<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MAY 31, 1996
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number: 0-1461
THE TODD-AO CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-1679856
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation)
172 GOLDEN GATE AVENUE, SAN FRANCISCO, CALIFORNIA 94102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 928-3200
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- ------
The number of shares of common stock outstanding at July 8, 1996
was: 6,494,927 Class A Shares and 1,747,181 Class B Shares.
<PAGE>
THE TODD-AO CORPORATION
QUARTERLY REPORT ON FORM 10-Q
MAY 31, 1996
INDEX
- --------------------------------------------------------------------------------
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following financial statements are filed herewith:
Consolidated Balance Sheets, May 31, 1996
and August 31, 1995. Page 3
Consolidated Statements of Income and Retained Earnings
for the Nine Months and Three Months Ended
May 31, 1996 and 1995. Page 5
Consolidated Statements of Cash Flows for the Nine Months
Ended May 31, 1996 and 1995. Page 6
Notes to Consolidated Financial Statements for the
Nine Months Ended May 31, 1996. Page 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS Page 10
PART II - OTHER INFORMATION
ITEM 1.
Legal Proceedings Page 13
ITEM 4.
Submission of Matters to a Vote of Security Holders Page 13
ITEM 6.
Exhibits and Reports on Form 8-K Page 13
Signature Page 14
<PAGE>
PART I - FINANCIAL INFORMATION
THE TODD-AO CORPORATION
CONSOLIDATED BALANCE SHEETS
MAY 31, 1996 and AUGUST 31, 1995
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
MAY 31, AUGUST 31,
1996 1995
----------- ----------
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 3,263 $ 5,278
Marketable securities 2,685 3,484
Trade receivables
(net of allowance for doubtful
accounts of $663 at May 31, 1996
and $828 at August 31, 1995) 11,043 6,787
Inventories (first-in first-out basis) 661 484
Prepaid income taxes 727
Deferred income taxes 805 924
Other 552 565
-------- --------
Total current assets 19,009 18,249
-------- --------
INVESTMENTS 1,336 1,656
-------- --------
PROPERTY AND EQUIPMENT - at cost:
Land 4,270 4,270
Buildings 10,773 10,762
Leasehold improvements 6,802 6,802
Lease acquisition costs 2,187 2,187
Equipment 37,022 30,734
Equipment under capital leases 3,163 3,163
Construction in progress 122
-------- --------
Total 64,339 57,918
Accumulated depreciation and
amortization (29,113) (22,955)
-------- --------
Property and equipment - net 35,226 34,963
-------- --------
GOODWILL - net 1,738 1,832
-------- --------
OTHER ASSETS 375 498
-------- --------
TOTAL $ 57,684 $ 57,198
-------- --------
-------- --------
See notes to consolidated financial statements.
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3
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THE TODD-AO CORPORATION
CONSOLIDATED BALANCE SHEETS
MAY 31, 1996 and AUGUST 31, 1995
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
MAY 31, AUGUST 31,
1996 1995
----------- ----------
LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,517 $ 1,784
Accrued liabilities:
Payroll and related taxes 1,918 1,975
Interest 129 179
Equipment lease 300 396
Other 382 515
Income taxes payable 654
Current maturities of long-term debt 615 759
Capitalized lease obligations - current 867 897
Deferred income 446 703
-------- --------
Total current liabilities 7,828 7,208
LONG-TERM DEBT 6,065 7,707
CAPITALIZED LEASE OBLIGATIONS 68 620
DEFERRED COMPENSATION 265 401
DEFERRED GAIN ON SALE OF EQUIPMENT 5,277 6,381
DEFERRED INCOME TAXES 3,587 3,683
-------- --------
Total liabilities 23,090 26,000
-------- --------
SHAREOWNERS' EQUITY:
Common Stock:
Class A authorized 30,000,000 shares
of $0.25 par value; issued 6,488,727
at May 31, 1996 and 6,403,021 at
August 31, 1995 1,622 1,600
Class B authorized 6,000,000
shares of $0.25 par value;
issued and outstanding 1,747,181 437 437
Additional capital 20,985 21,048
Retained earnings 11,605 7,904
Unrealized gains on marketable securities
and long-term investments 204 473
Cumulative foreign currency translation adjustment (259) (264)
-------- --------
Total shareowners' equity 34,594 31,198
-------- --------
TOTAL $ 57,684 $ 57,198
-------- --------
-------- --------
See notes to consolidated financial statements.
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4
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THE TODD-AO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE NINE MONTHS AND THREE MONTHS ENDED MAY 31, 1996 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS THREE MONTHS
------------------------ ------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $ 48,140 $ 37,125 $ 16,801 $ 18,290
-------- -------- -------- --------
COSTS AND EXPENSES:
Operating costs and other expenses 37,231 29,405 12,952 12,872
Depreciation and amortization 3,967 3,014 1,379 1,444
Interest 531 320 145 220
Equipment lease expense - net 415 371 71 222
Other expense (income) - net (554) (223) (179) (271)
-------- -------- -------- --------
Total 41,590 32,887 14,368 14,487
-------- -------- -------- --------
INCOME BEFORE JOINT VENTURE
AND INCOME TAXES 6,550 4,238 2,433 3,803
LOSS FROM JOINT VENTURE 117 167 0 58
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 6,433 4,071 2,433 3,745
INCOME TAXES 2,371 1,452 861 1,416
-------- -------- -------- --------
NET INCOME 4,062 2,619 $ 1,572 $ 2,329
-------- --------
-------- --------
RETAINED EARNINGS BEGINNING OF PERIOD 7,904 11,087
LESS: DIVIDENDS PAID (361) (326)
-------- --------
RETAINED EARNINGS END OF PERIOD $ 11,605 $ 13,380
-------- --------
-------- --------
NET INCOME PER COMMON SHARE
AND COMMON SHARE EQUIVALENT $ .46 $ .31 $ .18 $ .28
-------- -------- -------- --------
-------- -------- -------- --------
AVERAGE SHARES OUTSTANDING 8,805,359 8,351,588 8,883,035 8,365,544
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
See notes to consolidated financial statements.
5
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THE TODD-AO CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MAY 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
1996 1995
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,062 $ 2,619
Adjustments to reconcile net
income to net cash provided
by (used in) operating activities:
Depreciation and amortization 3,967 3,014
Deferred income taxes 23 845
Loss from joint venture 167
Deferred compensation and other (136) (107)
Amortization of deferred gain
on sale of equipment (1,104) (612)
Loss on sale of marketable
securities and investments 42 29
Changes in assets and liabilities:
Trade receivables (4,022) (4,459)
Inventory and other current assets (16) (222)
Accounts payable and accrued
liabilities 103 1,233
Accrued equipment lease (96) 394
Income taxes 1,212 433
Deferred income (257) 347
-------- --------
Net cash flows provided by
operating activities: 3,778 3,681
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities
and investments (73) (489)
Proceeds from sale of marketable
securities and investments 881 1,159
Capital expenditures (3,317) (2,638)
Contributions to joint venture (167)
Purchase of Skywalker Sound South (6,966)
Purchase of Chrysalis Television
Facilities Ltd. (8,002)
Other assets 128 1
-------- --------
Net cash flows (used in)
investing activities: (2,381) (17,102)
-------- --------
CONTINUED ON PAGE 7
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6
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THE TODD-AO CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MAY 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
1996 1995
---- ----
CONTINUED FROM PAGE 6
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt 2,175 7,714
Payments of long-term debt (4,516) (84)
Payments on capital lease obligation (669) (820)
Proceeds from sale/leaseback transaction 11,218
Proceeds from issuance of common stock 519 60
Treasury stock transactions (560)
Dividends paid (361) (326)
------- -------
Net cash flows provided by (used in)
financing activities: (3,412) 17,762
------- -------
Effect of exchange rate changes on cash (13)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (2,015) 4,328
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 5,278 606
------- -------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 3,263 $ 4,934
------- -------
------- -------
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 581 $ 117
------- -------
------- -------
Income taxes $ 2,495 $ 675
------- -------
------- -------
See notes to consolidated financial statements.
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7
<PAGE>
THE TODD-AO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
If complete notes were to accompany these statements they would be substantially
in the same form as those to the Company's Financial Statements for the Year
Ended August 31, 1995. In addition the following notes are applicable:
1. In the opinion of management for the Company, all adjustments (which
comprise only normal recurring accruals) necessary for a fair presentation
of the results of operations have been included.
2. The consolidated financial statements include the Company and its wholly
owned subsidiaries Todd-AO Studios East, Inc. ("Todd-AO East"), Todd-AO
Productions, Inc., Todd-AO Digital Images, Inc. ("TDI"), Todd-AO Video
Services, Inc. ("TVS"), Todd-AO Studios West ("TSW"), Todd-AO Europe
Holding Ltd. ("TAO Europe"), Todd-AO Preservation Services and Todd-AO's
Land of the Future. All significant intercompany balances and transactions
have been eliminated.
3. Net income per common share is computed based on the weighted average
number of common and common equivalent shares outstanding for each of the
years presented including common share equivalents arising from the assumed
exercise of any outstanding dilutive stock options.
4. On February 15, 1995, TSW (a wholly owned subsidiary of the Company)
acquired substantially all of the property, equipment and inventory of
Kaytea Rose, Inc. (dba Skywalker Sound South) ("SSS"). TSW provides post
production sound services to the film and television industries. In
consideration of the purchase, TSW paid $6,966 in cash. TSW is included in
the Company's results of operations from February 1995.
On March 16, 1995 TAO Europe (formerly FCB 1120, Ltd.) (a wholly owned
subsidiary of the Company) acquired all of the outstanding shares of
Chrysalis/Todd-AO Europe Ltd. ("Chrysalis") (formerly Chrysalis Television
Facilities, Ltd.) from Chrysalis Holdings Ltd. ("CHL"). TAO Europe,
Chrysalis and CHL are all corporations organized under the laws of the
United Kingdom and headquartered in London. Chrysalis specializes in the
collation of television programming for satellite broadcast and also
provides post production video and other services to a variety of clients.
In consideration of the purchase, TAO Europe paid CHL $1,966 in cash at
closing and issued a note in the amount of $1,364. An additional cash
settlement of $220 was paid in June 1995. Concurrently with the
acquisition, TAO Europe advanced and paid on behalf of Chrysalis its
intercompany debt to CHL in the amount of $4,585. Subsequent to the
acquisition, TAO Europe advanced and paid on behalf of Chrysalis other debt
in the amount of $1,562. TAO Europe and Chrysalis consolidated are
included in the Company's results of operations from March 1995.
The acquisitions are being accounted for under the purchase method of
accounting. The following unaudited pro forma consolidated financial
information for the nine months ended May 31, 1995 is presented as if the
acquisitions of TSW and TAO Europe had occurred on September 1, 1994. Pro
forma adjustments for TSW are primarily to operating expenses related to
nonapplicable allocations made by the parent corporation of SSS,
depreciation expense relating to the acquisition of assets, interest
expense on borrowings in connection with the acquisition and income
8
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taxes. Pro forma adjustments for TAO Europe are primarily to amortization
expense relating to allocation of the purchase price, interest expense on
borrowings in connection with the acquisition and income taxes.
1995
Revenues $ 46,224
---------
---------
Net income $ 2,761
---------
---------
Net income per common share $ 0.33
---------
---------
5. The Company has a stock repurchase program under which 1,300,000 shares may
be purchased from time to time in the open market or in private
transactions. As of May 31, 1996, 795,146 shares had been repurchased.
All of these shares have been cancelled and returned to authorized but
unissued status.
6. On August 11, 1995 a 10% stock dividend was declared for holders of Class A
and Class B stock, payable on September 29, 1995 to shareholders of record
on September 8, 1995.
The financial statements set forth herein, and applicable share and per
share data for periods and dates included in the accompanying financial
statements and notes, have been adjusted to retroactively reflect the stock
dividend.
7. The Company is in the process of organizing a limited liability company
("LLC") with United Artists Theatre Circuit, Inc., an operator of motion
picture theatres ("UATC") for the purpose of exploiting proprietary
technology to conserve film stock and reduce the length of wide screen film
release prints. The technology, known as "Compact Distribution Print" or
"CDP", is in the final stages of development. It is anticipated that the
Company and UATC will each have a 50% interest in any profits of the LLC,
which is known as "CDP Limited Liability Company".
In April 1996 TAO Europe (a wholly owned subsidiary of the Company)
acquired all the outstanding shares of Filmatic Laboratories, Ltd.
("Filmatic"), a London based film processing and video post production
company for the sum of $1. Concurrently with the acquisition, TAO Europe
advanced and paid on behalf of Filmatic bank debt in the amount of $555.
While the acquisition is integral to the Company's goals, it is not
material to the Company's consolidated financial statements.
The Company announced in June 1996 that it is in negotiations to acquire
Editworks, a limited liability company, based in Atlanta, Georgia and
engaged in the business of providing a full range of video tape editorial
post production services. Editworks is the DBA name for Edit Acquisition
LLC.
9
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
1. Material Changes in Financial Condition
In December 1994 the Company signed agreements with its bank to implement
the sale/leaseback of certain equipment and a long-term revolving to term
loan credit agreement. An aggregate of $11,218 was sold and leased back on
December 30, 1994. The sale/leaseback agreement terminates on December 30,
1999. Amendments to the credit agreement in March 1995, April 1996 and
June 1996 have increased the amount available from $10,000 to $28,000. In
addition, the June 1996 amendment converted the credit agreement from a
revolving to term facility to a reducing revolving facility. Under the
credit agreement, the Company may borrow up to $28,000 in revolving loans
until February 28, 2000. On that date and quarterly thereafter until the
expiration of the agreement on November 30, 2003, the revolving loan
commitment shall reduce by 5% of the original loan commitment. These
credit facilities are available for general corporate purposes, capital
expenditures and acquisitions. Management believes that the proceeds from
the sale/leaseback and the borrowings available under the credit facility
will be sufficient to meet the needs of the Company for the foreseeable
future.
In February 1995 the Company used $6,878 of the proceeds from the
sale/leaseback agreement to acquire substantially all of the property,
equipment and inventory of Skywalker Sound South.
In March 1995 the Company used $7,726 under the credit agreement in
connection with the acquisition of Chrysalis Television Facilities Ltd.
As of May 31, 1996 the Company has $5,327 outstanding under the credit
agreement.
The Company expects capital expenditures of approximately $7,000 for its
Los Angeles, New York City and London facilities in fiscal 1996. These
capital expenditures will be financed by bank leasing and credit facilities
and by internally generated funds.
2. Material Changes in Results of Operations
YEAR-TO-DATE
Total revenues increased 29.7% ($11,015) and operating costs and expenses
increased 26.6% ($7,826).
SOUND SERVICES:
Sound studio revenues in California and New York increased $4,367. Revenue
increases were due primarily to the inclusion of Todd-AO Studios West
("TSW") ($4,241) acquired in February 1995.
Sound studio operating costs and expenses increased $2,864 primarily due to
the inclusion of TSW acquired in February 1995.
VIDEO SERVICES:
Total video services revenues increased $6,648. Revenues increased $5,643
due to the acquisition of Chrysalis/Todd-AO Europe, Ltd.
10
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("Chrysalis") in March 1995 and $338 due to the acquisition of Todd-AO
Filmatic ("Filmatic") in April 1996. Todd-AO Video Services ("TVS")
increased $872 and Todd-AO Digital Images ("TDI") revenues decreased $205
in the current year.
Increases in operating costs and expenses attributable to Chrysalis,
Filmatic and TVS were $4,882 and are related to the revenue increases
described above.
CORPORATE:
Depreciation and amortization increased 31.6% ($953) primarily due to the
inclusion of TSW and Chrysalis in the current year.
Equipment lease expense net of gain on sale of equipment in connection with
a sale/leaseback agreement entered into in December 1994 with the Company's
institutional lender is $415 and interest expense primarily due to
borrowings in connection with acquisitions is $531.
A net increase in other income of $331 is primarily due to the following:
non-recurring provision adjustments of $215 and $218 due to the favorable
settlement of a contested claim and prior year business taxes; other
provision adjustments and a prior year severance cost totalling $302;
current year research and development costs ($112) and a decrease of $254
due to stock appreciation rights provision adjustments in the current and
prior year.
As a result of the above, income before taxes increased $2,362 and net
income increased $1,443.
CURRENT QUARTER
Total revenues decreased 8.1% ($1,489) and operating costs and expenses
remained the same. In the prior year, the ratio of operating costs to
revenue were low due to certain favorable contracts and arrangements. In
the current year, the ratio of operating costs to revenue returned to a
more normal level. In addition, certain fixed costs increased by
approximately $300 in the current year.
SOUND SERVICES:
Sound studio revenues in California and New York decreased $2,166. Revenue
decreases at the Los Angeles studios were due primarily to decreases in
feature film editing, scoring and ancillary services. Revenues at TSW and
the New York studios decreased due to an exceptional quarter in the prior
year which included services performed on the feature films "Die Hard 3" at
TSW and "Apollo 13" (which won the Academy Award for sound this year) in
New York.
Sound studio operating costs and expenses decreased $812 due to the revenue
decreases described above.
VIDEO SERVICES:
Total video services revenues increased $677. Revenues increased $338 due
to the acquisition of Todd-AO Filmatic ("Filmatic") in April 1996.
Chrysalis increased $196 and TVS increased $360. Todd-AO Digital Images
("TDI") revenues decreased $217.
11
<PAGE>
Increases in operating costs and expenses attributable to TVS, Filmatic and
Chrysalis were $904. These include corporate overhead costs of $192 in the
current year.
CORPORATE:
Depreciation and amortization decreased $65.
Equipment lease expense net of gain on sale of equipment in connection with
a sale/leaseback agreement entered into in December 1994 with the Company's
institutional lender is $71 and interest expense primarily due to
borrowings in connection with acquisitions is $145.
A net decrease in other income of $92 is primarily due to the following: a
non-recurring provision adjustment of $218 due to the favorable settlement
of prior years business taxes; $83 decrease in interest and dividend
income; other provision adjustments and a decrease of $183 due to stock
appreciation rights adjustments in the prior year.
As a result of the above, income before taxes decreased $1,312 and net
income decreased $757.
12
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in litigation and similar claims incidental to the
conduct of its business. None of the pending actions is considered
material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 6, 1996 the Company filed a definitive Information Statement
relating to the adoption of a Restated Certificate of Incorporation (the
"Restated Certificate") by Majority Consent of Stockholders. The
Information Statement was sent to stockholders on or about May 13, 1996.
The purpose for the Restated Certificate was to modernize the previous
Certificate of Incorporation and to eliminate obsolete provisions. The
Restated Certificate increased the number of authorized Class A and Class B
shares to 30,000,000 and 6,000,000 respectively but did not make any other
material changes to the existing documents. Adoption of the Restated
Certificate required the written consent of a majority of the 6,442,877
Class A shares and a majority of the 1,747,178 Class B Shares outstanding
as of March 29, 1996, and the written consents of at least 3,257,666 Class
A Shares and 1,703,636 Class B shares were obtained.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a). (1) Agreement for the acquisition of the entire issued share capital
of Filmatic Laboratories Ltd. dated as of April 18, 1996 between
David L. Gibbs, Ian Magowan and Todd-AO Europe Holding Company
Ltd.
(2) Third amendment dated June 14, 1996 to Credit Agreement dated as
of December 2, 1994 between The Todd-AO Corporation and Bank of
America National Trust and Savings Association.
(3) Exhibit 27 Financial Data Schedule.
13
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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
July 12, 1996 /s/ Silas R. Cross
- ----------------- --------------------------
Date Silas R. Cross
Chief Accounting Officer
<PAGE>
DATED APRIL 18, 1996
---------------------------------------------
(1) DAVID GIBBS AND IAN MAGOWAN
(2) TODD-AO EUROPE HOLDING COMPANY LIMITED
----------------------------------------------
AGREEMENT
FOR THE ACQUISITION OF THE ENTIRE
ISSUED SHARE CAPITAL OF
FILMATIC LABORATORIES LIMITED
----------------------------------------------
FRERE CHOLMELEY BISCHOFF
4 John Carpenter Street
London EC4Y 0NH
Tel: 0171-615 8000
Fax: 0171-615 8080
Ref: SJH/SES
<PAGE>
INDEX
PAGE NO.
--------
1. INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . 1
2. CONDITION PRECEDENT . . . . . . . . . . . . . . . . . . . . . 3
3. AGREEMENT FOR SALE . . . . . . . . . . . . . . . . . . . . . 5
4. CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . 5
5. PERIOD BEFORE COMPLETION . . . . . . . . . . . . . . . . . . 5
6. COMPLETION . . . . . . . . . . . . . . . . . . . . . . . . . 6
7. SELLERS' OBLIGATIONS ON COMPLETION . . . . . . . . . . . . . 7
8. BUYER'S OBLIGATIONS ON AND AFTER COMPLETION . . . . . . . . . 8
9. WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . 8
10. PROTECTION OF THE INTERESTS OF THE BUYER . . . . . . . . . . 9
11. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . 10
SCHEDULE 1
THE SELLERS . . . . . . . . . . . . . . . . . . . . . . . . . 13
SCHEDULE 2
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . 14
SCHEDULE 3
TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . 15
SCHEDULE 4
WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . 21
SCHEDULE 5
LIMITATIONS OF LIABILITY . . . . . . . . . . . . . . . . . . 36
AGREED FORM DOCUMENTS:
Auditors' Resignation
Certificate of non-crystallisation
Disclosure Letter
Assignment of Winkwell Indebtedness
Employment Agreements
Power of Attorney
Release of Guarantee
Resignation of Director/Secretary
Completion Board Minutes
i
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THIS AGREEMENT is made on April 18, 1996
BETWEEN:
(1) THE INDIVIDUALS whose names and addresses are set out in schedule 1 (the
"Sellers"); and
(2) TODD-AO EUROPE HOLDING COMPANY LIMITED a company registered in England
under number 3014792 whose registered office is at 4 John Carpenter
Street, London EC4Y 0NH (the "Buyer").
RECITAL:
The Sellers wish to sell and the Buyer wishes to buy the entire issued share
capital of Filmatic Laboratories Limited on the terms of this Agreement.
IT IS AGREED as follows:
I. INTERPRETATION
A. In this Agreement:
"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 period ended on the Accounts Date, together with any notes on them
and any reports or statements attached to them;
"ACCOUNTS DATE" means 31 March 1995;
"BUYER'S SOLICITORS" means Frere Cholmeley Bischoff of 4 John Carpenter
Street, London EC4Y 0NH;
"CLAIM" means any claim for breach of a Warranty or any claim under the
Tax Covenant;
"COMPANY" means Filmatic Laboratories Limited, details of which are set
out in schedule 2;
"COMPLETION" means completion of the sale and purchase of the Shares in
accordance with clause 6;
"COMPLETION DATE" means the date on which Completion takes place;
"COVENANTS" means the covenants of the Sellers contained in clause 10.1;
"DISCLOSURE LETTER" means the disclosure letter in the agreed form from
the Sellers to the Buyer, dated with the date of this Agreement and any
supplements thereto
1
<PAGE>
in the agreed form, together with the documents attached to that letter;
"EMPLOYEES" means the employees of the Company;
"ENCUMBRANCE" means any mortgage, charge, lien, option, encumbrance or
other right or interest of any third party (including any right of pre-
emption or first refusal) or any agreement to create any of the
foregoing;
"INDEBTEDNESS" means all borrowing or indebtedness in the nature of
borrowing including, without limitation, all amounts owed in respect of
accrued interest and in respect of finance leases, hire purchase
agreements or other arrangements having the characteristics of borrowing;
"INTELLECTUAL PROPERTY RIGHTS" means all patents, trade marks, service
marks, trade names, registered designs, design rights, copyright, moral
rights, rights relating to confidential information or know-how and other
intellectual property rights, in each case whether registered or
unregistered, and all equivalent or similar rights or forms of protection
anywhere in the world;
"SELLERS' SOLICITORS" means Holman, Fenwick & Willan of Marlow House,
Lloyds Avenue, London EC3N 3AL;
"SHARES" means all the issued shares of the Company, being 130,450
ordinary shares of L1 each;
"TAXATION" has the meaning given to it in schedule 3;
"TAX COVENANT" means the covenant given by the Sellers pursuant to clause
9.6 and schedule 3;
"TAXES ACT" means the Income and Corporation Taxes Act 1988;
"VATA" means the Value Added Tax Act 1994;
"WARRANTIES" means the warranties and representations set out in schedule
4; and
"EMPLOYMENT AGREEMENTS" means agreements in the agreed form between the
Company and the Sellers.
B. In this Agreement, unless express contrary provision is made:
1. a reference to a statute or a provision of a statute includes a
reference to any subordinate legislation (as defined in s.21(1)
Interpretation
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Act 1978) made under it and to that statute or provision as amended,
repealed and/or re-enacted from time to time, and to any previous
statute or provision which was repealed and/or re-enacted by it;
2. a reference to a clause or schedule or to the parties is a reference
to a clause or schedule or to the parties of or to this Agreement,
and a reference to a paragraph is a reference to the schedule in
which that reference appears;
3. a reference to the "agreed form" of a document is to that document
in terms agreed between and initialled by or on behalf of the
Sellers and the Buyer before execution of this Agreement;
4. a reference to a breach of any Warranty includes a reference to the
existence of circumstances which are inconsistent with that
Warranty;
5. a reference to an agreement includes any form of arrangement,
whether or not in writing and whether or not legally binding; and
6. a reference to either Seller includes his personal
representatives.
C. The headings shall not affect the construction of this Agreement.
D. The schedules form part of this Agreement.
E. People will be taken to be connected if they would be treated as
connected for the purposes of s.839 Taxes Act as in effect on the date of
this Agreement.
F. Any undertaking by a party not to do any act or thing includes an
undertaking not to allow, cause or assist the doing of that act or thing.
G. Where any statement in this Agreement is qualified by the expression "so
far as the Sellers are aware" or any similar expression, the Sellers
shall be deemed to be aware of all matters which would have been revealed
to either of them or any of their professional advisers as a result of
due enquiry of all appropriate people. Any opinion, expectation or
belief recorded in the Disclosure Letter as being given or held by the
Sellers shall be deemed to include a further statement that the opinion,
expectation or belief in question is fairly and honestly held and has
been arrived at after such due enquiry.
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H. All obligations of the Sellers under this Agreement shall be joint and
several unless expressly stated otherwise.
II. CONDITION PRECEDENT
A. Clauses 1, 2, 5 and 11 shall have effect immediately after this Agreement
is executed. The remaining provisions of this Agreement shall not have
effect unless and until each of the following conditions is satisfied or
(where permitted by clause 2.2) waived on or before 5.30pm on 30 April
1996:
1. the Company's annual accounts for the financial period ending 31
March 1996 (together with the directors' report for that financial
period and of the auditors' report on those accounts) being
satisfactory to the Buyer in its sole discretion;
2. the balance sheet of the Company as at 31 March 1996 comprised in
those accounts disclosing that the value of the assets of the
Company exceed the amount of its liabilities after making the
following adjustments to the Company's balance sheet:
a. reducing the amount of the liabilities of the Company by the sum
of L172,000;
b. increasing the value of the fixed assets of the Company to an
amount L100,000 higher than their book value as at 31 March
1996;
c. reducing the liabilities of the Company by an amount equal to
the Indebtedness assigned pursuant to the assignment referred to
in clause 7.1(h);
3. the Buyer being satisfied that all cheques drawn on and withdrawals
made from any bank account of the Company after 1 April 1996 have
been so drawn or made in the ordinary course of business and that no
interest has been charged by Barclays Bank plc since that date;
4. the Company capitalising all or part of the Indebtedness of the
Company to Barclays Bank plc immediately before Completion and/or
Barclays Bank plc assigning to the Buyer all or part of the
Indebtedness of the Company to Barclays Bank plc immediately before
Completion and giving a release of all security interests in respect
of assets of the Company, in each case on terms satisfactory to the
Buyer in its sole discretion; and
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5. the Buyer being satisfied with the progress made in relation to the
integration of the Company's pension scheme with the group personal
pension scheme operated by Chrysalis Todd-AO Europe Limited
B. The Buyer may waive any or all of the conditions in clause 2.1. Any such
waiver (which for the purposes of this clause may comprise an extension
of the time allowed for satisfaction of any relevant conditions) may be
given unconditionally or subject to such conditions as may be imposed in
the absolute discretion of the Buyer.
C. If the conditions in clause 2.1 are not satisfied or waived (where
permitted by clause 2.2) on or before 5.30pm on the date specified in
clause 2.1, this Agreement shall terminate. In the event of termination,
the parties shall have no further rights or obligations under this
Agreement other than accrued rights and obligations at the time of
termination.
III. AGREEMENT FOR SALE
A. On Completion the Sellers shall sell with full title guarantee, and the
Buyer shall buy, the Shares.
B. The Shares shall be sold free from all Encumbrances, and together with
the right to receive dividends and other distributions declared, made or
paid by the Company on or after the date of this Agreement and all other
rights attaching to them on or after that date. No dividends will be
declared and/or paid prio to the acquisition date.
C. Each Seller waives all rights of pre-emption in respect of any of the
Shares conferred on him by the articles of association of the Company or
in any other way.
IV. CONSIDERATION
The consideration for the sale of the Shares shall be the payment by the
Buyer to the Sellers of the aggregate sum of L1 in accordance with clause
8.1. Each Seller shall be entitled to the percentage of each such
payment set against his name in column 4 of schedule 1.
V. PERIOD BEFORE COMPLETION
A. The Sellers shall ensure that throughout the period starting on the date
of this Agreement and ending on Completion and save with the prior
written consent of the Buyer:
1. the business of the Company is conducted in the
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ordinary and proper course and so as to maintain it as a going
concern;
2. no alteration is made in the memorandum or articles of association
of the Company, no share in the capital of the Company and no
debenture of the Company is issued or agreed to be issued and no
appointment is made to the board of directors of the Company;
3. no person is engaged as an Employee or a consultant to the Company,
every reasonable endeavour is used to retain the services of the
Employees and the consultants to the Company at the date of this
Agreement and the Buyer is informed as soon as is reasonably
practicable of any Employee who gives notice;
4. the insurance policies of the Company in effect at the date of this
Agreement are maintained in full force and effect without reduction
in value or scope of cover;
5. no dividend or other distribution is declared, paid or made by the
Company;
6. no resolution of the Company is passed in general meeting;
7. none of the Warranties would be breached if given as at any time
during the period starting on the date of this Agreement and ending
on Completion with reference to the facts then existing (and on the
assumption that any reference in any Warranty to the date of this
Agreement is a reference to that time); and
8. the Buyer and any person authorised by the Buyer are given access at
all times during normal business hours to the Company's records,
assets and employees and are permitted to make copies of such
documents belonging to the Company or in its possession, and
promptly supplied with such information relating to the Company, as
any of them may from time to time reasonably require.
B. The Sellers shall immediately notify the Buyer of any matter which would
or might give rise to a breach of clause 5.1.
C. The Buyer may by notice to the Sellers given at any time before
Completion postpone Completion by up to seven business days, or terminate
this Agreement without liability on its part, if it becomes aware of any
matter
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which the Sellers would be required to notify to it under clause 5.2.
The Buyer's rights under this clause, and Completion notwithstanding any
matter required to be notified to the Buyer, shall be without prejudice
and in addition to all other rights which the Buyer may have as a result
of the matter in question. In the event of termination, the parties
shall have no further rights or obligations under this Agreement other
than accrued rights and obligations at the time of termination.
VI. COMPLETION
A. Subject to clause 6.2, Completion shall take place at the offices of the
Buyer's Solicitors on the first business day after the conditions in
clause 2.1 are all satisfied or (where permitted by clause 2.2) waived,
or on or at any other date or place agreed between the parties.
B. If the Sellers are or would on the date when Completion is due to take
place under clause 6.1 be unable or unwilling to fulfil all of their
obligations under clause 7, the Buyer may by notice:
1. terminate this Agreement;
2. proceed to Completion and require the Sellers to fulfil those of
their obligations under clause 7 as they are then able to, in which
case the Sellers shall be obliged to do so and to fulfil their
outstanding obligations under clause 7 on any later date specified
by the Buyer; or
3. postpone Completion by up to 20 business days.
If Completion is postponed on any occasion under clause 6.2(c), this
clause 6.2 shall apply with respect to each occasion to which it is so
postponed. This clause shall apply mutatis mutandis if the Buyer is or
would on the date when Completion is due to take place under clause 6.1
be unable or unwilling to fulfil all of its obligations under clause 8.
C. The rights of any party under clause 6.2 shall be without prejudice and
in addition to all other rights which it may have as a result of failure
by the other(s) to comply with their or its obligations under clause 7 or
8 (as the case may be). In the event of termination under clause 6.2(a),
the parties shall have no further rights or obligations under this
Agreement other than accrued rights and obligations at the time of
termination.
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VII. SELLERS' OBLIGATIONS ON COMPLETION
A. On Completion, the Sellers shall deliver to the Buyer:
1. stock transfer forms in respect of the Shares duly completed in
favour of the Buyer or its nominees and executed by the relevant
registered holders;
2. the share certificates in respect of the Shares in the name of the
relevant transferors;
3. a power of attorney in the agreed form duly executed by each Seller
as a deed;
4. the statutory books of the Company complete and duly written up to
Completion (with any unissued share certificates), and the
certificate of incorporation, the certificate of incorporation on
change of name and the seal of the Company;
5. a notice in the agreed form from Cooper Lancaster Brewers, resigning
their office as auditors of the Company with effect from Completion;
6. a certificate of non-crystallisation in the agreed form dated not
earlier than the second working day immediately preceding the
Completion Date duly executed by the holder of each outstanding
floating charge given by the Company;
7. cheque books and bank mandates in respect of all bank accounts
operated by the Company;
8. an assignment in the agreed form in favour of the Buyer of the
Indebtedness owed by the Company to Winkwell Management Limited as
at Completion, duly executed by Winkwell Management Limited;
9. the Employment Agreements duly executed by the Company and each of
the Sellers; and
10. a resignation in the agreed form duly executed as a deed by the
secretary of the Company.
B. On Completion, the Sellers shall ensure that a meeting of the board of
directors of the Company is duly convened and held at which resolutions
are passed in the agreed form and after which the Employment Agreements
are executed by the Company. The Sellers shall on Completion provide the
Buyer with a copy of the minutes of that meeting, as signed by its
chairman, and certified as true by either Seller.
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VIII. BUYER'S OBLIGATIONS ON AND AFTER COMPLETION
A. On Completion, the Buyer shall pay the sum of L1 to the Sellers.
B. On Completion, the Buyer shall deliver to the Sellers a release in the
agreed form of the guarantees given by each of them on 21 August 1990 to
Barclays Bank plc and a counterpart of the Employment Agreements duly
executed by the Company.
IX. WARRANTIES
A. The Sellers represent and warrant to the Buyer in the terms of the
Warranties, subject only to matters disclosed by the Disclosure Letter.
B. A matter shall be regarded as disclosed by the Disclosure Letter only if
it is expressly and accurately stated in it. No claim may be made
pursuant to the Warranties in relation to any matter which has been so
disclosed.
C. Each of the Warranties is separate and shall be construed independently
of the others.
D. Each Seller unconditionally and irrevocably releases any claim which he
may have in respect of any misrepresentation, inaccuracy or omission in
or from any information or advice supplied or given by any Employees, or
any other person for whom the Company is or may be vicariously liable, in
connection with the giving of the Warranties and/or the preparation of
the Disclosure Letter.
E. Schedule 5 shall apply to limit or exclude, as the case may be, any
liability which the Sellers may have in respect of a Claim, provided that
no provision of schedule 5 shall apply to any such liability arising from
or in connection with any deliberate breach of the Warranties.
F. The provisions of schedule 3 shall have effect on Completion.
X. PROTECTION OF THE INTERESTS OF THE BUYER
A. Each Seller severally covenants that he shall not, directly or
indirectly, alone or jointly with any other person, and whether as
shareholder, partner, director, officer, agent, employee or consultant or
in any other capacity, without the prior written consent of the Buyer:
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1. for a period starting on the date of this Agreement and ending four
years after the Completion Date (less the unexpired term of the
Employment Agreement executed by that Seller if it has been
terminated early), carry on, assist or be interested or concerned in
any business or concern which competes with any business carried on
by the Company as at Completion within the United Kingdom and Eire,
provided that the holding by each Seller by way of passive
investment of shares listed on a stock exchange shall not be
prohibited by this clause if those shares (when aggregated with
those held by each person connected with that Seller) do not exceed
5% in nominal value of all the issued shares in that company;
2. for a period starting on the date of this Agreement and ending four
years after the Completion Date (less the unexpired term of the
Employment Agreement executed by that Seller if it has been
terminated early), and in connection with a business competing with
any business carried on by the Company as at that date, accept or
solicit custom from a person who was a client of the Company at any
time during the period of twelve months ending on the Completion
Date for any goods or services supplied to that customer during that
period; or
3. for a period starting on the date of this Agreement and ending four
years after the Completion Date (less the unexpired term of the
Employment Agreement executed by that Seller if it has been
terminated early), and in connection with a business competing with
any business carried on by the Company as at that date, induce or
encourage any Employee holding an operations, engineering, sales or
marketing position to leave that position, whether or not that
person would thereby commit a breach of his service contract.
The Buyer may withhold consent under this clause only so far as may be
reasonably necessary to protect its legitimate interests.
B. Each Seller severally covenants that he shall not, at any time after
Completion disclose or use any confidential information relating to the
Company for any purpose other than for the proper fulfilment of the
obligations of the Sellers under the Employment Agreements and shall use
all reasonable endeavours to prevent the disclosure of any such
confidential information. The obligations in the preceding sentence
shall not prohibit disclosure of confidential
10
<PAGE>
information pursuant to a legal obligation involuntarily incurred or if
required by any regulation or rule of any stock exchange or governmental
or other regulatory authority. In any such case, the Seller in question
shall consult with the Buyer to the maximum extent practicable before the
relevant disclosure is made.
C. Each Seller severally covenants that he shall not, at any time after
Completion, use in any manner in the course of any business competing
with the business of the Company the names "Filmatic" or "Filmatic
Television" or any other trade or business name or distinctive mark,
style or logo used by the Company at any time during the period of three
years ending on the Completion Date or any confusingly similar name,
mark, style or logo.
D. Since the Sellers have confidential information relating to the Company
and a detailed awareness of the Company's customer connections, and since
the consideration payable for the Shares has been calculated on the basis
that the Covenants are to be given to the Buyer, the parties acknowledge
that the Covenants are reasonable as to subject matter, area and duration
and are necessary to provide the Buyer with the full benefit of the
businesses and goodwill of the Company.
E. Each of the parties agrees that the Covenants may be specifically
enforced by preliminary and permanent injunction, it being acknowledged
that a breach of any Covenant will cause injury to the Buyer in respect
of which damages will not provide an adequate remedy.
F. Clause 10.1 is without prejudice to any other obligations of the Sellers
implied at law or in equity.
G. For the purposes of this clause 10, "confidential information" includes
trade secrets, and technical information and know-how which is not
available to the public generally.
XI. GENERAL PROVISIONS
A. SEVERABILITY
The unenforceability or illegality for any reason of any provision of
this Agreement (including without limitation any Covenant or other
obligation of any of the Sellers) shall not affect the enforceability of
any of the other provisions of this Agreement (including any obligation
of any other Seller).
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B. ASSIGNMENT
The Buyer may assign to any person (at law or in equity) any or all of
its rights under this Agreement (so that, without limitation, each of the
Warranties shall on assignment be deemed to have been given to that
assignee). References to the Buyer are references to a person who for
the time being is entitled to exercise any of those rights.
C. ANNOUNCEMENTS
No press or other public announcement disclosing the price payable for
the Shares shall be made by either party without the prior written
consent of the other, except that The Todd-AO Corporation may make any
announcement required in connection with this Agreement by any regulation
or rule of any stock exchange.
D. COSTS
Each party shall be responsible for the costs of its professional
advisers and agents in connection with the preparation, negotiation,
execution and completion of this Agreement.
E. NOTICES
Any notice (which for the purposes of this clause includes any request,
instruction, waiver or consent) to be given under this Agreement shall be
in writing. Each such notice shall be delivered if to the Sellers, by
courier or pre-paid registered post to his address as stated on page 1,
and if to the Buyer shall be delivered by courier sent by pre-paid
registered post as follows:
The Managing Director
Todd-AO Europe Holding Company Limited
c/o 4 John Carpenter Street
London EC4Y 0NH
with a copy (which shall not constitute notice) addressed to Mr Salah M
Hassanein of The Todd-AO Corporation, 900 North Seward Street, Los
Angeles, California 90038, USA, facsimile no. 0101 213 466 2327, or
otherwise to any other person, address or facsimile number notified in
accordance with this clause. In the event of the death of either Seller,
notices may be given by or to that individual's personal representatives
(or any of them if there is more than one).
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F. 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
shall 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.
G. WAIVERS
No act, course of conduct, failure to act, delay, acquiescence or other
indulgence 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 to that
effect given to that other party specifying this clause and the right in
question. If the Buyer releases or waives any liability of either Seller
for any obligation which is both joint and several, the other Seller
shall continue to be severally and together to be jointly liable for that
obligation.
H. NO DEDUCTIONS
All sums payable under this Agreement 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 paying party shall be
obliged to pay such sum as will after that withholding, set-off or
counterclaim has been made leave the payee with the same amount as it
would have been entitled to receive in the absence of any such
requirement.
I. 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 non-exclusive jurisdiction of the
English courts in respect of any matter arising from or in connection
with this Agreement or any such document.
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 SELLERS
(1) (2) (3) (4)
NAME ADDRESS SHARES HELD PERCENTAGE
- ---- ------- ----------- -----------
David Leslie Minton Cottage 78,270 60%
GIBBS 7 Alton Road East
Parkstone
Poole
Dorset BH14 9LH
Ian MAGOWAN 7 Stepnells 52,180 40%
Marsworth
Tring
Hertfordshire
HP23 4NQ
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SCHEDULE 2
THE COMPANY
1. Date of incorporation : 11 February 1935 as Sub-Standard Film
Finishers Limited and on 1 January 1959 as
Filmatic Laboratories Ltd
2. Registered number : 297109
3. Directors : David Leslie Gibbs
Ian Magowan
4. Secretary : Joan Annette Bennett
5. Auditors : Cooper Lancaster Brewers
6. Accounting Reference Date: 31:03
7. Registered Office : 16 Colville Road
London W11 2BS
8. Authorised Share Capital : L130,450 divided into 130,450 ordinary shares
of L1 each
9. Issued Share Capital : L130,450
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SCHEDULE 3
TAX COVENANT
1. DEFINITIONS
1.1 In this schedule the following expressions have the following meanings:
"CLAIM FOR TAXATION" includes 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" includes (without limitation) any payment, event, transaction or
series of transactions of whatever nature, act, omission or occurrence
whether or not the Company or the Buyer is a party thereto and includes
completion of the sale of the Shares to the Buyer;
"RELIEF" includes any relief from Taxation, any loss, allowance,
exemption, set-off or deduction in computing or against any profits,
income or gains or credit against Taxation or any right to repayment of
Taxation;
"TAXATION" includes 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.
1.2 For the purposes of this schedule:
(a) any reference to any Event shall include any Event which is deemed
to have occurred pursuant to any enactment whenever enacted;
(b) 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;
(c) any reference to an Event occurring on or before
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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;
(d) references to Taxation shall include:
(i) the loss, counterclaim, cancellation, counteraction,
nullification, disallowance or clawback in whole or part of
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 Accounts of
the Company or which would but for such Relief have appeared
in the Accounts;
(ii) 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 Accounts of the Company;
and
(iii) 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 schedule) 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:
- the amount of the Relief so lost or if such Relief is
deducted from or set against income or profits, the amount
of Taxation which would have been saved thereby but for
such loss or
- 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;
(e) 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
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Relief arising in respect of an Event or Events occurring after
Completion; and
(f) references to inheritance tax shall be deemed to include references
to capital transfer tax.
2. COVENANT TO PAY
2.1 The Sellers covenant to pay, as directed by the Buyer, to the Buyer or to
the Company on the relevant payment date as ascertained pursuant to
paragraph 3 of this schedule an amount equal to:
(a) any Taxation for which the Company is or may become 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;
(b) any inheritance tax for which the Company is or may become liable
which:
(i) is at Completion a charge on any of the shares or assets of
the Company or gives rise to a power to sell, mortgage or
charge any of the shares or assets of the Company; or
(ii) after Completion becomes a charge on or gives rise to a power
to sell, mortgage or charge any of the shares or assets of
the Company being a liability in respect of inheritance tax
payable as a result of the death of any person within seven
years after a transfer of value (or a deemed transfer of
value) if a charge on or power to sell, mortgage or charge
any such shares or assets existed at Completion or would, if
the death had occurred immediately before Completion and the
inheritance tax payable as a result thereof had not been
paid, have existed at Completion; or
(iii) arises as a result of a transfer of value by or to the
Company occurring on or before Completion (whether or not in
conjunction with the death of any person whenever occurring);
(c) without prejudice to the generality of paragraph 2.1(a), any
liability of the Company under Section 767A of the Taxes Act 1988
(together with any liability for interest relating thereto save as
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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;
(d) 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 Company with the migrating company
as defined in such section on or at any time before Completion;
(e) without prejudice to the generality of paragraph 2.1(a), 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
(f) all costs and expenses incurred or 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 schedule, including the
costs and expenses of taking or defending any action under this
schedule.
2.2 In determining for the purposes of this schedule whether a charge on or
power to sell, mortgage or charge any of the shares or assets of the
Company exists at any time the fact that any inheritance tax is not yet
payable or may be paid by instalments shall be disregarded and such
inheritance tax shall be treated as becoming due and a charge or power to
sell, mortgage or charge as arising on the date of the transfer of value
or other date or event on or in respect of which it becomes payable or
arises.
2.3 The provisions of Section 213 of the Inheritance Tax Act 1984 shall not
apply to any payments falling to be made under this schedule.
3. TIME FOR PAYMENT
3.1 A payment to be made by the Sellers under paragraph 2 or paragraph 4 of
this schedule shall be made in cleared funds on or before the relevant
payment date which shall be ascertained as follows:
(a) insofar as such payment represents Taxation to be
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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;
(b) 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 paragraph 1.2(d)(iii), 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;
(c) insofar as such payment relates to a claim under paragraphs
1.2(d)(i) and 1.2(d)(ii) 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;
(d) in any other case seven days after the date on which a notice
setting out details of the amount claimed is delivered to the
Sellers.
3.2 If any payment due to be made by the Sellers under this Schedule 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 3% above the
base rate from time to time of Barclays Bank plc.
4. STAMP DUTY
4.1 The Sellers hereby warrant that:
(a) 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
(b) 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.
4.2 The Sellers hereby agree that in the event of a breach of the warranty in
paragraph 4.1 they 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.
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5. GROSSING-UP
5.1 If any sum payable by the Sellers to the Buyer or the Company under this
schedule (other than interest under paragraph 3) 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 schedule.
6. NOTICE OF CLAIMS
If the Buyer and/or the Company shall become aware of any claim which
could give rise to a liability under this Schedule it shall as soon as
reasonably practicable give written notice thereof to the Sellers and
shall take such action and give such information and assistance in
connection with the affairs of the Company as the Sellers may reasonably
request to avoid, resist, appeal or compromise such claim provided that
the Sellers have first agreed to indemnify the Buyer and/or the Company
to the Buyer's reasonable satisfaction against all losses, costs, damages
and expenses (including interest on overdue Taxation) which may be
incurred thereby and provided that neither the Buyer or the Company shall
be obliged to appeal against any claim for any payment of Taxation made
on it if after the Sellers have been given written notice of such claim
pursuant hereto it has not within 10 days thereafter received from the
Sellers instructions in writing to do so.
7. EFFECT OF DISCHARGE OF CLAIM
For the avoidance of doubt, the Sellers shall remain liable in accordance
with the terms of this schedule notwithstanding that any Taxation giving
rise to a liability to make a payment under paragraph 2 is or has been
discharged or suffered by the relevant Company, whether before or after
the date hereof and whether by payment or by the loss or utilisation of
any Relief or right to repayment of Taxation.
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SCHEDULE 4
WARRANTIES
1. DISCLOSURE LETTER
1.1 The information set out in the Disclosure Letter is complete, accurate
and (so far as the Sellers are aware) not misleading.
1.2 So far as the Sellers are aware, there are no circumstances which are not
set out or referred to in the Disclosure Letter which might reasonably be
expected to have a material adverse effect on the financial or trading
position of the Company save circumstances likely to affect generally the
industry in which the Company operates.
2. THE COMPANY
2.1 The Company has the power and authority to conduct its business as
conducted at the date of this Agreement.
2.2 The memorandum and articles of association of the Company available for
public inspection at Companies House constitute complete and accurate
copies of the memorandum and articles of association of Company and set
out all of the rights attaching to the Shares.
2.3 The information in schedules 1 and 2 is accurate and (where relevant)
complete.
2.4 The Company does not own or have any interest in any shares, debentures
or other securities of any person and has not agreed to acquire any such
interest.
2.5 The Company has no branch or other place of business or agency outside
the United Kingdom.
3. SHARE CAPITAL
3.1 The Shares represent the entire issued share capital of the Company and
are legally and beneficially owned by the Sellers free from all
Encumbrances, and no person has claimed to be entitled to any such
Encumbrance.
3.2 Any purchase or redemption by the Company of its own shares has been
effected in accordance with all applicable requirements.
3.3 The Shares were allotted fully paid up.
3.4 So far as the Sellers are aware, none of the Shares have been transferred
at an undervalue within the meaning of
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ss.238 or 339 Insolvency Act 1986.
4. FINANCIAL INFORMATION
4.1 The Accounts and the accounts referred to in clause 2.1(a) give a true
and fair view of the state of affairs of the Company as at the Accounts
Date or 31 March 1996 (as the case may be) and of the profit or loss of
the Company for the period ended on the Accounts Date or 31 March 1996
(as the case may be).
4.2 Without limiting the generality of paragraph 4.1:
(a) the Accounts and the accounts referred to in clause 2.1(a) make
provision for or disclose all liabilities and financial commitments
of the Company as at the Accounts Date or 31 March 1996 (as the case
may be) whether actual, contingent or disputed and all bad or
doubtful debts as at the Accounts Date or 31 March 1996 (as the case
may be), in accordance with generally accepted accounting
principles;
(b) the audited accounts of the Company for each of the last three
financial years ended on 31 March 1996 were prepared applying
accounting policies and bases consistently within the same accounts
as from one financial year to the next and complied with the
requirements of all applicable laws, Statements of Standard
Accounting Practice, Financial Reporting Standards and other
generally accepted accounting principles;
(c) the audited accounts of the Company for each of the last three
financial years ended on 31 March 1996 were not (save as
specifically noted or stated in them) affected by any extraordinary,
exceptional or non-recurring item or any other factor rendering the
profits or losses for any such periods unusually high or low.
4.3 The forecasts relating to the Company for the 12 months ending 31 March
1997 were prepared in good faith on the basis of assumptions which were
believed to be reasonable when made. The Sellers believe that those
assumptions remain reasonable.
5. POSITION SINCE THE ACCOUNTS DATE
5.1 Since the Accounts Date the Company has carried on its business in the
ordinary and proper course and so as to maintain that business as a going
concern and there has been no material adverse change in the financial or
trading position or prospects of the Company nor, so far
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as the Sellers are aware, are there any circumstances which might give
rise to such a change.
5.2 Without limiting the generality of paragraph 5.1, since the Accounts
Date:
(a) the Company has not entered into, and has not agreed to enter into
and is not negotiating, any financial commitment requiring
expenditure in excess of L1,000 in any twelve month period;
(b) the Company has not disposed of or acquired, and has not agreed and
is not negotiating to dispose of or acquire, any business or any
material asset;
(c) no customer of or supplier of the Company has ceased to deal, or has
indicated an intention to cease to deal or deal on a smaller scale,
with the Company, or has changed or indicated that it wishes to
change the terms on which it deals with the Company where such new
terms have or might have a material adverse impact on the Company;
(d) the Company has not cancelled or waived any debt, claim or right of
material value (or agreed to do so);
(e) no dividend or other distribution (within the meaning of s.209 Taxes
Act) has been declared, paid or made by the Company except as
provided in the Accounts;
(f) the Company has not created or incurred, and has not agreed and is
not negotiating to create or incur, any Indebtedness (other than
trade credit incurred in the ordinary and usual course of business);
(g) there has not been any material increase in the levels of debtors or
creditors of the Company;
(h) there has not been any material decrease in the cash balances of the
Company;
(i) no Employee has given or been given notice or been made redundant or
been dismissed, and no person has been employed whose basic salary
is more than L25,000 per annum;
(j) no share capital of the Company has been allotted, issued, redeemed,
reduced or purchased and no agreement to do so has been entered into
by the Company; and
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(k) no resolution of the shareholders of the Company has been passed.
6. RECORDS
6.1 The records required to be kept by the Company under any applicable law
have been properly kept, contain complete and accurate records of the
matters with which they should deal and are in the possession or under
the control of the Company.
6.2 All documents required to be delivered by the Company to Companies House
or any other governmental, regulatory or other body of competent
jurisdiction have been so delivered in compliance with the requirements
of any applicable law.
7. DEBT
7.1 Complete and accurate terms of the Indebtedness of the Company (other
than trade debts incurred in the ordinary and proper course of business)
are contained in the Disclosure Letter.
7.2 The Company has not factored or discounted any debts owing to it or has
agreed to do so.
7.3 There has not occurred any event of default or other circumstance which
would (or which would with the lapse of time) entitle any person to call
for early repayment under any agreement relating to any Indebtedness of
the Company or to enforce any security given by the Company, and no
person has threatened to call for early repayment of or to enforce any
security relating to any Indebtedness of the Company.
7.4 The Company has obtained no grant or allowance from any person.
7.5 No person is entitled to receive from the Company any finder's fee,
brokerage or commission in connection with this Agreement or anything
contained in it.
7.6 The debts of the Company disclosed in its audited accounts as at 31 March
1996 will within six months realise their nominal value (less any
provision made for bad debts in those accounts) save as is disclosed in
the Disclosure Letter.
8. ASSETS
8.1 The Company is the sole legal and beneficial owner of all the fixed
assets and stock included in the Accounts or acquired since the Accounts
Date (other than stock
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disposed of in the ordinary and proper course of business). No such
asset is subject to any Encumbrance and no person has claimed that they
are entitled to an Encumbrance in respect of any such asset.
8.2 All of the assets owned by the Company, or which the Company has the
right to use, are in the possession or are under the control of the
Company.
8.3 The assets owned by the Company comprise all the assets employed in its
business or which are necessary for the continuation of its business in
the place and in the manner currently conducted.
8.4 All plant, equipment, machinery and vehicles owned or used by the Company
are in good repair, condition and working order, have been properly and
regularly maintained (and complete and accurate copies of all applicable
service histories are attached to the Disclosure Letter) and comply with
all applicable safety laws and regulations currently in force.
8.5 All plant, equipment and machinery owned by the Company will be capable,
over the period of time during which it is currently proposed to write
them down to nil in the accounts of the Company, of doing the work for
which they were purchased.
8.6 The plant registers of the Company comprise a complete and accurate
record of all the plant, equipment, machinery and vehicles owned or in
the possession of the Company.
8.7 All charges in favour of the Company have been duly registered in
accordance with all applicable law.
9. INTELLECTUAL PROPERTY RIGHTS
9.1 The Company owns no Intellectual Property Rights.
9.2 Complete and accurate terms of all licences granted to or by the Company
in respect of Intellectual Property Rights are set out in the Disclosure
Letter. Neither the Company or (so far as the Sellers are aware) any
third party is in default under any such licence.
9.3 Other than the licences referred to in the previous paragraph, the
Company does not require the use of nor has it infringed (or is likely to
infringe) the Intellectual Property Rights of any third party, or has
used any confidential information in circumstances which might entitle a
third party to make a claim against it. No third party has threatened to
make a claim in respect of any such rights or information, and so far as
the
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Sellers are aware, there are no circumstances in which such a claim might
be made.
9.4 No person has taken or threatened to take any action against the Company
to the effect that any business carried on by it is a passing-off in
relation to the business carried on by a third party.
9.5 In respect of all information not at present in the public domain which
is owned by the Company or which is used, or is required to be used, by
the Company in connection with its business:
(a) such information is adequately documented to enable the Company to
have the full benefit of such information; and
(b) no such information has been disclosed, and the Company is not
obliged to disclose it, to any person other than to the Employees
for the proper performance of their duties.
9.6 The Company does not trade or carry on business under or uses any name or
style other than its name.
10. AGREEMENTS
10.1 All agreements to which the Company is a party are valid and binding and
are in full force and effect. Neither the Company nor (so far as the
Sellers are aware) any other party is (nor, with the lapse of time, will
be) in default under any such agreement, and (so far as the Sellers are
aware) there are no circumstances which ought to give rise to such a
default.
10.2 All agreements to which the Company is a party and which are material to
the conduct of its business carried on as at the date of this Agreement
are in writing and the original or original counterparts of those
agreements are in the Company's possession or under its control.
10.3 The Company is not a party to or is bound by any agreement:
(a) which involves or is likely to involve obligations, restrictions or
expenditure of an unusual, onerous or exceptional nature;
(b) in any way restricts its freedom to carry on the whole or any part
of its business in any part of the world in such manner as it thinks
fit;
(c) to which either Seller or any person connected with either Seller is
a party or is otherwise
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interested;
(d) which cannot be terminated without cost to the Company on less than
3 months notice or which has a fixed term of more than 1 year;
(e) which requires capital expenditure of more than L1,000 in any 12
month period;
(f) which was entered into otherwise than in the ordinary and proper
course of business and on terms which unconnected parties would
reasonably be expected to negotiate;
(g) which establishes any joint venture, consortium, partnership or
profit (or loss) sharing arrangement;
(h) pursuant to which the Company has disposed of any company, business
or asset and remains subject to any liability which is not fully
provided for in the Accounts;
(i) which is a bid or tender, proposal or offer which, if accepted,
would result in the Company becoming a party to any agreement
described above.
10.4 There is not outstanding any security arrangement, guarantee, indemnity,
suretyship or comfort letter or other arrangement having an equivalent or
similar effect to pay, provide funds or take action in the event of
default in the payment by, or in the performance of any obligation of,
any person given by or for the benefit of the Company.
10.5 There is no subsisting power of attorney or similar arrangement giving
authority to any person to bind the Company.
11. INSURANCE
11.1 Complete and accurate particulars of all the insurances of the Company
are given in the Disclosure Letter.
11.2 All insurances of the Company are in full force and effect and so far as
the Sellers are aware, there are no circumstances which might lead to any
liability under any of those insurances being avoided by the insurers or
the premiums being increased.
11.3 There is no claim outstanding under any such insurance and, so far as the
Sellers are aware, there are no circumstances which might give rise to
such a claim.
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11.4 Complete and accurate details of all insurance claims made by the Company
in the period of two years ending on the date of this Agreement are set
out in the Disclosure Letter.
12. CONSEQUENCES OF PURCHASE
12.1 Neither the acquisition of the Shares by the Buyer nor the execution and
performance of the terms of this Agreement and the documents referred to
in it to be entered into by the Sellers will:
(a) cause any event of default, termination or breach by the Company or
give rise to any right of termination or relieve any person of any
obligation under any agreement to which the Company is a party;
(b) cause the Company to lose the benefit of any asset, licence, right
or privilege to which it is currently entitled; or
(c) so far as the Sellers are aware, affect the willingness of any
customer or supplier of the Company to deal with that Company
without any adverse change in the terms on which it currently deals
with the Company.
13. LITIGATION AND COMPLIANCE WITH LAW
13.1 Neither the Company or (so far as the Sellers are aware) any person for
whose acts or defaults it may be liable is involved, or has during the
two years ended on the date of this Agreement been involved, in any
civil, criminal, arbitration or other proceedings in any jurisdiction.
No such proceedings have been threatened in writing or (so far as the
Sellers are aware) have been threatened orally by or against the Company
or any person for whom it may be liable and, so far as the Sellers are
aware, there are no circumstances which might give rise to any such
proceedings.
13.2 So far as the Sellers are aware, the Company has conducted its business
in accordance with all applicable laws and regulations and there is no
order, decree or judgment of any court or other body of the United
Kingdom or any relevant foreign jurisdiction outstanding against the
Company, or any person for whose acts or defaults the Company may be
liable.
14. EMPLOYEES
14.1 There is no subsisting consultancy agreement between the Company and any
person.
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14.2 The Disclosure Letter contains complete and accurate details of:
(a) the total number of Employees including those who are on maternity
or paternity leave or are absent on the grounds of sickness,
disability or other leave of absence and who have or may have a
statutory or contractual right to return to work with the Company;
(b) the name, date of commencement of employment, period of continuous
employment, salary and other guaranteed benefits and the age of each
Employee.
14.3 There are no amounts owing (whether legally incurred or gratuitously
provided) to any Employee or former employee of the Company (other than
in respect of accrued remuneration or reimbursement of business
expenses).
14.4 The Company has given no notice of any redundancies to any Employee or
government department.
14.5 There is no outstanding claim against the Company by any person who is
now or has been an employee of the Company, no dispute has arisen within
the last five years between the Company and a material number or category
of its employees and so far as the Sellers are aware, there are no
circumstances which might give rise to any such dispute.
14.6 So far as the Sellers are aware, the Company has in relation to each of
its Employees (and so far as is relevant to each of its former employees)
complied with all obligations imposed on it by any employment contract
entered into with that Employee (or former employee) and all applicable
legislation, regulations, orders, awards and codes of conduct relevant to
the relations between it and that Employee (or former employee).
14.7 The Company has not entered into any union membership, security of
employment, recognition or other collective agreement or other agreement
with a trade union or other body or organisation representing its
Employees nor has it done any act which might be construed as
recognition.
15. INSOLVENCY
15.1 No order has been made, petition presented or resolution passed for the
winding up of the Company and no meeting has been convened to consider
any such resolution.
15.2 No petition has been presented for an administration order to be made in
relation the Company, and no
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receiver, manager or administrative receiver has been appointed in
respect of the whole or part of any of the property, assets and/or
undertaking of the Company.
15.3 The Company has not convened a meeting of its creditors and is not
proposing to do so, and has not made a proposal to its creditors under
Part I Insolvency Act 1986 for a composition in satisfaction of its debts
or a scheme of arrangement of its affairs, has not proposed a composition
or arrangement with its creditors or any class of them, whether under
s.425 Companies Act 1985 or in any other way, and is not in any case
proposing to do so.
15.4 So far as the Sellers are aware, the Company has not been party to any
transaction which might constitute in whole or in part a transaction at
an undervalue or a preference for the purposes of ss.238, 239, 339 or 340
Insolvency Act 1986.
15.5 Neither Seller has made a proposal to his creditors, whether under Part
VIII Insolvency Act 1986 or in any other way, for a composition in
satisfaction of his debts or a scheme of arrangement of his affairs, or
is proposing to do so, no interim order has been made under s.252
Insolvency Act 1986 in respect of either Seller, and no petition for a
bankruptcy order to be made against either Seller has been presented.
16. PROPERTY
16.1 The Company has no beneficial interest in any freehold or leasehold
property.
16.2 The Company has not been the tenant or guarantor in respect of any
leasehold premises in respect of which any obligations or liabilities
could accrue to the Company.
16.3 The Company is not in breach of the licence pursuant to which it occupies
the property from which it currently trades.
17. PENSIONS AND OTHER BENEFITS
For the purposes of this paragraph 17:
"APPROVED" means approved by the Inland Revenue for the purposes of
Chapter 1 of Part XIV of the Taxes Act and a reference to "APPROVAL" is
to be construed accordingly;
"EMPLOYEE" includes any former Employee; and
"PENSION SCHEME" means the Filmatic Pension Scheme.
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17.1 GENERAL
Save for the Pension Scheme there is not in operation, and no proposal
has been announced to enter into or establish, any agreement,
arrangement, custom or practice (whether legally enforceable or not and
Approved or not) for the payment of, or payment of a contribution
towards, a pension, allowance, lump sum or other similar benefit on
retirement, death, termination of employment (whether voluntary or not)
or during periods of sickness or disablement, for the benefit of an
Employee or an Employee's defendants.
17.2 SCHEMES - DISCLOSED
(a) Details of the Pension Scheme have been given to the Buyer in the
form of the following information, which is up-to-date, true,
accurate and not misleading and contains no material omissions:
(i) a copy of each agreement, deed and all rules governing or
relating to the Pension Scheme including, without limitation,
each agreement between the Company and an Employee relating
to the provision of a benefit of the type referred to in
paragraph 17.1 above;
(ii) a copy of each explanatory document issued to an Employee who
is or may become a member of the Pension Scheme;
(iii) a copy of each announcement issued to any Employee who is a
member of the Pension Scheme in respect of improvements to
benefits or another amendment not yet incorporated into the
documentation of the Pension Scheme;
(iv) a copy of each policy effected with and agreement with an
insurance company for the purposes of the Pension Scheme;
(v) a copy of the latest available report and audited accounts of
the Pension Scheme and the latest available actuarial
valuation;
(vi) details of the assets of the Pension Scheme including without
limitation particulars of any self investment and any
investment in which more than five per cent of the total
value of the net assets of the Pension Scheme is invested;
(vii) a list of the Pension Scheme's active
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members, pensioners and deferred pensioners and all details
necessary to establish their entitlements to benefits; and
(viii) a copy of any agreement with regard to the provision of
services of any kind in connection with each Pension Scheme
including, without limitation, investment, management,
advisory, administration and data processing services.
(b) No discretion or power has been exercised under any Pension Scheme
to:
(i) augment benefits;
(ii) admit to membership a person who would not otherwise have
been eligible for admission to membership or provide a
benefit which would not otherwise be provided;
(iii) pay a contribution which would not otherwise have been paid;
(iv) pay a transfer value or make a transfer of assets to another
scheme the amount of value of which was more than the cash
equivalent to which the person acquired a right under the
Pension Schemes Act 1993.
(c) Each benefit (except a refund of contributions) payable under the
Pension Scheme on the death of a member or during periods of
sickness or disability of the member is at the date of this
Agreement fully insured under a policy effected with an insurance
company of good repute. Each member has been covered for that
insurance by that insurance company at its usual rates and on its
usual terms for persons in good health and all insurance premiums
payable have been paid. No action has been taken or omission made
which might enable the insurance company to avoid any policy issued
for the purposes of the Pension Scheme.
(d) No plan, proposal or intention to amend, discontinue (in whole or in
part) or exercise a discretion in relation to the Pension Scheme has
been communicated to any member.
(e) Each Employee who has been admitted to or promised admission to
membership of the Pension Scheme has been admitted or promised
admission on terms which
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are consistent with the continued treatment of the Pension Scheme as
Approved and (if applicable) the provisions of Part II of Schedule 6
to the Finance Act 1989. The substance of the terms of admission or
promised admission have been communicated to the Employee.
(f) No payment or repayment of an asset of a Pension Scheme has been
made to the Company.
(g) The assets of the Pension Scheme are wholly invested in a contract
between Legal & General and the trustees of the pension scheme a
copy of which appears at item 20 of the Disclosure Letter and in
annuity contracts issued by Legal & General to secure the benefits
of pensioners.
(h) Save as disclosed there has been no breach of the trusts of the
Pension Scheme. There is no civil, criminal, arbitration,
administrative or other proceeding or dispute concerning the Pension
Scheme by or against the trustees or administrator of the Pension
Scheme or the Seller and none is pending or threatened. The Seller
is not aware of a matter which might give rise to a proceeding or
dispute of that type.
17.3 FUNDING OF PENSION SCHEMES - CONTRIBUTION
(a) No contribution due to the Pension Scheme is unpaid.
(b) The Disclosure Letter contains a statement on the basis on which the
Company has undertaken to contribute to the Pension Scheme, and the
rate and amount of the contributions made in the three years ending
on the date of this Agreement.
(c) No assurance, promise or guarantee (oral or written) has been made
or given to a member of the Pension Scheme of any particular level
or amount of benefits (other than insured lump sum death in service
benefits referred to in paragraph 17.1) to be provided for or in
respect of him under the Pension Scheme on retirement, death or
leaving employment.
(d) The Company may terminate an obligation it may have to contribute to
the Pension Scheme without incurring a liability to a member of the
Pension Scheme under any contract of employment or other agreement
or arrangement with the member.
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17.4 COMPLIANCE
(a) The Pension Scheme is Approved and the Seller is not aware of a
matter which might give the Inland Revenue reason to withdraw
Approval.
(b) The Pension Scheme is a contracted-out scheme for the purposes of
the Pension Schemes Act 1993 and has been administered in accordance
with the contracting-out requirements of that Act. The Company
holds or is named in a current contracting-out certificate issued in
relation to the Pension Scheme.
(c) The Pension Scheme has been designed to comply with, and has been
administered in accordance with, all applicable legal and
administrative requirements (including, without limitation, Article
119 of the Treaty of Rome as it applies to the eligibility of an
Employee to join the Pension Scheme) and the trusts, powers and
provisions of the Pension Scheme. The Company has complied with
Article 119 of the Treaty of Rome as it applies to the eligibility
of an Employee to join, contributions made to and the provisions of
benefits under the Pension Scheme.
17.5 FUNDING - LIABILITIES
(a) The data supplied to the Actuary who administers the Pension Scheme
for the purpose of the last actuarial valuation of the Pension
Scheme was complete and accurate in all respects.
(b) There has been no increase in the membership of that Pension Scheme
since the effective date of that actuarial valuation.
(c) There has been no increase in pensionable payroll since the
effective date of that actuarial valuation in respect of the Pension
Scheme in excess of the rate assumed in the actuarial valuation as
to future increases in salaries.
(d) There have been no early retirements (whether on grounds of ill
health or otherwise) since the effective date of the last actuarial
valuation.
18. TAX
18.1 All returns, computations and notices which are or have been required to
be made or given by the Company for any Taxation purpose:
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(a) have been made or given within the requisite periods and on a proper
basis and are up to date and correct; and
(b) none of them is, or is likely to be, the subject of any dispute with
the Inland Revenue or other Taxation authorities.
18.2 All information required to be provided to the Inland Revenue or any
Taxation authority has been provided within the requisite period and is
complete and accurate.
18.3 The Disclosure Letter contains full and accurate particulars of all
matters in respect of which the Company is required to make a return or
provide information to the relevant Taxation authorities and in respect
of which the time for making such return or providing such information
will expire on or after Completion.
18.4 The provisions or reserve for Taxation appearing in the Accounts of the
Company are sufficient (on the basis of the rates of taxation current at
the date hereof) to cover all Taxation for which the Company was at the
Accounts Date or may after that date become or have become liable on or
in respect of or by reference to any profits, gains or income (whether
deemed or actual) for any period ended on or before the Accounts Date or
in respect of any distribution or transaction made or entered into or
deemed made or entered into on or before the Accounts Date.
18.5 The Company has:
(a) paid all Taxation which it has become liable to pay before the date
of this Agreement;
(b) duly deducted and accounted for all Taxation due to have been
deducted or accounted for by it before the date of this Agreement;
and
(c) is not and has not at any time since the Accounts Date been liable
to pay interest on or penalties in respect of any unpaid Taxation.
18.6 In respect of the period commencing immediately after the Accounts Date
and ending on Completion the Company will not have any liability for
Taxation which has not been either paid prior to Completion or provided
for in the Accounts of the Company other than Taxation on profits
realised in the ordinary course of trading.
18.7 The Company is not nor will it become liable to pay, or
36
<PAGE>
make reimbursement or indemnity in respect of, any Taxation (or amounts
corresponding thereto) in consequence of the failure by any other person
to discharge that Taxation within any specified period or otherwise,
where such Taxation relates to a profit, income or gain, transaction,
event, omission or circumstance arising, occurring or deemed to arise or
occur (whether wholly or partly) prior to Completion.
18.8 The book value of each of the capital assets of the Company in or adopted
for the purposes of the Accounts of the Company does not exceed the
amount deductible under section 38 Taxation of Chargeable Gains Act 1992
and the Company has all necessary records to calculate any future
liability to corporation tax on capital gains in respect of each such
capital asset.
18.9 (a) The Company is registered for the purposes of value added tax and
has complied at all times with all statutory requirements, orders,
directions or conditions relating to value added tax, including the
terms of any agreement made with HM Customs & Excise.
(b) The Company has not at any time been a member of a group
registration for the purposes of value added tax.
(c) No transaction or arrangement has been effected as a result of which
the Company may be liable for any value added tax chargeable against
any other person.
18.10 All documents to which the Company is a party and/or which relate to or
are necessary to prove the title of the Company to any asset owned or
possessed by it and/or contain material rights on the part of the Company
are in the United Kingdom and have been duly stamped.
18.11 The Company has not entered into any transaction or series of
transactions, scheme or arrangement of which the main purpose, or one of
the main purposes, was the avoidance or reduction of a Taxation liability
and for which there was no commercial purpose.
18.12 If the plant and machinery of the Company were disposed of in total for a
consideration equal to its book value in or adopted for the purposes of
the Accounts of the Company, no balance charge under these Capital
Allowances Act 1990 not fully provided for in the Accounts would arise.
18.13 (a) The Company is not liable and there are no circumstances in
existence as a result of which it
37
<PAGE>
may become liable to be assessed to Taxation as donor or donee of
any gift or transferor or transferee of value.
(b) No circumstances exist under which any power within Section 212
Inheritance Tax Act 1984 could be exercised in relation to, and
there is no Inland Revenue charge within the meaning of Section 237
Inheritance Tax Act 1984 attaching to or over any shares or
securities in or assets of the Company.
38
<PAGE>
SCHEDULE 5
LIMITATIONS OF LIABILITY
1. All sums payable by the Sellers by reason of any Claim shall for all
purposes be treated as reducing the purchase price for the Shares.
2. The Sellers shall have no liability in respect of any Claim or series of
Claims arising from the same subject matter if the amount for which they
would otherwise be liable does not exceed L500.
3. Subject to paragraph 2, no liability shall attach to the Sellers in
respect of any Claims unless the aggregate liability of the Sellers in
respect of all such Claims, whether by virtue of a judgment of a court of
competent jurisdiction, arbitration award or admission in writing signed
by both the Sellers, shall exceed L5,000 whether in respect of one Claim
or a number of Claims in aggregate, and if any such Claim exceeds that
amount, the Sellers shall only be liable for the amount by which such
Claim exceeds L5,000.
4. The aggregate liability of the Sellers in respect of Claims shall not in
any event exceed L119,000.
5. No Claim shall be made unless notice of that Claim is given in writing by
the Buyer to the Sellers not later than the second anniversary of the
Completion Date or (in the case of Claims made for breach of any of the
Warranties contained in paragraph 18 of schedule 4 or under the Tax
Covenant, before the last day of the sixth accounting period of the
Company ending after Completion). Any such Claim which may be made within
the relevant time period shall (if it has not been previously satisfied,
settled or withdrawn) be deemed to have been withdrawn twelve months
after it is made unless legal proceedings in respect of it have been
commenced against the Sellers. For this purpose, legal proceedings shall
not be deemed to have been commenced unless they have been both issued
and served on both of the Sellers.
6. If the Buyer or the Company is at any time notified of a claim made by a
person who is not connected with either Seller (the "Third Party Claim")
and which is likely to give rise to a claim against the Sellers under the
Warranties, the Buyers shall as soon as reasonably practicable notify the
Sellers of that Third Party Claim, giving full details so far as
practicable. The Buyer shall defend each Third Party Claim after such
consultation with the Sellers as is reasonable in the circumstances, and
shall not settle or compromise any
39
<PAGE>
such claim without the prior written consent of the Sellers, such consent
not to be unreasonably withheld and to be deemed given if not refused
within seven days of being required.
7. If after the Sellers have made a payment (a "relevant payment") to the
Buyer or the Company pursuant to a claim under any of the Warranties (a
"relevant claim") the Buyer or the Company (the "relevant company") shall
effect any recovery or receive any credit by reason of the matters
complained of (a "relevant benefit") then the relevant company shall
forthwith repay to the Sellers whichever is the lesser of the relevant
payment and the relevant benefit (less all costs charges and expenses
incurred by the Buyer or the Company in obtaining the relevant benefit
and any applicable tax thereon) provided that (i) the Sellers shall not
be entitled to any repayment to the extent that all or any part of the
relevant benefit has already been taken into account when determining the
relevant claim and has therefore reduced the amount of the relevant claim
and (ii) the Buyer shall reduce the amount of any relevant claim by the
full amount of the relevant benefit and the provisions of this Agreement
relating to claims for breach of the Warranties shall apply to the
relevant claim as so reduced.
8. If the Sellers pay an amount in respect of a claim under any of the
Warranties which is referable to a matter as respects which there is or
shall thereafter arise a right of action of the Buyer or the Company
against any third party, the Buyer shall if so requested by the Sellers
ensure that such right of action is to the fullest extent possible
assigned to and for the exclusive benefit of the Sellers.
9. The Buyer shall at all times, and shall ensure that the Company shall at
all times, use all reasonable endeavours to mitigate any loss or damage
arising out of any matter or default which gives rise to a claim under
any of the Warranties and duly acknowledges to the Sellers its
responsibility to take that action.
10. Without prejudice to the other provisions of this schedule, the Sellers
shall have no liability in respect of any Claim to the extent that:
(a) provision for the subject matter of such claim has been made in the
Accounts or in the accounts referred to in clause 2.1(a); or
(b) the Claim would not have arisen but for an act or omission or
transaction of the Buyer or the Company voluntarily effected after
Completion other than in
40
<PAGE>
the normal course of business as carried on by the Company as at the
Completion Date which could reasonably have been avoided and which
the Buyer or the Company was aware or should reasonably have been
aware would give rise to that Claim; or
(c) the Claim would not have arisen but for a change in a law or
regulation made on or after Completion (whether or not expressed to
have retrospective effect); or
(d) the Claim relates to Taxation in respect of corporation tax on the
Company's actual profits, gains and income arising or accruing by
reason of transactions after 31 March 1996 in the ordinary and
proper course of business and the Company is primarily liable
therefor.
11. The Buyer hereby acknowledges and confirms that apart from the Warranties
it has not relied upon or been induced to enter into this Agreement by
any representation or warranty whether oral or written of the Sellers or
the Company or of any officer or Employee or of any adviser of the
Sellers.
41
<PAGE>
SIGNED by DAVID GIBBS )
SIGNED by IAN MAGOWAN )
SIGNED by )
for and on behalf of )
TODD-AO EUROPE HOLDING )
COMPANY LIMITED )
42
<PAGE>
THIRD AMENDMENT
TO CREDIT AGREEMENT
This THIRD AMENDMENT TO CREDIT AGREEMENT ("Third Amendment") is
entered into as of June 14, 1996 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, as amended by a First
Amendment to Credit Agreement dated as of March 13, 1995 and a Second Amendment
to Credit Agreement dated as of April 5, 1996 (as so amended, the "Agreement").
RECITAL
The Borrower and the Bank desire to increase the Commitment, convert
the Agreement from a revolving-to-term facility to a reducing revolving facility
and amend certain covenants, all 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 following definitions in Section 1.2 of the Agreement are
amended and restated in their entirety as follows:
"'Commitments'" means the Revolving Loan Commitment."
"'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
- 1 -
<PAGE>
to exceed $20,000,000, as the same may be adjusted pursuant to the
provisions of Section 2.4."
2.2 Subsection (d) of the definition of "Interest Period" in Section
1.2 of the Agreement is amended and restated in its entirety as follows:
"(d) no Interest Period for a Borrowing shall extend beyond the
Maturity Date;"
2.3 The definition of "Loans" in Section 1.2 of the Agreement is
amended by deleting "and the Term Loan."
2.4 The definition of "Maturity Date" in Section 1.2 of the Agreement
is amended by deleting "November 30, 2000" and inserting "November 30, 2003" in
lieu thereof.
2.5 The definition of "Pound Sterling Borrowing" in Section 1.2 of
the Agreement is amended by deleting "or Pound Sterling Term Loans."
2.6 The following new definition is inserted in proper alphabetical
order as follows:
"'Regular Amortization Amount' has the meaning set forth in
Section 2.5(a)."
2.7 The definitions of "Dollar Term Loan Commitment," "Pound Sterling
Term Loan Commitment," "Pound Sterling Term Loans," "Term Loans," "Term Loan
Commitment" and "Termination Date" in Section 1.2 of the Agreement are deleted
in their entirety.
2.8 Sections 2.1 and 2.3 of the Agreement are amended by deleting
"Termination Date" and inserting "Maturity Date" in lieu thereof.
2.9 Section 2.5(a) of the Agreement is amended and restated in its
entirety as follows:
"(a) On the last Offshore Rate Business Day of February, 2000,
and on the last Offshore Rate Business Day of each May, August,
November, and February thereafter through the Maturity Date (each such
day, an "Amortization Date"), the Dollar Revolving Loan Commitment
shall automatically reduce by an amount equal to 5% of the original
Dollar Revolving Loan Commitment, and the Pound Sterling Revolving
Loan Commitment shall automatically reduce by an amount equal to 5% of
the original Pound Sterling Revolving Commitment (the "Regular
Amortization Amount"), and the
- 2 -
<PAGE>
Borrower shall on each such Amortization Date pay to the Bank the
amount by which the principal amount of Revolving Loans denominated in
Dollars and Pound Sterling Revolving Loans outstanding exceed the
Dollar Revolving Loan Commitment and the Pounds Sterling Revolving
Loan Commitment, respectively, as so reduced. The Dollar Revolving
Loan Commitment and the Pounds Sterling Revolving Loan Commitment
shall reduce to zero on the Maturity Date on which date the principal
amount of all Revolving Loans shall be due and payable in full."
2.10 Section 8.1(f) of the Agreement is amended by deleting
"$4,000,000" and inserting "$8,000,000" in lieu thereof.
2.11 Section 3 of the Agreement is amended and restated in its
entirety as follows:
"Section 3. Intentionally left blank."
2.12 The last sentence of Section 4.3(a) of the Agreement is amended
by deleting "Term Loans" and "Term Loan Commitment" and inserting "Revolving
Loans" and "Revolving Loan Commitment," respectively, in lieu thereof.
2.13 The first sentence of Section 4.3(c) of the Agreement is amended
by deleting ", in the case of Revolving Loans, and Section 3.2, in the case of
Term Loans."
2.14 The first sentence of Section 4.12 of the Agreement is amended
by deleting "or of Term Loans pursuant to Section 3.4."
2.15 Section 8.9 of the Agreement is amended by deleting "$5,000,000"
and inserting "$10,000,000" in lieu thereof.
2.16 Section 8.13 of the Agreement is amended and restated in its
entirety as follows:
"8.13 RATIO OF FREE AVAILABLE CASH FLOW TO FIXED CHARGES.
Permit at any time, for the Borrower and its Subsidiaries calculated
on a consolidated basis, the ratio of (i) Free Available Cash Flow for
the four immediately preceding fiscal quarters to (ii) Interest
Expense for the four immediately preceding fiscal quarters PLUS the
current portion of Funded Indebtedness (including without limitation
the current portion of capitalized leases, but excluding any Revolving
Loan repayments due on the Maturity Date in excess of the Regular
Amortization Amount) PLUS all pro
- 3 -
<PAGE>
forma operating lease expense for the immediately following four
fiscal quarters (excluding that portion of the lease balloon payment
exceeding the usual quarterly reduction) to be less than (a) 1.75 to
1.00 through and including November 30, 1998 and (b) 1.50 to 1.00
thereafter."
2.17 All references to Chrysalis Television Facilities, Ltd. in
the Agreement shall be deemed references to the new name of such Subsidiary,
Todd-AO Europe Holdings Ltd.
2.18 Exhibit A to the Agreement is amended by deleting all references
to Term Loans.
3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents
and warrants to the Bank that:
3.1 AUTHORITY. The Borrower has all the necessary corporate power to
make, execute and deliver this Third Amendment, and this Third Amendment is the
legal, valid and enforceable obligation of the Borrower it purports to be.
3.2 NO LEGAL OBSTACLE TO AGREEMENT. Neither the
execution of this Third 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 Third 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.
3.5 NEW SIGNIFICANT SUBSIDIARIES. Except for Chrysalis Television
Facilities, Ltd., a United Kingdom company, and Todd-AO Europe Holdings Ltd., a
United Kingdom company, the Borrower has no
- 4 -
<PAGE>
Significant Subsidiaries which are not Guarantors or whose equity interests have
not been pledged to the Bank, as required by Section 7.9 of the Agreement.
4. CONDITIONS, EFFECTIVENESS. The effectiveness of this Third
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 AMENDMENT FEE. An amendment fee of $190,000 payable in two
installments as follows: $150,000 due on the date of this Third Amendment and
$40,000 due on November 30, 1996; PROVIDED, HOWEVER, that if the Borrower
provides evidence satisfactory to the Bank that it has received at least
$30,000,000 in gross proceeds from new equity investments after the date hereof
and on or prior to November 30, 1996, the second installment of the amendment
fee shall be waived.
4.2 OTHER EVIDENCE. Such other evidence with respect to the Borrower
or any other person as the Bank may reasonably request to establish the
consummation of the transactions contemplated hereby, the taking of all
corporate action in connection with this Third Amendment and the Agreement and
the compliance with the conditions set forth herein.
5. MISCELLANEOUS.
5.1 CORPORATE PROCEEDINGS; INCUMBENCY CERTIFICATE. Not later than
July 31, 1996, the Borrower shall deliver the following to the Bank in form and
substance satisfactory to the Bank:
(a) 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 Third
Amendment, certified by the secretary or an assistant secretary of the Borrower
as of the date such documents are delivered.
(b) A certificate of the secretary or an assistant secretary of the
Borrower, dated the date such certificate is delivered, as to the incumbency and
signature of the officers of the Borrower executing on behalf of the Borrower
this Third Amendment.
5.2 REFERENCES TO CHRYSALIS IN PLEDGE AGREEMENT. All references to
Chrysalis Television Facilities, Ltd. in the Pledge Agreement shall be deemed
references to the new name of such Subsidiary, Todd-AO Europe Holdings Ltd.
- 5 -
<PAGE>
5.3 EFFECTIVENESS OF THE AGREEMENT. Except as provided in this
Amendment, all of the terms and conditions of the Agreement shall remain in full
force and effect.
5.4 WAIVER. This Third 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 Third 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 Third 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 Third Amendment when invoiced therefor.
5.7 JURISDICTION. This Third Amendment, and any instrument or
agreement required hereunder, shall be governed by and construed under the laws
of the State of California.
- 6 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third
Amendment as of the day and year first above written.
THE TODD-AO CORPORATION,
a Delaware corporation
By: /s/ Coburn T. Haskell
--------------------------
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
- 7 -
<PAGE>
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 Third Amendment
to Credit Agreement dated as of May 31, 1996 and confirms that its Continuing
Guaranty remains in full force and effect after giving effect thereto.
Dated as of June 14, 1996
TODD-AO PRODUCTIONS INC.
TODD-AO STUDIOS EAST INC.
TODD-AO DIGITAL IMAGES
TODD-AO VIDEO SERVICES
TODD-AO STUDIOS WEST
By:
-------------------------
J.R. DeLang
Vice President
- 1 -
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> MAY-31-1996
<CASH> 3,263
<SECURITIES> 2,685
<RECEIVABLES> 11,706
<ALLOWANCES> 663
<INVENTORY> 661
<CURRENT-ASSETS> 19,009
<PP&E> 64,339
<DEPRECIATION> 29,113
<TOTAL-ASSETS> 57,684
<CURRENT-LIABILITIES> 7,828
<BONDS> 6,133
0
0
<COMMON> 2,059
<OTHER-SE> 32,535
<TOTAL-LIABILITY-AND-EQUITY> 57,684
<SALES> 0
<TOTAL-REVENUES> 48,140
<CGS> 0
<TOTAL-COSTS> 41,613
<OTHER-EXPENSES> (437)
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