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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest event reported) March 16, 1995
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THE TODD-AO CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 0-1461 13-1679856
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
172 Golden Gate Avenue, San Francisco, California 94102
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 928-3200
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Not Applicable
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(Former name or former address, if changed from last report)
Exhibit index located on page 2
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THE TODD-AO CORPORATION
FORM 8-K
MARCH 16, 1995
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TABLE OF CONTENTS
Item 2. ACQUISITION OR DISPOSITION OF ASSETS. Page 2
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS.
a. Financial Statements of business acquired:
Item 7 (a) has been omitted due to the
impracticality of filing the required
audited financial statements at the
time of filing this report on Form 8-K.
Item 7 (a) will be filed on Form 8 within
60 days after the required filing date of
this report.
b. Pro forma condensed financial information:
Item 7 (b) has been omitted due to the
impracticality of filing the required pro
forma information at the time of filing
this report on Form 8-K. Item 7 (b) will
be filed on Form 8 within 60 days after
the required filing date of this report.
c. Exhibit Index Page 2
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Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On March 16, 1995, a wholly owned subsidiary of the Company ("Buyer")
acquired all of the outstanding shares of Chrysalis Television Facilities
Limited ("CTV") from Chrysalis Holdings Limited ("Seller"). Buyer, CTV and
Seller are all corporations organized under the laws of the United Kingdom and
headquartered in London. The transaction has been accounted for as a purchase
and the acquisition price was equal to the sum of: (i) L1,225,000 (paid at
closing); (ii) an amount equal to CTV's net asset value as at February 28, 1995
less L150,000 (expected to be approximately L850,000) payable L300,000 on each
of the first and second anniversaries and L250,000 on the third anniversary of
the completion date (February 28, 1995), with interest on the unpaid balance at
the National Westminster Bank base rate plus 1 1/2%. Any difference between
CTV's net asset value (less L150,000) and L850,000 will be settled after the
closing when the net asset value is determined. Concurrently with the
acquisition, Buyer advanced and paid on behalf of CTV its intercompany debt in
the amount of L2,856,672.09.
The funds paid at closing were provided by the Company's institutional
lender. On March 16, 1995, the exchange rate for the pound sterling was
US $1.5885. The obligations of the Buyer have been guaranteed by the Company.
CTV specializes in the collation of television programming for satellite
broadcast in Europe and also provides post production video and other services
to a variety of clients. It is anticipated that CTV will be renamed
"Chrysalis/Todd-AO Europe Limited."
Item 7. FINANCIAL STATEMENTS, PRO FORMA INFORMATION AND EXHIBITS
c. The following exhibits are filed with this Current Report on Form 8-K:
Exhibit No. Exhibit
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1 Agreement for the acquisition of the entire issued share
capital of Chrysalis Television Facilities Ltd. dated as of
March 16, 1995 between FCB 1120 Limited and Chrysalis
Holdings Limited.
2 Tax deed dated as of March 16, 1995 between FCB 1120 Limited
and Chrysalis Holdings Limited.
3 Performance guarantee dated March 16, 1995 between The Todd-
AO Corporation and Chrysalis Holdings Ltd.
4 First amendment to credit agreement dated as of March 13,
1995 between The Todd-AO Corporation and Bank of America
National Trust and Savings Association which amends credit
agreement dated as of December 2, 1994.
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SIGNATURE
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
THE TODD-AO CORPORATION
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(Registrant)
/s/ Silas R. Cross
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Silas R. Cross
Vice President/Treasurer
March 31, 1995
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Date
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EXHIBIT 1
DATED 16 March 1995
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CONFORMED COPY
(1) FCB 1120 LIMITED
(2) CHRYSALIS HOLDINGS LIMITED
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AGREEMENT FOR THE ACQUISITION
OF THE ENTIRE ISSUED SHARE CAPITAL OF
CHRYSALIS TELEVISION FACILITIES LIMITED
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FRERE CHOLMELEY BISCHOFF
4 John Carpenter Street
London EC4Y 0NH
Tel: 071-615 8000
Ref: SJH/APH
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INDEX
1. INTERPRETATION 1
2. AGREEMENT FOR SALE 9
3. CONSIDERATION 9
4. COMPLETION ACCOUNTS 10
5. COMPLETION 12
6. SELLER'S OBLIGATIONS ON COMPLETION 12
7. BUYER'S OBLIGATIONS ON AND AFTER COMPLETION 14
8. WARRANTIES 17
9. PROTECTION OF THE INTERESTS OF THE BUYER 19
10. PENSIONS 22
11. FACILITIES USE 22
12. GUARANTEES 25
13. GROUP RELIEF AND TAX COMPUTATIONS 26
14. FURTHER ASSURANCE 27
15. ASSIGNMENT 27
16. ANNOUNCEMENTS 28
17. COSTS 28
18. NOTICES 28
19. CUMULATIVE RIGHTS 30
20. WAIVER 30
21. COUNTERPARTS 30
22. LAW 31
SCHEDULE 1 33
The Company
SCHEDULE 2 34
Accounting Policies
SCHEDULE 3 37
The Property
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SCHEDULE 4 39
Warranties
SCHEDULE 5 59
Seller's Protection Schedule
SCHEDULE 6 68
Services
SCHEDULE 7 69
Pensions
SCHEDULE 8 78
Disclaimed Capital Allowances
Documents in the agreed form:-
Certificate of Title
Deed of Covenant
Disclosure Letter
Guarantee
Powers of Attorney
Resignations of directors/secretary
Resignation of KPMG
Waiver of pre-emption rights
Release of the Shares by National Westminster Bank plc
Release of guarantee by National Westminster Bank plc
Completion board minutes
Completion EGM minutes
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THIS AGREEMENT is made on 16 March 1995
BETWEEN:-
(1) FCB 1120 LIMITED (registered number 3014792) whose registered office is at
4 John Carpenter Street, London EC4Y 0NH (the "Buyer"); and
(2) CHRYSALIS HOLDINGS LIMITED (registered number 00918616) whose registered
office is at The Chrysalis Building, Bramley Road, London W10 6SP (the
"Seller").
RECITALS:-
1. The Seller is the beneficial owner of the entire issued share capital of
Chrysalis Television Facilities Limited (the "Company"), a private company
limited by shares incorporated in England. Information about the Company
is contained in schedule 1.
2. The Seller wishes to sell and the Buyer wishes to buy all of the issued
shares in the capital of the Company on the terms of this Agreement.
NOW IT IS AGREED as follows:-
1. INTERPRETATION
1.1 In this Agreement, unless stated otherwise:-
"ACCOUNTS" means the audited balance sheet of the Company as
at the Accounts Date and the audited profit and
loss account of the Company for the financial year
ended on
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that date, together with all notes on and the
directors' report in relation to that balance
sheet and/or profit and loss account and the
detailed profit and loss account of the Company
attached to that balance sheet and profit loss
account;
"ACCOUNTS DATE" means 31 August 1994;
"ASSOCIATE" means a company of which the Seller, any holding
company of the Seller or any subsidiary of any
such holding company beneficially owns not less
than 50% of the issued share capital, not being a
subsidiary of any such holding company;
"BUSINESS DAY" means a day (other than a Saturday or a Sunday) on
which banks are open for business in the City of
London;
"BUYER'S ACCOUNTANTS" means Touche Ross of 1 Stonecutter Court,
Stonecutter Street, London EC4A 4TR;
"BUYER'S SOLICITORS" means Frere Cholmeley Bischoff of 4 John Carpenter
Street, London EC4Y 0NH;
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"CERTIFICATE OF TITLE" means the agreed form of certificate of title
relating to the Property given by Messrs Woodfords
to the Buyer, dated with the date of this
Agreement, together with the documents attached to
that certificate;
"COMPANY" has the meaning given in recital 1;
"COMPLETION" means completion of the sale and purchase of the
Shares;
"COMPLETION ACCOUNTS" means the balance sheet of the Company as at
28 February 1995 and the profit and loss account
for the period from 1 September 1994 to
28 February 1995, in each case using the format
adopted for the balance sheet or profit and loss
account (as the case may be) comprised within the
Accounts and drawn up in accordance with the
accounting bases and policies of the Company
specified in schedule 2;
"COMPLETION DATE" means the date of this Agreement;
"COVENANTS" means the covenants of the Seller contained in
clause 9.1;
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"DEED OF COVENANT" means the agreed form of deed of covenant against
taxation;
"DISCLOSURE LETTER" means the agreed form of letter making disclosure
against the Warranties from the Seller to the
Buyer dated with the date of this Agreement
including all documents attached to it and
referred to in it;
"EVENT" has the meaning given to it in the Deed of
Covenant;
"FINANCIAL YEAR" has the meaning given by s.223 Companies Act 1985
(as in effect on the date of this Agreement);
"GROUP RELIEF" has the meaning given by s.402 Taxes Act (as in
effect on the date of this Agreement);
"GUARANTEE" means the agreed form of guarantee to be given by
The Todd-AO Corporation to the Seller;
"HOLDING COMPANY" has the meaning given by s.736 Companies Act 1985
(as in effect on the date of this Agreement);
"INTELLECTUAL means (in any case wherever
PROPERTY RIGHTS" subsisting and whether registered or not) trade
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marks, service marks, registered designs, design
rights, patents, copyrights, neighbouring rights,
moral rights, renewal rights and reversionary
rights, rights similar or analogous to and
applications for any of the rights previously
listed, rights relating to confidential processes
or information or know-how, and trade and business
names;
"INTERCOMPANY DEBT" means the debt of L2,856,672.09 owed by the
Company to Chrysalis Group plc as at 13 March
1995;
"LEGISLATION" includes any statute, treaty and bye-law, any
Order in Council not made under an enactment, and
any other law, regulation or decree in each case
in force in any country or territory, including
any Treaty or any Community Instrument (as defined
in the European Communities Act 1972);
"NET ASSET VALUE" means the aggregate of the assets of the Company
less the aggregate of the liabilities of the
Company (including for the avoidance of doubt the
Intercompany Debt) as at close of business
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on 28 February 1995, to be determined in
accordance with clause 4;
"PROCEEDINGS" means any action or proceedings before a court or
tribunal or a statutory, governmental or
regulatory body (including an arbitration);
"PROPERTY" means the property at 13 Hawley Crescent and 29
Kentish Road, London NW1, details of which are
contained in part 1 of schedule 3;
"RELIEF" has the meaning given to it in the Deed of
Covenant;
"SELLER'S ACCOUNTANTS" means KPMG of 1 Puddle Dock, London EC4Y 3PD;
"SELLER'S GROUP" means each subsidiary and holding company of the
Seller, each subsidiary of any such holding
company and all associates of the Seller;
"SELLER'S SOLICITORS" means Harbottle & Lewis of Hanover House, 14
Hanover Square, London W1R 0BE;
"SHARES" means the 100,000 ordinary shares of L1 each and
the 1,500,000 redeemable ordinary shares of L1
each in the
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capital of the Company in issue on the date of
this Agreement;
"SUBSIDIARY" has the meaning given by s.736 Companies Act 1985
(as in effect on the date of this Agreement);
"TAXATION" has the meaning given by clause 1.2 of the Deed of
Covenant to "Taxation";
"TAXES ACT" means the Income and Corporation Taxes Act 1988;
"TAX GROUP" means of a group of companies as defined by Part X
Chapter IV Taxes Act for the purposes of group
relief;
"TCGA " means the Taxation of Chargeable Gains Act 1992;
"VATA" means the Value Added Tax Act 1994; and
"WARRANTIES" means the warranties and representations listed in
schedule 4 given and made by the Seller under
clause 8.
1.2 In this Agreement, unless the context requires otherwise, words denoting
the singular include the plural, and vice versa, words denoting any gender
include all genders, and a reference to:-
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(a) a person or people includes a reference to an individual, a body
corporate or unincorporated association wherever incorporated or
formed, the trustees of a trust, a government, a supra-national,
governmental, public, local or municipal authority and any other
entity which is given, or is recognised as having, legal personality
by the law of any applicable country or territory;
(b) a statute or a provision of a statute includes a reference to any
statutory instrument, order or regulation made under it and to that
statute or provision as from time to time amended, repealed, and/or
re-enacted, in any case whether before or after the date of this
Agreement, and any paragraph of schedule 4 relating to any breach,
compliance or non-compliance with any statute or provision of any
statute includes a reference to any previous statute or provision
which was repealed or re-enacted by that statute or provision if
applicable to the Company at the relevant time;
(c) a recital, clause or schedule or to the parties is a reference to a
recital, clause or schedule or to the parties of or to this Agreement;
(d) an agreement includes any form of binding arrangement, whether or not
in writing; and
(e) the "agreed form" of a document is to that document in terms agreed
before Completion by or on behalf of the Seller and the Buyer.
1.3 The headings to clauses and schedules shall not affect the construction of
this Agreement.
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1.4 The schedules form part of this Agreement.
1.5 Where any statement in this Agreement is qualified by the expression "so
far as the Seller is aware" or any similar expression, the Seller shall be
deemed to be aware of all matters which would have been revealed to it or
to any of its professional advisers as a result of due and careful enquiry
of all relevant people in connection with all relevant matters.
2. AGREEMENT FOR SALE
2.1 With effect from Completion the Seller as beneficial owner shall sell, and
the Buyer shall buy, the Shares.
2.2 The Shares shall be sold free from equities, charges, liens and
encumbrances and together with all rights attaching or accruing to them on
or at any time after Completion, including the right to receive dividends
and other distributions declared, paid or made by the Company on or after
the date of this Agreement (whether or not relating in whole or in part to
a period ending on or before the date of this Agreement).
3. CONSIDERATION
The consideration for the sale of the Shares shall be the payment by the
Buyer to the Seller of:-
(a) a sum equal to the Net Asset Value less L150,000; and
(b) the sum of L1,225,000;
payable in accordance with clause 4.4 and clause 7.
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4. COMPLETION ACCOUNTS
4.1 The Seller confirms that it has instructed the Seller's Accountants to
prepare the Completion Accounts and deliver them to the Buyer on or before
the date falling 60 days after the Completion Date, together with a
calculation of the Net Asset Value in the format set out in schedule 2.
4.2 Within 30 days of receiving the Completion Accounts and the calculation of
the Net Asset Value, the Buyer shall give notice to the Seller stating
whether or not it agrees with the calculation of the Net Asset Value. The
Buyer's notice shall include details of the reasons for any disagreement,
and any suggested adjustment. If the disagreement is not resolved within
10 days of the Buyer giving that notice, either the Seller or the Buyer may
within 15 days of the Buyer's notice being given refer the disagreement to
an independent firm of chartered accountants agreed between them. In
default of agreement within 5 days as to the identity of any firm of
chartered accountants to be appointed, either the Seller or the Buyer may
apply for the appointment of such a firm by the President for the time
being of the Institute of Chartered Accountants in England and Wales.
4.3 If within 30 days of receiving the Completion Accounts and the calculation
of the Net Asset Value the Buyer gives no notice under clause 4.2, the
calculation of the Net Asset Value shall be deemed to have been agreed by
the Buyer and shall be final and binding on the parties.
4.4 Within 10 business days of the Buyer's agreeing (or being deemed to agree)
the Net Asset Value or (as the case may be) of receipt by both the parties
of a determination made under clause 4.6:-
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(a) if the Net Asset Value is less than L1,000,000, the Seller shall pay
to the Buyer in cleared funds an amount equal to the shortfall (being
the difference between the amount of the Net Asset Value and
L1,000,000), together with interest to accrue from day to day on the
sum payable from the Completion Date to the date of such payment at
the rate of 1 1/2% over the National Westminster Bank plc base rate
from time to time; or
(b) if the Net Asset Value is greater than L1,000,000, the Buyer shall pay
to the Seller in cleared funds an amount equal to the excess, (being
the difference between the amount of the Net Asset Value and
L1,000,000) together with interest to accrue from day to day on the
sum payable from the Completion Date to the date of such payment at
the rate of 1 1/2% over the National Westminster Bank plc base rate
from time to time.
4.5 Each of the Seller and Buyer shall, and shall use all reasonable endeavours
to ensure that its accountants shall, promptly provide to the other or the
other's accountants (and to any independent firm of chartered accountants
appointed under clause 4.2) access upon reasonable notice during normal
working hours to any working papers, records, documents and information
within its possession or under its control and give all explanations and
assistance in each case reasonably requested for the purpose of preparing
or reviewing the Completion Accounts and the calculation of the Net Asset
Value.
4.6 Any firm of chartered accountants appointed under clause 4.2 shall be
instructed in writing to resolve the matters in dispute and provide a
written determination of the Net Asset Value to both parties
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within 28 days of being instructed. The determination of that firm, which
shall act as expert and not as arbitrator, shall be final and binding on
both parties. The instructions to be given to that firm shall require it
to hear submissions from each party within such time limit as it in its
sole discretion considers appropriate. The costs of that firm shall be
borne by the parties in such proportions as that firm in its sole
discretion determines to be appropriate, having regard to the relative
merits of the arguments of each of the parties or, if that firm makes no
such determination, in equal shares.
4.7 The level of materiality to be used by the Seller's Accountants and the
Buyer's Accountants for the purposes of the Completion Accounts and the
computation of the Net Asset Value shall be equal to L7,500.
5. COMPLETION
Completion shall take place at the offices of the Buyer's Solicitors
immediately after the execution of this Agreement.
6. SELLER'S OBLIGATIONS ON COMPLETION
6.1 On Completion, the Seller shall deliver the following to the Buyer's
Solicitors:-
(a) duly completed and executed stock transfer forms in respect of all the
Shares in favour of the Buyer and/or any person nominated by it;
(b) the share certificates relating to the Shares;
(c) the agreed form of power of attorney, duly executed by the Seller, to
enable the Buyer to
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exercise all rights in respect of the Shares with effect from
Completion;
(d) the Deed of Covenant duly executed by the Seller;
(e) the certificate of incorporation, the certificates of incorporation on
change of name, the common seal(s) and the statutory books of the
Company, duly written up to Completion;
(f) the documents relating to the Properties as listed in part 2 of
schedule 3;
(g) the agreed form of resignation under seal duly executed by each of the
directors (other than Graham Hall) and the secretary of the Company as
at the date of this Agreement;
(h) the agreed form of letter of resignation from KPMG;
(i) the agreed form of waiver under seal duly executed by the Seller and
Chrysalis Investments Ltd in respect of their respective pre-emption
rights under the articles of association of the Company;
(j) the agreed form of release given by National Westminster Bank plc
releasing the Shares from the charge given by the Seller to National
Westminster Bank plc dated 9 April 1981;
(k) the agreed form of release given by National Westminster Bank plc
releasing the Company from its obligations under a guarantee given by
it dated 8 May 1987; and
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(l) a copy of the minutes of a meeting of the directors of the Seller
approving this Agreement and the Deed of Covenant, and authorising
execution of each document by each person signing it, certified as a
true copy of or extract from the original minutes by the secretary of
the Seller.
6.2 The Seller shall ensure that on completion a meeting of the board of
directors of the Company and an extraordinary general meeting of the
Company are duly convened and held at which resolutions are passed in both
cases in the agreed form.
7. BUYER'S OBLIGATIONS ON AND AFTER COMPLETION
7.1 On Completion, the Buyer shall pay the sum of L1,225,000 to the Seller by
telegraphic transfer of that sum in sterling to the following account:-
Account No.: 07291523
Sort Code: 50-41-06
National Westminster Bank plc
P.O. Box 4UQ
30 North Audley Street
London W1A 4UQ.
7.2 On Completion,the Buyer shall deliver the following to
the Seller's Solicitors:-
(i) the Deed of Covenant duly executed by the Buyer; and
(ii) the Guarantee duly executed by The Todd-AO Corporation; and
(iii) a copy of the minutes of a meeting of the directors of the Buyer
approving this
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Agreement and the Deed of Covenant, and authorising execution of
each document by each person signing it on behalf of the Buyer,
certified as a true copy of or extract from the original minutes
by the secretary of the Buyer.
7.3 The Buyer shall make the following payments to the Seller, by telegraphic
transfer to the bank account referred to in clause 7.1 (or to any other
bank account of which it is notified at least 5 business days before that
payment is due to be made):-
(a) as to L300,000 on each of the first and second anniversaries of the
Completion Date; and
(b) as to L250,000 on the third anniversary of the Completion Date.
7.4 If any due date for payment under clause 7.3 is not a business day, payment
shall be made on the next business day. Interest shall accrue from day to
day on each payment to be made under clause 7.3 from the Completion Date
until the actual date of payment at a rate of 1 1/2% per annum above the
base rate of National Westminster Bank plc from time to time.
7.5 The Buyer may withhold from any sum payable to the Seller under clause 7.3,
and pay into any account opened by it in the names of the parties (referred
to below as the "Escrow Account"), the aggregate amount of any claims which
satisfy the requirements of the last sentence of this clause and which it
makes against the Seller, within any relevant time period specified by
paragraph 4.2 of schedule 5, in respect of a breach of the Warranties or
under the Deed of Covenant (those claims being referred to in clause 7.6 as
"Warranty Claims"). The parties acknowledge that
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any money standing from time to time to the credit of the Escrow Account
(that money being referred to in clause 7.6 as the "Escrow Amount", to
include all interest credited to the Escrow Account) will be held on trust
by them, with their respective entitlement to that money to be determined
only as and when any sum becomes payable from the Escrow Account in
accordance with clause 7.6. The requirements referred to above are that:-
(a) the amount of each claim, or of related claims, must be equal to or
greater than the sum of L5,000 and (together with the aggregate amount
of all previous such claims or related claims) must exceed the sum of
L50,000; and
(b) the Buyer provides to the Seller an opinion from a Queen's Counsel
practising at the London Bar confirming that the claim is one in
respect of which the Buyer is, at least on the balance of
probabilities, likely to succeed.
7.6 Whenever a Warranty Claim in respect of which the Buyer has withheld money
under clause 7.5 is settled (meaning for the purposes of this clause
withdrawn by the Buyer, deemed to be withdrawn by the Buyer pursuant to
paragraph 4.3 of schedule 5, settled by agreement between the Buyer and the
Seller or adjudicated upon by any English court), then:-
(a) so much of the Escrow Amount as does not exceed any sum agreed or
adjudicated to be payable to the Buyer shall immediately be paid to
the Buyer;
(b) so much of the Escrow Amount as exceeds the aggregate amount of all
Warranty Claims which are not at that time settled (if any) less any
sum
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then payable to the Buyer under clause 7.6(a) shall immediately be
paid to the Seller.
When any party becomes entitled under this clause 7.6 to all or any part of
the Escrow Amount, the Buyer and the Seller shall ensure payment of the
relevant sum pursuant to this clause 7.6 from the Escrow Account to the
relevant party. Each party hereby irrevocably appoints the other as that
party's attorney for the purposes of giving any instructions to the bank at
which the Escrow Account is held in order to release that sum from the
Escrow Account when money is due to be released under this clause 7.6. No
other payments shall be made from the Escrow Account.
7.7 The provisions of schedule 8 shall have effect in relation to capital
allowances.
7.8 The Buyer undertakes to use all reasonable endeavours to have the stock
transfer forms referred to in clause 6.1(a) stamped, and the Buyer
registered as the holder of the Shares, within 10 days of Completion.
8. WARRANTIES
8.1 The Seller represents and warrants to the Buyer as at the date of this
Agreement in the terms set out in schedule 4, subject to the matters
expressly disclosed in the Disclosure Letter.
8.2 Each of the Warranties is separate and independent, and no Warranty shall
be limited by reference to or inference from any other Warranty or any
other provision of this Agreement.
8.3 The Warranties and all other provisions of this Agreement shall remain in
full force and effect after Completion (except to the extent that any such
other
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provision sets out any obligation which has been fully performed at
Completion).
8.4 Subject to schedule 5, the rights and remedies of the Buyer in respect of
any breach of the Warranties or under the Deed of Covenant shall not be
affected by Completion or by any investigation made by it or on its behalf
into the affairs of the Company.
8.5 The Seller acknowledges that the Buyer is entering into this Agreement in
reliance on the Warranties and the Deed of Covenant, and the Buyer
acknowledges that it is not entering into this Agreement in reliance upon
any other representation, warranty or inducement (other than any such
representation, warranty or inducement which may have been made
fraudulently).
8.6 The Seller unconditionally and irrevocably waives any claim which it may
have in respect of any misrepresentation, inaccuracy or omission in or from
any information or advice supplied or given by any employees of the Company
in connection with the giving of the Warranties, the execution of the Deed
of Covenant and/or the preparation of the Disclosure Letter. The Buyer
hereby accepts that waiver as trustee for the Company and those employees,
provided that in exercising any right as trustee the Buyer may limit any
action which it takes to such action as it considers appropriate in its
sole discretion.
8.7 The provisions of schedule 5 shall apply inter alia to limit or exclude (as
the case may be) the liability of the Seller in respect of a breach of the
Warranties or under the Deed of Covenant.
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9. PROTECTION OF THE INTERESTS OF THE BUYER
9.1 Subject to clause 23.1, the Seller undertakes that it will not, and that it
will ensure that its subsidiaries do not, and will use all reasonable
endeavours to ensure that its associates do not, without the prior written
consent of the Buyer, that consent to be withheld only so far as may be
reasonably necessary to protect the legitimate interests of the Buyer,
alone or jointly with any person or as principal, agent, partner,
shareholder or consultant or in any other capacity of any kind and whether
directly or indirectly:-
(a) for a period of five years starting on the Completion Date be engaged,
interested or concerned in any business or concern which provides
satellite transmission services in any member state of the European
Community as at the date of this Agreement for reception in the same
or any other member state;
(b) for a period of three years starting on the Completion Date, be
engaged, interested or concerned in any business or concern which
provides in the United Kingdom any services provided by the Company
before Completion other than satellite transmission services.
For the purposes of this clause, satellite transmission services consist of
the transmission of programmes via an uplink at the Property, or via a
landline to a party which uplinks those programmes, in each case to a
satellite for subsequent re-transmission, whether with or without the
performance of any services listed in part 1 of schedule 6 but the
restriction in clause 9.1(a) shall not for the avoidance of doubt extend to
the
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performance of any such services if not accompanied by any such
transmission. Satellite transmission services shall exclude (a) satellite
transmission of a radio service and (b) any terrestrial transmission. The
other services carried out by the Company before Completion consist of
those services listed in schedule 6. The Seller's obligation to use its
reasonable endeavours with respect to its associates will be satisfied by
the Seller voting against any board resolution to approve capital
expenditure for the purposes of competing with the Company, but subject
always to the provisions of clauses 9.2 and 23.1. For the avoidance of
doubt, clause 9.1 shall apply in respect of members of the Seller's Group
from time to time, and shall apply to members of the Seller's Group only
while they are members of the Seller's Group.
9.2 Clause 9.1 shall not prohibit:-
(a) each of Chrysalis Television Mobiles Limited, Air Studios Lyndhurst
Limited and AIR-Edel Limited carrying on those activities carried on
by it as at Completion;
(b) any company in the Seller's Group operating any sound-only recording
studios; or
(c) any company in the Seller's Group providing to itself (but only to
itself) any services referred to in clause 9.1(a) and/or 9.1(b)
provided by the Company before Completion if it is more cost-effective
for that company to provide those services to itself (rather than for
the Company to do so in accordance with clause 11.3(b)) due to
technological advancement(s) whether before or after Completion.
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9.3 Having regard to all the circumstances, and in particular the fact that the
Seller has detailed confidential information relating to the Company, the
parties believe that in their opinion the Covenants are reasonable as to
subject matter, area (in view of the market for the Company's services) and
duration and are necessary for the protection of the Buyer.
9.4 Each of the Covenants shall be severable from and construed independently
of the others, and the enforceability of any Covenant shall not be affected
by the unenforceability for any reason of any of the others.
9.5 Clause 9.1 is without prejudice to any other obligations of the Seller
implied at law or in equity.
9.6 Subject to clause 23.1, the Seller shall, and shall ensure (if necessary)
that all other members of the Seller's Group shall, permit the Company to
use the name "Chrysalis" as part of its corporate name, and to use the
Chrysalis logo used by the Company before Completion, but only in respect
of the activities carried on by the Company before Completion and in both
cases for a period of two years following the Completion Date.
9.7 The Seller shall ensure that after Completion none of its officers or
employees, and none of the officers or employees of any person connected
with it, wilfully discloses or uses any confidential information relating
to the finances or the customers of the Company, save pursuant to a legal
obligation or as required by any regulation or rule of a stock exchange or
governmental or other regulatory authority and save in relation to
confidential information which subsequently becomes in the public domain.
If the Seller becomes aware of any breach of this clause, it
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<PAGE>
shall immediately notify the Buyer of the information concerned and the
person(s) to whom it has been disclosed or (as the case may be) the use to
which it has been put.
9.8 For a period of one year starting on the Completion Date, neither the
Seller nor the Buyer shall hire, solicit, employ or engage the services of
any person who is or was at any time during the twelve months before the
date of this Agreement a senior employee employed by the Company (in the
case of the restriction imposed on the Seller by this clause 9.10) or by
any other member of the Seller's Group (in the case of the restriction
imposed on the Buyer by this clause 9.10) (whether or not that person would
thereby commit a breach of his contract of employment). For the purpose of
this clause, an employee shall be deemed to be a senior employee if earning
a salary in excess of L20,000 per annum at the date of this Agreement.
10. PENSIONS
The provisions of schedule 7 shall apply with effect from Completion.
11. FACILITIES USE
11.1 Subject to clauses 11.3 and 23.1, the Seller will ensure that members of
the Seller's Group place orders with the Company within the period of 4
years starting on the Completion Date (or such longer period as may be
necessary if the services to be provided by the Company are not available
when reasonably requested by the Seller or any member of the Seller's
Group) for services as specified in schedule 6 (including
materials/disbursements) or such other additional services as the Company
may agree from time to time
22
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having an aggregate price of not less than L1,000,000 plus VAT. The
reasonableness of any request made shall be determined by reference to the
availability of services as determined by reference to the Company's
standard booking practices. In the event that orders for services and
disbursements/materials having an aggregate price of not less than
L1,000,000 (plus VAT) are not placed, the Seller agrees to pay the Buyer
within five working days of the later of (a) the fourth anniversary of the
Completion Date whether or not the four year period referred to above is
extended (b) the date on which the Seller is notified by the Buyer or the
Company of the sum it is obliged to pay pursuant to clause 11.1 giving
details of purchase orders for services and materials/ disbursements placed
by members of the Seller's Group, dates and amounts of such purchase orders
and the dates of such purchase orders being carried out by the Company and
the dates and amounts of such purchase orders being rejected and (c) the
delivery to the Seller of a valid VAT invoice, the difference between the
aggregate value of the orders placed together with VAT and L1,000,000
together with VAT (the difference between those two sums being referred to
below as the "Shortfall"). Provided that the Shortfall is so paid, the
Buyer will ensure that orders having an aggregate price not exceeding the
Shortfall (inclusive of VAT) will be fulfilled by the Company free of
charge if placed within three years of the fourth anniversary of the
Completion Date, provided always that the timescale for the completion of
each such order is first agreed with the Company (that agreement not to be
unreasonably withheld or delayed). The Shortfall shall be reduced (but not
below zero):-
(a) in the event that any broadcaster or programming commissioner refuses
in writing to permit any member of the Seller's Group to use any
services
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<PAGE>
of the Company, by the aggregate value of orders for those services
supplied by a third party or third parties in respect of work
commissioned by such broadcaster or programming commissioner
(exclusive of VAT) during the remainder of the period covered by
clause 11.1 and to the extent that invoices in respect of those
services are provided to the Buyer;
(b) in the event that the Company ceases to provide any services referred
to in clause 9.1, by the aggregate value of orders for those services
and other related services required for the purpose of that order
supplied by a third party (exclusive of VAT) during the remainder of
the period covered by clause 11.1 and to the extent that invoices in
respect of those services are provided to the Buyer.
11.2 Subject to clauses 11.3 and 23.1, and in addition to its obligations under
clause 11.1, the Seller undertakes for the period of 4 years from
Completion to use all reasonable endeavours in good faith to ensure that it
(including all its television production divisions from time to time) and
each other member of the Seller's Group place orders with the Company for a
substantial part of the services required by it or each such member and
which are provided by the Company prior to Completion unless such services
are required to be provided outside London.
11.3 Notwithstanding clauses 11.1 and 11.2, the Seller shall be under no
obligation to place, or ensure or use reasonable endeavours to ensure that
any other member of the Seller's Group places, any specific order with the
Company unless the Company is able to provide the required service
competitively as to
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<PAGE>
price, speed and quality of customer services. For the purposes of this
clause "competitively" as to price shall mean:-
(a) where a proposed order requires services of broadcast quality, the
provision of services by the Company at a discount of 15% to the
Company's prices for those services as provided by its rate card,
which rate card price shall not be more than 5% above the average
prices for such services as contained in the then current rate cards
of the leading facilities houses in the industry, (being
Molinare/Visions Transmissions Limited, Teddington Studios Limited,
ITN, Carlton Studios Limited, Rushes Limited and TVI Limited at the
date of this Agreement). In the event of any disagreement between the
parties about whether the companies listed above are still the leading
facilities houses in the industry, the Buyer and the Seller will agree
a substituted list of such leading facilities houses (not exceeding 6
in number) for the purposes of this clause. In the event that the
Buyer and Seller cannot agree on such list of such leading facilities
houses either the Seller or the Buyer may refer the disagreement to
the Royal Television Society for adjudication. The Royal Television
Society shall be asked to resolve the disagreement and provide a list
of the 6 leading facilities houses in the industry; and
(b) in all other cases, the provision by the Company of services at the
same price (or a price more favourable to the relevant member of the
Seller's Group) as a third party proposal, notified to the Company, by
facsimile or courier, by the relevant member of the Seller's Group
wishing to place an order for the services with such third party,
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<PAGE>
within the reasonable timetable specified by the relevant member of
the Seller's Group. For the purposes of this clause 11.3.1(b) the
Seller shall ensure that any such third party proposal is first
offered to the Company in accordance with this clause before it is
accepted. For the purposes of this clause, competitiveness as to
speed and quality of customer service shall be assessed by reference
to speed and quality of customer service provided by the Company
before Completion.
11.4 The Company shall provide the Seller within 60 days of the end of each
successive period of six months (the first such period starting on the date
of this Agreement) with statements of orders offered and placed and the
dates and amounts of such purchase orders rejected and the balance of the
commitment of L1 million of orders referred to in clause 11.1 which remains
unfulfilled. Any statement so supplied to the Seller shall be addressed
for the attention of Mr. Nigel Butterfield unless the Company receives
written instructions to the contrary and shall be final and binding unless
the Seller notifies the Company that it disagrees with the statement within
90 days of receiving it.
11.5 The Seller will ensure that payroll services of the type provided to the
Company before Completion by any member of the Seller's Group are continued
to be provided (without charge to the Company or the Buyer) for a period
ending on the last day of the second calendar month after Completion.
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<PAGE>
12. GUARANTEES
The Buyer and the Seller shall use all their respective reasonable
endeavours to ensure that as soon as possible after Completion, the Seller
is released from all guarantees given by the Seller in respect of
obligations of the Company (other than obligations arising or relating to a
period of time before Completion if those obligations are not provided for
in the Completion Accounts). The reasonable endeavours of the Buyer
referred to in the previous sentence shall include offering itself and/or
(if not acceptable) The Todd-AO Corporation as guarantors of the relevant
obligations (except in the case of monies owing to the Bank of Scotland
plc). Pending release of any such guarantee, the Buyer shall indemnify the
Seller and keep the Seller indemnified against all liabilities under those
guarantees. For the purposes of this clause, the Buyer agrees to pay to
the Bank of Scotland plc within 7 days of Completion all monies owing to it
as at Completion by the Company, with the intention (inter alia) of the
Bank of Scotland plc giving a release of the guarantee of Chrysalis Group
plc and of the Company's debenture dated 3 May 1989, but save as provided
in this sentence, nothing in this clause shall oblige the Buyer to make any
payment to effect the release of the Seller from any guarantee given by it.
13. GROUP RELIEF AND TAX COMPUTATIONS
13.1 In respect of the accounting periods of the Company ended on 31st August
1992, 31st August 1993 and 31st August 1994, and in respect of the period
from 1st September 1994 to 28th February 1995 inclusive (the "Stub
Period"), but in the case of the Stub Period, only after the Company has
claimed all capital allowances which were available to it at that time,
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<PAGE>
the Seller shall ensure that the Seller and/or any other member or members
of its Tax Group shall surrender losses or any other eligible amounts by
way of group relief to the extent permitted by law to the Company for nil
consideration of an amount equal to the maximum amount which can be
utilised by the Company against its profits chargeable to corporation tax.
13.2 The Seller shall not, and shall procure that no other member of its Tax
Group shall, withdraw any surrender of group relief to the Company claimed
before the date of this Agreement or to be made under clause 13.1.
13.3 The Seller and the Buyer shall co-operate to secure the agreement of the
Inland Revenue to the accounts relating to the periods referred to in
clause 13.1 and shall take all necessary action to ensure that valid claims
and surrenders as required are made within the relevant statutory time
limits and agreed as soon as practicable.
13.4 The Seller undertakes that in finalising the tax computations of the
Company in respect of its accounting periods ended on 31st August 1992,
31st August 1993 and 31st August 1994, the Company shall not be required to
claim (or not disclaim to the extent previously claimed) capital allowances
if and to the extent that such claim or non-disclaimer would create a
deferred tax liability as at the date to which the Completion Accounts are
drawn up. For this purpose, "deferred tax liability" means any excess of
the aggregate net book value of plant and machinery and motor vehicles and
industrial buildings (excluding any finance lease assets) over and above
their tax written down value plus L197,900 in respect of gains held-over
and rolled-over.
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14. FURTHER ASSURANCE
The Seller shall after Completion at the Buyer's request and free of charge
make available, execute and do or cause to be made any other documents,
information, acts and things as the Buyer shall reasonably require in order
to vest in the Buyer legal title to and beneficial ownership of the Shares.
15. ASSIGNMENT
Neither party may assign its rights or obligations under this Agreement
without the prior written consent of the other, that consent not to be
unreasonably withheld or delayed in the case of a proposed assignment by
the Buyer of its rights to a subsidiary of The Todd-AO Corporation. The
terms of such assignment shall be on the basis that such rights will cease
to have effect if such assignee or subsequent assignee (as the case may be)
ceases to be a subsidiary of The Todd-AO Corporation unless those rights
are assigned to any other subsidiary of The Todd-AO Corporation, in which
circumstances this clause shall continue to apply.
16. ANNOUNCEMENTS
16.1 No announcement concerning the subject matter of this Agreement or
associated matters shall be made by a party without the prior written
consent of the other.
16.2 Notwithstanding clause 16.1, each of the parties may make any announcement
required by law or by any regulation or rule of any stock exchange or
governmental authority provided that (insofar as is practicable) it
consults with the other as soon as practicable and takes into account its
reasonable
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<PAGE>
requirements as to the timing, content and manner of making of that
announcement.
17. COSTS
Each party shall be responsible for the costs of its respective
professional advisers and agents in connection with the preparation,
negotiation, execution and completion of this Agreement.
18. NOTICES
18.1 Any notice (which for the purposes of this Agreement includes any request,
instruction, waiver, consent or other document) to be given under this
Agreement shall be in writing, and shall be delivered personally or by
courier, or sent by facsimile or pre-paid registered post (or airmail if
sent internationally), if to the Buyer addressed to Mr. Salah M.
Hassanein at The Todd-AO Corporation, 900 North Seward Street, Los Angeles,
California 90038, USA, facsimile number 0101 213 466 2327, with a copy to
the Buyer's Solicitors at 4 John Carpenter Street, London EC4Y 0NH (ref:
SJH) and if to the Seller addressed to Mr. Nigel Butterfield at the
Chrysalis Building, Bramley Road, London W10 6SP, facsimile number 0171 221
6155, with a copy to the Sellers' Solicitors at Hanover House, 14 Hanover
Square, London W1N 0BE (ref M. Derham) or otherwise to any other person,
address or facsimile number of whom or of which notice has been given in
accordance with this clause.
18.2 Subject to clause 18.5 any notice sent by post shall be deemed to have been
given 48 hours (72 hours if by airmail) after the envelope containing it
was so posted and proof that the envelope containing any such notice was
properly addressed and sent by prepaid registered post (or airmail as the
case may be) shall
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be sufficient evidence that such notice has been duly given.
18.3 Subject to clause 18.5 any notice sent by facsimile transmission shall be
deemed to have been duly sent on the date of transmission provided that a
confirming copy is sent by registered post within 6 hours after
transmission.
18.4 Subject to clause 18.5 any notice if delivered personally or by courier
shall be deemed to be served at the time when the same is left at the
address of the person to be served.
18.5 Any notice which is deemed to have been received on a day which is not a
business day shall be deemed to have been received on the next business
day.
19. CUMULATIVE RIGHTS
The rights of each of the parties under this Agreement are cumulative, and
do not exclude each other or any other rights. Accordingly, any failure to
exercise any right (in whole or part) in respect of any matter will not
prevent the exercise of any other right in respect of that matter, or a
subsequent exercise of the first right in respect of any other matter.
References in this Agreement to the rights of any party are to rights or
remedies of that party at law and/or in equity.
20. WAIVER
20.1 No act, course of conduct, failure to act, delay or acquiescence by a party
shall result in that party being taken to have waived or otherwise being
precluded (permanently or temporarily) from enforcing any right against any
other party, save for a notice
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to that effect given to that other party specifying this clause and the
right in question.
20.2 The parties shall comply with their respective obligations to make payments
on the dates on which payments are required to be made under this
Agreement.
21. COUNTERPARTS
This Agreement may be executed by the different parties using separate
documents in the same form.
22. LAW
This Agreement and the documents to be entered into under it shall be
governed by and construed in accordance with English law. Each of the
parties irrevocably submits to the exclusive jurisdiction of the English
courts in respect of any matter or dispute arising in connection with this
Agreement or any such document.
23. DEFAULT BY BUYER OR THE SELLER
23.1 The obligations of the Seller under clauses 9.1, 9.6, 11.1 and 11.2 shall
be suspended subject to the proviso below upon written notice from the
Seller to the Buyer (giving details of the default), if (a) the Buyer
defaults by failing to make the payment of the deferred consideration
pursuant to clause 4.4 and 7.3 and 7.4 (and for the purpose of this clause
23.1 a payment into the Escrow Account in accordance the provisions of
clause 7.5 shall not be deemed to be a failure to pay under clauses 4.4,
7.3 or 7.4) or the Buyer is in breach of its obligations to ensure payment
from the Escrow Account in accordance with clause 7.6 (other than by reason
of the Seller being in breach of its obligations to ensure payment under
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that clause) and (b) in either case if the Todd-AO Corporation does not
duly pay the relevant sum in accordance with the Guarantee. Provided that
such suspension will become effective 30 days after service of such written
notice by the Seller, unless during that period the Buyer or the Todd-AO
Corporation has remedied the default, and provided further that the
suspended obligations shall revive if the default is remedied within 12
months of the suspension becoming effective, subject always to clause 23.3.
23.2 Any obligations of the Seller suspended under clause 23.1 shall be released
and discharged in the event that the default in question has not been
remedied within 12 months of the suspension becoming effective.
23.3 In the event that obligations of the Seller are suspended for any period
and revive under clause 23.1, then the period during which the Seller is
obliged to ensure that sums are placed with the Company pursuant to clause
11.1 shall be extended by a period equal to the period of suspension, and
the Seller shall not be in breach of clause 9.1 after its obligations
revive by reason of the continuation after its obligations revive of any
activity commenced during the period of suspension.
ACCORDINGLY this Agreement has been entered into by each of the parties on the
date set out on page 1.
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SCHEDULE 1
THE COMPANY
1. Date of incorporation : 4th June 1970
2. Registered number : 981201
3. Directors : G.J. Hall, M.J. Pilsworth, C.N.
Spurgeon and C.N. Wright
4. Secretary : C.R. Potterell
5. Authorised share capital : 1,600,000 ordinary shares of L1
each
6. Issued share capital : 100,000 ordinary shares of L1 each
and 1,500,000 ordinary redeemable
shares of L1 each
7. Auditors : KPMG of 1 Puddle Dock, London EC4V
3PD
8. Accounting reference date: 31 August
9. Registered office : London House 53-54 Haymarket,
London SW14 4RP
10. Shareholders : Chrysalis Holdings Limited (99,999
ordinary shares and 1,500,000
ordinary redeemable shares)
Chrysalis Investments Ltd (1
ordinary share)
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SCHEDULE 2
ACCOUNTING POLICIES
1. Subject to the specific matters set out below, the Completion Accounts
shall be prepared applying the accounting policies listed in Note 1 to the 1994
Accounts and otherwise in accordance with the Company's accounting policies,
principles, practices and methods as applied in the preparation of the 1994
Accounts and on a consistent basis.
GRAHAM HALL BONUS PROVISION
Provision should be made in the Completion Accounts for any bonus due to
Graham Hall under the terms of his employment agreement with Chrysalis Group Plc
dated 1st March 1990, including employee's national insurance on that bonus but
excluding any other bonus payable to Graham Hall by Chrysalis Group plc or the
Seller. This should be calculated on a pro rata basis for the period from 1
September 1994 to 28 February 1995.
PROVISION FOR CHRYSALIS GROUP SERVICES
Provision should be made in the Completion Accounts for any charges
relating to management and any other services provided by Chrysalis Group Plc to
the Company for the period from 1 September 1994 to 28 February 1995.
PROVISION FOR BAD AND DOUBTFUL DEBTS
Provision should be made for specific debts identified by a review of the
trade debtors at 28 February 1995.
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TAPE STOCK
A physical stock take should be undertaken at the premises of the Company
on 28 February 1995, at which representatives of the Buyer may be present.
INVESTMENTS
Fixed asset investments are to be valued at the lower of cost and market
value.
REPAIRS
No provision shall be made for any repairs required to be made to or by
reason of the condition of the Property or to any equipment at the Property or
failure to obtain any necessary consent, permissions or certificates required
for the Property or such equipment or in relation to any matter referred to in
the Unick report dated 26 February 1995 attached to the Disclosure Letter or in
relation to any works in the course of being carried out in relation to the
Property at the time of Completion.
TAXATION COMPUTATION
In calculating the taxation provision (if any) required for the six month
period to 28th February 1995 or the group relief surrender required for the Stub
Period under clause 13.1 of the Agreement, there shall be taken into account a
notional deduction of L150,000 representing a notional provision of L150,000 for
works to be carried out at the Property or matters referred to in the Unick
Report which would have been made but for the deduction of L150,000 from the
consideration referred to in clause 3(a) of the Agreement.
2. The certificate of the Net Asset Value shall take the following form,
without qualification:-
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To: FCB 1120 Limited
Chrysalis Holdings Limited
Dear Sirs,
We refer to the agreement (the "Agreement") between FCB 1120 Limited
(1) and Chrysalis Holdings Limited (2) dated [ ] providing for
the sale to FCB 1120 Limited of the entire issued share capital of
Chrysalis Television Facilities Limited.
Attached to this letter is a copy of the Completion Accounts (as
defined in the Agreement) drawn up, in our opinion, in accordance with
paragraph 1 of Schedule 2 of the Agreement.
On the basis of the Completion Accounts, the Net Asset Value (as
defined in the Agreement) is equal to the sum of [ ].
......................
for and on behalf of
KPMG
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SCHEDULE 3
THE PROPERTY
PART 1
The freehold property at 13 Hawley Crescent and 29 Kentish Road, London
NW1, registered under title number NGL 515197.
PART 2
--------------------------------------------------------------------------------
NO. DOCUMENT PARTIES/TITLE NO.
--------------------------------------------------------------------------------
1. Land Certificate Title No. NGL 515197
(Freehold)
2. Counterpart Lease dated 9 London County Council (1) and
October 1964 Vines Biocrin (Properties) Ltd
(2)
3. Lease dated 23 August 1983 Vines Biocrin (Properties) Ltd
(1) and Research Recordings
Ltd (2)
4. Land Certificate Title No. NGL468821
(Leasehold)
5. Counterpart Lease dated 25 London County Council (1) and
November 1964 London Co-Operative Society
Ltd (2)
6. Counterpart Lease dated 21 Research Recordings Ltd (1)
January 1986 Artistes Production Associates
Ltd (2) and Videosonics Ltd
(3)
7. Rent Review Memorandum Research Recordings Ltd (1)
dated 29 November 1994 Artistes Production Associates
Ltd (2) and Videosonics Ltd
(3)
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8. Licence for Alterations dated Vines Biocrin Properties Ltd
23 August 1983 (1) and Research Recordings
Ltd (2)
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<PAGE>
SCHEDULE 4
WARRANTIES
NET ASSET VALUE
1. The net asset value of the Company as at Completion is not less than
L850,000 (less any payment to be made under clause 4.4(a) or, as the case may
be, plus any payment to be made under clause 4.4(b) but excluding any interest
payable under either clause).
ACCOUNTS
2. The Accounts have been prepared in accordance with the historic cost
convention, comply with the requirements of all relevant statutes, all
applicable Statements of Standard Accounting Practice and Financial Reporting
Standards and with generally accepted accounting principles and practices.
3. Without limiting the previous paragraph, the Accounts give a true and fair
view of the state of affairs of the Company as at the Accounts Date and of the
profits and losses for the financial year ended on that date.
4. The Accounts apply bases and policies of accounting consistently with those
applied in the preparation of the audited balance sheet and profit and loss
account of the Company for the two consecutive financial years of the Company
ending immediately before the financial year which ended on the Accounts Date.
5. The accounting records of the Company comply with s.221 Companies Act 1985
(as in effect on the date of this Agreement).
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<PAGE>
TITLE
6. The Company has sole beneficial ownership of all the assets used by it in
its business free from any liens, mortgages, charges, encumbrances or other
third party rights, hire or hire purchase agreements, credit sale agreements,
agreements for payment on deferred terms or bills of sale and from any rights of
any person to call for any of them. All those assets are in the sole possession
or under the sole control of the Company.
BORROWINGS AND LIABILITIES
7. Complete and accurate details of the borrowings of the Company (whether
from banks or any other person) are set out in the Disclosure Letter, together
with details of all guarantees given by any member of the Seller's Group in
respect of all or any of those borrowings.
8. The Company has no loan capital, and has not factored any of its debts or
engaged in financing of a type which would not be required to be shown or
reflected in audited accounts.
9. There is no sum owed by the Company to any other member of the Seller's
Group except the Intercompany Debt and intercompany trading balances arising in
the ordinary course of business and as set out in the Disclosure Letter and none
of the terms on which any such debt is due to or from the Company has been
changed since the Accounts Date.
10. The Company is not actually or contingently liable for any obligation or
liability of any other person (whether by way of guarantee or indemnity, under a
comfort letter or in any other way whatsoever).
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LITIGATION
11. There has been no act or omission which will give rise to any proceedings
against the Company after Completion, including, without limitation, any breach
of any agreement by which the Company is bound or any breach of any applicable
legislation.
12. Without prejudice to the previous paragraph, there are no proceedings
involving the Company (whether as plaintiff or defendant or in any other
capacity) pending or (so far as the Seller is aware) threatened against it, or
against any of its directors or officers in connection with the Company or its
business, and the Seller is not aware of any fact or circumstance which might
give rise to any such proceedings.
13. The Company is not being prosecuted for any criminal offence.
14. There are no unfulfilled or unsatisfied judgments or court orders
outstanding against the Company.
COMPLIANCE
15. The Seller has no notice of any investigation or enquiry by, or order,
decree or judgment of, any court, governmental agency or regulatory body
outstanding against the Company, and the Seller is not aware that any such
investigation or enquiry is anticipated.
16. So far as the Seller is aware, neither the Company, nor any of its
directors, employees or agents in connection with the business of the Company,
has committed any criminal offence or any tort or any breach of the
requirements or conditions of any relevant statute, treaty, bye-law or other
obligation for which the Company could be liable.
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17. The Company needs no licences or consents for the carrying on of its
business.
18. The carrying on by the Company of its business does not use or infringe any
Intellectual Property Rights other than the logo referred to in clause 9.8 or
require the making of royalty or similar payments to any third party, and no
claim has been made by any person against the Company alleging infringement of
any Intellectual Property Right.
CONTRACTS
19. Complete and accurate copies of all subsisting written agreements to which
the Company is a party or by which it is bound (referred to in the next four
paragraphs as the "Contracts") are attached to the Disclosure Letter.
20. All the Contracts are valid and binding and enforceable in accordance with
their respective terms, and none of the Contracts is voidable or liable to be
rescinded at the instance of any party. Neither the Company nor (so far as the
Seller is aware) any other party to any Contract has breached any provisions of
or is in default under any Contract, and (so far as the Seller is aware) there
are no circumstances which might give rise to any such default.
21. The Seller has not received any written notice from any party to any
Contract requiring the Seller to remedy any breach of any such agreement.
22. The Seller is not aware that any party to any Contract wishes to terminate
or vary that Contract (whether in whole or in part) or will wish to do so as a
result of the purchase of the Shares by the Buyer.
23. The Company is not, and has not been in the three years ending on
Completion, a party to, any agreement with any member of the Seller's Group
(except as described in the
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Disclosure Letter), or any agreement which is not of an arm's length nature,
which was not entered into in the normal course of its business or which is
unusual or onerous.
BOOK DEBTS
24. All debts owing to the Company at the Completion Date will realise in the
ordinary course of collection their full face (less any provisions for bad and
doubtful debts contained in the Completion Accounts).
25. The Company has not factored or discounted its debts or agreed to do so.
INFORMATION
26. All information contained in the documents attached to the Disclosure
Letter is complete and accurate.
THE COMPANY
27. The Company is duly incorporated under the laws of England and Wales, and
has full corporate power and authority to carry on its business as it is now
being conducted.
28. The copy of the memorandum and articles of association of the Company
attached to the Disclosure Letter is complete and accurate, and each resolution
and agreement referred to in s.380 Companies Act 1985 is duly embodied in or
annexed to those articles.
29. The register of members and the other statutory books of the Company are
duly entered up.
30. All annual returns and all resolutions and other documents required to be
filed with or delivered to the
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registrar of companies in respect of the Company have been duly filed.
SOLVENCY
31. No order has been made, petition presented, resolution passed or meeting
convened for the winding up of the Company or for an administration order in
relation to the Company.
32. No distress, charging order, execution or other process has been levied or
applied for in respect of any of the assets of the Company.
33. The Company is not unable to pay its debts within the meaning of s.123 of
the Insolvency Act 1986.
34. No administrative receiver, receiver or receiver and manager has been
appointed by any person over any assets of the Company.
35. No composition in satisfaction of the debts of the Company, or scheme of
arrangement of its affairs, or compromise or arrangement between it and its
creditors and/or members or any class of its creditors and/or members, has been
proposed, sanctioned or approved.
36. None of the Shares has been the subject of a transfer at an undervalue
(within the meaning of s.238 or s.339 Insolvency Act 1986) within the period of
five years before the date of this Agreement.
SHARE CAPITAL
37. The Shares comprise the whole of the allotted and issued share capital of
the Company, and all of the Shares have been duly issued and are fully paid.
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38. There are no equities, charges, liens, encumbrances or options over or
affecting any of the Shares, there is no agreement to create or give any such
interest and, so far as the Seller is aware, no person has claimed to be
entitled to any such interest.
DUE EXECUTION
39. The Seller has full power and authority to enter into this Agreement and
the Deed of Covenant without the sanction or consent of any other person.
40. When executed, the Agreement and the Deed of Covenant will constitute valid
and binding obligations on the Seller in accordance with their respective terms.
41. The execution and delivery of this Agreement and the Deed of Covenant, and
the performance by the Seller of its obligations under this Agreement and the
Deed of Covenant, will not result in a breach of, or allow any other party to
terminate, any agreement or arrangement or of any order, judgment or decree of
any court or governmental agency by which the Seller is bound.
GRANTS
42. The Company has never received any investment or similar grant which is
liable to become repayable in whole or in part under any circumstances.
INVESTMENTS
43. The Company is not the holder or beneficial owner of, and has not agreed to
acquire, any share or loan capital of any other company (whether incorporated in
the United Kingdom or elsewhere) and does not have and has not had any company
falling to be treated as an associated company for the purposes of SSAP1.
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44. The Company does not have outside the United Kingdom any branch, agency or
place of business or any permanent establishment (as that expression is defined
in the relevant double taxation relief orders current at the date of this
agreement).
45. The Company is not a member of any partnership or unincorporated
association.
PLANT IN WORKING ORDER
46. Complete and accurate details of machinery and plant of the Company and all
vehicles and office equipment owned by it and the operating, servicing and
maintenance histories and records of such equipment have been provided to the
Buyer before the date of this Agreement.
47. All assets which are subject to the hire purchase agreements and finance
leases referred to in the Disclosure Letter are located at the Property.
48. The assets owned by the Company comprise all the assets necessary for the
continuation of the business of the Company in the manner carried on immediately
before Completion.
49. The plant and machinery of the Company is, so far as the Seller is aware,
in reasonable repair and condition, having regard to its age.
CHANGES SINCE THE ACCOUNTS DATE
50. Since the Accounts Date:-
50.0.1 the Company's business has been carried on in the ordinary and normal
course;
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50.0.2 there has been no material adverse change in the financial position or
business of the Company;
50.0.3 no dividend or other distribution has been declared, paid or made by
the Company;
50.0.4 the Company has not acquired or disposed of any asset or assumed or
incurred any liabilities (including contingent liabilities) or made
any payment not provided for in the Accounts otherwise than in the
ordinary course of business;
50.0.5 no change has been made in the rate of remuneration or any other of
the terms of engagement of any employee of the Company, and the
Company has given no notice of redundancy to any person;
50.0.6 the Company has not borrowed any money or incurred any capital
expenditure in excess of L5,000; and
50.0.7 no event has occurred which would entitle any party to call for the
repayment of indebtedness of the Company prior to the normal maturity
date.
51. Attached to the Disclosure Letter is a complete and accurate list of all
bank accounts of the Company, including details of debit and credit balances on
them as at 28 February 1995 since that date there has been no payment out of any
of the accounts except for payments in the ordinary course of business.
CHARGES
52. There are no mortgages or charges over any part of the assets or
undertaking of the Company, and all charges (if
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any) in favour of the Company have (if appropriate) been duly registered in
accordance with the provisions of s. 395 and s. 398 Companies Act 1985.
POWERS OF ATTORNEY
53. The Company has not given any power of attorney or any other authority
which is still outstanding or effective to enter into any agreement or do
anything on its behalf, other than an authority to employees to enter into
contracts in the normal course of their duties.
PROPERTIES
54. Other than the Property, the Company does not have, and has never had, any
interest in any real property (whether by way of a freehold or leasehold
interest) or in any other way.
55. The Certificate of Title is accurate in all respects.
EMPLOYEES
56. The Disclosure Letter contains a complete and accurate list of all
employees of the Company, together with accurate details of their ages,
salaries, length of employment and other benefits as at 28 February 1995.
57. There are no agreements or contracts between the Company and any of its
directors or employees, nor any consultancy agreements with the Company which
cannot be lawfully terminated by three months' notice or less, without giving
rise to any claim for damages or compensation (other than a statutory redundancy
payment or statutory compensation for unfair dismissal).
58. There are no amounts owing to any present or former directors or employees
of the Company other than
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remuneration accrued due or for reimbursement of business expenses.
59. There are no claims pending or (so far as the Seller is aware) threatened
against the Company by any present or former director or employee in relation to
his employment or office, and/or the cessation of his employment or office, with
the Company, and so far as the Seller is aware, there are no circumstances which
might give rise to any such claim.
60. In relation to each of its employees (and former employees), the Company
has complied with all obligations imposed on it by all applicable laws,
regulations, orders and awards.
61. No person provides services to the Company as a consultant.
62. No offers of employment made by the Company remain outstanding.
63. None of the employees is a member of a trade union recognised by the Seller
in relation to the business.
FINDER'S FEES
64. No person is entitled to receive from the Company any finder's fee or other
commission in connection with the purchase of the Shares by the Buyer.
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TAXATION
65. All taxation returns for periods up to the Accounts Date have been duly
made by the Company and all information required under the Taxes Management Act
1970 or any other taxation or excise enactment has been duly supplied by it. All
such returns, notices, computations and information given to the Inland Revenue
and any other relevant taxation or excise authorities are up to date, true, made
on a proper basis and accurate, and so far as the Seller is aware there are no
outstanding questions or disputes raised by the appropriate authority in
connection with such returns and information. The Company is not involved in
and the Seller, having made all due enquiries, has no reason to anticipate any
dispute with the Inland Revenue or other taxation or excise authority. No
accounting period of the Company for corporation tax purposes has ended since
the Accounts Date.
66. All taxation of any nature whatsoever or other sum imposed, charged,
assessed, levied or payable under the provisions of any taxation statutes for
which the Company is liable prior to the date of this Agreement insofar as such
taxation or other sums ought to be paid before that date has been paid and full
provision and reserves have been made in the Accounts for taxation liable to be
assessed on the Company in respect of periods ending on or prior to the Accounts
Date. The Company has duly complied with statutory requirements relating to the
deduction of taxation before payments are made whether of interest, covenanted
donations to charity or otherwise.
67. The Company has complied with all regulations made by the Board of Inland
Revenue for the purposes of P.A.Y.E. and by the Department of Social Security
for the purposes of national insurance contributions and in particular, without
prejudice to the generality of the foregoing:-
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(a) has deducted tax as required by law from all payments made or treated
as made to its employees or former employees;
(b) has accounted to the Inland Revenue for all tax so deducted and for
all tax chargeable on benefits provided for its employees or former
employees for which the Company is liable to account, and to the
Department of Social Security for all national insurance contributions
for which it is liable;
(c) has kept and used full, complete, correct and up-to-date records and
other documents as appropriate or required for such purposes; and
(d) has made in due time correct and proper returns to the Inland Revenue,
including forms P9D, P11D and P35 in respect of all relevant
employees.
68. There are no outstanding questions raised by the Inland Revenue or the
Department of Social Security in connection with the returns and other matters
referred to in the previous paragraph, and the Company is not involved in, and
the Seller having made all due enquiries has no reason to anticipate, any
dispute with the Inland Revenue or the Department of Social Security in
connection with those returns and other matters.
69. The Company has not within the past six years paid or become liable to pay
any penalty or interest charged by virtue of the provisions of the Taxes
Management Act 1970, VATA or otherwise.
70. The Company has not in the last six years been the subject of an
investigation or discovery by or involving H.M. Customs & Excise, or the Inland
Revenue Special Office or Enquiry Branch and, having made all due enquiries,
there
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are no facts known to the Seller which are likely to cause an investigation or
discovery to be made.
71. The Company is duly registered for value added tax purposes and has
complied in all respects with all statutory requirements, regulations, notices,
orders, provisions, directions or conditions made or imposed in respect of value
added tax, and has made and maintained full, complete, correct and up-to-date
records, invoices and other documents appropriate or requisite for the purposes
of that legislation. The Company has duly paid or provided for amounts of VAT
for which it is liable prior to Completion and is not in arrears with the
submission of returns under that legislation or liable to any abnormal or
non-routine payment or any forfeiture or penalty or liable to the operation of
any penal provision under any taxation or excise enactment, and has not been
required by the Commissioners of Customs and Excise to give security for payment
of VAT. The Company has not at any time been treated as a member of a group for
such purposes and no application for it to be so treated has at any time been
made, and no act or transaction has been effected as a consequence of which the
Company is or may be held liable for any value added tax chargeable against some
other company.
72. The Company does not own, and has never owned, any capital items within the
meaning of regulation 37B of the Value Added Tax (General) Regulations 1985.
73. The book value in or adopted for the purpose of the Accounts as the value
of each of the capital assets of the Company on the disposal of which a
chargeable gain or allowable loss could arise does not exceed the amount
deductible under s.38 TCGA.
74. No asset owned or agreed to be acquired by the Company (other than plant
and machinery in respect of which it is
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entitled to capital allowances) is a wasting asset within s.44 TCGA.
75. There have been no claims by the Company under ss.23, 152 to 154, or 247
TCGA, or any claim pursuant to s.175 TCGA, which would affect the amount of the
chargeable gain or allowable loss which would but for such claim arise on a
disposal of any of its assets.
76. The Company has not acquired the benefit of any debts the satisfaction of
which or any part of which after Completion would produce a chargeable gain
under s.251 TCGA.
77. The Company has not since the Accounts Date disposed of or acquired any
asset in circumstances such that the provisions of s.17 TCGA could apply to such
disposal or acquisition.
78. The Company has not at any time within the period of six years ending with
the date of this Agreement acquired any assets other than trading stock from any
company which at the time of the acquisition was a member of the same group (as
defined in s.170 TCGA).
79. The execution or completion of this Agreement will not result in any profit
or gain being deemed to accrue to the Company for taxation purposes pursuant to
s.179 TCGA.
80. No tax is payable by the Company pursuant to s.190 TCGA in respect of any
chargeable gain accrued prior to Completion, and the Company has not at any time
within the period of three years ending with the date of this Agreement
transferred any assets other than trading stock to any company which at the time
of disposal was a member of the same group (as defined in s.170 TCGA).
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81. Full particulars are set out in, or attached to, the Disclosure Letter of
all amounts surrendered or claimed by the Company or agreed to be surrendered or
claimed by the Company by way of group relief under the provisions of ss.402,
403, 407, 408, 409, 411, 412 and 413 Taxes Act or any amount of advance
corporation tax under the provisions of s.240 Taxes Act, and the Company has
never made, received or agreed to make or receive a payment for group relief
within the meaning of s.402(6) Taxes Act or in respect of the surrender of the
benefit of an amount of advance corporation tax within the meaning of s.240(8)
Taxes Act which may be liable to be refunded in whole or in part.
82. All claims by the Company for group relief were when made and are now valid
and have been allowed by way of relief from corporation tax.
83. No payments have become due to the Company under any arrangement or
agreement made by it for surrender of group relief.
84. The Disclosure Letter contains particulars of all elections made by the
Company under s.247 Taxes Act during the last six years, all such elections are
now in force and all dividends and other payments within the meaning of s.247(4)
Taxes Act have either been paid pursuant to those elections or advance
corporation tax and income tax respectively have been accounted for on them.
85. The Company is not and was not at any time during the period of six years
ended on the Accounts Date a close company as defined in s.414 Taxes Act or a
close investment - holding company as defined in s.13A Taxes Act.
86. The aggregate book value of each of the assets of the Company, on which an
entitlement to industrial building allowances or other allowances in respect of
capital expenditure has arisen under the Capital Allowances Act 1990
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(or any other legislation relating to capital allowances), in or adopted for the
purposes of the Accounts does not exceed the aggregate residue of expenditure or
written down value attributable to such assets for the purposes of that Act or
other such legislation, and the aggregate book value of plant and machinery
allocated to a pool of plant and machinery on which an entitlement to capital
allowances has arisen under Part II Capital Allowances Act 1990 does not exceed
the written down value of the qualifying expenditure in respect of each such
pool under that Act. No first year or other allowance has been claimed to which
the provisions of ss.22(4)(c) and 75 to 78 and Chapter V of the Capital
Allowances Act 1990 apply.
87. All capital allowances made or to be made to the Company in respect of
capital expenditure incurred before the date of this Agreement or to be incurred
under any subsisting commitment have been made or will be made in taxing the
Company's trade.
88. Since the Accounts Date the Company has not done or omitted to do or agreed
to do or permitted to be done any act as a result of which there may be made a
balancing charge under ss.4, 24, 87, 100, 128 or 138 Capital Allowances Act 1990
or there may be any recovery of excess relief within Chapter V Capital
Allowances Act 1990.
89. The Company has not at any time repaid, agreed to repay, redeemed,
purchased, agreed to redeem or agreed to purchase any shares of any class of its
issued share capital.
90. The Company has not at any time capitalised or agreed to capitalise in the
form of shares or debentures any profits or reserves of any class or
description, nor has it issued any share capital as paid up (otherwise than by
the receipt of new consideration as defined in s.254(1) Taxes
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Act) nor has it passed or agreed to pass any resolution to do so.
91. No securities or equity notes (within the meaning of s.254(1) and s.209(9)
respectively Taxes Act) issued by the Company and remaining in issue at the date
of this Agreement were issued in such circumstances that the interest payable on
them falls or has at any time fallen under s.209(2)(d) or s.209(2)(e) Taxes Act.
92. No rents, interest, annual payments or other sums of an income nature paid
or payable by the Company, or which the Company is under an obligation to pay in
the future, are or may be wholly or partially disallowable as deductions or
charges in computing profits or against profits for the purposes of corporation
tax by reason of the provisions of ss.74, 79, 79A, 125, 338, 339, 779 to 784 or
787 Taxes Act or otherwise.
93. The Company has not at any time issued any deep discount securities, deep
gain securities, qualifying corporate bonds or convertible securities within
Schedules 4 and 11 Taxes Act, s.117 TCGA and s.56 of and Schedule 10 to the
Finance Act 1990 respectively.
94. The Company is and has at all times been resident in the United Kingdom and
not elsewhere for taxation purposes.
95. The Company has not entered into any transaction or agreed to carry out any
transaction which is or would be unlawful under ss.765 to 767 Taxes Act.
96. No circumstances have occurred which could give rise to a liability on the
Company under s.191 TCGA (non-payment of tax by non-resident companies).
97. The Company is not liable to be assessed to income tax under s.78 Taxes
Management Act 1970 (method of charging
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non-residents) and has not in the last six years received any such assessment.
98. No transactions or arrangements involving the Company have taken place or
are in existence which are such that the provisions of s.770 Taxes Act have been
or could be applied to them, and the Company is not and has not been involved in
any other enquiry in any jurisdiction in relation to the adjustment of profits
of associated enterprises for taxation purposes.
99. The Company has not been a party to or otherwise involved in any
transaction, scheme or arrangement to which the provisions of s.139 TCGA and
ss.703 to 709 (inclusive) Taxes Act could apply, other than transactions in
respect of which all necessary clearances have been obtained on the basis of
full and accurate disclosure to the Inland Revenue and/or the Special
Commissioners of all material facts and considerations relating to those
transactions.
100. Any such consent or clearance referred to in the previous paragraph is
valid and effective and any transaction for which such consent or clearance has
previously been obtained has been carried into effect (if at all) only in
accordance with the terms of the relative application and consent or clearance.
101. The Company has not since the Accounts Date taken any action which has had
or might have the result of altering, prejudicing or in any way disturbing any
arrangement or agreement which it has previously negotiated with the Inland
Revenue or the Commissioners of Customs and Excise or other taxation
authorities.
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INSURANCE
102. The particulars of the insurance policies effected for the benefit of the
Company which are set out in the Disclosure Letter are complete and accurate.
103. The Disclosure Letter contains details of all and any claims over L1,000
made by or on behalf of the Company in the last 3 years prior to Completion
under any insurance policy effected for its benefit (whether in conjunction with
others or not).
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SCHEDULE 5
SELLER'S PROTECTION SCHEDULE
1. GENERAL
1.1 The provisions in this schedule shall operate to limit the liability of the
Seller under the Warranties and (save where otherwise specified) under the
covenants or indemnities given by the Seller contained in the Deed of
Covenant (the "Indemnities"). Expressions defined in the Deed of Covenant
shall, where the context so requires, have the same meanings in this
schedule. Clause 8 and the Warranties and the Deed of Covenant
respectively shall accordingly have effect subject to and as qualified by
the terms of this schedule.
1.2 No liability shall attach to the Seller in respect of a claim under this
Agreement based upon a liability which is contingent only, unless and until
such contingent liability becomes an actual liability and is due and
payable.
2. DE MINIMIS CLAIMS
No liability shall arise in respect of any claim or related claims for
breach of the Warranties, or in respect of any claim or related claims
under the Indemnities, unless the loss sustained in respect of such claims
or related claims is L5,000 or more and (together with the aggregate amount
of losses sustained arising from such previous claims or related claims, if
any, for breach of the Warranties or under the Indemnities) exceeds a total
sum of L50,000 (fifty thousand pounds). In the event that such total sum
is exceeded, the Seller shall (subject always to the
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provisions of this schedule) be liable for the whole amount and not just
the excess.
3. MAXIMUM CLAIMS
The aggregate liability of the Seller in respect of all claims for breach
of the Warranties and for indemnity pursuant to the Indemnities made upon
the Seller shall not exceed the amount of the consideration payable for the
Shares by the Buyer, as adjusted under clause 4.4, together with the sum of
L2,856,672.09.
4. TIME LIMITS
4.1 Notice in writing of any claim or potential claim against the Seller in
respect of any breach of the Warranties or the Indemnities, specifying in
reasonable detail the nature of the claim and (in the case of an actual
claim) the amount claimed so far as practicable or, if not practicable,
confirming that the Buyer believes the amount so claimed is likely to
exceed L5,000, shall be given as soon as practicable after the Buyer first
becomes aware that it may be entitled to make that claim (in the case of a
potential claim) or (in the case of an actual claim) within 30 days after
the Buyer becomes aware that it is entitled to make that claim. The Buyer
shall, for a period of 60 days after notice of a potential claim is given,
take all reasonable steps to afford the Seller an opportunity to remedy or
avert the breach or potential breach in question.
4.2 No claim shall be brought by the Buyer against the Seller:-
(a) in respect of any breach of the Warranties (other than the Tax
Warranties, which for the purposes
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of this schedule shall be the Warranties contained in paragraph 65-101
of schedule 4, and the Litigation Warranties, which for the purposes
of this schedule shall be the Warranties contained in paragraph 11-143
of schedule 4) after 31 November 1996;
(b) in respect of claims under the Deed of Covenant and the Tax
Warranties, after the sixth anniversary of the end of the Company's
accounting period which is current at Completion;
(c) in respect of the Litigation Warranties, after the third anniversary
of Completion.
4.3 Any claim made under paragraph 4.1 before the final date relating to that
claim (the "Claim Date") shall (if that claim has not been previously
satisfied, settled or withdrawn) be deemed to have been withdrawn and shall
become fully barred and unenforceable on the expiry of the period of six
months commencing on the date of service of notice of the claim pursuant to
paragraph 4.1 (or twelve months where no sum has been withheld in respect
of that claim under clause 7.5), or (if later and if the relevant claim is
based on a liability which is contingent) commencing on the date when that
liability becomes an actual liability and is due and payable, unless
proceedings in respect of that claim have been commenced against the
Seller. For this purpose, proceedings shall not be deemed to have been
commenced unless they shall have been issued and served upon the Seller.
5. SUBSEQUENT RECOVERY FROM A THIRD PARTY
In the event of the Seller having paid to the Buyer an amount in respect of
a claim under the Warranties and subsequent to the date of making such
payment the
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Buyer or the Company (as the case may be) recovers from a third party a sum
in cash or by way of an offset from or is given a credit by a third party
which is referable to that payment which recovery is not made by reason of
any Relief arising or Event occurring after Completion, then the Buyer
shall forthwith after that recovery pay or procure the repayment by the
Company to the Seller of so much of the amount provided by the third party
as does not exceed the sum so paid by the Seller, less all reasonable costs
incurred by the Buyer and the Company in making that recovery and less any
Taxation (if any) on the sum, offset or credit so recovered. Any offset or
credit given by any third party shall be deemed recovered only when the
offset or credit becomes effective, rather than (if earlier) when given or
agreed to be given by the third party in question.
6. SPECIFIC LIMITATIONS
The Buyer shall not have any claim whatsoever against the Seller in respect
of any breach of any of the Warranties or any claim under the Indemnities:-
(a) if and to the extent that such breach or claim occurs as a result of any
legislation not in force at the date of this Agreement which takes effect
retrospectively or occurs as a result of any increase in the rates of
taxation in force at the date of this Agreement;
(b) if and to the extent that such breach or claim arises directly or
indirectly from any voluntary act, omission, transaction or arrangement
after Completion by the Buyer or the Company otherwise than in the ordinary
course of business of the Company as presently carried on;
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(c) to the extent that the Company is entitled to claim an indemnity against
any loss or damage suffered by the Company arising out of such breach or
claim under the terms of any insurance policy of the Company or for which
it would be indemnified by insurance if at the relevant time the Company
maintained adequate insurance cover of the type effected by the Company and
in force immediately prior to the date hereof;
(d) if and to the extent that the breach or claim relates to a claim or
liability for Taxation and would not have arisen but for any winding up or
cessation after Completion of any trade or business carried on by the
Company or but for a major change in the nature or conduct after Completion
of a trade or business of the Company;
(e) in respect of amounts provided for in the Completion Accounts;
(f) to the extent that such breach or claim relates to any matter referred to
in the report prepared by Messrs Unick dated 26 February 1995 (attached to
the Disclosure Letter) or any other matter relating to the condition of the
Property or equipment at the Property or failure to obtain any necessary
consent, permissions or certificates required for such Properties or
equipment thereon (except any such consent, permission or certificate
stated in the Certificate of Title to exist or have been obtained).
7. CREDIT FOR IMPROVEMENTS
Any liability of the Seller under the Warranties shall be reduced by:-
7.1 an amount equal to the amount of or by which any Taxation for which the
Company is accountable is
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actually extinguished or reduced as a result of the claim giving rise to
the liability;
7.2 the amount by which any provision for bad or doubtful debts or contingent
or other liabilities (other than relating to Taxation) contained in the
Completion Accounts proves after Completion to have been excessive;
7.3 the amount of any credits, recoveries or other benefits (other than
credits, recoveries or other benefits relating to Taxation) which have been
received or obtained by the Company by reason of or arising out of the
matters giving rise to the liability.
8. DOUBLE CLAIM
Notwithstanding the preceding provisions of this Agreement, the Seller
shall not be liable in respect of any breach of the Warranties if and to
the extent that the loss is or has been included in a claim under the Deed
of Covenant which has been satisfied, nor shall the Seller be liable in
respect of a claim under the Deed of Covenant if and to the extent that the
loss is or has been included in a claim for breach of the Warranties which
has been satisfied. In the event of any claim made both for breach of the
Warranties and under the Deed of Covenant in respect of the same subject
matter, the higher claim only may be paid into the Escrow Account pursuant
to clause 7.5.
9. INFORMATION RELATING TO CLAIMS
If any claim comes to the notice of the Buyer or the Company by reason or
in consequence of which the Seller may be liable under the Warranties and
the Indemnities, the Buyer shall or shall procure that the
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Company shall give the Seller and its professional advisers reasonable
access during normal working hours to the premises and personnel of the
Company, and to any relevant chattels, documents and records within the
possession or under the control of the Company, to enable the Seller and
its professional advisers to examine such chattels, accounts, documents and
records and take copies or photocopies thereof at their own expense.
10. CONDUCT OF CLAIMS
10.1 If any claim comes to the notice of the Buyer or the Company by reason or
in consequence of which the Seller may be liable under the Warranties, the
Buyer shall or shall ensure that the Company shall not make any admission
of liability, agreement or compromise with any person, body or authority
(provided that such non-admission, non-agreement or non-compromise shall
not materially damage the goodwill of the Company) without prior
consultation with or the prior agreement of the Seller, which shall not be
unreasonably withheld or delayed.
10.2 The Buyer shall and shall ensure that the Company shall each take such
action (provided that such action shall not materially damage the goodwill
of the Company) as the Seller may reasonably request to avoid, dispute,
resist, appeal, compromise or defend or mitigate any claim which would give
rise to a claim under the Warranties (other than the Tax Warranties)
including (without prejudice to the generality of the foregoing but subject
always to the proviso referred to above) providing all information and
documents relating to such third party claims and instructing such
solicitors or other professional advisers as the Seller may nominate to act
in the name of and on behalf of the Company and the Buyer, but in
accordance
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with the instructions of the Seller, so that such action shall be delegated
entirely to the Seller, but subject to the Buyer or the Company being
indemnified by the Seller as to all reasonable costs and expenses which
they may reasonably incur by reason of such action. The previous sentence
shall not apply in relation to any claim made against the Company by Thames
Entertainment Network International Limited or by Cable Programme Partners-
1 Limited Partnership ("WIRE TV") (except in relation to the transmission
of WIRE TV's sport programming). In the event of any claim by WIRE TV
against the Company, both the Buyer and the Seller shall use reasonable
endeavours to ensure that the other's relationship with WIRE TV is
protected to the extent reasonably practicable in all the circumstances.
10.3 The provisions of clause 6 of the Deed of Covenant shall apply in relation
to any claim under the Tax Warranties as it applies to claims under the
Deed of Covenant and as if references to "the Covenantor" and to liability
under the Deed of Covenant were replaced by references to "the Warrantor"
and to liability under the Tax Warranties.
10.4 For the avoidance of doubt, nothing in this schedule shall in any way
restrict or limit the general obligation at law (if any) of the Buyer or
the Company to mitigate any loss or damage which they may respectively
suffer in consequence of any breach by the Seller of the terms of this
Agreement.
11. COMPLETION ACCOUNTS' PROVISION
11.1 The provisions of clause 10 of the Deed of Covenant shall apply in relation
to any claim under the Tax Warranties as it applies to claims under the
Deed of Covenant and as if references to the "Covenantor" and
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to liability under the Deed of Covenant were replaced by references to the
"Warrantor" and to liability under the Tax Warranties.
12. REDUCTION IN CONSIDERATION
The amount of any successful claim against the Seller under the Warranties
or the Deed of Covenant shall be treated by the Seller and the Buyer as a
reduction pro tanto in the consideration for the Shares.
13. DISCLOSURE
If the Buyer shall proceed to Completion under this Agreement
notwithstanding that it has become aware (such awareness to be proven
beyond a reasonable doubt) that any Warranty is incorrect, the Buyer shall
have no rights or claims against the Seller in respect thereof.
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SCHEDULE 6
SERVICES
POST PRODUCTION SERVICES
Digital Component Editing
Component Editing
Composite/Multiformat Editing Suites
Audio: Nagra T 1/4" Dat & CD, plus Voice Over Booth to all suites
Offline Editing - Avids & Beta SP with Edit Master - Umatic
Digital Telecine 4:2:2 with primary and secondary colour correction, digital
still store, 8, 16, Siper 16 and 35mm Gates
Paintbox VE Video Graphics with rostrum camera
DUPLICATION
Standards Conversion PAL/NTSC
Broadcast Quality Dubbing (EBU/SMPTE Specifications)
Quality Control (x3 transfer and Quality Control Booths) & Master Tape Technical
Evaluations
Fully Computerised Screen Subtitling
Beta SP Compilation Suite (x2); on line Beta SP Edit Suite
Duplication with D1, D2, D3, PAL & NTSC, Digital Betacam
1" C, 2" Quad, Beta SP PAL/NTSC, M11, Hi-Band
Hi8 & Video 8, Umatic, S-VHS, VHS PAL/NTSC
PRODUCTION
Television Production studio hire together with ancillary services
AUDIO
Audio Laybacks
Audio Dubbing
Audio Voice-Over Booth to all suites
Nagra T 1/4", DAT, CD, 16/35mm Sep-Mag
Foreign Language Track Composition
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SCHEDULE 7
PENSIONS
1. INTERPRETATION
1.1 In this schedule:-
"ACTUARY'S LETTER" means the letter from the Scheme Actuary to Godwins a
copy of which is attached to this Agreement as Annex A;
"GODWINS" means Jim Buchan of Godwins or such other Actuary as may be
appointed by the Buyer for the purpose of this schedule;
"INTEREST" means in respect of any period and any principal sum, an amount
of interest (accruing daily and compounded quarterly) at a rate equal to 2%
above the base lending rate from time to time of Midland Bank Plc;
"INTERIM PERIOD" means the period commencing on and including Completion
and ending on but excluding the Transfer Date;
"MARKET ADJUSTMENT" means the adjustment referred to in the Actuary's
Letter as the "Timing Adjustment";
"MONEY PURCHASE EMPLOYEES" means those of the employees of the Company who,
at Completion, are members of the money purchase section of the Seller's
Scheme;
"PAYMENT DATE" means the date which falls seven days after the later of:-
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(i) the date on which requests for transfer payments are to have been
returned pursuant to paragraph 3.4; and
(ii) the date upon which the approval of the Board of Inland Revenue
(if necessary) to the payment of the Transfer Values is obtained;
"PENSION ARRANGEMENT" means a retirement benefits scheme or a personal
pension scheme (in either case approved under Part XIV of the Taxes Act) or
any other fund, scheme or arrangements to which transfers from the Seller's
Scheme may be paid with the consent of the Inland Revenue;
"PENSIONABLE EMPLOYEES" means those of the employees of the Company who, at
Completion, are members of the final salary section of Seller's Scheme;
"SCHEME ACTUARY" means Nigel Hacking of Aspen plc or such other Actuary as
may be appointed by Seller for the purpose of this schedule;
"SELLER'S SCHEME" means the Chrysalis Group plc Retirement and Death
Benefit Scheme or the trustees thereof as the context may require;
"TRANSFER DATE" means the day falling three calendar months after
Completion or such earlier date as the Buyer may specify by not less than
one week's notice in writing to the Seller or such later date as the Seller
and the Buyer may agree in writing;
"TRANSFERRING MEMBERS" means those of the Pensionable Employees who request
that a transfer be made to a Pension Arrangement nominated by them pursuant
to paragraph 3.4;
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"TRANSFER VALUE" means in relation to each Pensionable Employee an amount
(calculated as at the Transfer Date by reference to the actuarial
assumptions set out in the Actuary's Letter) equal to the value of the
benefits (whether immediate, prospective or contingent) to which that
Pensionable Employee (including his dependants and other persons claiming
through him) is prospectively entitled under the Seller's Scheme as at the
Transfer Date in respect of pensionable service up to (but excluding) that
date but making allowance for projected future increases in pay from the
Transfer Date to the date of retirement and increases (whether or not
pursuant to a legal obligation) in pensions in payment and deferred
pensions.
2. THE SELLER'S SCHEME
2.1 The Seller shall procure that subject to the tax treatment of the Seller's
Scheme not being adversely affected the Company is permitted to participate
in the Seller's Scheme throughout the Interim Period.
2.2 The Seller warrants that it shall use its best endeavours to ensure that
until the Payment Date the Seller's Scheme is not terminated.
2.3 The Buyer shall during the Interim Period:-
(a) pay or procure to be paid during the Interim
Period to the Seller's Scheme at monthly intervals, in respect of the
Pensionable Employees and the Money Purchase Employees, the
contributions payable by and in respect of such employees calculated
on the following basis:-
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(i) employer contributions at the rate notified in writing to
the Buyer before the signing of the Agreement; and
(ii) employees contributions in accordance with the provisions of
the Seller's Scheme
(b) comply or procure that the Company complies with the provisions of the
Seller's Scheme; and
(c) not and procure that the Company does not exercise any right, power or
discretion under the Seller's Scheme except with the consent of the
Seller (such consent not to be unreasonably withheld).
2.4 The Buyer and Seller undertake to use all reasonable endeavours:-
(a) to procure that the employment of the Pensionable Employees and the
Money Purchase Employees is contracted-out by reference to the
Seller's Scheme throughout the Interim Period; and
(b) on demand to provide promptly or procure to be provided such
information as it reasonably requested for the administration of the
Seller's Scheme during the Interim Period.
2.5 The Seller shall indemnify the Buyer or the Company from and against any
liability to make payment to the Seller's Scheme after Completion
(including, without prejudice, any liability arising under section 144 of
the Pension Schemes Act 1993) other than to pay contributions as provided
in paragraph 2.3(a) of this schedule.
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3. TRANSFER FROM THE SELLER'S SCHEME
3.1 The Seller undertakes to procure that:-
(a) forthwith upon the Transfer Date the Seller shall instruct the Scheme
Actuary to calculate a Transfer Value in respect of each Pensionable
Employee and shall use all reasonable endeavours to expedite the
calculation of such Transfer Values; and
(b) the Scheme Actuary provides Godwins and the Buyer with the calculated
Transfer Values for each Pensionable Employee within one month after
the Transfer Date.
3.2 The Seller undertakes to provide promptly and on demand all such
calculations, and data or information as the Scheme Actuary or Godwins may
reasonably require to enable them to calculate and agree the Transfer
Values in accordance with paragraphs 3.1(a) and 3.3.
3.3 The Buyer undertakes to instruct Godwins to verify and agree the
calculations of the Scheme Actuary within 14 days after receiving all
information relevant to such verification in order to agree the amount of
the Transfer Values with the Scheme Actuary. If the Scheme Actuary and
Godwins do not so agree the amount of the Transfer Values within a further
14 days the matter may be referred for determination to an independent
actuary selected by agreement between the Buyer and the Seller, which
actuary shall act as an expert and not as an arbitrator.
3.4 The Buyer and the Seller undertake to procure that not later than 10 days
after the Transfer Values in respect of the Pensionable Employees have been
agreed
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in accordance with the provisions of paragraph 3.3, all Pensionable
Employees are informed, in writing, of the amount of the Transfer Value
available from the Seller's Scheme in accordance with the provisions of
this paragraph and that all the Pensionable Employees are given the
opportunity to request within 28 days after receipt of such letter, that an
amount equal to the Transfer Value attributable to each Pensionable
Employee (adjusted as set out in paragraph 3.5) be paid in cash, on their
behalf, to a Pension Arrangement nominated by them.
3.5 The Transfer Value in respect of a Pensionable Employee shall be adjusted
by multiplying that amount by the Market Adjustment for the period from and
including the Transfer Date to and including the day before the date of
actual payment not being later than the Payment Date.
3.6 The Seller shall procure that on or before the Payment Date the Seller's
Scheme transfers to such Pension Arrangement as may have been selected by
each Transferring Member an amount equal to the Transfer Value attributable
to them (adjusted as set out in paragraph 3.5).
3.7 In the event that any Transfer Value (adjusted as set out in paragraph 3.5)
is not transferred in full within seven days after the Payment Date the
Seller shall on demand pay to the Company a cash sum equal to the amount
(if any) by which the aggregate of the Transfer Values for all the
Transferring Employees (adjusted as aforesaid) exceeds the aggregate amount
of any transfers made from the Seller's Scheme to any Pension Arrangement
or Arrangements nominated by the Pensionable Employees together with
Interest thereon from the Payment Date to the date of actual payment.
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3.8 For the purposes of this paragraph there shall be disregarded:-
(a) any benefits under the Seller's Scheme which are attributable to
additional voluntary contributions made to it by the members and in
respect of which such persons are not entitled to benefits based on
their pay;
(b) any such contributions;
(c) any assets representing such contributions; and
(d) any transfer in respect of any such benefits.
The Seller shall, nevertheless, use best endeavours to procure that the
Seller's Scheme transfers to any Pension Arrangement nominated by a
Pensionable Employee on the Payment Date for the benefit of that
Pensionable Employee all such funds or assets of the Seller's Scheme which
represent all such contributions (if any) made by the Pensionable Employee
and the investment return earned in respect of them.
4. PENSION WARRANTIES
The Seller represents and warrants to the Buyer, subject to the matters
expressly, fully and fairly disclosed in the Disclosure Letter:-
4.1 other than the Seller's Scheme there is no arrangement to which the Company
contributes or may become liable to contribute under which benefits of any
kind are payable to or in respect of any of the Pensionable Employees or
the Money Purchase Employees (or to any spouse or dependant of any of them)
on retirement, on death or in the event of disability or sickness or in
other similar circumstances and nor is the Company
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under any legally binding obligation to provide any such benefits;
4.2 the Company is not making nor has regularly made any ex gratia payments to
any of the Pensionable Employees or the Money Purchase Employees (or to
any spouse or dependant of any of them);
4.3 the records of the Seller's Scheme have been properly and accurately
maintained insofar as is relevant for the purposes of this schedule and
will be, if such is not the case, brought up-to-date (at the cost of the
Seller) as at Completion within two months of Completion;
4.4 no undertaking or assurance has been given to any Pensionable Employee or
Money Purchase Employee as to the continuance or introduction or increase
or improvements of any pension rights or entitlements which the Company or
Buyer would be required to implement in accordance with good industrial
relations practice whether or not there is any legal obligation to do so;
4.5 all provisions of the Seller's Scheme including true and accurate copies of
the following have been fully and fairly disclosed to the Buyer prior to
the date this Agreement:-
(a) The current definitive trust deed and rules;
(b) The letter from the Pension Schemes Office confirming that the
Seller's Scheme has exempt approved status;
(c) All current announcement letters and other communications with the
employees of the Company;
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(d) All current explanatory literature;
(e) Contracting out certificate;
(f) List of all Pensionable Employees and Money Purchase Employees
together with all particulars relevant to their membership of the
Seller's Scheme and their entitlement to benefits;
(g) Latest signed actuarial valuation and report;
4.6 all information including without limitation the information referred to in
paragraph 4.5 above which has been made available to the Buyer or to
Godwins on or before the signing of this Agreement concerning matters
referred to in this schedule is true, complete and accurate in all material
respects and contains no material omission;
4.7 the benefits accrued to the Pensionable Employees in the Seller's Scheme,
other than guaranteed minimum pension benefits, have been equalised to the
extent necessary to comply with English or European Community requirements
(as the same are currently understood in the light of ECJ decisions already
delivered at the date of this Agreement) relating directly or indirectly to
equality of pay or treatment between male and female employees or between
full and part time employees, including without prejudice Article 119 of
The EEC Treaty.
Each of the warranties set out in this paragraph 4 is separate and
independent and shall not be limited by reference to or inference from any other
warranty or any other provision of this Agreement.
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SCHEDULE 8
DISCLAIMED CAPITAL ALLOWANCES
1. If the Company disclaims any capital allowances in respect of machinery or
plant for its accounting periods ended 31st August 1992, 31st August 1993
and/or 31st August 1994, ("Disclaimed Capital Allowances") and such
disclaimers are validly made and finally agreed with the Inland Revenue,
then the following provisions of this schedule shall operate.
2. To the extent that the Company obtains a reduction in its liability to
corporation tax by utilising the Disclaimed Capital Allowances as explained
in paragraph 3, excluding from the Disclaimed Capital Allowances for this
purpose:-
(i) such Disclaimed Capital Allowances as would be required to be
claimed to eliminate the tax liabilities referred to in paragraph
73 of the Disclosure Letter (rolled-over and held-over gains);
(ii) any of the Disclaimed Capital Allowances which are taken into
account in preparing the Completion Accounts;
(iii) any of the Disclaimed Capital Allowances claimed by the Company
to eliminate a taxation liability for which the Company is or
becomes liable in respect of any Event occurring on or before
Completion or by reference to any income, profits or gains
earned, accrued or received on or before Completion; and
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(iv) any of the Disclaimed Capital Allowances which are claimed by the
Company to eliminate any other taxation liability for which the
Covenantor would have been liable under the Deed of Covenant but
for clause 3.[5] thereof (exclusion for Reliefs)
together "the Excluded Allowances"
(but so that no amount shall be counted more than once under any
of (i) to (iv) inclusive)
then the Buyer shall pay to the Seller a sum equal to 50% of such reduction
in liability to corporation tax on the date which is the later of nine
months from the end of the relevant accounting period in respect of which
such reduction is obtained, or the date immediately after the taxation
return of the Company for the relevant accounting period is finally agreed
with the Inland Revenue.
3. The Company will be taken to have utilised the Disclaimed Capital
Allowances as referred to in paragraph 2 above, when and to the extent that
in each subsequent accounting period the Company is able to successfully
claim capital allowances in respect of all or part of that amount of
expenditure forming part of the Reducing Pool which amount ("the Disclaimed
Amount") would not have formed part of the Reducing Pool but for the
disclaimer(s) referred to in paragraph 1 above. The Disclaimed Amount will
reduce year by year as the Disclaimed Capital Allowances are so utilised
until it is eliminated. Utilisation of the Excluded Allowances will reduce
the Disclaimed Amount.
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4. If at the end of any accounting period the Actual Pool is greater than the
Reducing Pool, then the amount of capital allowances claimed by the Company
in that period which are deemed to be allocated to the Reducing Pool will
be scaled down proportionately.
5. Any disposal value to be brought into account for the purposes of capital
allowances after the date to which the Completion Accounts are made up
shall be deemed to be allocated to the Reducing Pool until it is
eliminated.
6. For the avoidance of doubt, subject to paragraph 4 above, neither the Buyer
nor the Company accepts under this paragraph any obligation to utilise the
Disclaimed Capital Allowances in priority to any other relief or claim, or
any restriction on the Company's conduct of its financial, accounting or
taxation matters.
7. For the purposes of this schedule:-
"REDUCING POOL" means from time to time that pool of qualifying expenditure
of the Company for the purposes of capital allowances representing its pool
of qualifying expenditure as at the date to which the Completion Accounts
are drawn up and declining on a reducing balance basis as capital
allowances are claimed in respect of the Reducing Pool. For the avoidance
of doubt no expenditure is to be added to the Reducing Pool; and
"ACTUAL POOL" means from time to time the pool of qualifying expenditure of
the Company for the purposes of capital allowances.
8. The Buyer shall procure that the Company will disclaim to the extent
permitted by law all or any capital
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allowances requested by the Seller in respect of the Company's accounting
periods ended 31st August 1992, 31st August 1993 and/or 31st August 1994
but only if and to the extent that group relief is surrendered under clause
13 of the Agreement against profits of the Company which become chargeable
to corporation tax as a result of such disclaimer or disclaimers.
9. For the avoidance of any doubt, the provisions of this schedule 8 shall not
affect the Seller's liability under the Warranties or the Deed of Covenant.
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EXECUTED as a Deed )
for and on behalf of )
FCB 1120 LIMITED by:- )
SALAH HASSANEIN
Director
LEGIST SECRETARIES LIMITED
Secretary
EXECUTED as a Deed )
for and on behalf of )
CHRYSALIS HOLDINGS LIMITED)
by:- )
CHRISTOPHER SPURGEON
Director
NIGEL BUTTERFIELD
Secretary
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EXHIBIT 2
DATED 16TH MARCH 1995
----------------------------------------
(1) FCB 1120 LIMITED
(2) CHRYSALIS HOLDINGS LIMITED
___________________________________
TAX DEED
___________________________________
[FRERE CHOLMELEY BISCHOFF LETTERHEAD]
<PAGE>
THIS DEED is made on 16th March 1995
BETWEEN:-
(1) FCB 1120 LIMITED (registered number 3014792) whose registered office is at
4 John Carpenter Street, London EC4Y 0NH (the "Buyer", which expression
shall unless the context does not so permit include its successors in title
and assignees); and
(2) CHRYSALIS HOLDINGS LIMITED (registered number 00918616) whose registered
office is at The Chrysalis Building, Bramley Road, London W10 6SP (the
"Covenantor").
WHEREAS by an agreement dated today between the Covenantor and the Buyer (the
"Agreement"), the Buyer has agreed to buy the Shares (as defined in the
Agreement) from the Covenantor in reliance inter alia upon the provisions of
this Deed.
WITNESSES as follows:-
1. DEFINITIONS
1.1 Unless the context otherwise requires, words and expressions defined in the
Agreement shall have the same meaning in this Deed, and the provisions of
Clauses 1.2. and 1.3 inclusive of the Agreement concerning interpretation
and construction shall apply in this Deed.
1.2 In this Deed, the following expressions have the following meanings:-
"ACCOUNTS RELIEF" means any Relief which has been assumed to be available
in fixing the amount of the Taxation provision or reserve (including any
provision or reserve for deferred taxation) in the Completion Accounts of
the Company or which would but for such Relief have appeared in the
Completion Accounts;
"CLAIM" means any assessment, notice, demand, letter or other document
issued or action taken by or on behalf of any person, authority or body
(including the Company) responsible for the assessment, collection or
recovery of Taxation anywhere in the world from which it appears that the
Company may be liable or is sought to be made liable to make any payment of
Taxation or that any Relief may be lost or counteracted or any right to
repayment of Taxation nullified cancelled or set-off;
"EVENT" means any payment, event, transaction or series of transactions of
whatever nature, act,
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omission or occurrence, whether or not the Company or the Buyer is a party
to it, and includes completion of the sale of the Shares to the Buyer;
"RELIEF" means any relief from Taxation, any loss, allowance, exemption,
set-off or deduction in computing or against any profits, income or gains
for the purposes of Taxation or credit against Taxation or any right to
repayment of Taxation;
"TAXATION" means all forms of taxation, duty, rate, impost, contribution,
charge or levy (in the nature of taxation) imposed by any body or authority
whatsoever in the United Kingdom or elsewhere, including any payment which
the Company may be or become bound to make as a result of any enactment
relating to taxation, whenever enacted, including under any settlement of
any claim for taxation and including any interest, surcharge, penalty or
fine in relation thereto.
1.3 For the purposes of this Deed:-
1.3.1 any reference to any Event shall include any Event which is deemed to
have occurred pursuant to any enactment whenever enacted;
1.3.2 any reference to income, profits or gains earned, accrued or received
shall include any income, profits or gains which are deemed to be
earned, accrued or received pursuant to any enactment whenever
enacted;
1.3.3 any reference to an Event occurring on or before Completion shall
include the combined result of two or more Events the first of which
shall have taken place or the commencement of which shall have
occurred on or before Completion;
1.3.4 references to Taxation shall include:-
1.3.4.1 the loss, counterclaim, cancellation, counteraction,
nullification, disallowance or clawback in whole or part of any
Accounts Relief; and
1.3.4.2 the nullification, cancellation or set-off in whole or part of a
right to repayment of Taxation which has been taken into account
as an asset (including where taken into account by way of a
reduction in any provision or reserve for Taxation or deferred
taxation) in computing the Completion Accounts of the Company;
and
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1.3.4.3 the setting off against profits or against a Taxation liability
(in either case in respect of which but for such setting off the
Company would have had a liability to pay Taxation in respect of
which a Claim could have been made under this Deed) of any Relief
which is not available before Completion but arises in respect of
an Event or Events occurring after Completion;
and in such case:-
(i) if such Relief would have been set against Taxation, the
amount of the Relief so lost or if such Relief would have
been deducted from or set against income or profits, the
amount of Taxation which would have been saved thereby but
for such loss; or
(ii) the amount of the repayment which would otherwise have been
obtained;
shall be treated as an amount of Taxation for which a liability
on the Company has arisen and fallen due;
1.3.5 A payment of Taxation shall be deemed to be made by the Company if a
payment of Taxation would have been made by it but for the utilisation
of any Relief arising in respect of an Event or Events occurring after
Completion.
2. COVENANT TO PAY
2.1 Subject as provided below, the Covenantor covenants with the Buyer that the
Covenantor will pay to the Buyer on the relevant payment date ascertained
pursuant to Clause 7 of this Deed an amount equal to:-
2.1.1 any Taxation for which the Company is or becomes liable in respect of
or arising from any Event occurring on or before Completion or by
reference to any income, profits or gains earned, accrued or received
on or before Completion, whether or not such Taxation is attributable
to, chargeable against or recoverable from any other person;
2.1.2 any payment of Taxation by the Company in pursuance of a notice under
Section 132 of the Finance Act 1988 served on the Company as being a
person to whom sub-section (3) of such section applies by virtue of
the relationship of the
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Company with the migrating company as defined in such section on or at
any time before Completion;
2.1.3 without prejudice to the generality of Clause 2.1.1 above, any
Taxation for which the Company becomes liable in consequence of the
failure by any company which has at any time before Completion been a
member of a group (as defined from time to time for any Taxation
purpose) of which the Company has at any time prior to Completion been
a member, to satisfy a liability for Taxation whether or not such
Taxation is attributable to, chargeable against or recoverable from
any other person;
2.1.4 without prejudice to the generality of Clause 2.1.1 above, any
liability of the Company under Section 767A of the Taxes Act 1988
(together with any liability for interest relating thereto save as
attributable to the Company's default) as being a person to whom sub-
section (2) of such section applies by virtue of circumstances
existing at any time prior to Completion;
2.1.5 any liability of the Company to repay in whole or in part any payment
for group relief or payment for the surrender of surplus advance
corporation tax received pursuant to any agreement or arrangement
entered into on or before Completion, or any payment which the Company
fails to obtain for group relief or for the surrender of surplus
advance corporation tax which was taken into account as an asset in
the Completion Accounts;
2.1.6 all reasonable costs and expenses incurred and payable by the Buyer
and/or the Company in connection with or in consequence of any matter
for which a claim is made by the Buyer under this Deed, including the
reasonable costs and expenses of taking or defending any action under
this Deed.
3. EXCLUSIONS
The Covenantor shall not be liable under Clause 2 above in respect of any
Taxation:-
3.1 to the extent that provision therefor has been made in the Completion
Accounts;
3.2 to the extent that any Claim relating thereto also
has given rise to a claim by the Buyer or the Company for breach of
warranty condition representation or
4
<PAGE>
undertaking under the Agreement and the Covenantor has satisfied such
claim;
3.3 to the extent that such liability for Taxation would not have arisen but
for any change in accounting or in Taxation policy introduced by the
Company after Completion save as necessary to comply with any legal
requirements or with generally accepted accounting practice;
3.4 to the extent that recovery has previously been made by the Buyer under
this Deed in respect of the same claim;
3.5 to the extent that any Relief (other than a Relief utilised against profits
relating to the transactions referred to in 3.8 below) arising as a
consequence of or by reference to any Event occurring on or before
Completion or in respect of a period ended on or before Completion is
available and can be utilised by the Company to relieve or mitigate that
liability at the time that payment is due from the Covenantor in respect of
that liability in accordance with the provisions of clause 7 of this Deed;
or
3.6 to the extent that on or before Completion the liability for Taxation was
discharged whether by payment or by utilisation of any Relief;
3.7 to the extent that the amount otherwise payable by the Covenantor is
increased by reason of the Company or the Buyer failing after written
warning by the Covenantor to act in accordance with the provisions of
clause 6 below;
3.8 which arises as a result of transactions in the ordinary and proper course
of the trade of the Company since the date to which the Completion Accounts
are made up and prior to Completion, and which is not interest, a penalty,
surcharge, fine or other payment arising from any default relating to
Taxation;
3.9 to the extent that it is a liability in respect of value added tax relating
to supplies made by the Company in respect of which the time of supply is
after the date to which the Completion Accounts are made up and in respect
of which value added tax has been properly charged and collected by the
Company and a tax invoice properly issued;
3.10 to the extent that liability for such Taxation is excluded under Schedule 5
of the Agreement.
5
<PAGE>
4. REFUNDS
If the Covenantor has made a payment under Clause 2 of this Deed and the
Buyer or the Company subsequently receives from any person other than the
Company or the Buyer a payment or offset or credit referable to the Taxation
concerned which payment offset or credit is not made by reason of any Relief
arising after Completion, the Buyer shall forthwith repay or procure the
repayment to the Covenantor of the amount received (less any reasonable costs
incurred and payable by the Company or the Buyer and not otherwise reimbursed by
the Covenantor in recovering such amount and any Taxation on such amount) not
exceeding the payment by the Covenantor hereunder. Any offset or credit given
by any third party shall be deemed recovered only when the offset or credit
becomes effective, rather than (if earlier) when given or agreed to be given by
the third party in question.
5. RIGHTS AGAINST THIRD PARTIES
If the Covenantor has made a payment under Clause 2 of this Deed and the
Buyer or the Company is or becomes entitled to recover from some other person
(other than the Company or the Buyer but including any Taxation or other
competent authorities) any sum in respect of the Taxation concerned other than
by reason of any Relief arising after Completion, the Buyer shall or shall
procure that the Company shall if so required by the Covenantor at the
Covenantor's expense and upon the Covenantor providing security to the
reasonable satisfaction of the Company or the Buyer against all reasonable costs
and expenses which may thereby be incurred and payable by the Company or the
Buyer take all reasonable steps to enforce such recovery (keeping the Covenantor
fully informed of any progress) provided that the Company or the Buyer shall not
be obliged to take any action which the Company or the Buyer shall reasonably
consider to be prejudicial to its commercial interest and shall account to it
for any amount recovered (including any interest or repayment supplement paid on
or in respect thereof) net of any Taxation chargeable in respect thereof not
exceeding the amount paid by the Covenantor hereunder and after deducting all
reasonable costs of recovery borne by the Company or the Buyer and not
previously reimbursed.
6. DEFENCE OF CLAIMS
6.1 If the Buyer becomes aware of a Claim which could give rise to a liability
under this Deed it shall within a reasonable time thereafter (and in any
event in a case where the Claim requires a response within a time period to
avoid the imposition of any penalty, fine or interest or to preserve the
right of appeal within ten
6
<PAGE>
business days after the Buyer becomes aware of such claim) notify the
Covenantor in writing specifying the nature of such Claim in reasonable
detail. It shall then take or procure that the Company shall take such
action to avoid, resist, appeal or compromise the Claim as the Covenantor
may reasonably request provided that the Covenantor has first indemnified
and secured it to its reasonable satisfaction against all losses, costs,
damages and expenses (including interest on overdue Taxation) which may be
incurred thereby Provided that neither the Buyer nor the Company shall
be obliged to appeal against any Claim for Taxation raised on it if having
given the Covenantor written notice of the receipt of such Claim for
Taxation it has not within 15 days from the giving of such written notice
received instructions in writing from the Covenantor to do so. For the
avoidance of doubt the Covenantor shall not be entitled to take over the
conduct of proceedings relating to the Claim in question.
6.2 The provisions of Clauses 6.1 above shall not apply if it shall be found
that the Covenantor or the Company shall have committed fraud wilful
default or neglect in relation to any Taxation.
6.3 If the Covenantor fails to comply with the provisions of Clause 6.1 above
or delays unreasonably after written warning by the Buyer in giving any
such requests as are mentioned in Clause 6.1, the Buyer and the Company
shall be free without reference to the Covenantor to pay, settle or
otherwise deal with the Claim on such terms as they may in their absolute
discretion think fit and without prejudice to their rights and remedies
under this Deed.
7. TIME FOR PAYMENT
7.1 A payment to be made by the Covenantor under Clause 2 or Clause 8 of this
Deed shall be made in cleared funds on or before the relevant payment date
which shall be ascertained as follows:-
7.1.1 insofar as such payment represents Taxation to be borne by the Company
the payment date shall be the last business day before the day on
which payment of the relevant Taxation is due provided that if the
payment is deferred following an application to the appropriate
authority then the date on which the relevant Taxation is due shall be
such later date when the amount of Taxation is agreed or finally held
to be due to the person demanding the same;
7
<PAGE>
7.1.2 insofar as such payment represents Taxation which would have been
payable but for the utilisation of a Relief arising after Completion
as referred to in sub-clause 1.3.4.3 above, the payment date shall be
the date on which payment of the relevant Taxation would have been due
but for the availability of the relevant Relief;
7.1.3 insofar as such payment relates to a Claim under sub-clauses 1.3.4.1
and 1.3.4.2 above the payment date shall be the earliest date on which
Taxation becomes payable which would not have been payable had the
relevant Relief not been so lost or, in the case of a repayment of
Taxation, the date the repayment would have been obtained;
7.1.4 in any other case seven days after the date on which a notice setting
out full details of the amount claimed is delivered to the Covenantor.
7.2 If any payment due to be made by the Covenantor under this Deed is not made
on the relevant payment date the same shall carry interest from such
relevant payment date until actual payment at the rate of 1 1/2% above the
base rate from time to time of the National Westminster Bank plc.
8. STAMP DUTY
8.1 The Covenantor hereby warrants to the Buyer that:-
8.1.1 all documents forming part of the title to any asset of the Company or
which the Company may wish to enforce or produce in evidence are in
the United Kingdom, have been duly stamped with the correct amount of
stamp duty and have where appropriate been adjudicated;
8.1.2 the Company has not incurred any liability to or been accountable for
any stamp duty reserve tax and there are no circumstances in existence
at the date hereof which could lead to the Company incurring such a
liability or becoming so accountable.
8.2 The Covenantor hereby agrees that in the event of a breach of the warranty
in Clause 8.1 above it shall pay to the Buyer by way of liquidated damages
an amount equal to any unpaid stamp duty and stamp duty reserve tax and any
interest or penalties payable in respect thereof.
8
<PAGE>
9. GROSSING-UP
9.1 All sums payable by the Covenantor to the Buyer under this Deed shall be
paid free and clear of all deductions, withholdings, set-offs or
counterclaims whatsoever save only as may be required by law. If any such
deductions, withholdings, set-offs or counterclaims are required by law the
Covenantor shall be obliged to pay to the relevant person such sum as will
after such deduction, withholding, set-off or counterclaim has been made
leave that person with the same amount as it would have been entitled to
receive in the absence of any such requirement Provided that if the Buyer
retains and utilises a tax benefit by reason of any deduction or
withholding the Buyer shall as soon as reasonably practicable thereafter
reimburse the Covenantor the payment or such part of the payment as will
leave the Buyer (after such reimbursement) in no worse a position than it
would have been in if no such deduction or withholding had been required to
be made.
9.2 If any sum payable by the Covenantor to the Buyer under this Deed (other
than interest under Clause 7 above) shall be subject to Taxation in the
hands of the recipient then the sum so payable shall be grossed up by such
amount as will ensure that after payment of Taxation there shall be left a
sum equal to the sum that would otherwise be payable under this Deed.
10. SAVINGS, OVER-PROVISIONS AND SET-OFF
10.1 If:-
10.1.1 any provision for Taxation (including deferred tax) contained in the
Completion Accounts shall be found to be an over-provision other than
by reason of (i) an Event occurring after Completion or (ii) a change
in legislation taking place after Completion or (iii) the use of a
Relief arising as a result of an Event which occurs after Completion
(an "Over-provision"); or
10.1.2 the liability for Taxation which has resulted in the payment by the
Covenantor hereunder falling due shall give rise to a corresponding
saving of Taxation ("a Saving") for the Company which would not
otherwise have arisen and which is not taken into account in the
Completion Accounts other than by reason of (i) an Event occurring
after Completion or (ii) a change in legislation taking place after
Completion or (iii) the use of a Relief arising as a result of an
Event which occurs after Completion
9
<PAGE>
the amount of the Over-provision or Saving (as certified to the parties by
the Company's auditors at the request and reasonable expense of the
Covenantor) shall be treated as reducing a liability for Taxation in
respect of which a payment is then due from the Covenantor hereunder or (in
the event and to the extent that it is not so set off) shall be deemed to
be set-off retrospectively against liabilities for Taxation in respect of
which the Covenantor has already paid hereunder (but has not been repaid
under this Clause 10.1 or Clause 4 or 5 above) so that repayment shall be
made by the Buyer within 15 business days of the date such certificate is
supplied to the parties provided that any amount not so set-off or repaid
to the Covenantor shall be carried forward and available for off-set
against future payments under this Deed by the Covenantor.
10.2 For the purposes of sub-clause 10.1 above the Company obtains a Saving if
as a result of the payment of Taxation which results in the payment by the
Covenantor hereunder the Company is relieved in whole or in part of a
liability to make a payment of Taxation which it would otherwise have been
liable to make (other than a liability for Taxation for which a claim could
be made under this Deed) or it obtains a relief, allowance or credit
against Taxation (other than a liability for Taxation for which a claim
could be made under this Deed) which would not otherwise have been
available.
10.3 If the Buyer shall discover that there has been an Over-provision or Saving
the Buyer shall give or shall procure that the Company shall forthwith give
full details thereof to the Covenantor in writing and shall supply the
Company's auditors with such information as they may require to certify the
value of the Over-provision or Saving. The Buyer shall procure that the
Company will supply the Covenantor (at or within a reasonable time after
the time when the Company's auditors issue their certificate) with such
information as the Covenantor may reasonably request to check the accuracy
of the certificate.
11. GENERAL
11.1 The following provisions of the Agreement shall be incorporated in this
Deed as if specifically set out in it:-
Clause 15 (assignability)
Clause 18 (notices)
Clause 20 (waivers)
10
<PAGE>
Clause 21 (Counterparts)
Clause 22 (governing law and jurisdiction).
11.2 No variation hereof shall be effective unless agreed in writing and signed
by or on behalf of both the parties hereto.
12. ILLEGALITY
If at any time any term or provision of this Deed is or becomes illegal,
invalid or unenforceable in whole or in part in any respect under the law of any
jurisdiction, to that extent such term or provision or part shall be deemed not
to form part of this Deed and the enforceability of the remainder of this Deed
shall not be affected and neither the legality, validity or enforceability of
such term or provision under the law of any other jurisdiction shall in any way
be affected or impaired thereby.
13. EFFECT OF DISCHARGE OF CLAIM
For the avoidance of doubt and subject to clause 3 of this Deed, the
Covenantor shall remain liable in accordance with the terms of this Deed
notwithstanding that any Taxation giving rise to a liability to make a payment
under Clause 2 or Clause 8 of this Deed is or has been discharged or suffered by
the Company, after the date hereof and whether by payment or by the loss or
utilisation of any Relief or right to repayment of Taxation.
14. VOTING RIGHTS
The Buyer undertakes to the Covenantor that it shall and shall procure that
its nominees and representatives shall exercise all voting rights attached to
any shares owned or controlled by them and all powers, discretions and
authorities directly controlled by them in relation to the Company so as to
procure in so far as they are able that the Company complies with any
undertakings and obligations expressed to be binding on it hereunder.
15. SURRENDER OF TAX LOSSES
If any liability of the Covenantor hereunder could be reduced or eliminated
by the surrender of losses or other amounts by way of group relief or surrender
of advance corporation tax by the Covenantor or any other company in the
Covenantor's Tax Group to the Company at no cost to the Company, (and without
prejudice to the surrenders required by clause 13 of the Agreement), the
Covenantor shall be entitled to make or procure the making of such surrender to
the extent permitted by law in priority to any claim(s) by the Company to
utilise losses arising after the end of its accounting period commencing on 1st
September 1994 and the
11
<PAGE>
Buyer shall procure that the Company shall co-operate in making all necessary
and reasonable claims, consents and notifications. Neither the Company nor the
Buyer shall be liable to give any consideration for such surrender. If either
(a) such surrender is agreed by the Inland Revenue, or (b) the Covenantor would
have been able to make such a surrender had the Company had sufficient taxable
profits for the accounting period commencing on 1st September 1994, "a deemed
surrender", then the Covenantor shall be deemed for the purposes of this Deed to
have made a payment to the Buyer equal to the payment which it would have been
obliged to make had it not made or procured the surrender referred to in (a) or
had there not been a deemed surrender under (b).
16. MIGRATION OF THE COMPANY
If (i) the Company becomes non-resident in the UK for tax purposes after
Completion and (ii) any member of the Seller's Group becomes liable to make any
payment of Taxation under Section 132 Finance Act 1988 as being a person to whom
sub-section (3) of such section applies by virtue of the relationship of that
member with the Company as defined in such section, the Buyer hereby covenants
with the Covenantor to pay to the Covenantor on behalf of itself and any other
member of the Seller's Group an amount equal to such Taxation and the provisions
of clauses 7 and 9 shall apply with the necessary changes.
IN WITNESS whereof the parties have executed these presents the day and year
first above written
12
<PAGE>
EXECUTED as a Deed )
for and on behalf of )
FCB 1120 LIMITED by:- )
Director /s/ Salah M. Hassanein
Secretary /s/ Stephen Hermer
EXECUTED as a Deed )
for and on behalf of )
CHRYSALIS HOLDINGS LIMITED )
by:- )
Director /s/ Nigel Butterfield
Secretary /s/ Clive Potterell
13
<PAGE>
EXHIBIT 3
Dated 16th March 1995
CHRYSALIS HOLDINGS LIMITED
-and-
THE TODD-AO CORPORATION
---------------------------
PERFORMANCE GUARANTEE
---------------------------
Harbottle & Lewis
Hanover House
34 Hanover Square
London W1K OBE
<PAGE>
TO: CHRYSALIS HOLDINGS LIMITED of The Chrysalis Building, Bramley Road,
London, W10 6SP (referred to as "you", which expression and cognate
expressions shall be deemed to include successors, transferees and assigns of
the benefit of this guarantee).
1. In consideration of you CHRYSALIS HOLDINGS LIMITED entering into an
agreement to be dated today ("the Agreement") with FCB 1120 LIMITED
(Registered No. 3014792) whose registered office is at 4 John Carpenter
Street, London EC4Y ONH ("the Company") relating to the sale by you of
the entire issued share capital of Chrysalis Television Facilities
Limited (Company No. 981201) of London House, 53-54 Haymarket, London
SW14 4RP. We THE TODD-AO CORPORATION a Delaware Corporation whose
principal place of business is at 900 North Seward Street, Los Angeles,
California 90038, USA ("the Guarantor") hereby unconditionally and
irrevocably guarantee to you the due and punctual performance payment
and discharge of all obligations monies and liabilities which are now or
may hereafter become due, owing or incurred by the Company to you, under
the Agreement (for the avoidance of doubt after giving effect to all
limitations on the Company's liability as provided in the Agreement and
so that any amount paid into the Escrow Account (as defined in the
Agreement) in accordance with the terms of the Agreement will be deemed
not to have been due owing or incurred to you until payment to you from
the Escrow Account falls due in accordance with the terms of the
Agreement) (such guaranteed liabilities hereinafter referred to as "the
Liabilities").
2. The Guarantor hereby further agrees that in the event that any
shares in the Company are transferred or the Agreement is assigned,
this Guarantee shall still be enforceable against the Guarantor for
the performance and payment of the Liabilities.
3. This Guarantee shall not be considered as satisfied or discharged by
any intermediate payment or satisfaction of the whole or any part of any
of the Liabilities but shall constitute and be a continuing guarantee and
extend to cover the ultimate balance of
<PAGE>
such Liabilities.
4. This Guarantee shall be in addition to and shall not prejudice or
affect and shall not be prejudiced or affected by any collateral or
other security now or hereafter held by you or any judgment or order
obtained by you for all or any part of the Liabilities or any lien to
which you may be otherwise entitled. No sums shall be due or payable
under this Guarantee unless the Company shall have failed to pay the
sums claimed by you under the Agreement on the due date or on demand (as
the case may be) and you have served written notice of your claim
hereunder to the Guarantor.
5. Any settlement, release, compromise or discharge between the
Guarantor and you of the Guarantor's obligations under this Guarantee
shall be conditional upon no security or payment to you by the Company
or any other person being avoided or reduced or set aside or being
proved invalid by virtue of any provisions of the Insolvency Act of
1986 (including without limitation any of Sections 238-240 inclusive) or
any other enactments relating to liquidation for the time being in
force and you shall be entitled to recover the value or amount of any
such security or payment from the Guarantor subsequently as if such
settlement, discharge, compromise or release had not occurred.
6. The Guarantor further agrees as a separate and independent
stipulation that this Guarantee shall not be discharged nor shall the
Guarantor's liability hereunder be affected in respect of the
Liabilities by reason of any legal limitation disability incapacity on or
of the Company or of the Guarantor or of any want of power or authority
of the Company or the Guarantor or any person purportedly acting on
behalf of the Company or the Guarantor or by reason of any other fact or
circumstances whatsoever and whether or not known to you and the
Guarantor shall nevertheless pay the discharge all the Liabilities as
sole or principal debtor in respect thereof.
7. Any amounts payable by the Guarantor hereunder shall be paid in
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<PAGE>
full without any deduction or withholding (whether in respect of
set-off, counterclaim, duties, charges, taxes or otherwise) unless such
deduction or withholding is required by law, in which event the
Guarantor shall pay to you an additional amount so that the net amount
received by you will equal the full amount which you would have received
had no such deduction or withholding been made PROVIDED THAT you will
(at the Guarantor's expense) take all such reasonable actions and
execute all such documents as the Guarantor shall reasonably require to
avoid or mitigate the Guarantor's liability to make any such deduction
or withholding PROVIDED ALWAYS THAT you will not be required to take
such action or execute such documents if a delay in payment to you by
the Guarantor of the monies due hereunder would be delayed thereby. If
you obtain any refund, relief, credit or payment (other than from the
Guarantor under this clause) by reason of such deduction or withholding
you will promptly reimburse the Guarantor the amount of such refund,
relief, credit or payment.
8. Until the balance of the Liabilities has been discharged in full the
Guarantor shall not be entitled to take any step to enforce any right or
claim against the Company in respect of any monies paid by the Guarantor
to you hereunder or have or exercise any rights as surety in competition
with you. Furthermore, the Guarantor undertakes and agrees with you that
it shall not in respect of any payment made by it under the Guarantee:
(a) accept or appropriate any monies or other property of or from the
Company; or
(b) prove or accept any payment in any scheme or arrangement or
composition with, or any assignment for the benefit of the Company's
creditors or any winding-up of the Company or from any incumbrancer in
possession of, or any trustee, receiver, administrator, administrative
receiver, liquidator or other similar officer or insolvency
practitioner appointed in respect of any part of the Company's business
or assets;
to the extent that by doing so your recovery of the Liabilities in
-3-
<PAGE>
full may be prejudiced in any way.
9. If the Guarantor shall have taken or shall hereafter take any
security from the Company in respect of the liability of the Guarantor
under this guarantee such security shall stand as a security for you and
shall forthwith be deposited with or transferred to you.
10. This is a continuing guarantee and shall remain in full force and
effect notwithstanding any disability of the Guarantor until payment in
full is received by you and without regard to the validity regularity or
enforceability of any of the obligations of the Company under the
Agreement and shall not be affected in any way by any time or indulgence
granted to the Company or any third party by any variation compromise or
release of the Company's obligations under the Agreement which may from
time to time be agreed or the failure on the Company's part to perform
any obligation under the Agreement or the liquidation administration or
dissolution or by the appointment of a receiver administrator or
administrative receiver or by any other act omission or circumstance
which would or might otherwise affect the obligations of the Company to
meet the Liabilities or discharge or impair the Guarantor's liability
hereunder.
11. (a) Any demand or notice to or upon the Guarantor shall be
addressed to the Guarantor for the attention of Mr. Salah M. Hassanein
at:-
900 North Seward Street
Los Angeles
California 90038
USA
Fax No: 0101 213 466 2327
or at such other address as the Guarantor may hereafter
specify by notice in writing to you. Such notice shall be
-4-
<PAGE>
delivered personally or by courier or sent by facsimile or
pre-paid registered post (or air mail if sent internationally)
(b) Subject to Clause 11(e) any notice sent by post shall be
deemed to have been given 48 hours (72 hours if by air mail) after
the envelope containing it was so posted and proof that the
envelope containing any such notice was properly addressed and sent
by pre-paid registered (or air mail as the case may be) shall be
sufficient evidence that such notice has been duly given.
(c) Subject to Clause 11(e) any notice sent by facsimile
transmission shall be deemed to have been duly sent on the date of
transmission provided that a confirming copy is sent by registered
post (or air mail) within 6 hours after transmission.
(d) Subject to Clause 11(e) any notice if delivered
personally or by courier shall be deemed to be served at the time
when the same is left at the address of the Guarantor.
(e) Any notice which is deemed to have been received on a day
which is not a business day (meaning a day (other than a Saturday
or a Sunday) on which banks are open for business in the City of
London) shall be deemed to have been received on the next business
day.
12. The Guarantor shall fully and effectively indemnify you and
keep you indemnified on demand against all losses liabilities costs
actions claims or demands which you may incur or have made against
you arising out of or in connection with any failure by the Company
to perform its obligations under the Agreement.
13. Your rights under this Guarantee are cumulative, may be
exercised as often as you consider appropriate and are in addition
to your rights under the general law. Your rights (whether arising
under
-5-
<PAGE>
this Guarantee or under the general law) shall not be capable of
being waived or varied otherwise than by an express waiver or variation
in writing and in particular any failure to exercise or any delay in
exercising any of such rights shall not operate as a waiver or variation
of that or any other such right. Any defective or partial exercise of any
of such right shall not preclude any other or further exercise of that or
any other such right and no act or course of conduct or negotiation on
your part or on your behalf shall in any way preclude you from
exercising any such right or constitute a suspension or any variation of
any such right.
14. If at any time any one or more of the provisions of this Guarantee
becomes invalid, illegal or unenforceable in any respect under any law,
the validity, legality and enforceability of the remaining provisions
hereof shall not in any way be affected or impaired thereby.
15. This Guarantee shall be binding on the Guarantor and shall enure
to the benefit of and be enforceable by you and your successors
transferees and assigns provided always that payment by the Guarantor to
you, or (if the Guarantor reasonably believes that you have ceased to be
the beneficiary of the Guarantee) to such persons whose identity and
address have been notified to the Guarantor by you as being those of such
successor or assign, shall be deemed a valid payment for all purposes of
this guarantee and shall discharge the Guarantor's liability hereunder
to the extent of such payment. It is understood and agreed that none of
these terms or provisions may be waived altered or modified or amended
except in writing duly signed by you. The Guarantor may not assign or
novate this Guarantee or any of its rights or obligations hereunder
without your prior written consent which may be withheld by you in your
absolute discretion.
16. This Guarantee shall be construed in accordance with and governed
in all respects by English Law.
17. The Guarantor irrevocably assigns appoints and empowers Messrs
-6-
<PAGE>
Frere Chomeley Bischoff of 4 John Carpenter Street, London EC4Y ONH
(for the attention of Stephen Hermer) as its agent to receive for and on
its behalf service of proceedings in any legal action or proceedings.
18. This Guarantee is and will remain your property until our liability
hereunder has been fully discharged whereupon you shall return this
document to the Guarantor with a suitable endorsement confirming that
this guarantee hereunder has been so discharged.
Executed as a DEED this 16th day of March 1995
EXECUTED AS A DEED BY ) Salah M. Hassanein
THE TODD-AO CORPORATION )
in the presence of:- ) Silas R. Cross
-7-
<PAGE>
EXHIBIT 4
FIRST AMENDMENT
TO CREDIT AGREEMENT
This FIRST AMENDMENT TO CREDIT AGREEMENT ("First Amendment") is
entered into as of March 13, 1995, by and between THE TODD-AO CORPORATION, a
Delaware corporation (the "Borrower") and BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, (the "Bank") and amends that certain Credit Agreement dated
as of December 2, 1994 between Borrower and the Bank (the "Agreement").
RECITAL
The Borrower and the Bank desire to amend the Agreement on the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Borrower and the Bank
hereby agree as follows:
1. TERMS. All terms used herein shall have the same meaning as in
the Agreement unless otherwise defined herein. All references to the Agreement
shall mean the Agreement as hereby amended.
2. AMENDATORY PROVISIONS TO AGREEMENT. The Borrower and the Bank
hereby agree that the Agreement is amended as follows:
2.1 The definition of "Business Day" in Section 1.2 of the Agreement
is amended by inserting the following at the end thereof:
"and, with respect to Pound Sterling Revolving Loans, a day on which
dealings in Pounds Sterling deposits are carried out by the Bank's
Grand Cayman branch.
2.2 The definition of "Interest Period" in Section 1.2 of the
Agreement is amended by inserting the following at the end of clause (ii):
"and (iii) with respect to any Pound Sterling Borrowing, a period from
the Borrowing Date with respect to such Borrowing (or the date of the
- 1 -
<PAGE>
expiration of the then current Interest Period with respect to any
Pound Sterling Borrowing) to a date 1, 2, 3 or 6 months thereafter
(but only to the extent Pound Sterling deposits of such duration are
generally available in the offshore Pound Sterling interbank market)"
2.3 The definition of "Offshore Rate Business Day" in Section 1.2 of
the Agreement is amended by inserting the following at the end thereof:
"and, with respect to Pound Sterling Revolving Loans, a day on which
dealings in Pounds Sterling deposits are carried out by the Bank's
Grand Cayman branch.
2.4 The definition of "Offered Rate" in the definition of "Offshore
Rate" in Section 1.2 of the Agreement is amended and restated in its entirety as
follows:
"'Offered Rate' means (a) for Offshore Rate Loans denominated in
Dollars, the rate of interest at which Dollar deposits for such
Interest Period would be offered by the Bank's Grand Cayman Branch,
Grand Cayman, British West Indies, to major banks in the offshore
Dollar interbank markets upon request of such banks at approximately
8:00 a.m. San Francisco time two Offshore Business Days prior to the
first day of such Interest Period and (b) for Offshore Rate Loans that
are Pound Sterling Revolving Loans, the rate of interest at which
Pound Sterling deposits for such Interest Period would be offered by
the Bank's Grand Cayman Branch, Grand Cayman, British West Indies, to
major banks in the offshore Pound Sterling interbank markets upon
request of such banks at approximately 8:00 a.m. San Francisco time
[two] Offshore Business Days prior to the first day of such Interest
Period."
2.5 The definition of "Revolving Loan Commitment" in Section 1.2 of
the Agreement is amended and restated in its entirety as follows:
"'Revolving Loan Commitment' means the Dollar Revolving Loan
Commitment and the Pound Sterling Revolving Loan Commitment."
2.6 The definition of "Term Loan Commitment" in Section 1.2 of the
Agreement is amended and restated in its entirety as follows:
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"'Term Loan Commitment' means the Dollar Term Loan Commitment and
the Pound Sterling Term Loan Commitment."
2.7 The following additional definitions are inserted in proper
alphabetical order in Section 1.2 of the Agreement:
"'Chrysalis' means Chrysalis Television Facilities, Ltd., a
United Kingdom company.
"'Dollar Revolving Loan Commitment' means the Bank's undertaking
to make Dollar-denominated Revolving Loans to the Borrower subject to
the terms and conditions hereof in an aggregate principal amount not
to exceed $10,000,000, as the same may be adjusted pursuant to the
provisions of Section 2.4."
"'Dollar Term Loan Commitment' means the Bank's undertaking to
make Dollar-denominated Term Loans to the Borrower subject to the
terms and conditions hereof in an aggregate principal amount not to
exceed $10,000,000, as the same shall be reduced pursuant to Section
3.4(d)."
"'Dollar Equivalent' means the equivalent in Dollars of Pounds
Sterling calculated at the spot rate, rounded upward to the nearest
1/16 of one percent, for the purchase of Pounds Sterling with U.S.
Dollars quoted to the Bank by reference to the Reuters Wrldpage during
customary trading hours two Pound Sterling Banking Days prior the
relevant date of determination."
"'Obligations' means all advances, debts, liabilities,
obligations, covenants and duties arising under this Agreement or the
Pledge Agreement owing by the Borrower to the Bank, whether direct or
indirect (including those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter arising."
"'Pledge Agreement' means the Pledge Agreement, given by the
Borrower in favor of the Bank substantially in the form of EXHIBIT C
hereto, either as originally executed or as the same may from time to
time be supplemented, modified, amended, renewed, extended or
supplanted."
"'Pound Sterling' and the sign "L" means pounds sterling in
lawful currency of the United Kingdom."
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"'Pound Sterling Borrowing' means a Borrowing consisting of Pound
Sterling Revolving Loans or Pound Sterling Term Loans."
"'Pound Sterling Revolving Loans' means Revolving Loans that are
denominated in Pounds Sterling."
"'Pound Sterling Revolving Loan Commitment' means the Bank's
undertaking to make Revolving Loans to the Borrower in Pounds Sterling
subject to the terms and conditions hereof in an aggregate principal
amount not to exceed L5,000,000, as the same may be adjusted pursuant
to the provisions of Section 2.4."
"'Pound Sterling Term Loans' means Term Loans that are
denominated in Pounds Sterling."
"'Pound Sterling Term Loan Commitment' means the Bank's
undertaking to make Term Loans to the Borrower in Pounds Sterling
subject to the terms and conditions hereof in an aggregate principal
amount not to exceed L5,000,000, as the same shall be adjusted
pursuant to Section 3.4(d)."
2.8 Section 2.1 of the Agreement is amended and restated in its
entirety as follows:
"2.1 AMOUNTS. Subject to the terms and conditions hereof, the
Bank agrees to make revolving credit loans in Dollars or in Pounds
Sterling (each a "Revolving Loan" and, collectively, the "Revolving
Loans") to the Borrower pursuant to this Section 2 on a revolving
basis from time to time from the date hereof to the Termination Date,
during which period the Borrower may borrow, prepay and reborrow in
accordance with the provisions hereof; PROVIDED that the aggregate
unpaid principal amount of all Dollar-denominated Revolving Loans of
the Bank at any one time outstanding hereunder shall not exceed the
Dollar Revolving Loan Commitment, and the aggregate unpaid principal
amount of all Pound Sterling Revolving Loans of the Bank at any one
time outstanding hereunder shall not exceed the Pound Sterling
Revolving Commitment. Pound Sterling Revolving Loans denominated in
Dollars may be maintained, at the election of the Borrower made from
time to time as permitted herein as Reference Rate Loans, CD Rate
Loans or Offshore Rate Loans or any combination thereof. Revolving
Loans may be requested only as Offshore Rate Loans."
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2.9 The last sentence of Section 2.2(a) of the Agreement is amended
and restated in its entirety as follows:
"Each Reference Rate Borrowing shall be in an aggregate principal
amount at least equal to $250,000, each CD Rate Borrowing shall be in
an aggregate principal amount of at least $1,000,000 and each Offshore
Rate Borrowing shall be in an aggregate principal amount of at least
$1,000,000 or L500,000, as applicable; PROVIDED, HOWEVER, if the
unused portion of the Dollar Revolving Loan Commitment is less than
$1,000,000 as of any proposed Borrowing Date, the Borrower may request
only Reference Rate Borrowings, if the unused portion of the
applicable Revolving Loan Commitment is less than $250,000 as of any
proposed Borrowing Date, the Borrower may request Reference Rate
Borrowings in a principal amount equal to such unused portion, and if
the unused portion of the Pound Sterling Revolving Loan Commitment is
less than L500,000 as of any proposed Borrowing Date, the Borrower may
not request Pound Sterling Revolving Loans."
2.10 Clause (i) in the first sentence of Section 2.2(b) of the
Agreement is amended by inserting the following at the end thereof:
"denominated in Dollars and 10:00 a.m. (San Francisco time) not less
than four Offshore Rate Business Days prior to the proposed Borrowing
Date if the Borrowing is to be a Pound Sterling Borrowing,"
2.11 The proviso to Section 2.4 of the Agreement is amended by
inserting "or L500,000, as applicable," after "$1,000,000."
2.12 Section 2.5(b)(ii) and (iv) of the Agreement is amended by
inserting "or L500,000, as applicable," after "$1,000,000" wherever it appears.
2.13 Section 3.1 of the Agreement is amended and restated in its
entirety as follows:
"3.1 AMOUNTS. Subject to the terms and conditions hereof, on
the Termination Date the Bank agrees to make advances in Dollars or in
Pounds Sterling to the Borrower pursuant to this Section 3 (each a
"Term Loan" and collectively, the "Term Loans"), for the purpose of
repaying all or a part of the Borrower's indebtedness to the Bank
created pursuant to Section 2; PROVIDED that the aggregate unpaid
principal amount of all Dollar-denominated Term
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Loans of the Bank at any one time outstanding hereunder shall not
exceed the Dollar Term Loan Commitment, and the aggregate unpaid
principal amount of all Pound Sterling Term Loans of the Bank at any
one time outstanding hereunder shall not exceed the Pound Sterling
Term Commitment. Once repaid, the Term Loan may not be reborrowed;
PROVIDED that at the maturity of each Interest Period for a Term Loan,
such Term Loan may be refunded or converted in accordance with the
provisions of Section 4.3 subject to the foregoing proviso. The Term
Loans denominated in Dollars may be maintained, at the election of the
Borrower made from time to time as permitted herein as Reference Rate
Loans, CD Rate Loans or Offshore Rate Loans or any combination
thereof. Pound Sterling Term Loans may be requested only as Offshore
Rate Loans."
2.14 The last sentence of Section 3.2(a) of the Agreement is amended
and restated in its entirety as follows:
"Each Reference Rate Borrowing shall be in an aggregate principal
amount at least equal to $250,000, each CD Rate Borrowing shall be in
an aggregate principal amount of at least $1,000,000; and each
Offshore Rate Borrowing shall be in an aggregate principal amount of
at least $1,000,000 or L500,000, as applicable; PROVIDED, that
Borrowings of Term Loans denominated in Dollars may be made of
Reference Rate Borrowings in amounts less than such minimums so that
(y) the outstanding principal amount of all Term Loans denominated in
Dollars after any Amortization Date shall not exceed the Dollar Term
Loan Commitment as so reduced; and (z) a portion of the aggregate
principal amount of all Term Loans denominated in Dollars equal to the
principal amount due on the next Amortization Date will either be a
Reference Rate Borrowing or have an Interest Period ending on such
date. Pound Sterling Term Loans shall be repaid, as an additional
mandatory prepayment, prior to any Amortization Date to the extent
that the outstanding principal amount of any Pound Sterling Term Loan
after any Amortization Date would be less than L500,000."
2.15 Section 3.4(b) of the Agreement is amended by inserting the
following after "an Offshore Rate Borrowing:"
"denominated in Dollars and 10:00 a.m. (San Francisco time) not less
than four Offshore Rate Business Days prior to the proposed Borrowing
Date if the Borrowing is to be a Pound Sterling Borrowing,"
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2.16 Section 3.4(b) of the Agreement is further amended by inserting
"or L500,000, as applicable," after "$1,000,000."
2.17 Section 3.4(d) of the Agreement is amended and restated in its
entirety as follows:
"(d) On the last Offshore Rate Business Day of February, 1998,
and on the last Offshore Rate Business Day of each May, August,
November, and February thereafter (each such day, an "Amortization
Date"), the Dollar Term Loan Commitment and the Pounds Sterling Term
Loan Commitment shall each automatically reduce by an amount equal to
1/12 of the aggregate principal amount of the Term Loans denominated
in Dollars and Pound Sterling Term Loans, respectively, made on the
Termination Date, and the Borrower shall on each such Amortization
Date pay to the Bank the amount by which the principal amount of Term
Loans denominated in Dollars and Pound Sterling Term Loans outstanding
exceed the Dollar Term Loan Commitment and the Pounds Sterling Term
Loan Commitment, respectively, as so reduced.
2.18 Sections 4.3(a) and (b) of the Agreement are amended by
inserting "or L500,000, as applicable," after "$1,000,000" wherever it appears.
2.19 Section 4.3(b) the Agreement is amended by inserting the
following sentence after the first sentence therein:
"Conversions into or continuations of Offshore Rate Loans that are
Pound Sterling Revolving Loans shall not be permitted if the Bank
determines that Pound Sterling deposits in amounts as may be necessary
are not generally available in the offshore Pound Sterling interbank
markets."
2.20 Section 4.4 the Agreement is amended by inserting the following
sentence after the first sentence therein:
"Interest on Pound Sterling Revolving Loans shall be payable in Pounds
Sterling."
2.21 Section 4.7 the Agreement is amended by:
(a) inserting "or offshore Pound Sterling interbank markets" after
"offshore Dollar interbank markets;" and
(b) inserting the following after clause (4) thereof:
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"or (5) Pound Sterling deposits in the relevant amounts and for the
relevant Interest Period of a Pound Sterling Revolving Loan which is
an Offshore Rate Loan are not available to the Bank in the offshore
Pound Sterling inter-bank markets,"
2.22 Section 4.11 the Agreement is amended by inserting "or offshore
Pound Sterling deposits after "offshore Dollar deposits."
2.23 Section 4.13(a) the Agreement is amended by inserting the
following sentence after the second sentence therein:
"The commitment fee for Pound Sterling Revolving Loan Commitment shall
be payable in Dollars in an amount equal to the Dollar Equivalent of
the average daily unused amount of the Pound Sterling Revolving Loan
Commitment."
2.24 A new Section 4.15 is added to the Agreement after Section 4.14
as follows:
"4.15 COLLATERAL. All obligations shall be secured by the
Pledged Collateral, as defined in the Pledge Agreement."
2.25 Section 8.2(b) the Agreement is amended by deleting
"$15,000,000" and inserting "$12,491,000" in lieu thereof.
2.26 Section 8.6 the Agreement is amended by deleting "and" at the
end of clause (iii) in the proviso to such section, and inserting the following
at the end of such proviso:
"and (iv) the Borrower shall not cause, permit or suffer any
restrictions on dividends, distributions or other upstreaming of money
to the Borrower by any Subsidiary now owned or hereafter acquired by
the Borrower."
2.27 A new Exhibit C is added to the Agreement in the form of Exhibit
C hereto.
3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents
and warrants to the Bank that:
3.1 AUTHORITY. The Borrower has all the necessary power and has
taken all corporate action necessary to make this First Amendment, the
Agreement, and all other agreements and
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instruments executed in connection herewith and therewith, the legal, valid and
enforceable obligations they purport to be.
3.2 NO LEGAL OBSTACLE TO AGREEMENT. Neither the execution of this
First Amendment, the making by the Borrower of any borrowings under the
Agreement, nor the performance of the Agreement has constituted or resulted in
or will constitute or result in a breach of the provisions of any contract to
which the Borrower is a party, or the violation of any law, judgment, decree or
governmental order, rule or regulation applicable to Borrower, or result in the
creation under any agreement or instrument of any security interest, lien,
charge, or encumbrance upon any of the assets of the Borrower other than
pursuant to the Pledge Agreement. No approval or authorization of any
governmental authority is required to permit the execution, delivery or
performance by the Borrower of this First Amendment, the Agreement, or the
transactions contemplated hereby or thereby, or the making of any Borrowings by
the Borrower under the Agreement.
3.3 INCORPORATION OF CERTAIN REPRESENTATIONS. The representations
and warranties set forth in Section 4 of the Agreement are true and correct in
all respects on and as of the date hereof as though made on and as of the date
hereof.
3.4 DEFAULT. No Event of Default under the Agreement has occurred
and is continuing.
4. CONDITIONS, EFFECTIVENESS. The effectiveness of this First
Amendment shall be subject to the compliance by the Borrower with its agreements
herein contained, and to the delivery of the following to the Bank in form and
substance satisfactory to the Bank:
4.1 UPFRONT FEE. An upfront fee of $82,000. Such fee shall be
deemed earned by the Bank upon execution and delivery of this First Amendment,
and shall be nonreturnable whether or not this First Amendment remains effective
as contemplated by Section 5.2.
4.2 OTHER EVIDENCE. Such other evidence with respect to the Borrower
or any other person as the Bank or any Bank may reasonably request to establish
the consummation of the transactions contemplated hereby, the taking of all
corporate action in connection with this First Amendment and the Agreement and
the compliance with the conditions set forth herein.
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5. MISCELLANEOUS.
5.1 ADDITIONAL CLOSING MATTERS. (a) Concurrently with the closing
of Borrower's acquisition of Chrysalis, the Borrower shall deliver the following
in form and substance satisfactory to Bank:
(i) The Pledge Agreement duly executed and delivered by the
Borrower;
(ii) Certificates and instruments representing capital stock
having 66% of the voting power of the Borrower's Subsidiary referred
to in the Pledge Agreement, together with signed, undated stock
transfer powers executed in blank; and
(iii) the Chrysalis Note and all documents relating to
collateral therefor;
PROVIDED, HOWEVER, for purposes of closing this First Amendment, Borrower may
deliver to Bank facsimile copies of the foregoing with hardcopies to follow
promptly.
(b) Not later than 10 days after the day hereof, the Borrower shall
deliver, in form and substance satisfactory to Bank:
(i) CORPORATE PROCEEDINGS. Documents representing corporate
action taken by the Borrower, which documents may be in the form of
consents or other form satisfactory to the Bank, authorizing the
execution, delivery and performance of this First Amendment, certified
by the secretary or an assistant secretary of the Borrower as of the
date hereof.
(ii) INCUMBENCY CERTIFICATE. A certificate of the secretary or
an assistant secretary of the Borrower, dated the date hereof, as to
the incumbency and signature of the officers of the Borrower executing
on behalf of the Borrower this First Amendment.
5.2 CONDITION SUBSEQUENT TO EFFECTIVENESS. If Borrower's acquisition
of Chrysalis is not completed by March 31, 1995, this First Amendment shall
become null and void except for this paragraph from and after such date, and any
Loans advanced in contemplation of the First Amendment remaining effective shall
be immediately returned to the Bank with interest, and the failure to do so
shall be an immediate Event of Default under the Agreement.
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5.3 EFFECTIVENESS OF THE AGREEMENT. Except as provided in this
Amendment, and subject to Section 5.2, all of the terms and conditions of the
Agreement shall remain in full force and effect.
5.4 WAIVER. Section 7.9 of the Agreement is waived to the extent
that the Borrower shall be required only to pledge capital stock of the
Significant Subsidiary referred to in the Pledge Agreement having 66% of the
voting power thereof. This First Amendment is specific in time and in intent
and does not constitute, nor should it be construed as, a waiver of any right,
power or privilege under the Agreement, or any agreement, contract, indenture,
document or instrument mentioned in the Agreement; nor does it preclude other or
further exercise of any right, power, privilege or default hereunder, under the
Agreement or under any agreement, contract, indenture, document or instrument
mentioned in the Agreement. The Bank expressly reserves its right to exercise
any remedy available to it under the Agreement, or any agreement, contract,
indenture, document or instrument mentioned in the Agreement.
5.5 COUNTERPARTS. This First Amendment may be executed in any number
of counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument. This First Amendment shall not become
effective until the Borrower and the Bank shall have signed a copy hereof,
whether the same or counterparts, and the same shall have been delivered to the
Bank.
5.6 LEGAL FEES. Borrower shall pay all inhouse legal counsel fees
and expenses of the Bank incurred in connection with the preparation and
negotiation of this First Amendment when invoiced therefor.
5.7 JURISDICTION. This First Amendment, and any instrument or
agreement required hereunder, shall be governed by
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and construed under the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment as of the day and year first above written.
THE TODD-AO CORPORATION,
a Delaware corporation
By: /s/ COBURN T. HASKELL
-----------------------------
Title: Vice President--Controller
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:/s/ FRED L. THORNE
-----------------------
Fred L. Thorne
Vice President
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EXHIBIT C
PLEDGE AGREEMENT
This PLEDGE AGREEMENT ("Agreement"), dated as of March 13, 1995, is
made by TODD-AO CORPORATION, a Delaware corporation (the "Borrower") in favor of
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (the "Bank").
RECITAL
The Borrower is acquiring Chrysalis Television Facilities, Ltd., a
United Kingdom company, (the "Subsidiary"), and pursuant to that certain Credit
Agreement dated as of December 2, 1994, as amended or waived from time to time
(the "Credit Agreement") between the Borrower and the Bank of America National
Trust and Savings Association ("BofA"), Borrower is required to pledge the
Pledged Collateral to the Bank, all under the terms and conditions set forth in
this Agreement.
AGREEMENT
NOW, THEREFORE, in order to induce BofA to extend credit facilities to
the Borrower under the Credit Agreement, and for other good and valuable
consideration, the receipt and adequacy of which hereby is acknowledged,
Borrower hereby represents, warrants, covenants, agrees, and pledges as follows:
1. DEFINITIONS. Terms defined in the Credit Agreement and not
otherwise defined in this Agreement shall have the meanings given those terms in
the Credit Agreement as though set forth herein in full. The following terms
shall have the meanings respectively set forth after each:
"CERTIFICATES" means all certificates, instruments or other documents
now or hereafter representing or evidencing any Pledged Securities.
"CHRYSALIS NOTE" means each promissory note in favor of the Borrower
from the Subsidiary evidencing intercompany obligations owing from the
Subsidiary to the Borrower .
"PLEDGED COLLATERAL" means (i) any and all property of Borrower now or
hereafter pledged and delivered to the Bank for and on behalf of the Bank, (ii)
each Chrysalis Note together with any documentary evidence of any collateral
therefor and (iii) the Pledged Securities and the Certificates representing or
evidencing same, and any and all proceeds and products of any of the foregoing,
and any and all collections, dividends,
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distributions, redemption payments or liquidation payments with respect to any
of the foregoing, EXCEPT dividends or distributions actually paid to the
Borrower as permitted under the terms of the Credit Agreement.
"PLEDGED SECURITIES" means shares of the capital stock of the
Subsidiary, which shares have 66% of the voting power of all capital stock of
the Subsidiary, (1) any and all securities now or hereafter issued in
substitution, exchange or replacement therefor, or with respect thereto, (2) any
and all warrants, options or other rights to subscribe to or acquire any
additional capital stock of the Borrower (to the extent such additional capital
stock, together with that already pledged hereunder, would equal 66% of the
voting power of all such capital stock), and (3) any and all additional capital
stock of Subsidiary (to the extent such additional capital stock, together with
that already pledged hereunder, would equal 66% of the voting power of all such
capital stock).
2. REPRESENTATIONS AND WARRANTIES. The Borrower represents,
warrants and agrees that: (i) it has good title to the Pledged Collateral, free
from any liens, leases, encumbrances, defenses or other claims or restrictions
whatsoever; (ii) the security interest in the Pledged Collateral created hereby
constitutes a first, prior, and indefeasible security interest with respect to
such shares, and the possession by the Bank of the Certificates representing the
Pledged Securities will perfect the Bank's interest therein; (iii) it has the
right to transfer the Pledged Collateral pursuant to this Agreement without
restriction, and such shares have been duly and validly pledged to the Bank in
accordance with law; (iv) the Pledged Securities represent 66% of the voting
power of all capital stock of the Subsidiary, and (v) it shall provide such
additional endorsements, forms and writings and execute all documents and take
such other action as the Bank deems necessary to create and perfect a security
interest in the Pledged Collateral or as the Bank may at any time reasonably
request in connection with the administration or enforcement of this Agreement
or the administration of the Pledged Collateral.
3. CREATION OF SECURITY INTEREST.
(a) PLEDGE OF PLEDGED COLLATERAL. The Borrower hereby pledges
to the Bank and grants to Bank for the benefit of the Secured Parties a security
interest in and to all Pledged Collateral, together with all products, proceeds,
dividends, redemption payments, liquidation payments, cash, instruments and
other property, and any and all rights, titles, interests, privileges, benefits
and preferences appertaining or incidental to the Pledged Collateral. The
security interest and pledge created by
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this Section 3(a) shall continue in effect so long as any Obligation is owed to
the Bank.
(b) DELIVERY OF CERTAIN PLEDGED COLLATERAL. The Borrower shall
pledge and deliver the Pledged Collateral to the Bank. After the date hereof,
additional Pledged Collateral may from time to time be delivered to the Bank by
agreement between the Bank and the Borrower. All Pledged Collateral at any time
delivered to the Bank shall be in suitable form for transfer by delivery, or
shall be accompanied by duly executed instruments of transfer or assignment
undated in blank, all in form and substance satisfactory to the Bank. The Bank
shall hold all Pledged Collateral pledged hereunder on behalf of the Bank
pursuant to this Agreement.
3. SECURITY FOR OBLIGATIONS. This Agreement and the pledge and
security interests granted herein secure the prompt payment, in full in cash,
and full performance of, all Obligations, whether for principal, interest, fees,
expenses or otherwise, including, without limitation, all Obligations of the
Borrower now or hereafter existing under this Agreement, and all interest that
accrues on all or any part of any of the Obligations after the filing of any
petition or pleading against the Borrower, the Borrower or any other Person for
a proceeding under any bankruptcy or debtor relief law.
4. FURTHER ASSURANCES. The Borrower agrees that at any time, and
from time to time, at its own expense the Borrower will promptly execute,
deliver and file or record all further financing statements, instruments and
documents, and will take all further actions, including, without limitation,
causing the Borrower to so execute, deliver, file or take other actions, that
may be necessary or desirable, or that the Bank reasonably may request, in order
to perfect and protect any pledge or security interest granted hereby or to
enable the Bank to exercise and enforce the Bank's rights and remedies hereunder
with respect to any Pledged Collateral and to preserve, protect and maintain the
Pledged Collateral and the value thereof, including, without limitation, payment
of all taxes, assessments and other charges imposed on or relating to the
Pledged Collateral. The Borrower hereby consents and agrees that the issuers
of, or obligors on, the Pledged Collateral, or any registrar or transfer agent
or trustee for any of the Pledged Collateral, shall be entitled to accept the
provisions of this Agreement as conclusive evidence of the right of the Bank to
effect any transfer or exercise any right hereunder, notwithstanding any other
notice or direction to the contrary heretofore or hereafter given by the
Borrower or any other Person to such issuers or such obligors or to any such
registrar or transfer agent or trustee.
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<PAGE>
5. VOTING RIGHTS; DIVIDENDS; ETC. So long as no Event of Default
under the Credit Agreement occurs and remains continuing:
(a) VOTING RIGHTS. The Borrower shall be entitled to exercise
any and all voting and other consensual rights pertaining to the Pledged
Securities, or any part thereof, for any purpose not inconsistent with the terms
of this Agreement and the Credit Agreement; PROVIDED, HOWEVER, that the Borrower
shall exercise, or shall refrain from exercising, any such right if it would
result in a Default or an Event of Default.
(b) DIVIDEND AND DISTRIBUTION RIGHTS. The Borrower shall be
entitled to receive and to retain and use only those dividends or distributions
paid to the Borrower as permitted under the terms of the Credit Agreement;
PROVIDED, HOWEVER, that any and all such dividends or distributions received in
the form of capital stock shall be, and the Certificates representing such
capital stock forthwith shall be, to the extent required to make the
representation in Section 2(b)(iv) true and correct after giving effect to such
dividend, delivered to the Bank to hold as, Pledged Collateral and shall, if
received by the Borrower, be received in trust for the benefit of the Bank, be
segregated from the other property of the Borrower, and forthwith be delivered
to the Bank as Pledged Collateral in the same form as so received (with any
necessary endorsements).
6. RIGHTS DURING EVENT OF DEFAULT. When an Event of Default has
occurred and is continuing:
(a) VOTING, DIVIDEND, AND DISTRIBUTION RIGHTS. At the option of
the Bank, all rights of the Borrower to exercise the voting and other consensual
rights which it would otherwise be entitled to exercise pursuant to Section 5(a)
above, and to receive the dividends and distributions which it would otherwise
be authorized to receive and retain pursuant to Section 5(b) above, shall cease,
and all such rights shall thereupon become vested in the Bank who shall
thereupon have the sole right to exercise such voting and other consensual
rights and to receive and to hold as Pledged Collateral such dividends and
distributions. The Bank shall give notice thereof to the Borrower; PROVIDED,
HOWEVER, that (i) neither the giving of such notice nor the receipt thereof by
the Borrower shall be a condition to exercise of any rights of the Bank
hereunder, and (ii) the Bank shall incur no liability for failing to give such
notice.
(b) DIVIDENDS AND DISTRIBUTIONS HELD IN TRUST. All dividends
and other distributions which are received by the Borrower contrary to the
provisions of the Credit Agreement or
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<PAGE>
this Agreement shall be received in trust for the benefit of the Bank, shall be
segregated from other funds of the Borrower, and forthwith shall be paid over to
the Bank as Pledged Collateral in the same form as so received (with any
necessary endorsements).
(c) IRREVOCABLE PROXY. The Borrower hereby revokes all previous
proxies with regard to the Pledged Securities and appoints the Bank as its
proxyholder to attend and vote at any and all meetings of the shareholders of
the Subsidiary, and any adjournments thereof, held on or after the date of the
giving of this proxy and prior to the termination of this proxy and to execute
any and all written consents of shareholders of the Subsidiary on or after the
date of the giving of this proxy and prior to the termination of this proxy,
with the same effect as if the Borrower had personally attended the meetings or
had personally voted its shares or had personally signed the written consents;
PROVIDED, HOWEVER, that the proxyholder shall have rights hereunder only upon
the occurrence and during the continuance of an Event of Default under the
Credit Agreement, and that the Bank shall have instructed the proxyholder to
exercise voting rights with respect to the Pledged Securities or any of them.
The Borrower hereby authorizes the Bank to substitute another person as the
proxyholder and, upon the occurrence or during the continuance of any Event of
Default, hereby authorizes and directs the proxyholder to file this proxy and
the substitution instrument with the secretary of the appropriate corporation.
This proxy is coupled with an interest and is irrevocable until such time as all
Obligations have been paid and performed in full.
7. TRANSFERS AND OTHER LIENS. The Borrower agrees that, except as
specifically permitted under the Credit Agreement, it will not (i) sell, assign,
exchange, transfer or otherwise dispose of, or contract to sell, assign,
exchange, transfer or otherwise dispose of, or grant any option with respect to,
any of the Pledged Collateral, (ii) create or permit to exist any lien upon or
with respect to any of the Pledged Collateral, except for liens in favor of the
Bank, or (iii) take any action with respect to the Pledged Collateral which is
inconsistent with the provisions or purposes of this Agreement or the Credit
Agreement.
8. BANK APPOINTED ATTORNEY-IN-FACT. The Borrower hereby irrevocably
appoints the Bank as the Borrower's attorney-in-fact, with full authority in the
place and stead of the Borrower, and in the name of the Borrower, or otherwise,
from time to time, in the Bank's sole and absolute discretion to do any of the
following acts or things: (a) to do all acts and things and to execute all
documents necessary or advisable to perfect and continue perfected the security
interests created by this Agreement and to preserve, maintain and protect the
Pledged
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Collateral; (b) to do any and every act which the Borrower is obligated to do
under this Agreement; (c) to prepare, sign, file and record, in the Borrower's
name, any financing statement covering the Pledged Collateral; and (d) to
endorse and transfer the Pledged Collateral upon foreclosure by the Bank;
PROVIDED, HOWEVER, that the Bank shall be under no obligation whatsoever to take
any of the foregoing actions, and the Bank shall have no liability or
responsibility for any act (other than the Bank's own gross negligence or will-
ful misconduct) or omission taken with respect thereto. The Borrower hereby
agrees to repay immediately upon demand all reasonable costs and expenses
incurred or expended by the Bank in exercising any right or taking any action
under this Agreement, together with interest as provided for in the Credit
Agreement.
9. BANK MAY PERFORM OBLIGATIONS. If the Borrower fails to perform
any Obligation contained herein, the Bank may, but without any obligation to do
so and without notice to or demand upon the Borrower, perform the same and take
such other action as the Bank may deem necessary or desirable to protect the
Pledged Collateral or the Bank's security interests therein, the Bank being
hereby authorized (without limiting the general nature of the authority
hereinabove conferred) to pay, purchase, contest and compromise any lien which
in the reasonable judgment of the Bank appears to be prior or superior to the
Bank's security interests, and in exercising any such powers and authority to
pay necessary expense, employ counsel and pay reasonable attorneys' fees
(including incurring the allocated cost of Bank's inhouse counsel). The
Borrower hereby agrees to repay immediately upon demand all sum so expended by
the Bank, together with interest from the date of expenditure at the rates pro-
vided for in the Credit Agreement. The Bank shall be under no duty or
obligation to (1) preserve, maintain or protect the Pledged Collateral or any of
the Borrower's rights or interest therein, (2) exercise any voting rights with
respect to the Pledged Collateral, whether or not an Event of Default has
occurred or is continuing, or (3) make or give any notices of default,
presentments, demands for performance, notices of nonperformance or dishonor,
protests, notices of protest or notice of any other nature whatsoever in
connection with the Pledged Collateral on behalf of the Borrower or any other
Person having any interest therein; and the Bank does not assume and shall not
be obligated to perform the obligations of the Borrower, if any, with respect to
the Pledged Collateral.
10. REASONABLE CARE. The Bank shall in all events (and without
restriction on the limitations on liability of the Bank contained herein) be
deemed to have exercised reasonable care in the custody and preservation of the
Pledged Collateral in its possession if the Pledged Collateral is accorded
treatment substantially similar to that which the Bank accords its own
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property, it being understood that the Bank shall not have any responsibility
for (1) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Pledged
Collateral, whether or not the Bank has or is deemed to have knowledge of such
matters, or (2) taking any necessary steps to preserve rights against any Person
with respect to any Pledged Collateral.
11. EVENTS OF DEFAULT AND REMEDIES.
(a) RIGHTS UPON EVENT OF DEFAULT. Upon the occurrence and
during the continuance of an Event of Default under the Credit Agreement, the
Borrower shall be in default hereunder and the Bank shall have in any
jurisdiction where enforcement is sought, in addition to all other rights and
remedies that the Bank may have under this Agreement and under applicable law or
in equity, all rights and remedies of a secured party under the Uniform
Commercial Code as enacted in any such jurisdiction, and in addition the follow-
ing rights and remedies, all of which may be exercised with or without further
notice to the Borrower:
(i) to notify the Subsidiary that the Pledge Securities
have been pledged to the Bank and that all dividends and other
payments thereon are to be made directly and exclusively to the Bank;
to renew, extend, modify, amend, accelerate, accept partial payments
on, make allowances and adjustments and issue credits with respect to,
release, settle, compromise, compound, collect or otherwise liquidate,
on terms acceptable to the Bank, in whole or in part, the Pledged
Collateral and any amounts owing thereon or any guaranty or security
therefor; to enter into any other agreement relating to or affecting
the Pledged Collateral; and to give all consents, waivers and
ratification with respect to the Pledged Collateral and exercise all
other rights (including voting rights), powers and remedies and
otherwise act with respect thereto as if the Bank were the owner
thereof;
(ii) to enforce payment and prosecute any action or
proceeding with respect to any and all of the Pledged Collateral and
take or bring, in the Bank's name or in the name of the Borrower, all
steps, actions, suits or proceedings deemed by the Bank necessary or
desirable to effect collection of or to realize upon the Pledged
Collateral;
(iii) in accordance with applicable law, to take possession
of and operate or control the Pledged Collateral with or without judi-
cial process;
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(iv) to endorse, in the name of the Borrower, all checks,
notes, drafts, money orders, instruments and other evidences of
payment relating to the Pledged Collateral;
(v) to transfer any or all of the Pledged Collateral into
the name of the Bank or its nominee or nominees; and
(vi) in accordance with applicable law, to foreclose the
liens and security interests created under this Agreement or under any
other agreement relating to the Pledged Collateral by any available
judicial procedure or without judicial process, and to sell, assign or
otherwise dispose of the Pledged Collateral or any part thereof,
either at public or private sale or at any broker's board or
securities exchange, in lots or in bulk, for cash, on credit or on
future delivery, or otherwise, with or without representations or war-
ranties, and upon such terms as shall be acceptable to the Bank;
all at the sole option of and in the sole discretion of the Bank.
(b) APPOINTMENT OF A RECEIVER. Upon the occurrence and during
the continuance of an Event of Default, the Bank also shall have the right,
without notice or demand, either in person, by agent or by a receiver to be
appointed by a court (and the Borrower hereby expressly consents upon the occur-
rence and during the continuance of an Event of Default to the appointment of
such a receiver), and without regard to the adequacy of any security for the
Obligations, to take possession of the Pledged Collateral or any part thereof
and to exercise the proxy granted to the Bank under Section 6(c). Taking
possession of the Pledged Collateral shall not cure or waive any Event of
Default or notice thereof or invalidate any act done pursuant to such notice.
The rights, remedies and powers of any receiver appointed by a court shall be as
ordered by said court.
(c) NOTICE OF SALE. The Bank shall give the Borrower at least
five (5) days' written notice of sale of all or any part of the Pledged
Collateral. Any sale of the Pledged Collateral shall be held at such time or
times and at such place or places as the Bank may determine in the exercise of
its sole and absolute discretion. The Bank may bid (which bid may be, in whole
or in part, in the form of cancellation of Obligations) for and purchase for the
account of the Bank or any nominee of the Bank the whole or any part of the
Pledged Collateral. The Bank shall not be obligated to make any sale of the
Pledged Collateral if they shall determine not to do so regardless of the fact
that notice of sale of the Pledged Collateral may have been given.
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<PAGE>
The Bank may, without notice or publication, adjourn the sale from time to time
by announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned.
(d) PRIVATE SALES. Whether or not any of the Pledged Collateral
has been effectively registered under the Securities Act of 1933 or other
applicable laws, the Bank may, in its sole and absolute discretion, sell all or
any part of the Pledged Collateral at private sale in such manner and under such
circumstances as the Bank may deem necessary or advisable. Without limiting the
foregoing, the Bank may (i) approach and negotiate with a limited number of
potential purchasers, and (ii) restrict the prospective bidders or purchasers to
persons who will represent and agree that they are purchasing the Pledged
Collateral for their own account for investment and not with a view to the
distribution or resale thereof. In the event that any of the Pledged Collateral
is sold at private sale, the Borrower agrees that if the Pledged Collateral is
sold for a price which the Bank in good faith believe to be reasonable, then
(A) the sale shall be deemed to be commercially reasonable in all respects,
(B) the Borrower shall not be entitled to a credit against the Obligations in an
amount in excess of the purchase price, and (C) the Bank shall not incur any
liability or responsibility to the Borrower in connection therewith, notwith-
standing the possibility that a substantially higher price might have been
realized at a public sale. The Borrower recognizes that a ready market may not
exist for Pledged Collateral which is not regularly traded on a recognized
securities exchange, and that a sale by the Bank of any such Pledged Collateral
for an amount substantially less than a pro rata share of the fair market value
of the issuer's assets minus liabilities may be commercially reasonable in view
of the difficulties that may be encountered in attempting to sell a large amount
of Pledged Collateral or Pledged Collateral that is privately traded.
(e) TITLE OF PURCHASERS. Upon consummation of any sale of
Pledged Collateral pursuant to this Section 11, the Bank shall have the right to
assign, transfer and deliver to the purchaser or purchasers thereof the Pledged
Collateral so sold. Each such purchaser at any such sale shall hold the Pledged
Collateral sold absolutely free from any claim or right on the part of the
Borrower, and the Borrower hereby waives (to the extent permitted by applicable
law) all rights of redemption, stay and appraisal which it now has or may at any
time in the future have under any rule of law or statute now existing or
hereafter enacted. If the sale of all or any part of the Pledged Collateral is
made on credit or for future delivery, the Bank shall not be required to apply
any portion of the sale price to the Obligations until such amount actually is
received by the Bank, and any Pledged Collateral so sold may be retained by the
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<PAGE>
Bank until the sale price is paid in full by the purchaser or purchasers
thereof. The Bank shall not incur any liability in case any such purchaser or
purchasers shall fail to pay for the Pledged Collateral so sold, and, in case of
any such failure, the Pledged Collateral may be sold again upon like notice.
(f) DISPOSITION OF PROCEEDS OF SALE. The net cash proceeds
resulting from the collection, liquidation, sale or other disposition of the
Pledged Collateral shall be applied, FIRST, to the reasonable costs and expenses
(including reasonable attorneys' fees and the allocated cost of inhouse counsel)
of retaking, holding, storing, processing and preparing for sale, selling,
collecting and liquidating the Pledged Collateral, and the like; SECOND, to the
satisfaction of all Obligations in any order that the Bank may select in its
sole discretion; and, THIRD, to all other indebtedness secured hereby in such
order and manner as the Bank in its sole and absolute discretion may determine.
12. OTHER AGREEMENTS. Nothing herein shall in any way modify or
limit the effect of terms or conditions set forth in any other security or other
agreement in connection with the Obligations, whether or not executed by the
Borrower, but each and every term and condition hereof shall be in addition
thereto.
13. COVENANT NOT TO ISSUE UNCERTIFICATED SECURITIES. The Borrower
represents and warrants to the Bank that all of the capital stock of the
Subsidiary is in certificated form (as contemplated by Division 8 of the
California Commercial Code), and covenants to the Bank that it will not cause or
permit the Subsidiary to issue any capital stock in uncertificated form or seek
to convert all or any part of its existing capital stock into uncertificated
form (as contemplated by Division 8 of the California Commercial Code).
14. COVENANT NOT TO MAKE ADVANCES NOT EVIDENCED BY A CHRYSALIS NOTE.
The Borrower represents, warrants and covenants to the Bank that it will not
make any advances, investments, loans or other transfers of money to Chrysalis
which are not evidenced by a Chrysalis Note, and the Borrower covenants that it
will first deliver any such Chrysalis Note to the Bank as Pledged Collateral
hereunder.
15. COVENANT NOT TO DILUTE INTERESTS OF THE BANK IN PLEDGED
SECURITIES. The Borrower represents, warrants and covenants to the Bank that it
will not at any time cause or permit the Borrower (or any corporation whose
securities constitute Pledged Collateral) to issue any additional capital stock,
or any warrants, options or other rights to acquire any additional capital
stock.
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<PAGE>
16. FAILURE OR DELAY NOT A WAIVER. No delay or omission by the Bank
to exercise any right under this Agreement shall impair any such right, nor
shall it be construed to be a waiver thereof. No waiver of any single breach or
default under this Agreement shall be deemed a waiver of any other breach or
default.
17. NOTICES. Any communications between the parties hereto or
notices or requests provided herein to be given may be given by mailing the
same, postage prepaid, or by telex or telecopier, to each party at its address
set forth on the signature pages to the Credit Agreement, or to such other
addresses as each party may in writing hereafter indicate. Any notice, request
or demand to or upon the Bank shall not be effective until received.
18. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to
the benefit of the parties hereto and their respective successors and assigns;
PROVIDED, however, that the Borrower shall not assign this Agreement or any of
the rights of the Borrower hereunder without the prior written consent of the
Bank.
19. ENTIRE AGREEMENT. This Agreement and any agreement, document or
instrument attached hereto or referred to herein integrate all the terms and
conditions mentioned herein or incidental hereto, and supersede all oral
negotiations and prior writings in respect to the subject matter hereof. In the
event of any conflict or inconsistency between the terms, conditions and
provisions of this Agreement and any such agreement, document or instrument
required hereunder, the terms, conditions and provisions of this Agreement shall
prevail.
20. GOVERNING LAW. This Agreement, and any instrument or agreement
required hereunder, shall be governed by and construed under the laws of the
State of California.
21. SEVERABILITY OF PROVISIONS. The illegality or enforceability of
any provision of this Agreement or any instrument or agreement required
hereunder shall not in any way affect or impair the legality or enforceability
of the remaining provisions of this Agreement or any instrument or agreement
required hereunder.
22. COUNTERPARTS. This Agreement and any amendments, waivers,
consents or supplements may be executed in as many counterparts as may be deemed
necessary or convenient, and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same agreement. This
Agreement shall become effective as of the date first
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<PAGE>
written above upon the execution of a counterpart by the Bank and the Borrower
and by delivery thereof, or notice of such execution, to the Borrower and the
Bank.
23. AMENDMENT OR WAIVER OF AGREEMENT. No amendment or waiver of any
provision of this Agreement, and no consent with respect to any departure by the
Borrower shall be effective unless the same shall be in writing and signed or
acknowledged by the Bank, and then any such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
IN WITNESS WHEREOF, the Borrower has caused this Agreement to be duly
executed as of the date first above written.
"Borrower"
THE TODD-AO CORPORATION,
a Delaware corporation
By: /s/ COBURN T. HASKELL
Title: Vice President--Controller
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CONSENT OF GUARANTORS
Each of the undersigned, as a Guarantor under its Continuing Guaranty
dated as of December 2, 1994, hereby consents to the foregoing First Amendment
to Credit Agreement and confirms that its Continuing Guaranty remains in full
force and effect after giving effect thereto.
Dated: March 13, 1995
TODD-AO PRODUCTIONS INC.
TODD-AO STUDIOS EAST INC.
TODD-AO DIGITAL IMAGES
TODD-AO VIDEO SERVICES
TODD-AO STUDIOS WEST
By: /s/ Silas R. Cross
------------------
Title: V-P/TREASURER
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