fairly the financial position
of the Company as of May 31, 1995, the results of its operations for the three-
month periods ended May 31, 1995 and 1994 and its cash flows for the three-
month periods ended May 31, 1995 and 1994 have been included. The results of
operations for interim periods are not necessarily indicative of the results
which may be realized for the full year.
The Company's Modified Third Amended Joint Consolidated Plan of Reorganization
was confirmed by the United States Bankruptcy Court for the Southern District
of New York pursuant to an order issued on October 20, 1992, and became
effective on November 5, 1992. The condensed consolidated financial statements
and other disclosures contained herein should be read in light of such
effectiveness. In particular, as described in "Liquidity and Capital
Resources", selling, general and administrative costs and interest expense
currently exceed and in future periods are likely to exceed gross profit
recognized in each period, which results in the reporting of net losses for
financial reporting purposes.
2. BASIS OF PRESENTATION
On December 11 and 12, 1991 (the "Filing Date"), the Company and substantially
all of its subsidiaries filed petitions for relief under chapter 11 of Title 11
of the United States Code (the "Bankruptcy Code") in the United States
Bankruptcy Court for the Southern District of New York (the "Court"). The
Company filed its "Debtors' Joint Consolidated Plan of Reorganization" (the
"Plan") with the Court on July 13, 1992 (as amended on July 24, 1992, August 7,
1992, September 3, 1992 and October 20, 1992) and the related "Disclosure
Statement for Debtors' Joint Consolidated Plan of Reorganization" with the
Court on July 21, 1992 (as amended on July 24, 1992, August 7, 1992 and
September 3, 1992). On October 20, 1992 (the "Confirmation Date"), the Court
confirmed the Plan which became effective on November 5, 1992 (the "Effective
Date"). The Plan and the Company's reorganization activities are more fully
described in "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Certain claims have arisen after the Filing Date from rejection of executory
contracts and leases, and from the determination by the Court (or agreed to by
parties in interest) of allowed claims for contingencies and other disputed
amounts (Note 8).
<PAGE>
Page 7
3. FILM INVENTORIES
The following is an analysis of film inventories (in thousands):
May 31, February 28,
1995 1995
---------- ------------
Theatrical films:
Released $ 215,155 $ 240,330
Television programs:
Released 8,820 9,344
--------- ---------
$ 223,975 $ 249,674
========= =========
The Company has made substantial writeoffs to its released and unreleased
product. As a result, approximately two-thirds of the film inventories shown
above at May 31, 1995 are stated at estimated net realizable value and will not
result in the recording of gross profit upon the recognition of related
revenues in future periods.
Since the date of the Company's quasi-reorganization (February 28, 1982), when
the Company's inventories were restated to reflect their then current market
value, the Company has amortized 93% of the gross cost of its film inventories,
including those produced subsequent to the quasi-reorganization. Approximately
97% of such gross film inventory costs will have been amortized by May 31,
1998. As of May 31, 1995, approximately 60% of the unamortized balance of film
inventories will be amortized within the next three-year period based upon the
Company's revenue estimates at that date.
<PAGE>
Page 8
4. NOTES AND SUBORDINATED DEBT
Notes and subordinated debt is comprised of the following (in thousands):
May 31, February 28,
1995 1995
--------- ------------
Notes payable to banks pursuant to the Third Amended
and Restated Credit Agreement ("Third Restated
Credit Agreement") $ 46,465 $ 58,619
Obligation to Metromedia under Reimbursement
Agreement 19,929 19,544
Talent Notes due 1999, net of unamortized discounts
of $8,333 and $8,488 25,417 26,057
Creditor Notes due 1999, net of unamortized discounts
of $20,105 and $21,745 42,270 40,630
Non-interest bearing payment obligation to Sony,
net of unamortized discounts of $984 and $1,191 12,505 16,756
Other guarantees and contracts payable, net of
unamortized discounts of $2,774 and $2,943 8,179 8,124
--------- ---------
Total notes payable $ 154,765 $ 169,730
========= =========
10% Subordinated Debentures due 2001,
net of unamortized discounts of $7,422 and $8,097 43,385 42,349
--------- ---------
Total notes and subordinated debt $ 198,150 $ 212,079
========= =========
Approximately $190,826,000 was outstanding under the Company's Third Restated
Credit Agreement on the Effective Date of the Plan. Such amount has been
reduced through repayments by the Company and its majority shareholder as
described below, to approximately $42,074,000 at June 30, 1995 which amount
matures in full on October 20, 1995.
Notwithstanding the above maturity date, and to the extent that the Company
generates positive Net Cash Flow (as defined in the Third Restated Credit
Agreement) ("Net Cash Flow") for the immediately preceding period, the Company
is required to make principal payments of amounts outstanding under the Third
Restated Credit Agreement at least quarterly during the period from the
Effective Date to October 20, 1995, in amounts approximating 62% of the
Company's Net Cash Flow. In addition, in connection with consummation of the
Plan, Metromedia Company ("Metromedia"), the Company's majority shareholder,
and an affiliate of Metromedia guaranteed the payment of substantially all of
the Company's payment obligations under the Third Restated Credit Agreement
pursuant to a bank guarantee (the "Bank Guarantee"). On October 20, 1994 the
Guarantors made a payment of $14,041,000 to the Banks under the Bank Guarantee
as the Company had not generated sufficient Net Cash Flow to such date to make
the required principal payments to the Banks. Pursuant to a reimbursement
agreement between the Company and Metromedia (the "Reimbursement Agreement")
entered into in connection with the consummation of the Plan, upon payments by
the guarantors under the Bank Guarantee they become subrogated to the rights of
the banks and, the Company has agreed to reimburse Metromedia for all such
payments made under the Bank Guarantee or as cure payment to Sony (as described
below) plus interest on all such guaranteed payments made by Metromedia at the
rate of LIBOR plus 1.75% out of the portion of Net Cash Flow allocated to the
<PAGE>
Page 9
Banks (62%) and Sony (23%) following payment in full of the Banks (on October
20, 1995) and Sony (on November 5, 1995). In accordance with the terms of the
Reimbursement Agreement approximately $385,000 and $344,000, respectively, of
interest due April 21, 1995 and January 21, 1995, related to amounts owed to
Metromedia, was accrued and compounded, thereby increasing the principal amount
due.
In accordance with the terms of the Plan, the Company had a $70,000,000 non-
interest bearing payment obligation to Sony at the Effective Date. The
obligation to Sony is payable PARI PASSU with amounts payable under the Third
Restated Credit Agreement described above and is backed by a letter of credit
issued pursuant to the Third Restated Credit Agreement. Such amount has been
reduced through repayments to approximately $11,878,000 at June 30, 1995 which
amount matures on November 5, 1995.
Notwithstanding the above maturity schedule and to the extent that the Company
generates positive Net Cash Flow for the immediately preceding period, the
Company is required to make principal payments of amounts outstanding for the
obligation to Sony at least quarterly during the period from the Effective Date
to November 5, 1995 in an amount approximating 23% of the Company's Net Cash
Flow. To the extent the Company fails to repay such amounts on a timely basis,
Sony may draw under the letter of credit issued in its favor after giving
notice and an opportunity to cure to the Guarantors under the Bank Guarantee.
In the event Sony does draw under the letter of credit issued in its favor,
such amount would become an obligation of the Company under the Third Restated
Credit Agreement and guaranteed pursuant to the Bank Guarantee. In order to
cure a shortfall by the Company in its payments to Sony which would have
entitled Sony to draw under the letter of credit issued in its favor, on
November 5, 1994, the Guarantors under the Bank Guarantee made a payment of
$5,159,000 to Sony. Such amount plus interest on such amount at the rate of
LIBOR plus 1.75% is reimbursable to Metromedia in accordance with the terms of
the Reimbursement Agreement described above.
In accordance with the provisions of the Plan and the agreements entered into
in connection with the Plan, the Company must make certain cumulative minimum
aggregate Net Cash Flow payments ("Mandatory Minimum") to the holders of the
Talent Notes, the Creditors Notes and the 10% Subordinated Debentures (the
"Plan Debt") in payment of their respective principal and interest. As is more
fully described in the 1995 Form 10-K, the Indentures pursuant to which the
Talent Notes and the Creditor Notes were issued (the "Indentures") provide for
only a single Mandatory Minimum threshold that must be received by the holders
of the Plan Debt in payment of their respective principal and interest for each
fiscal quarter through the fiscal year ended February 28, 1999, rather than
separate quarterly thresholds for each fiscal quarter. The Company believes
the language set forth in the Indentures does not reflect the agreement between
the Company and its principal creditors who negotiated and agreed upon the
provisions based upon the Company's review of the agreement in principle agreed
to by such parties. Notwithstanding the literal language of the Indentures, it
is the Company's intention to follow what it believes is the intention of the
agreeing parties. Therefore, the following summarizes both the anticipated
Mandatory Minimum amounts contained in the Indentures and the interpretation of
the Company ("Interpretation"). Under the terms of the Indentures, these
Mandatory Minimum amounts are to be reduced by 15% of the portion of amounts
due under the Showtime agreement to the extent that the amounts are not
received by the Company ("Showtime Shortfall") until such time as the Banks
and/or Sony and, if applicable, the guarantor under the Bank Guarantee are paid
in full. Thereafter, the Mandatory Minimums will be reduced by 100% of the
Showtime Shortfall.
As more fully discussed in Note 10 below, utilizing the literal language set
forth in the Indentures instead of the Company's Interpretation, the Company
did not generate enough Net Cash Flow through the fiscal quarter ended May 31,
1995, to satisfy the Mandatory Minimums. Accordingly, as also more fully
described in Note 10, it is possible that the Trustee under the Indenture or
the Holders of Talent Notes or Creditor Notes could assert that an Event of
Default should have occurred under each such Indenture at May 31, 1995.
<PAGE>
Page 10
PER INDENTURES
Estimated Adjusted Cumulative Minimum Amounts
---------------------------------------------
(in thousands)
Fiscal Year Ended
February 28(29) May August November February
--------------- -------- -------- -------- --------
1996 $ 61,948 $ 61,948 $ 61,948 $ 61,948
1997 $ 97,802 $ 97,802 $ 97,802 $ 97,802
1998 $161,140 $161,140 $161,140 $161,140
1999 $204,741 $204,741 $204,741 $204,741
PER INTERPRETATION
Estimated Adjusted Cumulative Minimum Amounts
---------------------------------------------
(in thousands)
Fiscal Year Ended
February 28(29) May August November February
--------------- -------- -------- -------- --------
1996 $ 36,184 $ 44,772 $ 53,360 $ 61,948
1997 $ 70,911 $ 79,874 $ 88,838 $ 97,802
1998 $113,636 $129,470 $145,304 $161,140
1999 $172,040 $182,940 $193,840 $204,741
The Company has made eleven Net Cash Flow distributions in accordance with the
Plan. The distributions were made in November 1992, March 1993, June 1993,
December 1993, March 1994, June 1994, September 1994, October 1994, December
1994, March 1995, and June 1995, respectively. In accordance with the
provisions of the Plan and the agreements entered into in connection with the
Plan, a Net Cash Flow distribution was not made for the quarter ended August
31, 1993 because the Company did not generate Net Cash Flow. Because
distributions of Net Cash Flow are dependent upon the Company's ability to
generate Net Cash Flow and are determined for specified periods in accordance
with the Plan and the agreements entered into in connection with the Plan, no
assurance can be made as to the amount, if any, of each future distribution.
The following table summarizes and describes the allocation of these
distributions in accordance with the Plan (in thousands):
<TABLE>
<CAPTION>
June Mar. Fiscal Fiscal 11/5/92
1995 1995 1995 1994 To 2/28/93 Total
------ ------- ------- ------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Third Restated Credit Agreement $4,391 $12,154 $50,202 $39,345 $28,619 $134,711
Metromedia Obligation --- --- --- --- --- ---
Sony Obligation 1,611 4,458 18,413 17,984 10,497 52,963
Talent Notes (principal and interest) 600 1,661 6,861 5,733 3,910 18,765
Creditor Notes --- --- 164 1,046 1,498 2,708
10% Subordinated Debentures due 2001 --- --- --- --- 977 977
Interest on 10% Subordinated
Debentures due 2001 459 1,270 5,083 3,339 519 10,670
-------- -------- -------- -------- -------- --------
$ 7,061 $ 19,543 $ 80,723 $ 67,447 $ 46,020 $220,794
======== ======== ======== ======== ======== ========
</TABLE>
Pursuant to the Waiver and Consent dated as of June 30, 1993 under the Third
Restated Credit Agreement, $2,600,000 of the portion of the June 1993
distribution payable pursuant to the Plan to the Company's banks was instead
paid to Sony. In accordance with the terms of the Plan, all or part of the
portion of Net Cash Flow which would otherwise be payable to holders of
Creditor Notes for ten of the eleven distributions were used to satisfy, in
whole or in part, the interest obligation on the 10% Subordinated Debentures.
In addition, in accordance with the indenture for the 10% Subordinated
Debentures, approximately $362,000, $525,000 and $898,000, respectively, of the
interest due April 1, 1995, April 1, 1994 and October 1, 1993 related to the
10% Subordinated Debentures was paid by the issuance of additional debentures.
Also, in accordance with the Talent Note indenture, all of the interest due for
the three-month periods ended May 31, 1995, November 30, 1994, November 30,
1993 and August 31, 1993 on the Talent Notes was paid by the issuance of
additional notes (approximately $212,000, $393,000, $410,000 and $405,000,
respectively). The payments
<PAGE>
Page 11
on the Sony Obligation have reduced the outstanding amount on the
letter of credit supporting such obligation to $16,878,000 at June 30, 1995.
All descriptions of securities above refer to securities issued and in certain
cases, estimated amounts of such securities that are yet to be issued, because
certain bankruptcy claims have not been resolved.
5. INCOME TAXES
The provision for income taxes for the three months ended May 31, 1995 and
1994 consists of the following (in thousands):
Three Months Ended
May 31,
-------------------
1995 1994
-------- -------
Federal $ --- $ ---
State and local 100 100
Foreign 100 200
------- -------
$ 200 $ 300
======= =======
These provisions are based, in part, upon estimates of the Company's effective
tax rate for the entire year. Only a portion of such provisions are offset by
losses from operations, because of certain foreign and state taxes which cannot
be mitigated by such losses. In addition, foreign taxes are provided for
certain transactions in the period in which they occur.
6. LOSS PER COMMON SHARE
Per-share amounts presented on the Company's condensed consolidated statements
of operations are computed by dividing Net loss by the weighted average number
of common shares outstanding during each period.
7. REVENUE INFORMATION
The sources of the Company's revenues from operations by market for the three
months ended May 31, 1995 and 1994 are set forth in "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
The Company derives significant revenues from the foreign distribution of its
theatrical motion pictures and television programming. During the three months
ended May 31, 1995 and 1994, the Company generated revenues of $11,028,000 and
$15,421,000, respectively, from foreign distribution of such product.
8. CONTINGENT LIABILITIES
The Company and its subsidiaries are contingently liable with respect to
various matters, including litigation in the ordinary course of business and
otherwise. Some of the pleadings in various litigation matters contain prayers
for material awards including claims arising after the Filing Date from the
determination by the Court (or agreement by parties in interest) to allow
claims for certain contingencies and other disputed amounts. Based upon
management's review of the underlying facts and circumstances and consultation
with counsel, management believes such matters will not result in the allowance
by the Court of significant additional liabilities which would have a material
adverse effect upon the consolidated financial position or results of
operations of the Company with the possible exception of the matter described
below.
<PAGE>
Page 12
As previously disclosed in the Registrant's Annual Reports on Form 10-K for the
fiscal years ended February 28, 1995, February 28, 1994, and February 28, 1993
on October 12, 1990, Hemdale Film Corporation ("Hemdale") filed an action
against the Company in the Superior Court for Los Angeles alleging various
breaches of the agreements between Hemdale and the Company for distribution of
the motion pictures "PLATOON", "HOOSIERS" and "THE TERMINATOR". The plaintiff
produced these pictures which the Company released. The complaint seeks an
accounting and damages purportedly in excess of $30,000,000 and is based on the
allegation that the Company paid Hemdale less than it was due under the
agreements, used improper accounting practices, refused to permit Hemdale's
representatives to conduct appropriate examinations of the Company's books and
records and provided Hemdale with allegedly inaccurate and inadequate
settlement statements. On December 10, 1990, the Company filed its answer,
denying the material allegations of the complaint, asserting that its
accounting practices were accurate in all respects. Hemdale has filed a proof
of claim substantially based on the allegations in its complaint. The Company
has objected to Hemdale's claim and the estimation hearing on Hemdale's claim
has been further adjourned in the Court until July 24, 1995. Therefore, no
assurance can be given at this time concerning the ultimate outcome of the
Hemdale litigation or the effect thereof, if adverse to the Company. As a
result of the Company's chapter 11 filings, it is expected that this case will
be tried before the Court.
9. MERGER AGREEMENT
On April 12, 1995, the Company entered into a Merger Agreement (the "Merger
Agreement") with The Actava Group Inc. ("Actava"), MCEG Sterling Incorporated
("Sterling") and Metromedia International Telecommunications ("MITI"), an
affiliate of Metromedia, which with an affiliate, beneficially owns a majority
of the Company's common stock. The Merger Agreement provides that at the
effective time of the mergers, each of the Company, Sterling and MITI will
merge with and into Actava, with Actava, renamed "Metromedia International
Group, Inc.," being the surviving corporation of the mergers. The Merger
Agreement provides that each share of the Company's outstanding common stock
will be converted as follows: (i) if the average of the last sale price for
Actava's common stock on the NYSE for the 20 consecutive trading days ending on
the business day immediately preceding the Effective Time of the mergers (the
"Average Closing Price") is greater than or equal to $10.50, each share of the
Company's outstanding common stock will be converted into a number of shares of
Actava common stock equal to a fraction, the numerator of which is 11,428,572
and the denominator of which is the number of shares of the Company's common
stock outstanding on the business day immediately preceding the Effective Time
of the mergers or (ii) if the Average Closing Price is less than $10.50, each
share of the Company's outstanding common stock will be converted into a number
of shares of Actava's common stock which can be determined by solving for "Y"
in the following formula and dividing "Y" by the number of shares of the
Company's common stock outstanding on the business day immediately preceding
the Effective Time of the mergers:
"Y" = 120,000,000
--------------------
Average Closing Price
Assuming that the effective time of the merger was July 12, 1995, the Company's
stockholders would have exchanged each share of the Company's common stock for
.5714 shares of Actava common stock and collectively the Company's stockholders
would have been entitled to receive approximately 31.1% of the surviving
corporation's common stock. The Actava common stock to be issued to the
Company's, Sterling's and MITI's stockholders in connection with the mergers
will be identical to the shares of Actava common stock currently outstanding.
Immediately following the mergers, Metromedia and certain of its affiliates
will exchange their shares of Actava common stock received in the mergers and
may convert certain nonrecourse amounts owed by the Company and its
subsidiaries and by MITI and its subsidiary to affiliates of Metromedia for
shares of Class A common stock of the surviving corporation. The shares of
Class A common stock will be entitled to three votes per share on all matters
voted upon by the surviving corporation's stockholders (other than the election
of directors) and will vote as a separate class to elect 6 of the 10 members of
the surviving corporation's board of directors. It is currently anticipated
that Metromedia and its affiliates would control in excess of 50% of the voting
power of the surviving entity as a result of the stock exchanges described
above.
<PAGE>
Page 13
Metromedia International Group, Inc. will be managed by a three person Office
of the Chairman consisting of John W. Kluge, the Company's current Chairman of
the Board as Chairman, Stuart Subotnick, the Company's current Vice Chairman as
Vice Chairman, and John D. Phillips, President and Chief Executive Officer of
Actava, as President and Chief Executive Officer of the surviving corporation.
On March 2, 1995, the Company's Board of Directors formed a special committee
(the "Special Committee") to consider the terms of the Merger Agreement and
make a recommendation to the full Board of Directors of the Company regarding
the Merger Agreement. The Special Committee was formed because the Company's
Board of Directors is composed of a majority of persons who are affiliated with
Metromedia and because of the Board of Director's view that in light of the
share exchanges described above and the simultaneous merger of MITI into
Actava, the members of the Board of Directors affiliated with Metromedia could
be viewed as having an interest in the transactions contemplated by the Merger
Agreement in addition to the interests of the Company stockholders. The
members of the Special Committee are Michael I. Sovern, Joel R. Packer and
Raymond L. Steele, each of whom the Company considers an independent director.
The Special Committee was also authorized and did engage the services of an
independent law firm and an independent investment banking firm to offer advice
and in the case of the investment banking firm, to render a fairness opinion to
the Special Committee. At a May 17, 1995 meeting of the Board of Directors,
the Special Committee made its unanimous recommendation that the full Board of
Directors approve the Merger Agreement and the full Board of Directors by
unanimous vote approved the Merger Agreement on such date.
The closing of each merger contemplated by the Merger Agreement is also
contingent upon the closing of the other mergers contemplated by the Merger
Agreement. In addition, the consummation of the mergers contemplated by the
Merger Agreement is subject, among other things, to approval by the Boards of
Directors and shareholders of the Company and the stockholders of Actava,
Sterling and MITI, the receipt of all required consents, the successful
refinancing of the currently outstanding amounts owed to the Company's senior
secured creditors (the Banks and Sony), and holders of Plan Debt, to Actava's
Average Closing Price not being less than $8.25, that no material adverse
change in the business, assets, prospects, condition or results of operations
of the Company, Actava, MITI or Sterling shall have occurred since the date of
the Merger Agreement, that the shares of Actava's common stock currently
outstanding and to be issued to the stockholders of the Company, MITI and
Sterling pursuant to the Mergers shall have been accepted for listing on the
New York Stock Exchange, the American Stock Exchange or accepted for quotation
on NASDAQ/NMS, the successful completion by Actava and its due diligence review
of MITI, the receipt of certain fairness opinions with respect to the mergers,
and the receipt of all required regulatory approvals, including approval with
respect to the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended.
There can be no assurance that this proposed refinancing or the mergers
contemplated by the Merger Agreement will be consummated.
Metromedia and its affiliates will control Metromedia International Group, Inc.
after the mergers. Accordingly, the merger of the Company with and into Actava
and the merger of Sterling with and into Actava will be accounted for as a
reverse acquisition of Actava and a purchase of Sterling under the purchase
method of accounting. The common control merger of the Company and MITI will
be accounted for on a basis similar to a pooling of interests. For accounting
purposes, the Company will be deemed the surviving corporation of each of the
mergers.
As discussed below, the Company has been named a defendant in three separate
shareholder lawsuits which are attempting to enjoin the mergers contemplated by
the Merger Agreement.
10. LIQUIDITY
As described in Note 4 the Company has significant obligations under the Plan.
To the extent that the Company generates Net Cash Flow, the Company is required
to make principal payments with respect to the Banks and Sony and to its
holders of its Talent Notes, Creditor Notes and 10% Subordinated Debentures
(the "Plan Debt") at least quarterly out of Net Cash Flow. Net Cash Flow as
defined in the Plan generally provides for the payment of operating costs as
incurred. Because distributions are dependent upon the Company's ability to
generate Net Cash Flow and are determined for specified periods in accordance
with
<PAGE>
Page 14
the Plan, no assurance can be made as to the amount, if any, of each
future distribution. See Note 4 for a schedule of the Company's Net Cash Flow
payments since the Effective Date.
The poor performance of the Company's pictures released after the Effective
Date and the reduction pursuant to the Showtime Settlement from the contractual
amounts which otherwise would be payable by Showtime under the Showtime
Agreement, have had an adverse effect on the liquidity of the Company. As
described in Note 4, such events had an adverse effect on the Company's ability
to meet its obligations under the Third Restated Credit Agreement and to Sony,
as discussed below, in the fiscal year ended February 28, 1995 ("fiscal 1995")
and could have an adverse effect on the Company's ability to meet the other
Plan obligations, as discussed below, in the fiscal year ended February 29,
1996 ("fiscal 1996").
As described in Note 4, the Company was obligated to make certain principal
payments to its Bank lenders under the terms of the Third Restated Credit
Agreement and to Sony pursuant to the Sony Obligation in October and November
1994, respectively, and is obligated to make additional principal payments in
October and November 1995, respectively. The Company did not generate
sufficient Net Cash Flow to make the scheduled payments to the Banks and Sony
in October and November 1994, respectively, and accordingly, the Guarantors
under the Bank Guarantee made certain payments to such parties. In addition,
the Company does not currently believe it will generate sufficient Net Cash
Flow to make the scheduled final maturity payments to the Banks and Sony, in
October and November 1995, respectively. The payments made by the Guarantor in
October and November 1994 and any such additional payments made by the
Guarantors under the Bank Guarantee on behalf of the Company to the Bank and/or
to Sony result in such Guarantors becoming subrogated to the Banks' and Sony's
portion of the Company's Net Cash Flow following payment in full of the
Company's obligations to the Banks and Sony. The Company is obligated to
reimburse the amounts paid by the Guarantors under the Bank Guarantee on the
Company's behalf, plus interest, out of the portion of the Company's Net Cash
Flow previously allocable to the Banks and Sony until such Guarantors are
reimbursed in full.
In addition, as described in Note 4, the Indentures pursuant to which the
Talent Notes and Creditor Notes were issued (the "Indentures") provide that an
event of default ("Event of Default") will occur under such Indentures if the
aggregate amount of Net Cash Flow paid by the Company to the holders of Talent
Notes, Creditor Notes and 10% Subordinated Debentures (the "Plan Debt") does
not exceed the mandatory minimum amounts (the "Mandatory Minimums") specified
in the Indentures. The Indentures also provide, however, that the Mandatory
Minimums will be reduced by certain net amounts due under the Showtime
Agreement which are not received by the Company because of the Showtime
Settlement.
Although the Indentures provide that the Company must make payments to the
holders of the Plan Debt in the amounts specified in the Indentures (less the
reduction for the Showtime Settlement discussed above) for each fiscal quarter
through the fiscal year ended February 28, 1999, the Indentures only set forth
a single Mandatory Minimum threshold for each such fiscal year, rather than
separate quarterly thresholds for each fiscal quarter. Accordingly, a literal
reading of the Indentures would mean that by the end of each of the Company's
four fiscal quarters in each fiscal year beginning with the fiscal quarter
ended May 31, 1995, the Company would have had to pay to the holders of the
Plan Debt the same Mandatory Minimum amount. The Company believes that the
language set forth in the Indentures does not reflect the agreement between the
Company and its principal creditors who negotiated and agreed upon the
provisions based upon the Company's review of the agreement in principle agreed
to by such parties. The Company believes that the Mandatory Minimums specified
in the Indentures were intended to be the required Mandatory Minimum thresholds
for only the last fiscal quarter of each fiscal year beginning with the fiscal
year ended February 29, 1996 and that lower quarterly Mandatory Minimum amounts
should have been calculated and set forth in the Indentures for each fiscal
quarter of each fiscal year beginning with the quarter ended May 31, 1995.
Notwithstanding the literal language of the Indentures, it is the Company's
intention to follow what it believes to be the intention of the agreeing
parties.
Utilizing the Mandatory Minimums contained in the Indentures rather than the
Interpretation, which the Company believes reflects the agreement of the
parties, the Company did not generate sufficient Net Cash Flow to satisfy the
Mandatory Minimum threshold specified in the Indentures for the quarter ended
May 31, 1995. Accordingly, it is possible that the Trustee under the
Indentures or the Holders of Talent Notes or
<PAGE>
Page 15
Creditor Notes could assert that an Event of Default should have occurred
under each such Indenture on such date. Upon the occurrence and continuation
of an Event of Default, the Trustee under each of the Indentures or
40% in aggregate principal amount of either the Talent Notes or the
Creditor Notes could cause an immediate acceleration of the entire
principal amount of such Notes. To date the Company has not received
any notification from such Trustee or the Holders of Talent Notes or Creditor
Notes that an Event of Default has occurred under either Indentures and no such
acceleration has occurred. Should such acceleration under the Indentures
occur, the Company, absent other financing arrangements, may be forced to seek
protection under chapter 11 of the United States Bankruptcy Code.
Notwithstanding the literal language of the Indentures, the Company believes,
however, that no such Event of Default has occurred for the quarter ended May
31, 1995 because the language set forth in the Indentures does not reflect the
intention of the Company and the representatives of the Plan Debt who
negotiated such provisions and utilizing the Company's view that the agreement
of the parties is not reflected in the language of the Indentures and that the
Indentures should be reformed to set forth the quarterly Mandatory Minimum
thresholds for each fiscal quarter, as specified in Note 4 above, the Company
generated sufficient Net Cash Flow to satisfy the Mandatory Minimums for the
fiscal quarter ended May 31, 1995. The Company nevertheless currently believes
that it will not generate sufficient Net Cash Flow to satisfy such reformed
quarterly Mandatory Minimums at the quarter ended August 31, 1995. In order to
prevent the Company's anticipated shortfall, the Company must obtain a waiver,
refinance its existing Plan Debt, or obtain additional sources of financing
including those described below. If the Company cannot satisfy the Mandatory
Minimum thresholds at the quarter ended August 31, 1995, on such date an Event
of Default would occur under the Indentures, which in turn could cause an
acceleration of such Notes as described above. Should such acceleration under
the Indentures occur, the Company, absent other financing arrangements, may be
forced to seek protection under chapter 11 of the United States Bankruptcy
Code. As more fully described in Note 9, the Company has entered into the
Merger Agreement to combine the Company with Actava, Sterling and MITI. A
condition to consummation of the mergers is the refinancing of all the
Company's Plan Debt and its remaining obligations to the Banks and to Sony, so
as to ease the cash flow burden on the surviving company of the mergers and
avoid an Event of Default and possible acceleration of the Notes pursuant to
the Indentures. There can be no assurance that this proposed refinancing or
the mergers contemplated by the Merger Agreement will be consummated.
As previously discussed herein, the Company anticipates net losses for
financial reporting purposes for fiscal 1996, as well as insufficient liquidity
to meet its obligations in fiscal 1996 as described above.
The Company continues to exploit its existing library of product in order to
generate Net Cash Flow. The Company is also actively pursuing a number of
steps aimed at improving its operating results to date and increasing its Net
Cash Flow by acquiring or producing new product on a nonrecourse basis as
permitted under the Plan. Since the Effective Date, the Company has been able
to acquire some new product with nonrecourse financing. In order to further
exploit its existing distribution apparatus, the Company will continue to
actively seek to attract the requisite nonrecourse financing to fund the
acquisition and distribution costs of new theatrical and home video product,
which would be distributed by the Company through its distribution system. In
addition, the Company will pursue additional nonrecourse financing for the
production of new product, which the Company is also permitted to engage in
under the Plan on a nonrecourse basis or through certain unrestricted
subsidiaries. If the Company is successful in obtaining nonrecourse financing
as described above, the contribution to the Company's liquidity will generally
be in the form of a distribution fee. To date such activities have not
resulted in the receipt of material amounts by the Company. In addition to the
mergers described above, the Company continues to consider its alternatives in
connection with the anticipated payment shortfall to the holders of the Plan
Debt including other restructuring or refinancing of such Plan Debt. Despite
these intentions, there can be no assurance that any transaction, restructuring
or refinancing will be consummated or that the Company will be able to generate
sufficient Net Cash Flow to avoid an Event of Default under its Indentures in
fiscal 1996.
<PAGE>
Page 16
ORION PICTURES CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
On December 11 and 12, 1991 (the "Filing Date"), the Company and certain of its
subsidiaries filed petitions for relief under chapter 11 of Title 11 of the
United States Code (the "Bankruptcy Code") in the United States Bankruptcy
Court for the Southern District of New York (the "Court"). The Company filed
its "Debtors' Joint Consolidated Plan of Reorganization" as amended July 24,
August 7, September 3 and October 20, 1992 (the "Plan") with the Court on July
13, 1992. On October 20, 1992 (the "Confirmation Date"), the Court confirmed
the Plan which became effective on November 5, 1992 (the "Effective Date").
The Plan and the Company's reorganization activities are more fully described
in "Liquidity and Capital Resources" below. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Company's
Annual Report on Form 10-K for the year ended February 28, 1995 (the "1995
Annual M,D & A") for a further discussion of the Company's Plan of
Reorganization and the implications thereof.
On August 31, 1994, the Company, the Actava Group Inc. ("Actava"), MCEG
Sterling Incorporated ("Sterling"), International Tell, Inc. ("ITI") and
Metromedia International Inc. ("MITI"; and together with ITI, "MITI") signed
letters of intent to combine the foregoing companies (the "Merger Agreement")
into a new company to be called "Metromedia International Group, Inc.", as is
more fully described in Note 9 of Notes to Condensed Consolidated Financial
Statement ("Note 9").
RESULTS OF OPERATIONS
During the first quarter of the fiscal year ending February 29, 1996 ("fiscal
1996"), the Company recorded a net loss of $9,761,000 on revenues of
$42,232,000. During the first quarter of the preceding year ("fiscal 1995"),
the Company recorded a net loss of $12,104,000 on revenues of $83,757,000.
Certain factors should be considered when evaluating the Company's results of
operations in the first quarter of both fiscal 1996 and fiscal 1995. First,
as previously disclosed approximately two-thirds of the Company's film
inventories are stated at amounts approximating their estimated net realizable
value and do not result in the recording of gross profit upon recognition of
related revenues. A significant portion of recorded revenues in the first
quarter of both fiscal 1996 and fiscal 1995 related to such film inventories.
Accordingly, gross profit from profitable pictures (before the effect of the
writedowns in the first quarter of fiscal 1995 described below) was
insufficient to cover selling, general and administrative costs and interest
costs during each quarter. In addition, the Company released three films in
the domestic theatrical marketplace during the first quarter of fiscal 1995.
The company recorded approximately $5,500,000 of writedowns to estimated net
realizable value during that quarter on two of these titles.
<PAGE>
Page 17
REVENUES
The following table sets forth the sources of the Company's revenues from
operations by market during the first quarter of fiscal 1996 and 1995 (in
thousands):
Three Months Ended
May 31,
---------------------
1995 1994
--------- ---------
Theatrical distribution $ 953 $ 6,347
Television and video distribution:
Home video direct distribution 14,120 14,902
Home video subdistribution 405 2,616
Pay television 11,585 43,951
Free television and other 15,169 15,941
Total television and video -------- --------
distribution 41,279 77,410
-------- --------
$ 42,232 $ 83,757
======== ========
THEATRICAL REVENUES
During the current quarter, the Company released only one title in the domestic
theatrical marketplace ("BAR GIRLS") that was acquired utilizing non-recourse
financing under the restrictions of the Plan. Such title did not contribute
significant revenues during the current quarter, and accordingly theatrical
revenues decreased 85% to $953,000 for the three months ended May 31, 1995 as
compared to $6,347,000 for the three months ended May 31, 1994. Theatrical
revenues in the first quarter of fiscal 1995 reflects the poor performance of
the three films released in the domestic theatrical marketplace in that
quarter. Together, these films generated approximately $5,000,000 in domestic
theatrical revenues.
The Company's ability to produce or acquire additional product for distribution
is limited, therefore, revenues from theatrical distribution will depend
entirely on the Company's ability to produce or acquire additional product.
HOME VIDEO REVENUES
The distribution of the Company's theatrical release, "BLUE SKY", and an
acquired film "NOSTRADAMUS" in the domestic home video rental market through
Orion Home Video ("OHV") accounted for over one half of the Company's home
video direct distribution revenues during the current year's first quarter.
The distribution of "ROBOCOP 3" in the domestic home video rental market
through OHV accounted for the majority of the Company's home video direct
distribution revenues during the previous year's first quarter.
The Company's reduced theatrical release schedule beginning in fiscal 1992, and
the limitations of the Plan with regard to the investment in the production of
new theatrical product, are likely to continue to have an adverse effect on
quarterly revenues in this market for the foreseeable future.
PAY TELEVISION REVENUES
Three titles became available during the first quarter of fiscal 1996 for
exclusive exhibition in the pay cable market pursuant to a settlement (the
"Showtime Settlement") reached with Showtime Networks Inc. ("Showtime"), and
accordingly pay television revenue decreased 74% to $11,585,000 for the first
quarter of fiscal 1996 as compared to $43,951,000 for the first quarter of
fiscal 1995. During the first quarter of fiscal 1995, nine titles became
available for exclusive exhibition in the pay cable market pursuant to the
Showtime Agreement reached with Showtime during that quarter. Pay television
revenues for that quarter included
<PAGE>
Page 18
approximately $40,000,000 for the recognition of license fees on these titles.
The remainder of the Company's revenues in this market in each quarter was
recorded upon the availability of various titles under certain foreign pay
television agreements.
Furthermore, the reduced license fees under the Showtime Settlement, the
Company's reduced theatrical release schedule beginning in fiscal 1992, and the
limitations of the Plan with regard to the investment in the production of new
theatrical product, are likely to have an adverse effect on quarterly revenues
in this market for the foreseeable future.
FREE TELEVISION REVENUES
The Company's free television revenues in the first quarters of both fiscal
1996 and 1995 were derived primarily from the availability, in a number of
foreign territories of certain of the Company's theatrical titles. Free
television revenues in the first quarters of both fiscal 1996 and 1995 includes
fees from the availability to Lifetime of five pictures in each quarter under
the Company's two major agreements with that basic cable network.
GROSS PROFIT (LOSS)
No film generated significant gross profit in the current year's first quarter.
Gross profit in the previous year's first quarter was most favorably affected
by the recognition of approximately $40,000,000 of domestic pay television
license fees on nine titles pursuant to the Showtime Settlement. These nine
titles accounted for approximately $7,000,000 in gross profit during that
quarter.
The previous year's first quarter was most adversely affected by the recording
of writedowns to the estimated net realizable value of the carrying amounts of
the three first quarter domestic theatrical releases. These writedowns
aggregated approximately $6,100,000. In addition, a writedown to estimated net
realizable value of approximately $1,000,000 was recorded due to the less-than-
previously-expected domestic home video distribution of "ROBOCOP 3".
As previously disclosed, the Company has released only 16 theatrical films that
were substantially financed by the Company in the domestic theatrical
marketplace since the beginning of fiscal 1992 compared to an annual average of
14 releases in each of the previous three years. This reduced release schedule
has had an adverse effect on amounts and comparisons of revenues and,
consequently, gross profit and is expected to continue to have an adverse
effect on comparisons with earlier periods in the future. Furthermore, as
previously disclosed, approximately two-thirds of the Company's film
inventories are stated at estimated net realizable value and do not result in
the recording of gross profit upon the recognition of related revenues.
INTEREST EXPENSE
Interest expense for the first quarter of fiscal 1996 decreased $228,000 (3%)
from the previous year's quarter from $7,155,000 to $6,927,000. This decrease
which primarily reflects reduced interest charges on lower outstanding debt
balances as principal payments continue to reduce the Company's debt, was
partially offset by increased interest costs as well as a non recurring credit
in the first quarter of fiscal 1995 of approximately $526,000 representing
interest earned by the Company in connection with the Showtime Settlement.
PROVISION FOR INCOME TAXES
The provision for income taxes on operations in the first quarter of both
fiscal 1995 and fiscal 1996 are partially based on an estimate of the effective
tax rate for the entire year. Only a portion of the provisions are offset by
losses from operations because of certain foreign and state taxes which cannot
be mitigated by such losses. In addition, foreign taxes are provided for
certain transactions in the period in which they occur. The provision for
income taxes for the three months ended May 31, 1995 and 1994 are attributable
to foreign remittance taxes and minimum state taxes.
<PAGE>
Page 19
LIQUIDITY AND CAPITAL RESOURCES
On the Filing Date, as described above, the Company and certain of its
subsidiaries filed petitions for relief under the Bankruptcy Code in the Court.
Under the Plan, the Company will continue to concentrate its efforts on the
licensing and distribution of its library. Currently, the principal sources of
the funds required for the Company's motion picture distribution activities are
proceeds from the licensing of exhibition and ancillary rights to the Company's
library. In accordance with the terms of the Plan, the Company will be
permitted to invest in the production of new theatrical product, only if, among
other things, financing for such product can be obtained, which is secured only
by the film being produced or acquired and is thus nonrecourse to the other
assets of the Company.
Before the filing of the Company's petitions under chapter 11, the Company had
as an operating plan to release each year approximately 12 to 15 theatrical
motion pictures which the Company fully or substantially financed. Prior to
the filing, all new production was halted leaving the Company with only 12
largely completed but unreleased motion pictures at the Filing Date. In
addition, under the Plan, the Company's ability to produce or invest in new
theatrical product is severely limited as described above. Accordingly the
Company released only five, four, and three of such theatrical motion pictures
in the domestic marketplace in fiscal 1995, 1994, and 1993, respectively. This
reduced release schedule described above is likely to have an adverse impact on
results of operations for the foreseeable future. Furthermore, as described in
Note 3, approximately two-thirds of the Company's film inventories at May 31,
1995 are stated at amounts approximating their estimated net realizable value
and will not result in the recording of gross profit upon the recognition of
related revenues in future periods. Accordingly, selling, general and
administrative costs and interest expense in future periods are likely to
exceed gross profit recognized in each period, which will result in the
reporting of net losses for financial reporting purposes for the foreseeable
future.
The Company filed a proposed plan of reorganization and the related disclosure
statement as described above. The Court approved the Disclosure Statement on
September 8, 1992 and confirmed the Plan on October 20, 1992. On November 5,
1992, the Effective Date, the Company emerged from the chapter 11 proceedings.
The Plan is extremely complex and the summary presented below contains only a
brief synopsis of the compromises and benefits granted pursuant to the Plan and
is qualified in its entirety by reference to the Plan. The reader should refer
to the Plan to obtain a more thorough understanding of the provisions of the
Plan and for precise definitions of capitalized terms in the summary presented
below. The Plan represents a compromise and settlement reached among the
Company's principal creditor constituencies, most of which relinquished, upon
confirmation of the Plan, potential legal and equitable arguments in exchange
for the treatment and certainty provided by the Plan.
Under the Plan, the Company's senior secured creditors (the Banks and Sony) are
sharing 85% of the reorganized Company's Net Cash Flow. The Plan permits
certain unsecured creditors (including holders of certain 10% Subordinated
Debentures that were issued pursuant to the Plan as described below) to
receive, on a PARI PASSU basis with the senior secured creditors, the remaining
15% of Net Cash Flow. After payment in full of the Allowed Claims of the Banks
(and Metromedia and its Affiliate, if they shall become subrogees under the
Bank Guarantee) and Sony, 100% of Net Cash Flow will be paid to the holders of
such unsecured Allowed Claims. After payment of the Talent Notes, holders of
the Creditor Notes and the 10% Subordinated Debentures issued pursuant to the
Plan, as described below, will share 100% of Net Cash Flow.
Under the Plan, the holders of Guild Claims and Participation Claims reduced by
17% their Allowed Prepetition Residual Claims and Allowed Preconfirmation
Participation Claims, respectively, in exchange for Talent Notes, which are
payable currently out of a portion of Net Cash Flow not required to be paid to
the Banks and Sony; holders of Allowed Postpetition Residual Claims will be or
have been paid in full with respect to such Claims. The holders of most of the
other Unsecured Claims, have or will receive Creditor Notes, which are also
payable currently out of a portion of Net Cash Flow not required to be paid to
the Banks and Sony. Additional Creditor Notes will be issued in accordance
with the Plan as and when
<PAGE>
Page 20
Disputed Unsecured Claims become allowed.
Under the Plan, the holders of the Company's subordinated notes and debentures
outstanding at the Filing Date received an aggregate of $50,000,000 initial
principal amount of 10% Subordinated Debentures due October 31, 2001 of the
reorganized Company, payable out of the portion of Net Cash Flow not otherwise
payable to the Banks and Sony as described above, as well as 49% of the equity
of the reorganized Company. The holders of the Company's previously
outstanding Series B Preferred Stock and common stock received, in the
aggregate, 0.1% and 0.8%, respectively, of the common stock of the reorganized
Company. Metromedia and its affiliate have received an aggregate of 50.1% of
the common stock of the reorganized Company in exchange for $15,000,000, a
guarantee of the bank borrowings of the reorganized Company and a contribution
of all rights in respect of a letter agreement dated November 28, 1990 between
the Company and an affiliate of Metromedia (the "MetMermaids Rights").
For a period of five years from the Effective Date, the Company's By-laws
provide that the Company must cause certain Directors not affiliated with
Metromedia to be included in the Company's slate of directors nominated for
election by the Company's stockholders. One of such nominees is to be a member
of the Executive Committee of the Board of Directors of the reorganized
Company.
Pursuant to the terms of the Plan, the Company is licensing and distributing
its library. Expenditures for selling, general and administrative costs are
substantially less than the levels of such expenditures that were incurred
prior to the Filing Date. Further, the Plan limits the Company's ability to
produce or acquire new motion pictures or other product. Such product may be
produced or acquired only if, among other things, any financing of such
purchase or acquisition is secured, if necessary, only by the assets being
produced or acquired. With respect to acquired assets only, the Company is
nevertheless allowed, without any restriction, to pay related debt service out
of operating cash flow. While the Company has been able to acquire certain
distribution rights to certain new product with nonrecourse financing, no
assurance can be given that the Company will be successful in obtaining
additional nonrecourse debt financing or acquiring additional substantial
entertainment assets. Furthermore, to date, such arrangements have not
contributed substantially to the Company's results of operations.
To the extent that the Company generates Net Cash Flow, the Company is required
to make principal payments with respect to the Banks and Sony and to its
holders of its Talent Notes, Creditor Notes and 10% Subordinated Debentures
(the "Plan Debt") at least quarterly out of Net Cash Flow. Net Cash Flow as
defined in the Plan generally provides for the payment of operating costs as
incurred. Because distributions are dependent upon the Company's ability to
generate Net Cash Flow and are determined for specified periods in accordance
with the Plan, no assurance can be made as to the amount, if any, of each
future distribution. See Note 4 of Notes to Consolidated Financial Statements
("Note 4"), for a schedule of the Company's Net Cash Flow payments since the
Effective Date.
The poor performance of the Company's pictures released after the Effective
Date and the reduction pursuant to the Showtime Settlement from the contractual
amounts which otherwise would be payable by Showtime under the Showtime
Agreement, have had an adverse effect on the liquidity of the Company. As
described in Note 4, such events had an adverse effect on the Company's ability
to meet its obligations under the Third Restated Credit Agreement and to Sony,
as discussed below, in the fiscal year ended February 28, 1995 ("fiscal 1995")
and could have an adverse effect on the Company's ability to meet the other
Plan obligations, as discussed below, in the fiscal year ended February 29,
1996 ("fiscal 1996").
As described in Note 4, the Company was obligated to make certain principal
payments to its bank lenders under the terms of the Third Restated Credit
Agreement and to Sony pursuant to the Sony Obligation in October and November
1994, respectively, and is obligated to make additional principal payments in
October and November 1995, respectively. The Company did not generate
sufficient Net Cash Flow to make the scheduled payments to the Banks and Sony
in October and November 1994, respectively, and accordingly, the Guarantors
under the Bank Guarantee made certain payments to such parties. In addition,
the Company does not currently believe it will generate sufficient Net Cash
Flow to make the scheduled final maturity payments to the Banks and Sony, in
October and November 1995, respectively. The payments made by the Guarantor in
October and November 1994 and any such additional payments made by the
<PAGE>
Page 21
Guarantors under the Bank Guarantee on behalf of the Company to the Bank and/or
to Sony result in such Guarantors becoming subrogated to the Banks' and Sony's
portion of the Company's Net Cash Flow following payment in full of the
Company's obligations to the Banks (on October 20, 1995) and Sony on November
5, 1995. The Company is obligated to reimburse the amounts paid by the
Guarantors under the Bank Guarantee on the Company's behalf, plus interest, out
of the portion of the Company's Net Cash Flow previously allocable to the Banks
and Sony until such Guarantors are reimbursed in full.
In addition, as described in Note 4, the Indentures pursuant to which the
Talent Notes and Creditor Notes were issued (the "Indentures") provide that an
event of default ("Event of Default") will occur under such Indentures if the
aggregate amount of Net Cash Flow paid by the Company to the holders of Talent
Notes, Creditor Notes and 10% Subordinated Debentures (the "Plan Debt") does
not exceed the mandatory minimum amounts (the "Mandatory Minimums") specified
in the Indentures. The Indentures also provide, however, that the Mandatory
Minimums will be reduced by certain net amounts due under the Showtime
Agreement which are not received by the Company because of the Showtime
Settlement.
Although the Indentures provide that the Company must make payments to the
holders of the Plan Debt in the amounts specified in the Indentures (less the
reduction for the Showtime Settlement discussed above) for each fiscal quarter
through the fiscal year ended February 28, 1999, the Indentures only set forth
a single Mandatory Minimum threshold for each such fiscal year, rather than
separate quarterly thresholds for each fiscal quarter. Accordingly, a literal
reading of the Indentures would mean that by the end of each of the Company's
four fiscal quarters in each fiscal year beginning with the fiscal quarter
ended May 31, 1995, the Company would have had to pay to the holders of the
Plan Debt the same Mandatory Minimum amount. The Company believes that the
language set forth in the Indentures does not reflect the agreement between the
Company and its principal creditors who negotiated and agreed upon the
provisions based upon the Company's review of the agreement in principle agreed
to by such parties. The Company believes that the Mandatory Minimums specified
in the Indentures were intended to be the required Mandatory Minimum thresholds
for only the last fiscal quarter of each fiscal year beginning with the fiscal
year ended February 29, 1996 and that lower quarterly Mandatory Minimum amounts
should have been calculated and set forth in the Indentures for each fiscal
quarter of each fiscal year beginning with the quarter ended May 31, 1995.
Notwithstanding the literal language of the Indentures, it is the Company's
intention to follow what it believes to be the intention of the agreeing
parties.
Utilizing the Mandatory Minimums contained in the Indentures rather than the
Interpretation, which the Company believes reflects the agreement of the
parties, the Company did not generate sufficient Net Cash Flow to satisfy the
Mandatory Minimum threshold specified in the Indentures for the quarter ended
May 31, 1995. Accordingly, it is possible that the Trustee under the
Indentures or the Holders of Talent Notes or Creditor Notes could assert that
an Event of Default should have occurred under each such Indenture on such
date. Upon the occurrence and continuation of an Event of Default, the Trustee
under each of the Indentures or 40% in aggregate principal amount of either the
Talent Notes or the Creditor Notes could cause an immediate acceleration of the
entire principal amount of such Notes. To date the Company has not received
any notification from such Trustee or the Holders of Talent Notes or Creditor
Notes that an Event of Default has occurred under either Indentures and no such
acceleration has occurred. Should such acceleration under the Indentures
occur, the Company, absent other financing arrangements, may be forced to seek
protection under chapter 11 of the United States Bankruptcy Code.
Notwithstanding the literal language of the Indentures, the Company believes,
however, that no such Event of Default has occurred for the quarter ended May
31, 1995 because the language set forth in the Indentures does not reflect the
intention of the Company and the representatives of the Plan Debt who
negotiated such provisions and utilizing the Company's view that the agreement
of the parties is not reflected in the language of the Indentures and that the
Indentures should be reformed to set forth the quarterly Mandatory Minimum
thresholds for each fiscal quarter, as specified in Note 4 above, the Company
generated sufficient Net Cash Flow to satisfy the Mandatory Minimums for the
fiscal quarter ended May 31, 1995. The Company nevertheless currently believes
that it will not generate sufficient Net Cash Flow to satisfy such reformed
quarterly Mandatory Minimums at the quarter ended August 31, 1995. In order to
prevent the Company's anticipated shortfall, the Company must obtain a waiver,
refinance its existing Plan Debt, or obtain additional sources of financing
including those described below. If the Company cannot satisfy the Mandatory
Minimum thresholds at the quarter ended August 31, 1995, on such date an Event
of Default would occur
<PAGE>
Page 22
under the Indentures, which in turn could cause an acceleration of such
Notes as described above. Should such acceleration under the Indentures
occur, the Company, absent other financing arrangements, may be forced
to seek protection under chapter 11 of the United States Bankruptcy
Code. As more fully described in Note 9, the Company has entered into the
Merger Agreement to combine the Company with Actava, Sterling and MITI. A
condition to consummation of the mergers is the refinancing of all the
Company's Plan Debt and its remaining obligations to the Banks and to Sony, so
as to ease the cash flow burden on the surviving company of the mergers and
avoid an Event of Default and possible acceleration of the Notes pursuant to
the Indentures. There can be no assurance that this proposed refinancing or
the mergers contemplated by the Merger Agreement will be consummated.
As previously discussed herein, the Company anticipates net losses for
financial reporting purposes for fiscal 1996, as well as insufficient liquidity
to meet its obligations in fiscal 1996 as described above.
The Company continues to exploit its existing library of product in order to
generate Net Cash Flow. The Company is also actively pursuing a number of
steps aimed at improving its operating results to date and increasing its Net
Cash Flow by acquiring or producing new product on a nonrecourse basis as
permitted under the Plan. Since the Effective Date, the Company has been able
to acquire some new product with nonrecourse financing. In order to further
exploit its existing distribution apparatus, the Company will continue to
actively seek to attract the requisite nonrecourse financing to fund the
acquisition and distribution costs of new theatrical and home video product,
which would be distributed by the Company through its distribution system. In
addition, the Company will pursue additional nonrecourse financing for the
production of new product, which the Company is also permitted to engage in
under the Plan on a nonrecourse basis or through certain unrestricted
subsidiaries. If the Company is successful in obtaining nonrecourse financing
as described above, the contribution to the Company's liquidity will generally
be in the form of a distribution fee. In addition to the mergers described
above and in Note 9, the Company continues to consider its alternatives in
connection with the anticipated payment shortfall to the holders of the Plan
Debt including other restructuring or refinancing of such Plan Debt. Despite
these intentions, there can be no assurance that any transaction, restructuring
or refinancing will be consummated or that the Company will be able to generate
sufficient Net Cash Flow to avoid an Event of Default under its Indentures in
fiscal 1996.
<PAGE>
Page 23
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
1. THE CHAPTER 11 CASES
The Company is, and will continue to be, a party to numerous contested
matters and adversary proceedings pending against it in the Court seeking a
variety of forms of relief, including, without limitation, motions (a) to
approve settlements and compromises, and (b) to allow or disallow claims.
Other matters and claims may be referenced in the Disclosure Statement filed by
Debtors with the Court on July 24, 1992, as amended, and approved by such Court
by order dated September 8, 1992. The Company also has the right to file such
motions or actions as may be necessary to implement and enforce the terms of
the Plan.
Pursuant to section 362 of the Bankruptcy Code an automatic stay went into
effect when the Debtors commenced their chapter 11 cases. The automatic stay
halted, among other things, all pending litigation and prevented the
commencement of all judicial, administrative or other proceedings against the
debtor that were or could have been commenced before the commencement of the
bankruptcy case. Pursuant to paragraph 35 of the Confirmation Order, any
action which had been stayed by operation of section 362(a) of the Bankruptcy
Code continues to be stayed pursuant to sections 1141(d) and 105(2) of the
Bankruptcy Code, absent special relief which the Court could grant.
2. THE LITIGATION-BASED CLAIMS
HEMDALE FILM CORPORATION V. ORION PICTURES CORPORATION, (Los Angeles County
Superior Court, Case No. RCO12594). The court has adjourned the hearing on the
objections to the claim to July 24, 1995. Settlement negotiations are ongoing.
PACIFIC WESTERN PRODUCTIONS, INC., ET AL. V. HEMDALE FILM CORPORATION AND
ORION PICTURES CORPORATION, ET AL., (Los Angeles County Superior Court, Case
No. RCO12873). The Bankruptcy Court has adjourned the hearing on the
objections to the claim to July 24, 1995.
SHARON BADAL V. ORION PICTURES CORPORATION, (United States District Court,
Southern District Court, Southern District of New York, Case No. 91 Civ. 4288).
The Bankruptcy Court has adjourned the hearing on the objections to the claim
to July 24, 1995. Settlement negotiations are ongoing.
Antitrust and Similar Proceedings - JOSEPH SOFFER D/B/A CINE 1-2-3-4 V.
ORION PICTURES DISTRIBUTION CORPORATION, ET AL., (United States District Court
for the District of Connecticut). The Bankruptcy Court has adjourned the
hearing on objections to the claim to July 24, 1995. Settlement negotiations
are ongoing. THE MOVIE V. ORION PICTURES DISTRIBUTION CORPORATION, ORION
CLASSICS, ET AL., (United States District Court for the Northern District of
California, Case No. C86-203-90RPA). The Bankruptcy Court has adjourned the
hearing on objections to the claim to July 24, 1995. Settlement negotiations
are ongoing.
3. OTHER CLAIMS ISSUES
The Company filed numerous claims objections with the Bankruptcy Court, both
prior to and after the Effective Date of the Plan. Most of those objections
have been granted by the Bankruptcy Court or consensually resolved, but certain
disputes remain outstanding and ultimately will be disposed of through
negotiations or contested hearings before the Bankruptcy Court. The Company
believes that the disposition of these disputed claims will not have a material
adverse effect on its consolidated financial position or results of operations.
<PAGE>
Page 24
4. SHAREHOLDER ACTION ARISING OUT OF PROPOSED TRANSACTION
JERRY KRIM V. JOHN W. KLUGE, SILVIA KESSEL, JOEL R. PACKER, MICHAEL I.
SOVERN, RAYMOND L. STEEL, STUART SUBOTNICK, ARNOLD C. WADLER, STEPHEN
WERTHEIMER, LEONARD WHITE AND ORION PICTURES CORPORATION, (Delaware Chancery
Court, C.A. No.13721). The Company and each of its directors has been named as
a defendant in a purported class action lawsuit which alleges that the mergers
with Actava, MITI and Sterling are adverse to the Company's shareholders. The
Company's directors have been sued for alleged violations of their fiduciary
duties to the Company and its shareholders and seeks to enjoin the mergers
contemplated by the Merger Agreement. The lawsuit further alleges that as a
result of the actions of the Company's directors, the Company's shareholders
will not receive the fair value of the Company's assets and business in
exchange for their Orion stock, in the mergers contemplated by the Merger
Agreement. The Company and its directors have obtained an extension of time to
answer the complaint.
HARRY LEWIS V. JOHN W. KLUGE, LEONARD WHITE, STUART SUBOTNICK, SILVIA
KESSEL, JOEL PACKER, MICHAEL I. SOVERN, RAYMOND L. STEEL, ARNOLD L. WALKER,
STEPHEN WERTHEIMER, ACTAVA GROUP, INC. AND ORION PICTURES CORP. (Delaware
Chancery Court, C.A. No. 14234); complaint filed April 17, 1995. Orion, each
of its directors and Actava have been named in this purported class action
lawsuit, which was filed after the execution of the Merger Agreement. The
complaint contains similar allegations and seeks similar relief to the KRIM
case described above. The Company and its directors have obtained an extension
of time to answer to complaint.
JAMES F. SWEENEY, TRUSTEE OF FRANK SWEENEY DEFINED BENEFIT PLAN TRUST V.
JOHN D. PHILLIPS, FREDERICK B. BREILSTEIN, III, JOHN E. ADERHOLD, MICHAEL B.
CAHR, J. M. DARDEN, III, JOHN P. IMLAY, JR., CLARK A. JOHNSON, ANTHONY F. KOPP,
RICHARD NEVINS, CARL E. SANDERS, ORION PICTURE CORPORATION, INTERNATIONAL
TELCELL, INC., METROMEDIA INTERNATIONAL, INC. AND MCEG STERLING INC. (Delaware
Chancery Court, C.A. No. 13765). The Company is a defendant in this class
action lawsuit which was filed by shareholders of Actava against Actava and its
directors as well as the Company. The complaint alleges that the terms of the
merger of the Company, Actava, MITI and Sterling constitutes an overpayment by
Actava for the assets of the Company and it seeks to enjoin the mergers
contemplated by the Merger Agreement. The complaint further alleges that the
Company knowingly aided, abetted and materially assisted Actava's directors in
breach of their fiduciary duties to Actava's shareholders. The Company has
obtained an indefinite extension of the time to answer the complaint.
<PAGE>
Page 25
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the first quarter of the fiscal year ended
February 29, 1996 to a vote of the holders of the Company's Common Stock,
through the solicitation of proxies or otherwise.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
10.28 - Loan agreement dated as of March 14, 1995 between the Company and
Metproductions, Inc..
10.29 - Loan agreement dated as of April, 1995 between the Company and
Metproductions, Inc..
10.30 - Loan agreement dated as of June 28, 1995 between the Company and
Metproductions, Inc..
11 - Statement Re: computation of per-share earnings
(B) REPORTS ON FORM 8-K
The Registrant filed no Current Reports on Form 8-K during the fiscal quarter
for which this Quarterly Report on Form 10-Q is filed.
<PAGE>
Page 26
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 thereunto duly authorized.
ORION PICTURES CORPORATION
(Registrant)
Dated: July 17, 1995 \s\ Cynthia A. Friedman
-------------------------
Cynthia A. Friedman
Senior Vice President and
Chief Financial Officer
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Loan Agreement") dated as of March
__, 1995 between Orion Pictures Corporation, a Delaware corporation
(hereinafter referred to as "Orion") and MetProductions, Inc., a Delaware
corporation (hereinafter referred to as "MetProductions").
W I T N E S S E T H:
WHEREAS, Orion and Lauran Hoffman d/b/a Lavender Circle Mob
Productions ("Lavender Circle") have entered into that certain
Distribution Agreement attached hereto as Exhibit A (the "Distribution
Agreement") dated as of December 12, 1994 with respect to the sole and
exclusive right of Orion Pictures Corporation to distribute the completed
motion picture entitled "Bar Girls" (the "Picture") in all media in the
Licensee Territory (as defined in the Distribution Agreement).
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned thereto in the Distribution Agreement;
WHEREAS, pursuant to the terms of the Distribution Agreement,
Orion agreed to pay to Lavender Circle an Advance of up to $175,000 and
to expend a minimum of $225,000 for Print and Advertising Costs.
WHEREAS, in connection with the Distribution Agreement, Orion
has requested and MetProductions has agreed to loan to Orion the
principal sum of up to Seven Hundred Seventy-Five Thousand Dollars
($775,000), which represents the maximum amount of the Advance and Print
and Advertising Costs.
NOW, THEREFORE, in consideration of the promises and of the
mutual covenants and agreements hereinafter set forth, the parties hereto
agree as follows:
1. THE LOAN.
1.1 LOAN. Subject to the terms and conditions set forth
herein, upon the execution hereof, MetProductions shall loan to Orion the
principal sum of up to Seven Hundred Seventy-Five Thousand Dollars
($775,000) (the "Loan"). The Loan shall be made as directed by Orion in
accordance with the Distribution Agreement.
1.2 NOTE. The Loan shall be evidenced by a Promissory
Note of Orion in the principal amount of up to Seven Hundred Seventy-Five
Thousand Dollars ($775,000) and in the form attached hereto as Exhibit B.
Each payment made
<PAGE>
Page 2
by MetProductions pursuant to section 1.1 hereof shall be reflected in
Exhibit 1 to the Promissory Note.
1.3 PAYMENTS GENERALLY. All payments of principal and
interest, or any other amount payable hereunder, shall be made to
MetProductions at its address set forth under its name on the signature
page hereof in immediately available funds by wire transfer in accordance
with the instructions set forth on the signature page hereto. Upon
payment in full of the Loan hereunder, MetProductions will surrender to
Orion such Note duly marked cancelled and terminate any security
interest. Orion may prepay, in whole or in part, without premium or
penalty the principal amount of the Loan and any accrued interest on the
Loan at any time notwithstanding the accounting terms set forth in
Section 1.5 below.
1.4 INTEREST. Orion will pay interest on the principal
amount of the Loan from the date of such loan until the Loan is paid in
full hereunder, at a rate per annum equal to Ten Percent (10%). Interest
shall be calculated on the basis of a 360-day year for the actual number
of days elapsed.
1.5 REPAYMENT OF LOAN. The Loan and all accrued interest
thereon shall be payable first from the Gross Receipts to which Orion is
entitled pursuant to the terms of the Distribution Agreement, less any
distribution expenses incurred by Orion in connection with distributing
the Picture (e.g. residuals, marketing costs). Orion shall remit to
MetProductions all Gross Receipts to which Orion is entitled pursuant to
the terms of the Distribution Agreement (less the costs and expenses set
forth in the preceding sentence) until the full amount of the Loan and
all accrued interest thereunder has been repaid in accordance with the
terms of this Loan Agreement.
2. SECURITY.
2.1. SECURITY. As security for the punctual payment in
full of the Loan and all accrued interest thereon, and other amounts
payable hereunder or any other agreement or by operation of law or
otherwise, relating to the transactions described herein, Orion hereby
grants to MetProductions a first priority lien on and security interest
in all of Orion's right, title and interest in the Picture pursuant to
the terms of the Distribution Agreement but only to the extent necessary
to secure MetProductions' right to receive payments under this Loan
Agreement (the "Collateral"). The security interest hereby created shall
attach immediately on the execution of this Loan Agreement by
MetProductions and Orion. Concurrently with the
<PAGE>
Page 3
execution of this Loan Agreement (or within a reasonable time thereafter),
the parties hereto shall execute and file the Mortgage of Copyright and
Security Agreement (the "Security Agreement") attached hereto as Exhibit
C and any UCC Financing Statement(s) required to perfect the security
interest created by this Loan Agreement and the Security Agreement.
3. EVENTS OF DEFAULT.
3.1. Each of the following shall constitute an Event of
Default:
(a) the failure of Orion to pay MetProductions in
accordance with Section 1.5 hereof within three (3) business days after
notice from MetProductions that such amount is due.
(b) the filing by Orion of a voluntary petition for
relief under any federal or state bankruptcy or insolvency law, or the
commencement by Orion of any other voluntary proceeding or other action,
proceeding or other action in bankruptcy, or the filing of any
involuntary petition against Orion under any federal or state bankruptcy
law.
3.2. If any Event of Default shall occur, MetProductions
may, at its sole option and without notice, declare the entire principal
amount loaned to Orion in accordance with this Loan Agreement and the
Note to be due and payable in accordance with the terms and conditions of
this Loan Agreement and the Note.
3.3. If any Event of Default shall occur, MetProductions
shall be entitled to exercise all of the rights, powers and remedies
permitted by law, including without limitation, all rights and remedies
of a secured party of a debtor in default under the Uniform Commercial
Code in effect in the State of New York for the protection and
enforcement of its rights in respect of the Collateral.
4. REPRESENTATIONS AND WARRANTIES OF ORION.
Orion hereby represents and warrants to MetProductions that:
4.1. Orion has the right to enter into this Loan Agreement
and to grant and assign to MetProductions the interest in the Picture
herein granted.
<PAGE>
Page 4
4.2. The execution, delivery and performance of this Loan
Agreement have been duly authorized by all necessary action of Orion and
do not and will not contravene or conflict with any corporate or
fiduciary obligation Orion has to its shareholders, including but not
limited to, the terms or provisions of Orion Pictures Corporation's By-
Laws or Orion Pictures Corporation's Restated Certificate of
Incorporation. This Loan Agreement constitutes the legally valid and
binding obligations of Orion and is enforceable against Orion in
accordance with its terms.
4.3. The execution, delivery and performance of this Loan
Agreement will not result in a breach of or constitute (with due notice
or lapse of time or both) a default under any agreement, undertaking or
other instrument to which Orion is a party or by which it may be bound or
affected.
4.4. To the best of Orion's knowledge and except as
disclosed in Orion Pictures Corporation's Annual Report on Form 10-K for
the fiscal year ended February 28, 1994, and those quarterly reports on
Form 10-Q filed up to and including the date hereof, there is no action,
suit or proceeding pending or threatened against or affecting Orion, or
the Picture which, if adversely determined, would materially affect
Orion's ability to perform this Loan Agreement.
4.5. Orion agrees to use its reasonable commercial
efforts, consistent with good business practices, in distributing and
exploiting and causing the distribution and/or exploitation of the
Picture as herein provided.
4.6. Orion agrees to provide MetProductions with
statements of the distribution costs and expenses in connection with its
distribution of the Picture on a reasonable basis but not less than semi-
annually.
4.7. Orion agrees to maintain records pertaining to the
license and distribution of the Picture. MetProductions shall have the
right upon reasonable notice to Orion to inspect such records until
repayment of the Note in full.
5. ACKNOWLEDGMENT OF METPRODUCTIONS.
5.1. MetProductions acknowledges and agrees that Orion
makes no representation, warranty, guarantee or agreement as to the
amount of the Gross Receipts of the Picture which may be derived from the
distribution, exhibition or other exploitation thereof, nor does Orion
<PAGE>
Page 5
guarantee the performance by any distributor, sub-distributor, sub-licensee
and/or agent of the Picture.
5.2. Orion shall have the right to select distributors,
sub-distributors, sub-licensees, and/or agents upon such terms and
conditions as Orion may determine, consistent with its past business
practices and with the customs and practices of the motion picture
industry in general, in connection with the distribution, exhibition or
other exploitation of the Picture.
6. INDEMNIFICATION.
6.1. Orion agrees, at its own expense, to defend,
indemnify and hold MetProductions, its affiliates, its assignees and
licensees, harmless from and against any and all loss, damage, liability
and expense (including without limitation, reasonable attorneys' fees and
costs) which may be suffered or incurred by MetProductions, its
affiliates, its assignees or licensees, as the result of (i) any material
breach or default of any of the representations, warranties, covenants or
agreements made by Orion hereunder, (ii) any material breach or default
of any agreement whatsoever entered into by Orion in connection with the
Picture or (iii) any claim arising out of, or related to, the production,
distribution, or other exploitation of the Picture.
7. MISCELLANEOUS
7.1. This Loan Agreement shall be construed in accordance
with and interpreted under the laws of the State of New York governing
agreements which are wholly executed and performed therein.
7.2. Wherever provision is made in this Loan Agreement for
the giving of any notice, such notice shall be in writing and shall be
deemed to have been duly given if mailed by first class United States
mail, postage prepaid, addressed to the party entitled to receive the
same or delivered personally to such party at the address specified below
or by facsimile (receipt confirmed) to such party:
If to MetProductions to:
c/o Metromedia Company
One Meadowlands Plaza
East Rutherford, New Jersey 07073
Attention: General Counsel
Telecopy No.: (201) 531-2803
<PAGE>
Page 6
If to Orion:
1888 Century Park East
Los Angeles, California 90067
Attention: General Counsel
Telecopy No.: (310) 282-9902
or to such other address as either party hereto shall have last
designated by notice to the other party. Notice shall be deemed to have
been given three days following the date on which such notice was so
mailed or on the date such notice was delivered personally or by
facsimile.
7.3 This Loan Agreement may be executed by one or more of
the parties to this Loan Agreement on any number of separate counterparts
and all of said counterparts taken together shall be deemed to constitute
one and the same instrument.
7.4 Each party shall execute and deliver to the other
party from time to time all such other agreements, instruments and other
documents (including without limitation all requested financing and
continuation statements) and do all such other and further acts and
things as the requesting party may reasonably request in order further to
evidence or carry out the intent of this Loan Agreement.
7.5 This Loan Agreement represents the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all previous representations, understandings or agreements,
oral or written, between the parties, with respect to the subject matter
hereof.
7.6 If any inconsistencies between the terms and
conditions of this Loan Agreement and the Distribution Agreement are
deemed to exist, the terms and conditions of the Distribution Agreement
shall govern.
IN WITNESS WHEREOF, the parties hereto have executed this Loan
Agreement as of the date and year first above written.
MetProductions, Inc.
By:__________________________
Arnold L. Wadler,
Senior Vice President
<PAGE>
Page 7
Orion Pictures Corporation
By:__________________________
Leonard White, President
<PAGE>
EXHIBIT B
PROMISSORY NOTE
$775,000 New York, New York
March __, 1995
FOR VALUE RECEIVED, Orion Pictures Corporation, a Delaware
corporation ("Borrower"), promises to pay to the order of MetProductions,
Inc. ("Lender") or its assigns, up to the principal sum of $775,000 in
accordance with the terms of the Loan Agreement between Borrower and
Lender of even date herewith (the "Loan Agreement"); together with
accrued interest on the unpaid principal balance from the date herewith
at the annual rate of Ten (10%) percent. All payments of principal and
interest shall be made at Lender's offices located at One Meadowlands
Plaza, East Rutherford, New Jersey 07073-2137, Attention: Accounting
Department, or at such other address provided to Borrower, in writing,
from time to time by the holder of this Note.
All capitalized terms used herein and not otherwise defined
shall have the meanings assigned thereto in the Loan Agreement.
If any Event of Default specified in the Loan Agreement shall
occur, then the holder of this Note can declare the entire unpaid
principal amount of this Note, together with interest accrued thereon, to
be immediately due and payable and such holder will have all of the
rights and remedies set forth in the Loan Agreement.
Borrower hereby waives presentment, demand for payment, notice
of default, dishonor or nonpayment, protest and notice of protest and all
other demands and notices in connection with the delivery, acceptance,
performance or enforcement of this Note.
This Note shall be governed by and construed in accordance with
the laws of the State of New York, without reference to the conflict of
laws principles thereof.
IN WITNESS WHEREOF, Borrower has executed and delivered this
Note on the __ day of March, 1995.
ATTEST: Orion Pictures Corporation
____________________ By:_________________________
Leonard White, President
Secretary
<PAGE>
EXHIBIT C
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") is made and
entered into as of March __, 1995 between Orion Pictures Corporation, a
Delaware corporation, (the "Debtor") with offices located at 1888 Century
Park East, Los Angeles, California 90067 and MetProductions, Inc., a
Delaware corporation (the "Secured Party") with offices of c/o Metromedia
Company, One Meadowlands Plaza, Fast Rutherford, New Jersey 07073.
R E C I T A L S:
WHEREAS, pursuant to that certain Distribution Agreement dated
as of December 12, 1994 between Debtor and Lauran Hoffman d/b/a Lavender
Circle Mob Productions (such agreement as it may be amended, modified,
supplemented, replaced, renewed or superseded from time to time, is
herein referred to as the "Distribution Agreement"), Debtor acquired the
sole exclusive right and license to distribute the completed motion
picture entitled "Bar Girls" (the "Picture") in all media in the Licensee
Territory. Capitalized terms used herein and not otherwise defined shall
have the meanings assigned thereto in the Loan Agreement and the
Distribution Agreement.
WHEREAS, the Debtor and Secured Party have entered into that
certain Loan Agreement of even date herewith (the "Loan Agreement").
Pursuant to the Loan Agreement, Secured Party has agreed to loan (the
"Loan") to Debtor the sum of up to Seven Hundred Seventy-Five Thousand
Dollars ($775,000) to fund the Advance of up to One Hundred Seventy-Five
Thousand Dollars ($175,000) and to comply with the agreement to expend a
minimum of Two Hundred Twenty-Five Thousand Dollars ($225,000) for Print
and Advertising Costs.
In consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration the receipt of
which is hereby acknowledged, and in order to induce the Secured Party to
enter into the Loan Agreement, the parties hereto hereby agree as
follows:
1. GRANT OF SECURITY INTEREST.
(a) GRANT. Debtor hereby mortgages, hypothecates, grants
and assigns to Secured Party as security for the Secured Obligations and
Rights (as such term is defined in subparagraph 1(b) below) a continuing
<PAGE>
Page C-2
first priority security interest in and to all of Debtor's right, title,
and interest of every kind and nature in and to (but none of Debtor's
obligations with respect to) all of the items listed in subparagraph 1(c)
below, which items are hereinafter collectively referred to as the
"Collateral." Notwithstanding anything to the contrary contained herein,
except for the security interest granted hereby and pursuant to the
Copyright Mortgages and Assignments referred to in subparagraph 1(f)
below and the Secured Party's rights and remedies with respect to such
security interests, this Security Agreement is not intended to and does
not grant to Secured Party any greater exploitation rights in the Picture
than granted to Debtor pursuant to the Distribution Agreement.
(b) PURPOSE OF GRANT. The security interest in the
Collateral granted to the Secured Party pursuant hereto and pursuant to
the Copyright Mortgages and Assignments is being granted to secure the
Secured Obligations and Rights. The term "Secured Obligations and
Rights" shall mean and include (i) the full and timely payment and
performance by Debtor when due of all of Debtor's agreements,
representations, warranties and covenants, hereunder and under the Loan
Agreement (collectively, the "Debtor Obligations"), and (ii) the
continuing right of the Secured Party in accordance with all of the terms
of the Loan Agreement to exercise all of the rights of the Secured Party
under the Loan Agreement (collectively, the "Secured Party's Rights")
including, without limitation, the rights of the Secured Party to
(a) exploit the Picture pursuant to the terms of the Distribution
Agreement, (b) recoup all sums paid, advanced or guaranteed by Debtor in
connection with the Picture, including without limitation, the Advance
and the agreement to expend a minimum of Two Hundred Twenty-Five Thousand
Dollars ($225,000) for Print and Advertising Costs, all to the extent
provided in the Distribution Agreement, (c) receive, retain and own all
Gross Receipts or other sums derived from or in connection with the
exploitation of the Picture subject to the terms and conditions of the
Distribution Agreement, (d) exercise the Secured Party's right of access
to and use of all Physical Properties (as herein defined), and (e) enjoy
the full exercise and quiet enjoyment of all rights in connection with
the Picture provided for in the Distribution Agreement.
(c) COLLATERAL. The term "Collateral," as used herein
shall mean all of Debtor's right, title and interest of every kind and
nature in and to the following items, whether now owned or in existence
or hereafter made, acquired or created and all product and proceeds
thereof:
<PAGE>
Page C-3
(i) All of the Debtor's rights under the Distribution
Agreement including all rights in the Picture and in all collateral with
respect to the foregoing including without limitation distribution rights
in the Picture granted pursuant to the Distribution Agreement;
(ii) All proceeds and product of the rights (including
without limitation the right of first negotiation with respect to the
remake, sequel and television production rights to the Picture) granted
to Debtor under the Distribution Agreement, including without limitation,
all accounts, contract rights, chattel paper, documents, general
intangibles and instruments (as defined under the Uniform Commercial Code
of the States of California and New York) and all money and claims for
money (whether or not such claims to money have been earned by
performance) derived from or arising out of such rights;
(iii) All of Debtor's rights to receive any sums of
money under or in connection with the Distribution Agreement.
(d) RIGHTS OF SECURED PARTY. With respect to the
security interests hereby granted to Secured Party and granted to the
Secured Party pursuant to the Copyright Mortgages and Assignments,
Secured Party and any of its successors or assignees shall at all times
be entitled to exercise in respect of the Collateral all of the rights,
remedies, powers and privileges available to a secured party under all
applicable laws, including without limitation, the United States
Copyright Act, the Uniform Commercial Code of the States of California
and New York in effect at the time which shall be applicable for the
purpose of establishing the relative rights of Secured Party and of
Debtor, and to those procedures to be followed thereunder in the event
this subparagraph 1(d) shall become operative, including the right to
sell the Collateral or any portion thereof, and, in addition thereto, to
the rights and remedies provided for herein and under the Loan Agreement
and to such other rights and remedies as may be provided by law or in
equity.
(e) EXERCISE OF RIGHTS. Secured Party shall not exercise
any of its rights hereunder in any manner that would interfere with the
production, completion, delivery or exploitation of the Picture (so long
as the exploitation of the Picture does not violate the Secured Party's
rights). Subject to the immediately preceding sentence, Secured Party or
any of its successors or assignees shall be entitled to exercise any or
all of the rights granted hereunder with respect to the Collateral in the
event Debtor (or any person or entity acting on Debtor's behalf or in its
place and stead) (i) rejects or attempts to reject or wrongfully
terminates or wrongfully disaffirms the Distribution
<PAGE>
Page C-4
Agreement, the Loan Agreement or this Security Agreement or (ii) breaches or
defaults, in any respect that would substantially prevent, hinder, impair,
infringe or delay Secured Party's enjoyment of the Secured Party's Rights,
in the payment or performance of any of the Secured Obligations and Rights and
fails to remedy such breach or default within 30 days after receipt of
written notice thereof from Secured Party if such breach or default is
capable of being cured within such time period. If the Debtor shall
breach any of its material obligations under the Loan Agreement, the
Distribution Agreement or this Security Agreement, the Secured Party,
after giving notice of its intention to do so, may take any reasonable
action which it may deem necessary for the maintenance, preservation, and
protection of any of the Collateral or its security interest therein.
(f) FURTHER DOCUMENTS. Debtor hereby agrees to execute
and deliver to Secured Party all such financing statements or similar
documentation for all jurisdictions designated by Secured Party
(collectively, the "Financing Statements"), one or more Copyright
Mortgages and Assignments in form and substance reasonably satisfactory
to Secured Party, and such other documents, agreements or instruments as
Secured Party shall reasonably request and are reasonably required to
better perfect, protect, evidence, renew and/or continue the security
interest in the Collateral granted hereunder and/or to effectuate the
purposes and intents of this Security Agreement (collectively, the
"Security Documents"), to file, register and/or record the same under (i)
the Uniform Commercial Code, and all other similar applicable laws of the
States of California and New York and under the laws of any other
jurisdiction where such filing, registration and/or recordation may
reasonably be required by Secured Party, and (ii) the United States
Copyright Act. If after the occurrence and during the continuance of any
of the events specified in the second sentence of subparagraph 1(e)
hereof Debtor fails to execute and deliver to Secured Party any of the
Financing Statements, the Copyright Mortgages and Assignments, or any
other Security Documents on request of Secured Party, Debtor hereby
appoints Secured Party its irrevocable attorney-in-fact to sign any such
document for Debtor, and agrees that such appointment constitutes a power
coupled with an interest and is irrevocable throughout the Term of the
Distribution Agreement, the Loan Agreement and this Security Agreement;
provided, however, that Secured Party shall be liable to Debtor and
Debtor's successors, licensees and assigns for any damages resulting from
inaccuracy or failure to conform to this Security Agreement in any
Financing Statement, Copyright Mortgage and Assignment or other Security
Document so signed by Secured Party as Debtor's attorney-in-fact. Debtor
hereby authorizes the Secured Party to file one or more financing
<PAGE>
Page C-5
or continuation statements, and amendments thereto, relative to all or any
part of the Collateral without the signature of the Debtor where
permitted by law. A carbon, photographic or other reproduction of this
Security Agreement or any part thereof shall be sufficient as a financing
statement where permitted by law.
(g) TERM OF SECURITY INTEREST. The security interest
created hereunder and under the Copyright Mortgages and Assignments shall
commence as of the date of this Security Agreement and shall terminate
upon the expiration of the Term of Secured Party's rights under the Loan
Agreement, at which time Secured Party, on Debtor's request and without
further consideration, shall execute and deliver to Debtor termination
statements releasing and terminating the Financing Statements, the
Copyright Mortgages and Assignments, and the other Security Documents,
all without recourse upon or warranty by Secured Party and with filing
thereof at the sole cost and expense of Debtor.
(h) PRIORITY OF SECURITY INTEREST. The security interest
by Secured Party in and to the Collateral shall be a first priority
security interest.
(i) CONTINUING SECURITY INTEREST. This Security
Agreement shall create a continuing security interest in the Collateral
and shall (a) be binding upon the Debtor, its successors and assigns and
(b) inure to the benefit of the Secured Party and its successors,
transferees and assigns.
2. DEBTOR'S WARRANTIES AND REPRESENTATIONS AND AGREEMENTS.
Debtor confirms, warrants and represents to Secured Party as
follows, which such confirmations, representations and warranties shall
be deemed to be continuing until the termination of the Secured Party's
security interest hereunder: (a) Debtor has the right to enter into this
Security Agreement and execute and deliver to Secured Party the Financing
Statements, the Copyright Mortgage and Assignment, and the other Security
Documents, and (b) Debtor has not and will not grant or permit to exist
on all or any portion of the Collateral any lien, security interest or
encumbrance (other than the security interest granted by Debtor to
Secured Party hereunder), which does or may in any way conflict or
interfere with or have priority over the security interest herein granted
by Debtor to Secured Party; provided, however, that in no event may Debtor
grant or permit to exist on all or any portion of the Collateral described
in subparagraphs 1(c)(i) through (iii) any lien, encumbrance or security
interest, and (c) no agreements, understandings or other arrangements have
been
<PAGE>
Page C-6
or will be made or entered into by Debtor which do or may in any way conflict
or interfere with the full, complete and unfettered exercise by Secured Party
of the Secured Party's Rights or any other rights granted by Debtor to Secured
Party in this Security Agreement or any of the other Security Documents or in
the Loan Agreement. Debtor will not sell, offer to sell, hypothecate or
otherwise dispose of any Collateral (including proceeds) subject hereto, or any
part thereof or interest therein, except subject to the security interest
granted to Secured Party hereunder.
3. EVENTS OF DEFAULT. The occurrence of any one or more of
the following events shall constitute a "Default" hereunder.
(a) failure of Debtor to perform its obligations under
the Loan Agreement;
(b) any material default by Debtor under the Loan
Agreement or the Distribution Agreement;
(c) any person shall levy on, seize, or attach the
Collateral;
(d) any person, including without limitation, Debtor
interferes with Secured Party's quiet enjoyment of Secured Party's rights
as a secured party hereunder;
(e) bankruptcy.
4. GOVERNING LAW. This Security Agreement and the other
Security Documents shall be governed by the laws of the State of New York
applicable to agreements wholly executed and performed therein, and
without giving effect to the principles of conflict or choice of laws
thereof.
5. ANY LEGAL ACTION. All of the parties hereto (a) agree
that any legal suit, action or proceeding arising out of or relating to
this Security Agreement may be instituted in a State or Federal court in
the City of New York, State of New York, (b) waive any objection which
they may have now or hereafter to the County of New York as the venue of
any such suit, action or proceeding, and (c) irrevocably submit to the
non-exclusive jurisdiction of the United States District Court for the
Southern District of New York, or any court of the State of New York
located in the City of New York in any such suit, action or proceeding
and any summons, order to show cause, writ, judgment, decree, or other
process with respect to any such suit, action or proceeding may be
delivered to Debtor personally outside the State of New York, and when so
delivered, Debtor shall be subject to the jurisdiction of such court, and
<PAGE>
Page C-7
amenable to the process so delivered as though the same had been served
within the State of New York, but outside the county in which such suit,
action or proceeding is pending.
6. NOTICES. All notices or other documents which any party
shall be required or shall desire to give to the other hereunder shall be
given in the manner provided for in the Loan Agreement.
7. AMENDMENTS AND WAIVERS. No amendment or waiver of any
provision of this Security Agreement nor consent to any departure by the
Debtor herefrom shall in any event be effective unless the same shall be
in writing and signed by the Secured Party, and then such waiver or
consent shall be effective only in the specific instance and for the
specific purpose for which given.
By signing in the spaces provided below, the parties hereto
have agreed to all of the terms and conditions of this Security
Agreement.
DEBTOR:
Orion Pictures Corporation
By:__________________________
Leonard White, President
SECURED PARTY:
MetProductions, Inc.
By:_________________________
Arnold L. Wadler,
Senior Vice President
<PAGE>
State of California )
).SS:
County of Los Angeles )
On March __, 1995, before me, ____________________ personally
appeared ___________________________, personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized
capacity(ies), and that by his/her/their signature(s) on the instrument
the person(s), or the entity upon behalf of which the person(s) acted,
executed the instrument.
WITNESS my hand and official seal.
Signature ________________________________ (Seal)
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Loan Agreement") dated as of April
__ 1995 between Orion Pictures Corporation, a Delaware corporation
(hereinafter referred to as "Orion") and MetProductions, Inc., a Delaware
corporation (hereinafter referred to as "MetProductions").
W I T N E S S E T H:
WHEREAS, Orion Pictures Corporation and Workin' Man Films, Inc.
("WMF") have entered into that certain Distribution Agreement attached
hereto as Exhibit A (the "Distribution Agreement") dated as of
January 12, 1995 with respect to the sole and exclusive right of Orion
Pictures Corporation to distribute the completed motion picture entitled
"Jeffrey" (the "Picture") in all media in the Licensee Territory during
the Term (both the Licensee Territory and the Term as defined in the
Distribution Agreement). Capitalized terms used herein and not otherwise
defined shall have the meanings assigned thereto in the Distribution
Agreement;
WHEREAS, pursuant to the terms of the Distribution Agreement,
Orion agreed to pay to WMF an Advance of up to $300,000 and to expend, in
connection with the initial theatrical release of the Picture, a minimum
of $300,000 for Print and Advertising Costs.
WHEREAS, in connection with the Distribution Agreement, Orion
has requested and MetProductions has agreed to loan to Orion up to the
sum of One Million Fifty Thousand Dollars ($1,050,000) which represents
the maximum amount of the Advance and Print and Advertising Costs.
NOW, THEREFORE, in consideration of the promises and of the
mutual covenants and agreements hereinafter set forth, the parties hereto
agree as follows:
1. THE LOAN.
1.1 LOAN. Subject to the terms and conditions set forth
herein, upon the execution hereof, MetProductions shall loan to Orion the
principal sum of up to One Million Fifty Thousand Dollars ($1,050,000)
(the "Loan"). The Loan shall be made as directed by Orion in accordance
with the Distribution Agreement.
1.2 NOTE. The Loan shall be evidenced by a promissory note of
Orion in the principal amount of up to One Million Fifty Thousand Dollars
($1,050,000) and in the
<PAGE>
Page 2
form attached hereto as Exhibit B. Each payment made by MetProductions
pursuant to section 1.1 hereof shall be reflected in Exhibit 1 to the
Promissory Note.
1.3 PAYMENTS GENERALLY. All payments of principal and
interest, or any other amount payable hereunder, shall be made to
MetProductions at its address set forth under its name on the signature
page hereof in immediately available funds by wire transfer in accordance
with the instructions set forth on the signature page hereto. Upon
payment in full of the Loan hereunder, MetProductions will surrender to
Orion such Note duly marked cancelled and terminate any security
interest. Orion may prepay, in whole or in part, without premium or
penalty the principal amount of the Loan and any accrued interest on the
Loan at any time notwithstanding the accounting terms set forth in
Section 1.5 below.
1.4 INTEREST. Orion will pay interest on the principal amount
of the Loan from the date of such loan until the Loan is paid in full
hereunder, at a rate per annum equal to Ten Percent (10%). Interest
shall be calculated on the basis of a 360-day year for the actual number
of days elapsed.
1.5 REPAYMENT OF LOAN. The Loan and all accrued interest
thereon shall be payable first from the Gross Receipts to which Orion is
entitled pursuant to the terms of the Distribution Agreement, less any
distribution expenses incurred by Orion in connection with distributing
the Picture (e.g. residuals, marketing costs). Orion shall remit to
MetProductions all Gross Receipts to which Orion is entitled pursuant to
the terms of the Distribution Agreement (less the costs and expenses set
forth in the preceding sentence) until the full amount of the Loan and
all accrued interest thereunder has been repaid in accordance with the
terms of this Loan Agreement.
2. SECURITY.
2.1 SECURITY. As security for the punctual payment in full of
the Loan and all accrued interest thereon, and other amounts payable
hereunder or any other agreement or by operation of law or otherwise,
relating to the transactions described herein, Orion hereby grants to
MetProductions a first priority lien on and security interest in all of
Orion's right, title and interest in the Picture pursuant to the terms of
the Distribution Agreement but only to the extent necessary to secure
MetProductions' right to receive payments under this Loan Agreement
(the "Collateral"). The security interest hereby created shall attach
immediately on the execution of this Loan Agreement
<PAGE>
Page 3
by MetProductions and Orion. Concurrently with the execution of this
Loan Agreement (or within a reasonable time thereafter), the parties
hereto shall execute and file the Mortgage of Copyright and
Security Agreement (the "Security Agreement") attached hereto as
Exhibit C and any UCC Financing Statement(s) required to perfect
the security interest created by this Loan Agreement and the Security
Agreement.
3. EVENTS OF DEFAULT.
3.1 Each of the following shall constitute an Event of Default:
(a) the failure of Orion to pay MetProductions in
accordance with Section 1.5 hereof within three (3) business days after
notice from MetProductions that such amount is due.
(b) the filing by Orion of a voluntary petition for
relief under any federal or state bankruptcy or insolvency law, or the
commencement by Orion of any other voluntary proceeding or other action,
proceeding or other action in bankruptcy, or the filing of any
involuntary petition against Orion under any federal or state bankruptcy
law.
3.2 If any Event of Default shall occur, MetProductions may, at
its sole option and without notice, declare the entire principal amount
loaned to Orion in accordance with this Loan Agreement and the Note to be
due and payable in accordance with the terms and conditions of this Loan
Agreement and the Note.
3.3 If any Event of Default shall occur, MetProductions shall
be entitled to exercise all of the rights, powers and remedies permitted
by law, including without limitation, all rights and remedies of a
secured party of a debtor in default under the Uniform Commercial Code in
effect in the State of New York for the protection and enforcement of its
rights in respect of the Collateral.
4. REPRESENTATIONS AND WARRANTIES OF ORION.
Orion hereby represents and warrants to MetProductions that:
4.1 Orion has the right to enter into this Loan Agreement and
to grant and assign to MetProductions the interest in the Picture herein
granted.
<PAGE>
Page 4
4.2 The execution, delivery and performance of this Loan
Agreement have been duly authorized by all necessary action of Orion and
do not and will not contravene or conflict with any corporate or
fiduciary obligation Orion has to its shareholders, including but not
limited to, the terms or provisions of Orion's By-Laws or Orion's
Restated Certificate of Incorporation. This Loan Agreement constitutes
the legally valid and binding obligations of Orion and is enforceable
against Orion in accordance with its terms.
4.3 The execution, delivery and performance of this Loan
Agreement will not result in a breach of or constitute (with due notice
or lapse of time or both) a default under any agreement, undertaking or
other instrument to which Orion is a party or by which it may be bound or
affected.
4.4 To the best of Orion's knowledge and except as disclosed in
its Annual Report on Form 10-K for the fiscal year ended February 28,
1994, and those quarterly reports on Form 10-Q filed up to and including
the date hereof, there is no action, suit or proceeding pending or
threatened against or affecting Orion, or the Picture which, if adversely
determined, would materially affect Orion's ability to perform this Loan
Agreement.
4.5 Orion agrees to use its reasonable commercial efforts,
consistent with good business practices, in distributing and exploiting
and causing the distribution and/or exploitation of the Picture as herein
provided.
4.6 Orion agrees to provide MetProductions with statements of
the distribution costs and expenses in connection with its distribution
of she Picture on a reasonable basis but not less than semi-annually.
4.7 Orion agrees to maintain records pertaining to the license
and distribution of the Picture. MetProductions shall have the right
upon reasonable notice to Orion to inspect such records until repayment
of the Note in full.
5. ACKNOWLEDGMENT OF METPRODUCTIONS.
5.1 MetProductions acknowledges and agrees that Orion makes no
representation, warranty, guarantee or agreement as to the amount of the
Gross Receipts of the Picture which may be derived from the distribution,
exhibition or other exploitation thereof, nor does Orion guarantee the
performance by any distributor, sub-distributor, sub-licensee and/or
agent of the Picture.
<PAGE>
Page 5
5.2 Orion shall have the right to select distributors, sub-
distributors, sub-licensees, and/or agents upon such terms and conditions
as Orion may determine, consistent with its past business practices and
with the customs and practices of the motion picture industry in general,
in connection with the distribution, exhibition or other exploitation of
the Picture.
6. INDEMNIFICATION.
6.1 Orion agrees, at its own expense, to defend, indemnify and
hold MetProductions, its affiliates, its assignees and licensees,
harmless from and against any and all loss, damage, liability and expense
(including without limitation, reasonable attorneys' fees and costs)
which may be suffered or incurred by MetProductions, its affiliates, its
assignees or licensees, as the result of (i) any material breach or
default of any of the representations, warranties, covenants or
agreements made by Orion hereunder, (ii) any material breach or default
of any agreement whatsoever entered into by Orion in connection with the
Picture or (iii) any claim arising out of, or related to, the production,
distribution, or other exploitation of the Picture.
7. MISCELLANEOUS.
7.1 This Loan Agreement shall be construed in accordance with
and interpreted under the laws of the State of New York governing
agreements which are wholly executed and performed therein.
7.2 Wherever provision is made in this Loan Agreement for the
giving of any notice, such notice shall be in writing and shall be deemed
to have been duly given if mailed by first class United States mail,
postage prepaid, addressed to the party entitled to receive the same or
delivered personally to such party at the address specified below or by
facsimile (receipt confirmed) to such party:
If to MetProductions to:
c/o Metromedia Company
One Meadowlands Plaza
East Rutherford, New Jersey 07073
Attention: General Counsel
Telecopy No.: (201) 531-2803
<PAGE>
Page 6
If to Orion:
1888 Century Park East
Los Angeles, California 90067
Attention: General Counsel
Telecopy No.: (310) 282-9902
or to such other address as either party hereto shall have last
designated by notice to the other party. Notice shall be deemed to have
been given three days following the date on which such notice was so
mailed or on the date such notice was delivered personally or by
facsimile.
7.3 This Loan Agreement may be executed by one or more of the
parties to this Loan Agreement on any number of separate counterparts and
all of said counterparts taken together shall be deemed to constitute one
and the same instrument.
7.4 Each party shall execute and deliver to the other party
from time to time all such other agreements, instruments and other
documents (including without limitation all requested financing and
continuation statements) and do all such other and further acts and
things as the requesting party may reasonably request in order further to
evidence or carry out the intent of this Loan Agreement.
7.5 This Loan Agreement represents the entire agreement between
the parties hereto with respect to the subject matter hereof and
supersedes all previous representations, understandings or agreement,
oral or written, between the parties, with respect to the subject matter
hereof.
7.6 If any inconsistencies between the terms and conditions of
this Loan Agreement and the Distribution Agreement are deemed to exist,
the terms and conditions of the Distribution Agreement shall govern.
IN WITNESS WHEREOF, the parties hereto have executed this Loan
Agreement as of the date and year first above written.
METPRODUCTIONS, INC.
BY:___________________________
Arnold L. Wadler,
Senior Vice President
<PAGE>
Page 7
ORION PICTURES CORPORATION
BY:___________________________
Leonard White, President
<PAGE>
Page 8
STATE OF CALIFORNIA )
).SS:
COUNTY OF LOS ANGELES )
On April __, 1995, before me, ___________________, personally
appeared ________________________, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity
(ies), and that by his/her/their signature(s) on the instrument the
person(s), or the entity upon behalf of which the person(s) acted,
executed the instrument.
WITNESS my hand and official seal.
Signature (Seal)
<PAGE>
EXHIBIT B
PROMISSORY NOTE
$1,050,000 New York, New York
April __, 1995
FOR VALUE RECEIVED, ORION PICTURES CORPORATION, a Delaware
corporation ("Borrower"), promises to pay to the order of METPRODUCTIONS,
INC. ("Lender") or its assigns, up to the principal sum of $1,050,000 in
accordance with the terms of the Loan Agreement between Borrower and
Lender of even date herewith (the "Loan Agreement"); together with
accrued interest on the unpaid principal balance from the date herewith
at the annual rate of Ten (10%) percent. All payments of principal and
interest shall be made at Lender's offices located at One Meadowlands
Plaza, East Rutherford, New Jersey 07073-2137, Attention: Accounting
Department, or at such other address provided to Borrower, in writing,
from time to time by the holder of this Note.
All capitalized terms used herein and not otherwise defined
shall have the meanings assigned thereto in the Loan Agreement.
If any Event of Default specified in the Loan Agreement shall
occur, then the holder of this Note can declare the entire unpaid
principal amount of this Note, together with interest accrued thereon, to
be immediately due and payable and such holder will have all of the
rights and remedies set forth in the Loan Agreement.
Borrower hereby waives presentment, demand for payment, notice
of default, dishonor or nonpayment, protest and notice of protest and all
other demands and notices in connection with the delivery, acceptance,
performance or enforcement of this Note.
This Note shall be governed by and construed in accordance with
the laws of the State of New York, without reference to the conflict of
laws principles thereof.
IN WITNESS WHEREOF, Borrower has executed and delivered this
Note on the __ day of April, 1995.
ATTEST: ORION PICTURES CORPORATION
By:______________________________
________________________ Leonard White, President
Secretary
<PAGE>
EXHIBIT C
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") is made and
entered into as of April __, 1995 between Orion Pictures Corporation, a
Delaware corporation, (the "Debtor") with offices located at 1888 Century
Park East, Los Angeles, California 90067 and MetProductions, Inc., a
Delaware corporation (the "Secured Party") with offices of c/o Metromedia
Company, One Meadowlands Plaza, East Rutherford, New Jersey 07073.
R E C I T A L S:
WHEREAS, pursuant to that certain Distribution Agreement dated
as of January 12, 1995 between Debtor and Workin' Man Films, Inc. (such
agreement as it may be amended, modified, supplemented, replaced, renewed
or superseded from time to time, is herein referred to as the
"Distribution Agreement"), Debtor acquired the sole exclusive right and
license to distribute the completed motion picture entitled "Jeffrey"
(the "Picture") in all media in the Licensee Territory (as defined in the
Distribution Agreement). Capitalized terms used herein and not otherwise
defined shall have the meanings assigned thereto in the Loan Agreement
and the Distribution Agreement.
WHEREAS, the Debtor and Secured Party have entered into that
certain Loan Agreement of even date herewith (the "Loan Agreement").
Pursuant to the Loan Agreement, Secured Party has agreed to loan (the
"Loan") to Debtor the sum of up to One Million Fifty Thousand Dollars
($1,050,000) to fund the Advance of up to Three Hundred Thousand Dollars
($300,000) and to comply with the agreement to expend, in connection with
the initial theatrical release of the Picture, a minimum of Three Hundred
Thousand Dollars ($300,000) for Print and Advertising Costs.
In consideration of the promises and mutual covenants herein
contained and for other good and valuable consideration the receipt of
which is hereby acknowledged, and in order to induce the Secured Party to
enter into the Loan Agreement, the parties hereto hereby agree as
follows:
1. GRANT OF SECURITY INTEREST.
(a) GRANT. Debtor hereby mortgages, hypothecates, grants and
assigns to Secured Party as security for the Secured Obligations and
Rights (as such term is defined in subparagraph 1(b) below) a continuing
<PAGE>
Page C-2
first priority security interest in and to all of Debtor's right, title,
and interest of every kind and nature in and to (but none of Debtor's
obligations with respect to) all of the items listed in subparagraph 1(c)
below, which items are hereinafter collectively referred to as the
"Collateral." Notwithstanding anything to the contrary contained herein,
except for the security interest granted hereby and pursuant to the
Copyright Mortgages and Assignments referred to in subparagraph 1(f)
below and the Secured Party's rights and remedies with respect to such
security interests, this Security Agreement is not intended to and does
not grant to Secured Party any greater exploitation rights in the Picture
than granted to Debtor pursuant to the Distribution Agreement.
(b) PURPOSE OF GRANT. The security interest in the Collateral
granted to the Secured Party pursuant hereto and pursuant to the
Copyright Mortgages and Assignments is being granted to secure the
Secured Obligations and Rights. The term "Secured Obligations and
Rights" shall mean and include (i) the full and timely payment and
performance by Debtor when due of all of Debtor's agreements,
representations, warranties and covenants, hereunder and under the Loan
Agreement (collectively, the "Debtor Obligations"), and (ii) the
continuing right of the Secured Party in accordance with all of the terms
of the Loan Agreement to exercise all of the rights of the Secured Party
under the Loan Agreement (collectively, the "Secured Party's Rights")
including, without limitation, the rights of the Secured Party to
(a) exploit the Picture pursuant to the terms of the Distribution
Agreement, (b) recoup all sums paid, advanced or guaranteed by Debtor in
connection with the Picture, including without limitation, the Advance of
Three Hundred Thousand Dollars ($300,000) and the agreement to expend, in
connection with the initial theatrical release of the Picture, a minimum
of Three Hundred Thousand Dollars ($300,000) for Print and Advertising
Costs, all to the extent provided in the Distribution Agreement,
(c) receive, retain and own all Gross Receipts or other sums derived from
or in connection with the exploitation of the Picture subject to the
terms and conditions of the Distribution Agreement, (d) exercise the
Secured Party's right of access to and use of all Physical Properties (as
herein defined), and (e) enjoy the full exercise and quiet enjoyment of
all rights in connection with the Picture provided for in the
Distribution Agreement.
(c) COLLATERAL. The term "Collateral", as used herein shall
mean all of Debtor's right, title and interest of every kind and nature
in and to the following items, whether now owned or in existence or
hereafter made, acquired or created and all product and proceeds thereof:
<PAGE>
Page C-4
(i) All of the Debtor's rights under the Distribution
Agreement including all rights in the Picture and in all collateral with
respect to the foregoing including without limitation distribution rights
in the Picture granted pursuant to the Distribution Agreement;
(ii) All proceeds and product of the rights granted to
Debtor under the Distribution Agreement, including without limitation,
all accounts, contract rights, chattel paper, documents, general
intangibles and instruments (as defined under the Uniform Commercial Code
of the States of California and New York) and all money and claims for
money (whether or not such claims to money have been earned by
performance) derived from or arising out of such rights; and
(iii) All of Debtor's rights to receive any sums of money
under or in connection with the Distribution Agreement.
(d) RIGHTS OF SECURED PARTY. With respect to the security
interests hereby granted to Secured Party and granted to the Secured
Party pursuant to the Copyright Mortgages and Assignments, Secured Party
and any of its successors or assignees shall at all times be entitled to
exercise in respect of the Collateral all of the rights, remedies, powers
and privileges available to a secured party under all applicable laws,
including without limitation, the United States Copyright Act, the
Uniform Commercial Code of the States of California and New York in
effect at the time which shall be applicable for the purpose of
establishing the relative rights of Secured Party and of Debtor, and to
those procedures to be followed thereunder in the event this
subparagraph 1(d) shall become operative, including the right to sell the
Collateral or any portion thereof, and, in addition thereto, to the
rights and remedies provided for herein and under the Loan Agreement and
to such other rights and remedies as may be provided by law or in equity.
(e) EXERCISE OF RIGHTS. Secured Party shall not exercise any
of its rights hereunder in any manner that would interfere with the
production, completion, delivery or exploitation of the Picture (so long
as the exploitation of the Picture does not violate the Secured Party's
rights). Subject to the immediately preceding sentence, Secured Party or
any of its successors or assignees shall be entitled to exercise any or
all of the rights granted hereunder with respect to the Collateral in the
event Debtor (or any person or entity acting on Debtor's behalf or in its
place and stead) (i) rejects or attempts to reject or wrongfully
terminates or wrongfully disaffirms the Distribution Agreement, the Loan
Agreement or this Security Agreement or (ii) breaches or defaults, in any
respect that would
<PAGE>
Page C-4
substantially prevent, hinder, impair, infringe or
delay Secured Party's enjoyment of the Secured Party's Rights, in the
payment or performance of any of the Secured Obligations and Rights and
fails to remedy such breach or default within 30 days after receipt of
written notice thereof from Secured Party if such breach or default is
capable of being cured within such time period. If the Debtor shall
breach any of its material obligations under the Loan Agreement, the
Distribution Agreement or this Security Agreement, the Secured Party,
after giving notice of its intention to do so, may take any reasonable
action which it may deem necessary for the maintenance, preservation, and
protection of any of the Collateral or its security interest therein.
(f) FURTHER DOCUMENTS. Debtor hereby agrees to execute and
deliver to Secured Party all such financing statements or similar
documentation for all jurisdictions designated by Secured Party
(collectively, the "Financing Statements"), one or more Copyright
Mortgages and Assignments in form and substance reasonably satisfactory
to Secured Party, and such other documents, agreements or instruments as
Secured Party shall reasonably request and are reasonably required to
better perfect, protect, evidence, renew and/or continue the security
interest in the Collateral granted hereunder and/or to effectuate the
purposes and intents of this Security Agreement (collectively, the
"Security Documents"), to file, register and/or record the same under
(i) the Uniform Commercial Code, and all other similar applicable laws of
the States of California and New York and under the laws of any other
jurisdiction where such filing, registration and/or recordation may
reasonably be required by Secured Party, and (ii) the United States
Copyright Act. If after the occurrence and during the continuance of any
of the events specified in the second sentence of subparagraph 1(e)
hereof Debtor fails to execute and deliver to Secured Party any of the
Financing Statements, the Copyright Mortgages and Assignments, or any
other Security Documents on request of Secured Party, Debtor hereby
appoints Secured Party its irrevocable attorney-in-fact to sign any such
document for Debtor, and agrees that such appointment constitutes a power
coupled with an interest and is irrevocable throughout the Term of the
Distribution Agreement, the Loan Agreement and this Security Agreement;
provided, however, that Secured Party shall be liable to Debtor and
Debtor's successors, licensees and assigns for any damages resulting from
inaccuracy or failure to conform to this Security Agreement in any
Financing Statement, Copyright Mortgage and Assignment or other Security
Document so signed by Secured Party as Debtor's attorney-in-fact. Debtor
hereby authorizes the Secured Party to file one or more financing or
continuation statements, and amendments thereto, relative to all or any
part of the Collateral without the signature
<PAGE>
Page C-5
of the Debtor where permitted by law. A carbon, photographic or other
reproduction of this Security Agreement or any part thereof shall be
sufficient as a financing statement where permitted by law.
(g) TERM OF SECURITY INTEREST. The security interest created
hereunder and under the Copyright Mortgages and Assignments shall
commence as of the date of this Security Agreement and shall terminate
upon the expiration of the Term of Secured Party's rights under the Loan
Agreement, at which time Secured Party, on Debtor's request and without
further consideration, shall execute and deliver to Debtor termination
statements releasing and terminating the Financing Statements, the
Copyright Mortgages and Assignments, and the other Security Documents,
all without recourse upon or warranty by Secured Party and with filing
thereof at the sole cost and expense of Debtor.
(h) PRIORITY OF SECURITY INTEREST. The security interest by
Secured Party in and to the Collateral shall be a first priority security
interest.
(i) CONTINUING SECURITY INTEREST. This Security Agreement
shall create a continuing security interest in the Collateral and shall
(a) be binding upon the Debtor, its successors and assigns and (b) inure
to the benefit of the Secured Party and its successors, transferees and
assigns.
2. DEBTOR'S WARRANTIES AND REPRESENTATIONS AND AGREEMENTS.
Debtor confirms, warrants and represents to Secured Party as
follows, which such confirmations, representations and warranties shall
be deemed to be continuing until the termination of the Secured Party's
security interest hereunder: (a) Debtor has the right to enter into this
Security Agreement and execute and deliver to Secured Party the Financing
Statements, the Copyright Mortgage and Assignment, and the other Security
Documents, and (b) Debtor has not and will not grant or permit to exist
on all or any portion of the Collateral any lien, security interest or
encumbrance (other than the security interest granted by Debtor to
Secured Party hereunder), which does or may in any way conflict or
interfere with or have priority over the security interest herein granted
by Debtor to Secured Party; provided, however, that in no event may
Debtor grant or permit to exist on all or any portion of the Collateral
described in subparagraphs 1(c)(i) through (iii) any lien, encumbrance or
security interest, and (c) no agreements, understandings or other
arrangements have been or will be made or entered into by Debtor which do
or may in any way conflict or interfere with the full, complete and
unfettered exercise by Secured Party of the Secured Party's
<PAGE>
Page C-6
Rights or any other rights granted by Debtor to Secured Party in this
Security Agreement or any of the other Security Documents or in the Loan
Agreement. Debtor will not sell, offer to sell, hypothecate or otherwise
dispose of any Collateral (including proceeds) subject hereto, or any
part thereof or interest therein, except subject to the security interest
granted to Secured Party hereunder.
3. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute a "Default" hereunder.
(a) failure of Debtor to perform its obligations under the
Loan Agreement;
(b) any material default by Debtor under the Loan Agreement or
the Distribution Agreement;
(c) any person shall levy on, seize, or attach the Collateral;
(d) any person, including without limitation, Debtor
interferes with Secured Party's quiet enjoyment of Secured Party's rights
as a secured party hereunder;
(e) bankruptcy.
4. GOVERNING LAW. This Security Agreement and the other Security
Documents shall be governed by the laws of the State of New York
applicable to agreements wholly executed and performed therein, and
without giving effect to the principles of conflict or choice of laws
thereof.
5. ANY LEGAL ACTION. All of the parties hereto (a) agree that any
legal suit, action or proceeding arising out of or relating to this
Security Agreement may be instituted in a State or Federal court in the
City of New York, State of New York, (b) waive any objection which they
may have now or hereafter to the County of New York as the venue of any
such suit, action or proceeding, and (c) irrevocably submit to the non-
exclusive jurisdiction of the United States District Court for the
Southern District of New York, or any court of the State of New York
located in the City of New York in any such suit, action or proceeding
and any summons, order to show cause, writ, judgment, decree, or other
process with respect to any such suit, action or proceeding may be
delivered to Debtor personally outside the State of New York, and when so
delivered, Debtor shall be subject to the jurisdiction of such court, and
amenable to the process so delivered as though the same had been served
within the
<PAGE>
Page C-7
State of New York, but outside the county in which such suit,
action or proceeding is pending.
6. NOTICES. All notices or other documents which any party shall be
required or shall desire to give to the other hereunder shall be given in
the manner provided for in the Loan Agreement.
7. AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of
this Security Agreement nor consent to any departure by the Debtor
herefrom shall in any event be effective unless the same shall be in
writing and signed by the Secured Party, and then such waiver or consent
shall be effective only in the specific instance and for the specific
purpose for which given.
By signing in the spaces provided below, the parties hereto
have agreed to all of the terms and conditions of this Security
Agreement.
DEBTOR:
ORION PICTURES CORPORATION
BY: ___________________________
Leonard White, President
SECURED PARTY:
METPRODUCTIONS, INC.
BY:______________________________
Arnold L. Wadler,
Senior Vice President
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Loan Agreement") dated as of June
28, 1995 between ORION PICTURES CORPORATION, a Delaware corporation
(hereinafter referred to as "Orion") and METPRODUCTIONS, INC., a Delaware
corporation (hereinafter referred to as "MetProductions").
W I T N E S S E T H:
WHEREAS, Orion and Hammertime Productions, Inc. ("Hammertime")
have entered into that certain Production Agreement attached hereto as
Exhibit A (the "Production Agreement") dated as of April 15, 1995 with
respect to the production, completion and delivery by Hammertime to Orion
of the new and original feature length motion picture tentatively
entitled "War Zone" (the "Picture"). Capitalized terms used herein and
not otherwise defined shall have the meanings assigned thereto in the
Production Agreement;
WHEREAS, pursuant to the terms of the Production Agreement,
Orion agreed to provide pre-production and production financing with
respect to the Picture upon the satisfaction of certain conditions.
WHEREAS, the final cash production budget for the Picture will
not exceed $3,987,424 (the "Budget") which consists of the Big Bear
Advance and the Orion Advance;
WHEREAS, Orion and Big Bear Licensing Corporation, Inc. ("Big
Bear") have entered into a Purchase Agreement dated as of October 10,
1994 (the "Foreign Distribution Agreement") pursuant to which Orion
agreed to grant to Big Bear exclusive distribution rights in the Picture
in all media and languages, with the exception of the United States and
Canada, their respective territories and possessions;
WHEREAS, pursuant to the Foreign Distribution Agreement, Big
Bear agreed to pay into the production bank account $1,500,000 (the "Big
Bear Advance") in accordance with the terms and conditions of the Foreign
Distribution Agreement;
WHEREAS, pursuant to an InterCreditor Agreement dated as of
June __ 1995 between the Lewis Horowitz Organization, a division of
Imperial Bank ("LHO"), LHO agreed to loan to Big Bear up to $1,145,000
(the "LHO Loan") of the Big Bear Advance;
<PAGE>
Page 2
WHEREAS, pursuant to an AFMA International Multiple Right
Distribution Agreement, dated as of December 14, 1995, between Big Bear
and Courage Film Productions, Inc. ("Courage"), Big Bear has granted
Courage the right to subdistribute, exhibit and exploit the Picture in
Germany (in certain German-speaking territories) and Courage, for the
benefit of big Bear, has paid $550,000 (the "Courage Payment")
representing the balance of the Big Bear Advance.
WHEREAS, pursuant to a Security Agreement dated as of October
10, 1994, Orion granted to Big Bear a security interest in the foregoing
distribution rights relating to the Picture to secure the Big Bear
Advance.
WHEREAS, Orion anticipates it will need to fund up to
$2,487,424 (the "Orion Advance") pursuant to the Production Agreement;
WHEREAS, in connection with the Production Agreement, Orion has
requested and MetProductions has agreed to loan to Orion up to the sum of
Two Million Four Hundred Eighty-Seven Thousand Four Hundred Twenty-Four
Dollars ($2,487,424) which represents the maximum amount that Orion is
obligated to fund in connection with the financing of the Picture,
pursuant to the Production Agreement.
NOW, THEREFORE, in consideration of the promises and of the
mutual covenants and agreements hereinafter set forth, the parties hereto
agree as follows:
1. THE LOAN.
1.1 LOAN. Subject to the terms and conditions set forth
herein, upon the execution hereof, MetProductions shall loan to Orion the
principal sum of up to Two Million Four Hundred Eighty-Seven Thousand
Four Hundred Twenty-Four Dollars ($2,487,424) (the "Loan"). The Loan
shall be made in accordance with the "Cash Flow" dated June 8, 1995,
attached hereto as Exhibit "A-1" or as directed by Orion.
1.2 NOTE. The Loan shall be evidenced by a promissory
note of Orion in the principal amount of up to Two Million Four Hundred
Eighty-Seven Thousand Four Hundred Twenty-Four Dollars ($2,487,424) and
in the form attached hereto as Exhibit B. Each payment made by
MetProductions pursuant to section 1.1 hereof shall be reflected in
Exhibit 1 to the Promissory Note.
1.3 PAYMENTS GENERALLY. All payments of principal and
interest, or any other amount payable hereunder, shall be made to
MetProductions at its address
<PAGE>
Page 3
set forth under its name on the signature page hereof in immediately available
funds by wire transfer in accordance with the instructions set forth on the
signature page hereto. Upon payment in full of the Loan hereunder,
MetProductions will surrender to Orion such Note duly marked cancelled and
terminate any security interest. Orion may prepay, in whole or in part,
without premium or penalty the principal amount of the Loan and any accrued
interest on the Loan at any time notwithstanding the accounting terms set forth
in Section 1.5 below.
1.4 INTEREST. Orion will pay interest on the principal
amount of the Loan from the date of such loan until the Loan is paid in
full hereunder, at a rate per annum equal to Ten Percent (10%). Interest
shall be calculated on the basis of a 360-day year for the actual number
of days elapsed.
1.5 REPAYMENT OF LOAN. The Loan and all accrued interest
thereon shall be payable first from the Gross Receipts to which Orion is
entitled pursuant to the terms of the Production Agreement (and any other
production-related agreement; e. g., the director's agreement) less any
distribution expenses incurred by Orion in connection with the
distribution of the Picture (e.g. print and advertising costs, residuals
and other marketing costs). Orion shall remit to MetProductions all
Gross Receipts to which Orion is entitled pursuant to the terms of the
Production Agreement (less the costs and expenses set forth in the
preceding sentence) until the full amount of the Loan and all accrued
interest thereunder has been repaid in accordance with the terms of this
Loan Agreement.
2. SECURITY.
2.1 SECURITY. As security for the punctual payment in
full of the Loan and all accrued interest thereon, and other amounts
payable hereunder or any other agreement or by operation of law or
otherwise, relating to the transactions described herein, Orion hereby
grants to MetProductions a first priority lien on and security interest
in all of Orion's right, title and interest in the Picture acquired by
Orion pursuant to the terms of the Production Agreement, except those
rights granted to Big Bear pursuant to the Foreign Distribution
Agreement, such first priority lien is only to secure MetProductions'
right to receive payments under this Loan Agreement (the "Collateral").
The security interest hereby created shall attach immediately on the
execution of this Loan Agreement by MetProductions and Orion.
Concurrently with the execution of this Loan Agreement (or within a
reasonable time thereafter), the parties hereto shall execute and file
the Mortgage of Copyright and Security Agreement (the
<PAGE>
Page 4
"Security Agreement") attached hereto as Exhibit C and any UCC Financing
Statement(s) required to perfect the security interest created by this
Loan Agreement and the Security Agreement.
3. EVENTS OF DEFAULT.
3.1 Each of the following shall constitute an Event of
Default:
(a) the failure of Orion to pay MetProductions in
accordance with Section 1.5 hereof within three (3) business days after
notice from Metproductions that such amount is due.
(b) the filing by Orion of a voluntary petition for
relief under any federal or state bankruptcy or insolvency law, or the
commencement by Orion of any other voluntary proceeding or other action,
proceeding or other action in bankruptcy, or the filing of any
involuntary petition against Orion under any federal or state bankruptcy
law.
3.2 If any Event of Default shall occur, MetProductions
may, at its sole option and without notice, declare the entire principal
amount loaned to Orion in accordance with this Loan Agreement and the
Note to be due and payable in accordance with the terms and conditions of
this Loan Agreement and the Note.
3.3 If any Event of Default shall occur, MetProductions
shall be entitled to exercise all of the rights, powers and remedies
permitted by law, including without limitation, all rights and remedies
of a secured party of a debtor in default under the Uniform Commercial
Code in effect in the State of New York for the protection and
enforcement of its rights in respect of the Collateral.
4. REPRESENTATIONS AND WARRANTIES OF ORION.
Orion hereby represents and warrants to MetProductions that:
4.1 Orion has the right to enter into this Loan Agreement
and to grant and assign to MetProductions the security interest in the
Picture herein granted and granted pursuant to the Security Agreement.
4.2 The execution, delivery and performance of this Loan
Agreement have been duly authorized by all necessary action of Orion and do not
and will not contravene or conflict with any corporate or fiduciary obligation
Orion has to its shareholders, including but not limited to, the
<PAGE>
Page 5
terms or provisions of Orion's By-Laws or Orion's Restated Certificate of
Incorporation. This Loan Agreement constitutes the legally valid and binding
obligations of Orion and is enforceable against Orion in accordance with its
terms.
4.3 The execution, delivery and performance of this Loan
Agreement will not result in a breach of or constitute (with due notice
or lapse of time or both) a default under any agreement, undertaking or
other instrument to which Orion is a party or by which it may be bound or
affected.
4.4 To the best of Orion's knowledge and except as
disclosed in its Annual Report on Form 10-K for the fiscal year ended
February 28, 1994, and those quarterly reports on Form 10-Q filed up to
and including the date hereof, there is no action, suit or proceeding
pending or threatened against or affecting Orion, or the Picture which,
if adversely determined, would materially affect Orion's ability to
perform this Loan Agreement.
4.5 Orion agrees to use its reasonable commercial
efforts, consistent with good business practices, in distributing and
exploiting and causing the production, distribution and/or exploitation
of the Picture in accordance with the Production Agreement and any
distribution agreement it may enter into with regard to the Picture,
including the Foreign Distribution Agreement.
4.6 Orion agrees to provide Metproductions with
statements and calculations of the Gross Receipts, Net Receipts,
distribution costs and expenses in connection with the production and
distribution of the Picture on a reasonable basis but not less than semi-
annually.
4.7 Orion agrees to maintain records pertaining to the
production, license and distribution of the Picture. MetProductions
shall have the right upon reasonable notice to Orion to inspect such
records until repayment of the Note in full.
5. ACKNOWLEDGEMENT OF METROPRODUCTIONS.
5.1 MetProductions acknowledges and agrees that Orion
makes no representation, warranty, guarantee or agreement as to the
amount of the Gross Receipts of the Picture which may be derived from the
distribution, exhibition or other exploitation thereof, nor does Orion
guarantee the performance by any distributor, sub-distributor, sub-
licensee and/or agent of the Picture.
<PAGE>
Page 6
5.2 Orion shall have the right to select distributors,
sub-distributors, sub-licensees, and/or agents upon such terms and
conditions as Orion may determine, consistent with its past business
practices and with the customs and practices of the motion picture
industry in general, in connection with the distribution, exhibition or
other exploitation of the Picture.
6. INDEMNIFICATION.
6.1 Orion agrees, at its own expense, to defend,
indemnify and hold MetProductions, its affiliates, its assignees and
licensees, harmless from and against any and all loss, damage, liability
and expense (including without limitation, reasonable attorneys' fees and
costs) which may be suffered or incurred by MetProductions, its
affiliates, its assignees or licensees, as the result of (i) any material
breach or default of any of the representations, warranties, covenants or
agreements made by Orion hereunder, (ii) any material breach or default
of any agreement whatsoever entered into by Orion in connection with the
Picture or (iii) any claim arising out of, or related to, the production,
distribution, or other exploitation of the Picture.
7. MISCELLANEOUS.
7.1 This Loan Agreement shall be construed in accordance
with and interpreted under the laws of the State of New York governing
agreements which are wholly executed and performed therein.
7.2 Wherever provision is made in this Loan Agreement for
the giving of any notice, such notice shall be in writing and shall be
deemed to have been duly given if mailed by first class United States
mail, postage prepaid, addressed to the party entitled to receive the
same or delivered personally to such party at the address specified below
or by facsimile (receipt confirmed) to such party:
If to MetProductions to:
c/o Metromedia Company
One Meadowlands Plaza
East Rutherford, New Jersey 07073
Attention: General Counsel
Telecopy No.: (201) 531-2803
If to Orion:
1888 Century Park East
Los Angeles, California 90067
Attention: General Counsel
<PAGE>
Page 7
Telecopy No.: (310) 282-9902
or to such other address as either party hereto shall have last
designated by notice to the other party. Notice shall be deemed to have
been given three days following the date on which such notice was so
mailed or on the date such notice was delivered personally or by
facsimile.
7.3 This Loan Agreement may be executed by one or more of
the parties to this Loan Agreement on any number of separate counterparts
and all of said counterparts taken together shall be deemed to constitute
one and the same instrument.
7.4 Each party shall execute and deliver to the other
party from time to time all such other agreements, instruments and other
documents (including without limitation all requested financing and
continuation statements) and do all such other and further acts and
things as the requesting party may reasonably request in order further to
evidence or carry out the intent of this Loan Agreement.
7.5 This Loan Agreement represents the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all previous representations, understandings or agreement,
oral or written, between the parties, with respect to the subject matter
hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Loan
Agreement as of the date and year first above written.
METPRODUCTIONS, INC.
BY:_____________________________
Arnold L. Wadler,
Senior Vice President
Orion Pictures Corporation
By:______________________________
Leonard White, President
<PAGE>
EXHIBIT B
PROMISSORY NOTE
$2,487,424 New York, New York
June 28, 1995
FOR VALUE RECEIVED, ORION PICTURES CORPORATION, a Delaware
corporation ("Borrower"), promises to pay to the order of METPRODUCTIONS,
INC. ("Lender") or its assigns, up to the principal sum of $2,487,424 in
accordance with the terms of the Loan Agreement between Borrower and
Lender of even date herewith (the "Loan Agreement"); together with
accrued interest on the unpaid principal balance from the date herewith
at the annual rate of Ten (10%) percent. All payments of principal and
interest shall be made at Lender s offices located at One Meadowlands
Plaza, East Rutherford, New Jersey 07073-2137, Attention: Accounting
Department, or at such other address provided to Borrower, in writing,
from time to time by the holder of this Note.
All capitalized terms used herein and not otherwise defined
shall have the meanings assigned thereto in the Loan Agreement.
If any Event of Default specified in the Loan Agreement shall
occur, then the holder of this Note can declare the entire unpaid
principal amount of this Note, together with interest accrued thereon, to
be immediately due and payable and such holder will have all of the
rights and remedies set forth in the Loan Agreement.
Borrower hereby waives presentment, demand for payment, notice
of default, dishonor or nonpayment, protest and notice of protest and all
other demands and notices in connection with the delivery, acceptance,
performance or enforcement of this Note.
This Note shall be governed by and construed in accordance with
the laws of the State of New York, without reference to the conflict of
laws principles thereof.
IN WITNESS WHEREOF, Borrower has executed and delivered this
Note as of the 28th day of June, 1995.
ATTEST: ORION PICTURES CORPORATION
By:
Secretary Leonard White, President
<PAGE>
EXHIBIT C
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") is made and
entered into as of June 16, 1995 between Orion Pictures Corporation, a
Delaware corporation, (the "Debtor") with offices located at 1888 Century
Park East, Los Angeles, California 90067 and METPRODUCTIONS, INC., a
Delaware corporation and its successors, assigns and affiliates (the
"Secured Party") with offices of c/o Metromedia Company, One Meadowlands
Plaza, East Rutherford, New Jersey 07073.
R E C I T A L S:
WHEREAS, pursuant to that certain Production Agreement dated as
of April 15, 1995 between Debtor and Hammertime Productions, Inc. (such
agreement as it may be amended, modified, supplemented, replaced, renewed
or superseded from time to time, is herein referred to as the "Production
Agreement"), Debtor acquired the right, title and interest to that
certain literary work now entitled "War Zone" (the "Work") including, but
not limited to, any motion picture (the "Picture") which may be based on
the Work, all properties, things of value, accounts, general intangibles,
documents, instruments and chattel paper related to the Work or the
exploitation thereof. Capitalized terms used herein and not otherwise
defined shall have the meanings assigned thereto in the Loan Agreement
and the Production Agreement.
WHEREAS, Debtor and Big Bear Licensing Corporation, Inc. ("Big
Bear") have entered into a Purchase Agreement dated as of October 10,
1994 (the "Foreign Distribution Agreement") pursuant to which Debtor
agreed to grant and assign to Big Bear exclusive distribution rights with
respect to the Picture in all media and languages with the exception of
the United States and Canada, their respective territories and
possessions, as more fully described in the Foreign Distribution
Agreement.
WHEREAS, pursuant to the Production Agreement, the production
budget of the Picture is $3,987,424 (the "Budget");
WHEREAS, Big Bear agreed to pay into the production bank
account for the Picture $1,500,000 in accordance with the terms of the
Foreign Distribution Agreement.
WHEREAS, pursuant to a Security Agreement dated as of October
10, 1994 between Debtor and Big Bear, Debtor agreed to grant to Big Bear
a security interest (the "Big Bear Security Interest") in the foreign
distribution rights relating to the Picture.
<PAGE>
Page C-2
WHEREAS, the Debtor and Secured Party have entered into that
certain Loan Agreement of even date herewith (the "Loan Agreement").
Pursuant to the Loan Agreement, Secured Party has agreed to loan (the
"Loan") to Debtor the sum of up to Two Million Four Hundred Eighty-Seven
Thousand Four Hundred Twenty-Four Dollars ($2,487,424) to fund the
portion of the pre-production and production expenses relating to the
Work equivalent to the difference between the Budget and the Big Bear
payment.
In consideration of the promises and mutual covenants herein
contained and for other good and valuable consideration the receipt of
which is hereby acknowledged, and in order to induce the Secured Party to
enter into the Loan Agreement, the parties hereto hereby agree as
follows:
1. GRANT OF SECURITY INTEREST.
(a) GRANT. Debtor hereby mortgages, hypothecates, grants
and assigns to Secured Party as security for the Secured Obligations and
Rights (as such term is defined in subparagraph 1(b) below) a continuing
first priority lien on and security interest in and to all of Debtor's
right, title, and interest of every kind and nature in and to (but none
of Debtor's obligations with respect to) all of the items listed in
subparagraph 1(c) below, which items are hereinafter collectively
referred to as the "Collateral".
(b) PURPOSE OF GRANT. The security interest in the
Collateral granted to the Secured Party pursuant hereto and pursuant to
the Copyright Mortgages and Assignments is being granted to secure the
Secured Obligations and Rights. The term "Secured Obligations and
Rights" shall mean and include (i) the full and timely payment and
performance by Debtor when due of all of Debtor's agreements,
representations, warranties and covenants, hereunder and under the Loan
Agreement (collectively, the "Debtor Obligations"), and (ii) the
continuing right of the Secured Party in accordance with all of the terms
of the Loan Agreement to exercise all of the rights of the Secured Party
under the Loan Agreement (collectively, the "Secured Party's Rights")
including, without limitation, the rights of the Secured Party to
(a) cause the production of and exploitation of the Picture, (b) recoup
all sums paid, advanced or guaranteed by Debtor in connection with
financing production of the Picture, including without limitation, the
provision of up to Two Million Four Hundred Eighty-Seven Thousand Four
Hundred Twenty-Four Dollars ($2,487,424), all to the extent provided in
the Production Agreement, (c) receive, retain and own all Gross Receipts
or other sums derived from or in connection
<PAGE>
Page C-3
with the exploitation of the Picture or the Work, subject to the terms and
conditions of the Production Agreement and any other production-related
agreement, e. g. the director's agreement, (d) exercise the Secured Party's
right of access to and use of all Physical Properties (as herein defined),
and (e) enjoy the full exercise and quiet enjoyment of all rights in
connection with the Picture provided for in the Distribution Agreement.
(c) COLLATERAL. The term "Collateral", as used herein
shall mean all of Debtor's right, title and interest of every kind and
nature whether now owned or in existence or hereafter made, acquired or
created and all product and proceeds thereof under the Production
Agreement and the security agreement executed in connection therewith
including all rights in the Work, the Picture and in all collateral with
respect to the foregoing except those distribution rights in the Picture
assigned to Big Bear pursuant to the Foreign Distribution Agreement and
subject to the rights of LHO as set forth in the InterCreditor Agreement
attached hereto as Exhibit B in and to the following items:
(i) All proceeds and product of the rights granted
to Debtor under the Production Agreement, including without
limitation, all accounts, contract rights, chattel paper, documents,
general intangibles and instruments (as defined under the Uniform
Commercial Code of the States of California and New York) and all
money and claims for money (whether or not such claims to money have
been earned by performance) derived from or arising out of such
rights;
(ii) All of Debtor's rights to receive any sums of
money under or in connection with the Production Agreement;
(iii) All physical properties of every kind or nature
of or relating to the distribution of the Picture and all versions
thereof, including, without limitation, exposed film, developed
film, positives, negatives, prints, answer prints, special effects,
preprint materials (including interpositives, negatives, duplicate
negatives, internegatives, color reversals, intermediates,
lavenders, fine grain master prints or other copies or additional
preprint elements, whether now known or hereafter devised)
soundtracks, recordings, audio and video tapes and discs of all
types and gauges, cutouts, trims and any and all other physical
properties of every kind and nature relating to the Picture in
whatever state of completion, and all
<PAGE>
Page C-4
duplicates, drafts, versions, variations and copies of each thereof
(all of the foregoing herein collectively referred to as the
"Physical Property");
(iv) All insurance and insurance policies heretofore
or hereafter obtained in connection with the Work, the Picture or
the insurable properties thereof and/or any person or persons
engaged in the development, distribution, delivery or exploitation
of the Picture, the Work and the proceeds of all of the foregoing;
(v) All rights to release, sell, distribute, lease,
market, license, exhibit, broadcast, reproduce, or otherwise exploit
the Picture, the Work and any and all rights therein, without
limitation, to the extent of Orion's right and interest in any
manner and in any media as provided in the Production Agreement and
the Foreign Distribution Agreement;
(vi) All rights, title and interest in and to the
agreements referred to in the preamble, and all other agreements
licensing, granting or selling rights to distribute, broadcast,
exhibit or otherwise exploit the Work, the Picture or rights
therein, and the proceeds of all of said agreements;
(vii) All rent, revenue, income, compensation,
products, increases, proceeds and profits or other property obtained
or to be obtained from the production, distribution, marketing,
licensing, exhibition, reproduction, publication, or other,
exploitation or uses of the Work or the Picture (or any rights
therein or part thereof), in any and all media, as provided in the
Production Agreement and any license or distribution agreement,
including without limitation, the properties thereof and of any
collateral, allied, ancillary and subsidiary rights therein and
thereto, and amounts recovered as damages by reason of unfair
competition, breach of any contract or infringement of any rights,
or derived therefrom in any manner whatsoever;
(viii) Any and all documents, receipts or books and
records, including, without limitation, documents or receipts of any
kind or nature issued by any pledgeholder, warehouseman or bailee
with respect to the Work, the Picture or any element thereof;
(ix) All proceeds, products, additions and accessions
(including insurance proceeds) of the
<PAGE>
Page C-5
Work or the Picture, as defined and referred to in subparagraphs (i)
through (viii) above;
(x) The following personal property, whether now
owned or hereafter acquired, and the proceeds thereof: (a) all of
Orion's rights, title and interest, in and to the Picture and the
exclusive use thereof including (without limitation) any and all
rights protected pursuant to trademark, service mark, unfair
competition and/or other laws, rules or principles of law or equity
and (b) all inventions, processes, formulae, licenses, patents,
patent rights, trademarks, trademark rights, service marks, service
mark rights, trade names, trade name rights, logos, indicia,
corporate and company names, business source or business identifiers
and renewals and extensions thereof, domestic and foreign, relating
to the Picture, whether now owned or hereafter acquired, and the
accompanying goodwill and other like business property rights, and
the right (but not the obligation) to register claim under trademark
or patent and to renew and extend such trademarks or patents and the
right (but not the obligation) to sue in name(s) of MetProductions
or Orion (or both) for past, present or future infringement of
trademark or patent;
(xi) All cash and cash equivalents of Orion derived
from or relating to the Picture and all drafts, checks, certificates
of deposit, notes, bills of exchange and other writings relating to
the Picture which evidence a right to the payment of money, are not
themselves security agreements or leases and are of a type which is
in the ordinary course of business transferred by delivery with any
necessary endorsement or assignment whether owned or hereafter
acquired;
(xii) All of Orion's rights of any kind and nature in
and to the literary and/or dramatic material upon which , in whole
or in part, the Picture is based, or which has been used or included
in the Picture, including, without limitation, all scripts,
scenarios, screenplays, bibles, stories, treatments, novels,
outlines, books, titles, concepts, manuscripts or other properties
or materials of any kind or nature, in whatever state of completion
and all drafts, versions and variations thereof (all of the
foregoing herein collectively referred to as the "Literary
Property");
(xiii) All rights, if any, to perform, copy, record,
re-record, produce, reproduce and/or synchronize any or all music
and musical composition
<PAGE>
Page C-6
created for, used in or to be used in connection with the
Picture and all other rights of any kind and nature in
and to any and all of said music and musical compositions
created for or used in connection with the Picture, including,
without limitation, all copyrights therein as well as all other
rights, if any, to exploit such music including record, soundtrack
recording, and music publishing rights; and
(xiv) All of Orion's rights, if any, in and to (a) all
collateral, allied, ancillary and subsidiary right of any kind and
nature, without limitation, derived from, appurtenant to or related
to the Work, the Picture or the Literary Property and (b) all rights
to use, exploit any and all rights of any kind and nature arising
out of or connected with or inspired by the Work, the Picture or the
Literary Property, including, without limitation, all merchandising
rights arising out of or connected with or inspired by the Work, the
Picture or the Literary Property, the title or titles of the Work or
the Picture, the characters appearing in the Picture or said
Literary Property and/or the names or characteristics of said
characters, and including further, without limitation, any and all
commercial exploitation in connection with or related to the Picture
and/or the Literary Property.
To the extent that any materials and/or rights in and to the
Work, the Picture or any other Collateral are not yet in existence or are
not yet acquired, such materials and rights are (to the extent
applicable) hereby assigned and conveyed to MetProductions by way of
present assignment of future copyright.
(d) RIGHTS OF SECURED PARTY. With respect to the
security interests hereby granted to Secured Party and granted to the
Secured Party pursuant to the Copyright Mortgages and Assignments,
Secured Party and any of its successors or assignees shall at all times
be entitled to exercise in respect of the Collateral all of the rights,
remedies, powers and privileges available to a secured party under all
applicable laws, including without limitation, the United States
Copyright Act, the Uniform Commercial Code of the States of California
and New York in effect at the time which shall be applicable for the
purpose of establishing the relative rights of Secured Party and of
Debtor, and to those procedures to be followed thereunder in the event
this subparagraph l(d) shall become operative, including the right to
sell the Collateral or any portion thereof, and, in addition thereto, to
the rights and remedies provided for
<PAGE>
Page C-7
herein and under the Loan Agreement and to such other rights and remedies
as may be provided by law or in equity.
(e) EXERCISE OF RIGHTS. Secured Party shall not exercise
any of its rights hereunder in any manner that would interfere with the
production, completion, delivery or exploitation of the Picture (so long
as the exploitation of the Picture does not violate the Secured Party's
rights). Subject to the immediately preceding sentence, Secured Party or
any of its successors or assignees shall be entitled to exercise any or
all of the rights granted hereunder with respect to the Collateral in the
event Debtor (or any person or entity acting on Debtor's behalf or in its
place and stead) (i) rejects or attempts to reject or wrongfully
terminates or wrongfully disaffirm the Production Agreement, the Loan
Agreement or this Security Agreement or (ii) breaches or defaults, in any
respect that would substantially prevent, hinder, impair, infringe or
delay Secured Party's enjoyment of the Secured Party's Rights, in the
payment or performance of any of the Secured Obligations and Rights and
fails to remedy such breach or default within 30 days after receipt of
written notice thereof from Secured Party if such breach or default is
capable of being cured within such time period. If the Debtor shall
breach any of its material obligations under the Loan Agreement, the
Distribution Agreement or this Security Agreement, the Secured Party,
after giving notice of its intention to do so, may take any reasonable
action which it may deem necessary for the maintenance, preservation, and
protection of any of the Collateral or its security interest therein.
(f) FURTHER DOCUMENTS. Debtor hereby agrees to execute
and deliver to Secured Party all such financing statements or similar
documentation for all jurisdictions designated by Secured Party
(collectively,the "Financing Statements"), one or more Copyright
Mortgages and Assignments in form and substance reasonably satisfactory
to Secured Party, and such other documents, agreements or instruments as
Secured Party shall reasonably request and are reasonably required to
better perfect, protect, evidence, renew and/or continue the security
interest in the Collateral granted hereunder and/or to effectuate the
purposes and intents of this Security Agreement (collectively, the
"Security Documents"), to file, register and/or record the same under (i)
the Uniform Commercial Code, and all other similar applicable laws of the
States of California and New York and under the laws of any other
jurisdiction where such filing, registration and/or recordation may
reasonably be required by Secured Party, and (ii) the United States
Copyright Act. If after the occurrence and during the continuance of any
of the events specified in the second sentence of subparagraph 1(e)
<PAGE>
Page C-8
hereof Debtor fails to execute and deliver to Secured Party any of the
Financing Statements, the Copyright Mortgages and Assignments, or any
other Security Documents on request of Secured Party, Debtor hereby
appoints Secured Party its irrevocable attorney-in-fact to sign any such
document for Debtor, and agrees that such appointment constitutes a power
coupled with an interest and is irrevocable throughout the Term of the
Distribution Agreement, the Loan Agreement and this Security Agreement;
provided, however, that Secured Party shall be liable to Debtor and
Debtor's successors, licensees and assigns for any damages resulting from
inaccuracy or failure to conform to this Security Agreement in any
Financing Statement, Copyright Mortgage and Assignment or other Security
Document so signed by Secured Party as Debtor's attorney-in-fact. Debtor
hereby authorizes the Secured Party to file one or more financing or
continuation statements, and amendments thereto, relative to all or any
part of the Collateral without the signature of the Debtor where
permitted by law. A carbon, photographic or other reproduction of this
Security Agreement or any part thereof shall be sufficient as a financing
statement where permitted by law.
(g) TERM OF SECURITY INTEREST. The security interest
created hereunder and under the Copyright Mortgages and Assignments shall
commence as of the date of this Security Agreement and shall terminate
upon the expiration of the Term of Secured Party's rights under the Loan
Agreement, at which time Secured Party, on Debtor's request and without
further consideration, shall execute and deliver to Debtor termination
statements releasing and terminating the Financing Statements, the
Copyright Mortgages and Assignments, and the other Security Documents,
all without recourse upon or warranty by Secured Party and with filing
thereof at the sole cost and expense of Debtor.
(h) PRIORITY OF SECURITY INTEREST. The security interest
by Secured Party in and to the Collateral shall be a first priority
security interest.
(i) CONTINUING SECURITY INTEREST. This Security
Agreement shall create a continuing security interest in the Collateral
and shall (a) be binding upon the Debtor, its successors and assigns and
(b) inure to the benefit of the Secured Party and its successors,
transferees and assigns.
<PAGE>
Page C-9
2. DEBTOR'S WARRANTIES AND REPRESENTATIONS AND AGREEMENTS.
Debtor confirms, warrants and represents to Secured Party as follows,
which such confirmations, representations and warranties shall be deemed
to be continuing until the termination of the Secured Party's security
interest hereunder: (a) Debtor has the right to enter into this Security
Agreement and execute and deliver to Secured Party the Financing
Statements, the Copyright Mortgage and Assignment, and the other Security
Documents, and (b) Debtor has not and will not grant or permit to exist
on all or any portion of the Collateral any lien, security interest or
encumbrance (other than the security interest granted by Debtor to
Secured Party hereunder), which does or may in any way conflict or
interfere with or have priority over the security interest herein granted
by Debtor to Secured Party; provided, however, that in no event may
Debtor grant or permit to exist on all or any portion of the Collateral
any lien, encumbrance or security interest senior to Secured Party (it
being understood expressly that Debtor may permit a lien on the
Collateral so long as such lien is subordinate to Secured Party's first
priority lien), and (c) no agreements, understandings or other
arrangements have been or will be made or entered into by Debtor which do
or may in any way conflict or interfere with the full, complete and
unfettered exercise by Secured Party of the Secured Party's Rights or any
other rights granted by Debtor to Secured Party in this Security
Agreement or any of the other Security Documents or in the Loan
Agreement. Debtor will not sell, offer to sell, hypothecate or otherwise
dispose of any Collateral (including proceeds) subject hereto, or any
part thereof or interest therein, except subject to the security interest
granted to Secured Party hereunder.
3. EVENTS OF DEFAULT. The occurrence of any one or more of
the following events shall constitute a "Default" hereunder.
(a) failure of Debtor to perform its obligations under
the Loan Agreement;
(b) any material default by Debtor under the Loan
Agreement or the Production Agreement;
(c) any person shall levy on, seize, or attach the
Collateral;
(d) any person, including without limitation, Debtor
interferes with Secured Party's quiet enjoyment of Secured Party's rights
as a secured party hereunder;
(e) bankruptcy of the Debtor.
<PAGE>
Page C-10
4. GOVERNING LAW. This Security Agreement and the other
Security Documents shall be governed by the laws of the State of New York
applicable to agreements wholly executed and performed therein, and
without giving effect to the principles of conflict or choice of laws
thereof.
5. ANY LEGAL ACTION. All of the parties hereto (a) agree
that any legal suit, action or proceeding arising out of or relating to
this Security Agreement may be instituted in a State or Federal court in
the City of New York, State of New York, (b) waive any objection which
they may have now or hereafter to the County of New York as the venue of
any such suit, action or proceeding, and (c) irrevocably submit to the
non-exclusive jurisdiction of the United States District Court for the
Southern District of New York, or any court of the State of New York
located in the City of New York in any such suit, action or proceeding
and any summons, order to show cause, writ, judgment, decree, or other
process with respect to any such suit, action or proceeding may be
delivered to Debtor personally outside the State of New York, and when so
delivered, Debtor shall be subject to the jurisdiction of such court, and
amenable to the process so delivered as though the same had been served
within the State of New York, but outside the county in which such suit,
action or proceeding is pending.
6. NOTICES. All notices or other documents which any party
shall be required or shall desire to give to the other hereunder shall be
given in the manner provided for in the Loan Agreement.
7. AMENDMENTS AND WAIVERS. No amendment or waiver of any
provision of this Security Agreement nor consent to any departure by the
Debtor herefrom shall in any event be effective unless the same shall be
in writing and signed by the Secured Party, and then such waiver or
consent shall be effective only in the specific instance and for the
specific purpose for which given.
<PAGE>
Page C-11
By signing in the spaces provided below, the parties hereto
have agreed to all of the terms and conditions of this Security
Agreement.
DEBTOR:
ORION PICTURES CORPORATION
BY:__________________________________
Leonard White, President
SECURED PARTY:
MetProductions, Inc.
By:__________________________________
Arnold L. Wadler,
Senior Vice President
<PAGE>
STATE OF CALIFORNIA )
).SS:
COUNTY OF LOS ANGELES )
On June __ , 1995, before me, ________________, personally
appeared __________________________, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized
capacity(ies), and that by his/her/their signature(s) on the instrument
the person(s), or the entity upon behalf of which the person(s) acted,
executed the instrument.
WITNESS my hand and official seal.
Signature _____________________________ (Seal)
EXHIBIT 11
ORION PICTURES CORPORATION
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(in thousands, except per-share amounts)
- ----------------------------------------------------------------------------
Three Months Ended May 31,
- ----------------------------------------------------------------------------
1995 1994
- ----------------------------------------------------------------------------
Net loss $ (9,761) $ (12,104)
========== ==========
Weighted average number of shares outstanding 20,000 20,000
======= =======
Loss per common share $ (0.49) $ (0.61)
========== ==========
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1996
<PERIOD-END> MAY-31-1995
<CASH> 14,188
<SECURITIES> 0
<RECEIVABLES> 69,630
<ALLOWANCES> 13,600
<INVENTORY> 223,975
<CURRENT-ASSETS> 0
<PP&E> 2,334
<DEPRECIATION> 142
<TOTAL-ASSETS> 323,284
<CURRENT-LIABILITIES> 0
<BONDS> 198,150
<COMMON> 5,000
0
0
<OTHER-SE> (23,228)
<TOTAL-LIABILITY-AND-EQUITY> 323,284
<SALES> 42,232
<TOTAL-REVENUES> 42,232
<CGS> 38,901
<TOTAL-COSTS> 44,866
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,927
<INCOME-PRETAX> (9,561)
<INCOME-TAX> 200
<INCOME-CONTINUING> (9,761)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,761)
<EPS-PRIMARY> (0.49)
<EPS-DILUTED> (0.49)
</TABLE>
